/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/160901.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, September 1, 2016, Vol. 17, No. 173 Headlines D E N M A R K * DENMARK: Economy Sluggish as Government Faces Challenges F R A N C E NEW CO: S&P Assigns Preliminary 'B+' CCR, Outlook Developing PICARD GROUPE: S&P Revises Outlook to Stable & Affirms 'B+' CCR G R E E C E GREECE: PM Urges International Creditors to Honor Pledges I T A L Y REITALY FINANCE: Fitch Raises Rating on Class E Notes to 'BBsf' N E T H E R L A N D S STORM 2016-II: Fitch Assigns 'B+(EXP)' Rating to Class D Notes N O R W A Y FARSTAD SHIPPING: In Stand-Still Agreement with Lenders * NORWAY: Debt Restructuring of OSV Companies May Take Years U N I T E D K I N G D O M CATTLES PLC: FRC Imposes GBP2.3MM Fine on PwC Over Audit Failures GULF KEYSTONE: Launches Open Offer as Part of Restructuring MELLON COUNTRY: Put Up for Sale Following Receivership SOFTEX INTERNATIONAL: Atradius Payout Keeps Business Afloat TRAVELEX HOLDINGS: S&P Lowers CCR to 'B-', Outlook Stable ********* ============= D E N M A R K ============= * DENMARK: Economy Sluggish as Government Faces Challenges ---------------------------------------------------------- Charles Duxubury at The Wall Street Journal reports that Denmark's economy is struggling for momentum, official data showed on Aug. 31, highlighting the challenge facing the government as it weighs tax cuts against public sector investments. Denmark's statistics agency said economic output increased 0.5% on the quarter and 0.4% on the year in the second quarter of 2016, largely in line with analysts' forecasts in a Wall Street Journal poll. The agency said public sector consumption and exports helped lift growth while total domestic demand fell, the Journal relates. Denmark's economy has been sluggish since the financial crisis of 2008, when a property bubble burst and hit many households' spending power, the Journal notes. Successive center-right and center-left governments have struggled for the right economic mix, the Journal states. According to the Journal, the export-dependent country, home to corporate giants like shipping company Maersk and drugs maker Novo Nordisk, has also been hit by ebbing demand in its main European market. Recent government forecasts peg growth expectations this year at 0.9% and 1.5% next year, lower than previously thought, the Journal discloses. The country's high tax level on earned income has come into focus as a possible handbrake on growth and a fierce debate is raging about whether a cut to the top rate of tax could help boost the economy, the Journal says. =========== F R A N C E =========== NEW CO: S&P Assigns Preliminary 'B+' CCR, Outlook Developing ------------------------------------------------------------ S&P Global Ratings said that it has assigned its 'B+' preliminary long-term corporate credit rating to France-based nuclear services company New Co. The outlook is developing. The final rating depends on S&P's receipt and satisfactory review of New Co's final capital structure. Accordingly, the preliminary rating should not be construed as evidence of the final rating. A key assumption for the preliminary rating is that AREVA will transfer its bonds maturing after 2016 to New Co, while the key syndicated bank and undrawn credit facilities remain at AREVA. The preliminary rating on New Co mirrors that on the company's 100% owner AREVA. As part of the reorganization of its activities, AREVA intends to transfer all its outstanding unsecured bonds totaling EUR4.8 billion (excluding EUR1 billion to be repaid in September 2016) to New Co. AREVA will retain the bank debt -- a EUR2 billion syndicated facility and a short-term EUR1.2 billion undrawn credit facility -- except for EUR0.6 billion of debt at AREVA NC, which is attributed to New Co. S&P believes New Co's business risk profile shows stronger credit characteristics than AREVA's and assess it as satisfactory versus fair for the AREVA group. However, New Co's initial leverage will be very high, with future viability of its capital structure dependent on the planned capital increase. Like its parent, New Co is, in S&P's view, a government-related entity (GRE) with an important role for and strong link with the French government, even though the state's direct and indirect shareholding in the group may be only about 67% after the capital increase. With respect to New Co's own status as a GRE, S&P do not anticipate that the high likelihood of extraordinary support from the French government, which results in a three-notch uplift to New Co's stand-alone credit profile, will reduce after the capital increase. S&P understands that AREVA plans to request consent from existing holders of its EUR4.8 billion bonds (excluding about EUR1 billion to be repaid in September 2016) for the transfer of the bonds to New Co. If the bond transfer is approved, S&P expects New Co's initial capital structure will be unsustainable, with adjusted leverage (debt to EBITDA) above 9x-10x. As a result, S&P assess New Co's current stand-alone credit profile at 'ccc+'. S&P currently estimates that the company's leverage may improve to about 6x if, as S&P assumes, it receives about EUR3 billion of the proceeds from AREVA's EUR5 billion capital increase, which is targeted for the first quarter of 2017. But there are execution risks, in S&P's view, such as from potential delays in obtaining the European Commission's approval of the proposed capital increase. In S&P's view, obtaining a firm commitment to New Co from minority shareholders would smooth this process. S&P expects that the 'B+' issue rating and recovery rating of '3H' on the unsecured AREVA bonds will remain unchanged upon their transfer to New Co. The developing outlook on New Co mirrors that on the parent AREVA until other shareholders take a majority share and S&P considers that the rating on New Co can be delinked from that on AREVA. Rating upside would come from allocation to New Co of about $3 billion of AREVA's planned EUR5 billion capital increase, targeted for January 2017. S&P thinks this could reduce adjusted debt to EBITDA to about 6x on average. If AREVA were no longer New Co's majority owner after the capital increase, S&P could consider raising the rating on New Co by a few notches to the 'BB' category. S&P could lower the rating on New Co if AREVA were downgraded, notably if S&P has concerns about AREVA's ability to secure a shareholder loan by the end of November 2016, should there be a delay in the approval of the capital increase. Other risk factors that could create rating downside for New Co include: -- The timing of the European authorities' approval of the state's capital injection in AREVA and the need for a firm offer from a minority investor in New Co; and -- Approval from AREVA's banks regarding the sale of a majority stake in New Co at the time of the capital increase. PICARD GROUPE: S&P Revises Outlook to Stable & Affirms 'B+' CCR --------------------------------------------------------------- S&P Global Ratings revised its outlook on French frozen food retailer Picard Groupe S.A.S. to stable from negative and affirmed its 'B+' long-term corporate credit rating on the group. At the same time, S&P affirmed its 'BB-' issue rating on the group's senior secured notes (about EUR772 million outstanding after buybacks). The recovery rating on the senior secured notes remains unchanged at '2', indicating S&P's expectation of substantial (70%-90%) recovery prospects in the event of a default. S&P also affirmed its 'B-' issue rating on the group's senior unsecured notes (about EUR428 million outstanding) and payment- in-kind (PIK) notes. The recovery rating on the senior unsecured notes and PIK notes remains unchanged at '6', indicating S&P's expectation of negligible (0%-10%) recovery prospects in the event of a default. S&P's outlook revision primarily reflects its expectations that Picard will defend its niche market position in the French grocery market, achieve modest growth from new store openings, maintain strong margins, and generate free operating cash flow (FOCF) for reducing debt gradually. Supported by bond buybacks of up to EUR50 million per year from free cash flows, S&P forecasts an adjusted debt to EBITDA of about 6.0x and an improved EBITDAR cash interest coverage of around 2.0x over the next 12 months. Picard is the leading frozen food retailer in France with about 18% market share. It offers customers a wide spectrum of products under its own brand across over 950 stores in the country. High quality food at affordable prices has built a strong Picard brand and a loyal customer base favored by the French population. This enables the group to achieve a superior adjusted EBITDA margin of about 17% and strong cash flow generation. Picard's competitive position is constrained by its modest size and scale, as it only accounts for around 1% of the overall French grocery market. As the macroeconomic environment in France is weak and major grocers increasingly focus on competitive pricing and expanding their convenience store network, macroeconomic and competitive pressure has led the group to exhibit weak like-for-like sales growth since 2012. S&P has therefore lowered Picard's business risk profile assessment to the high end of fair. Picard has sizable debt considering its operating scale. Its ownership by a private equity group (Lion Capital) also exposes the group to the inherent risk of dividend recapitalization. S&P forecasts S&P Global Ratings-adjusted debt to EBITDA to be around 6.1x for the financial year ending March 2017 (FY2017) and 5.9x for FY2018 (or 5.3x in FY2017 and 5.0x in FY2018 excluding the PIK notes). In light of the noncash interest from the PIK notes and high rent costs, S&P also assess Picard's EBITDAR cash interest coverage (defined as unadjusted EBITDA before deducting rent over cash interest plus rent). S&P expects Picard's EBITDAR cash interest coverage will remain healthy at around 2.0x in FY2017 and FY2018. Notwithstanding increasing capital expenditure (capex), S&P expects that Picard will generate strong reported FOCF of EUR30 million-EUR40 million per year in FY2017 and FY2018. Following the recent notes buyback of EUR50 million in 2016, S&P anticipates that Picard will continue to use FOCF for reducing leverage. S&P also expects Picard to commit to a conservative financial policy over the medium term. These supportive factors result in S&P's positive comparable ratings assessment, which provides a one-notch uplift to S&P's anchor of 'b' to arrive at the 'B+' corporate credit rating. In S&P's base case, it assumes: -- Following the U.K.'s Brexit vote, S&P forecasts real GDP growth in France slightly slowing to 1.2% in 2017 and 1.4% in 2018. -- Increased consumer price index (CPI) growth in France of 1.4% in 2016 and 1.2% in 2017. -- About 3% revenue growth in FY2017 and around 2% in FY2018. Growth is mainly driven by about 20 new store openings per year. S&P expects like-for-like sales growth to remain weak at less than 2% due to the weak macroeconomic environment and high price competition among grocers in France. -- Stable adjusted EBITDA margin of around 17% in FY2017 and FY2018. S&P expects that some competitive pressure on Picard's margin could be mitigated by cost savings on labor and logistics. -- Increase in capex to about EUR40 million-EUR45 million in FY2017 and FY2018 from EUR35 million in FY2016 for investing in new store expansion and information technology projects. -- Supportive financial policy demonstrated by buyback of notes at around EUR50 million per year. Based on these assumptions, S&P arrives at these credit measures: -- Adjusted debt to EBIDTA of around 6.1x in FY2017 and 5.9x in FY2018 (or 5.3x in FY2017 and 5.0x in FY2018 excluding the PIK notes). -- EBITDAR cash interest coverage of around 2.0x in FY2017 and FY2018. -- Reported FOCF generation of EUR30 million-EUR40 million per year in in FY2017 and FY2018. The stable outlook reflects S&P's view that, despite strong competition, Picard will defend its niche market position in the French grocery market, achieve modest growth from new store openings, maintain strong margins and generate FOCF for reducing debt gradually. S&P forecasts an adjusted debt to EBITDA of about 6.0x and an EBITDAR cash interest coverage of around 2.0x over the next 12 months. S&P could lower the ratings if Picard's operating performance deteriorates, leading to EBITDAR cash interest coverage weakening towards 1.7x, free operating cash flow reduces significantly, or if planned debt reduction does not materialize. This could result from an economic downturn in France, intensified price competition in the French grocery market, a food safety scare damaging its brand reputation, a supply chain disruption, or an inability to pass on hikes in labor costs and food inflation to customers. S&P could also lower the ratings if the financial sponsor owner Lion Capital materially increases leverage by adopting a more aggressive financial policy with respect to growth, investments, or shareholder returns. S&P currently considers an upgrade unlikely over the medium term. However, S&P could raise the ratings if, on the back of strong reported FOCF generation and an adequate liquidity position, Picard reduces its leverage such that S&P's adjusted debt to EBITDA improves to below 5x (including the PIK notes) on a sustainable basis. An upgrade would also be contingent on the management and the financial sponsor demonstrating a commitment to a conservative financial policy. =========== G R E E C E =========== GREECE: PM Urges International Creditors to Honor Pledges --------------------------------------------------------- Xinhua News Agency reports that Greek Prime Minister Alexis Tsipras urged Greece's international creditors to honor pledges and implement specific measures by the end of 2016 to make the Greek debt load sustainable and support Greece's economic recovery. "We are not just requesting, we are demanding and expecting -- on the basis of the deal we are implementing -- the specific measures which will make the debt sustainable," Xinhua quotes Mr. Tsipras as saying in an interview published by local newspaper Real News on Aug. 28. Mr. Tsipras, as cited by Xinhua, said the debt relief will open the way to economic recovery. According to Xinhua, a new round of talks between the Greek government and international creditors was set to resume on Aug. 29 in Brussels during the first Euro Working Group meeting after the summer lull. Mr. Tsipras said that his government is keeping its part of the deal and will push lenders to do the same, Xinhua relays. Greece, Xinhua says, believes that any continuation of harsh austerity will undermine all sacrifices made by Greek people to overcome the crisis, fuel recession and unemployment rates. Under the previous agreement with international creditors, Greece must meet budget surplus targets of 0.5% of the GDP this year, 1.75% in 2017 and 3.5% in 2018, among others, Xinhua discloses. Greek officials recently have insisted that the goal is not feasible and requested some alterations, Xinhua notes. Greece has been relying on international rescue loans since 2010, when its economy collapsed, Xinhua states. It will be eligible to receive the remaining third bailout tranche of EUR2.8 billion (US$3.1 billion) if it passes further reforms requested by creditors, according to Xinhua. ========= I T A L Y ========= REITALY FINANCE: Fitch Raises Rating on Class E Notes to 'BBsf' --------------------------------------------------------------- Fitch Ratings takes multiple rating actions on REITALY Finance S.r.l.'s floating rate notes due 2027 as: EUR70 mil. class A1 affirmed at 'A+sf'; Outlook Stable EUR39.3 mil. class A2 affirmed at 'Asf'; Outlook Stable EUR33.3 mil. class B affirmed at 'BBBsf'; Outlook Stable EUR12.4 mil. class C affirmed at 'BBB-sf'; Outlook Stable EUR17.7 mil. class D affirmed at 'BBsf'; Outlook Stable EUR9.3 mil. class E upgraded to 'BBsf' from 'BB-sf'; Outlook Stable The transaction is a securitization of a single EUR191.5 mil. commercial real estate loan advanced by Goldman Sachs International Bank (GS) to an Italian fund, which is secured by a portfolio of 25 Italian real estate assets. GS has retained 5% of the loan. The collateral falls into five sub-portfolios: (i) five large retail assets with exposure to a cinema operator; (ii) five cash- and-carry assets; (iii) three retail galleries; (iv) five retail boxes; and (v) seven smaller retail units. KEY RATING DRIVERS The upgrade reflects the improvement in property investment conditions in Italian retail markets since the transaction was issued in September 2015. In some cases market rental yields dropped from above their long-term average to below-average, reflected in a fall in the reported loan to value ratio (LTV) to 58% currently, from 62% at closing. While Fitch's 'BBsf' cap rate assumptions are designed to be higher than the long-term average, they had in some cases previously been floored by even higher actual yields. Where those yields have since fallen, any floored cap rates have also been reduced, improving projected recovery value at 'BBsf'. Investment-grade cap rate assumptions, however, have not fallen, since they remain above the path of actual yields. Along with the largely unchanged loan performance, and lack of property disposals, this supports today's affirmations. The interest coverage ratio for the transaction remains above 2x. Rental income has increased over the last 12 months as a result of rental increases and new lettings. While positive, almost half of contracted income is set to expire by loan maturity in 2020. Rising rent will have little impact on ratings unless it is accompanied by an increase in reported estimated rental values deemed sustainable by Fitch. RATING SENSITIVITIES If rising rental income translates into higher sustainable rental values, this may support future upgrades, although not exceeding the 'A+' rating cap on transactions with significant exposure to southern Italian properties. A major downturn in the Italian retail sector could affect the ratings adversely. Fitch's estimate of 'Bsf' LTV is 75.5%. ===================== N E T H E R L A N D S ===================== STORM 2016-II: Fitch Assigns 'B+(EXP)' Rating to Class D Notes -------------------------------------------------------------- Fitch Ratings has assigned STORM 2016-II B.V.'s notes expected ratings as: Class A floating-rate notes: 'AAA(EXP)sf'; Outlook Stable Class B floating-rate notes: 'AA-(EXP)sf'; Outlook Stable Class C floating-rate notes: 'BBB+(EXP)sf'; Outlook Stable Class D floating-rate notes: 'B+(EXP)sf'; Outlook Stable Class E floating-rate notes: not rated This transaction is a true sale securitization of prime Dutch residential mortgage loans originated and sold by Obvion N.V., an established mortgage lender and issuer of securitizations in the Netherlands. Since May 2012, Obvion has been 100% owned by Cooperatieve Rabobank U.A. This is the 35th transaction issued under the STORM series since 2003, and the first such transaction with a revolving feature. The expected ratings address timely payment of interest on the class A and B notes, including the step-up margin accruing from the payment date falling in August 2021, and full repayment of principal by legal final maturity in accordance with the transaction documents. The final ratings are contingent upon the receipt of final documents and legal opinions conforming to the information already received. Credit enhancement (CE) for the class A notes will be 8% at closing, provided by the subordination of the junior notes and a non-amortizing cash reserve (1%), fully funded at closing through the class E notes. KEY RATING DRIVERS Market Average Portfolio: This is a 59-month seasoned portfolio consisting of prime residential mortgage loans, with a weighted average (WA) original loan-to-market-value (OLTMV) of 89.2% and a WA debt-to-income ratio (DTI) of 27.2%, both of which are typical for Fitch-rated Dutch RMBS transactions and in line with previous STORM transactions. Revolving Transaction: A five-year revolving period will allow new assets to be added to the portfolio. In Fitch's view, the replenishment criteria adequately mitigate any significant risk of potential migration due to future loan additions. Fitch considered a stressed portfolio composition, based on the replenishment criteria, rather than the actual portfolio characteristics. Interest Rate Hedge: At close, a swap agreement will be entered into with Obvion to hedge any mismatches between the fixed and floating interest on the loans and the floating interest on the notes. In addition, the swap agreement guarantees a minimum level of excess spread for the transaction, equal to 50bp per annum of the outstanding A through D notes' balance, less principal deficiency ledgers (PDLs). The remedial triggers are linked to the parent's ratings, Rabobank. Rabobank Main Counterparty: This transaction relies strongly on the creditworthiness of Rabobank, which fulfils a number of roles. Fitch analyzed the structural features in place, including those mitigating construction deposit set-off and commingling risk and concluded that counterparty risk is adequately addressed. Robust Performance: Past performance of transactions in the STORM series, as well as data received on Obvion's loan book, indicate good historical performance in terms of low arrears and losses. For more information, see the Performance Analytics section. RATING SENSITIVITIES Material increases in the frequency of defaults and loss severity on defaulted receivables could produce losses larger than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency, along with a 30% decrease in the WA recovery rate, would result in a model- implied-downgrade of the class A notes to 'A-(EXP)sf', class B notes to 'BBB-(EXP)sf', class C notes to 'B(EXP)sf' and the class D and E notes to below 'B(EXP)sf'. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY For its ratings analysis, Fitch received a data template with all fields fully completed. Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a small file review on a targeted sample of origination files at the premises of Obvion and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices, and the other information provided to the agency about the asset portfolio. Overall and together with the assumptions referred to above, 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. =========== N O R W A Y =========== FARSTAD SHIPPING: In Stand-Still Agreement with Lenders ------------------------------------------------------- Ole Petter Skonnord at Reuters reports that Farstad Shipping's CEO Karl Johan Bakken said the company is in stand-still agreement with lenders until Oct. 1. According to Reuters, the CEO said the company is talking to both industrial and financial investors on how to refinance NOK11.6 billion in net interest bearing debt (US$1.4 billion). He said 7-8 significant banks are involved in the talks, Reuters relays. Farstad said at present there are no visible signs of improvement in the market balance for offshore service vessels, and is uncertain how long it will take before the market recovers, Reuter relates. Mr. Bakken, as cited by Reuters, said the market needs consolidation to be sustainable in the future. Farstad's operating profit before depreciation, amortizations and impairments fell to NOK735 million in Q2 from NOK1.04 billion in same period in 2015, and far below what it needs to be able to service its debt, Reuters discloses. Farstad Shipping is a provider of large, modern offshore service vessels to the oil and gas industry worldwide. The company is based in Alesund, Norway. * NORWAY: Debt Restructuring of OSV Companies May Take Years ------------------------------------------------------------ Stine Jacobsen at Reuters reports that restructuring the debt of struggling offshore oil service vessel (OSV) and drilling rig companies will take years to complete and complex cases must go through multiple stages. Dozens of exploration rigs and more than 100 service vessels have been mothballed since the plunge in oil prices began in mid-2014, leaving owners unable to repay billions of dollars to banks and bondholders, Reuters relates. "I think there is a chance that for many companies you may have a two-step process," Reuters quotes DNB's head of lending to large customers, Harald Serck-Hanssen, as saying on the sidelines of an energy conference. "Ideally we would have liked to see restructurings taking companies into 2020, but I think in many cases that is not possible to achieve," Mr. Serck-Hanssen, as cited by Reuters, said, adding that the large number of lenders involved added complexity to the process. According to Reuters, Mr. Serck-Hanssen said the first phase will likely see companies through to the second half of 2018 or first half of 2019, and unless markets have recovered they would then need a second phase. While more consolidation should be expected, he cautioned that mergers and restructurings must also involve the injection of new equity to make firms viable, Reuters notes. However, Mr. Serck-Hanssen said not all companies would be able to restructure their debt and bankruptcies among vessel and rig owners could occur already in 2016, Reuters relays. =========================== U N I T E D K I N G D O M =========================== CATTLES PLC: FRC Imposes GBP2.3MM Fine on PwC Over Audit Failures ----------------------------------------------------------------- Marion Dakers at The Telegraph reports that the accountancy firm that gave Cattles a clean bill of health before its near-collapse has been fined GBP2.3 million for not doing enough to spot the problems lurking at the doorstep loans company. PwC agreed to the penalty from the Financial Reporting Council after it signed off the 2007 accounts at Cattles, which then issued a string of profit warnings and suspended its shares, leaving investors wiped out, The Telegraph relates. The auditor and one of its partners, Simon Bradburn, admitted that their work on Cattles' books "fell significantly short of the standards reasonably to be expected", the FRC, as cited by The Telegraph, said. The watchdog also fined Mr. Bradburn GBP75,600 and gave both him and the company a severe reprimand, The Telegraph discloses. The penalty draws a line under the controversies surrounding Cattles' creaking sub-prime loan books ahead of the financial crisis, The Telegraph notes. The firm, once a member of the FTSE 250, announced in 2009 that its loan books were much weaker than thought, forcing it into two profit warnings within 11 days, followed by a restructuring deal with creditors to ward off administration in 2011, The Telegraph recounts. Two Cattles directors were banned from the City in 2012 for misleading investors about the quality of the firm's loan books, The Telegraph relays. The FRC accepted that these executives did not give PwC the full picture when compiling the accounts, The Telegraph states. Cattles and its creditors nevertheless took PwC to court to claim GBP1.6 billion for negligence, with the case settled last October for an undisclosed sum, according to The Telegraph. The watchdog reduced PwC's fine from GBP3.5 million to GBP2.3 million to reflect its cooperation during the long-running probe, The Telegraph says. Cattles plc -- http://www.cattles.co.uk/-- is a financial services company engaged in providing consumer credit to non- standard customers in the United Kingdom and the provision of debt recovery services to external clients and the Company's consumer credit business. Cattles also provides working capital finance for small and medium size businesses. GULF KEYSTONE: Launches Open Offer as Part of Restructuring ----------------------------------------------------------- UPI reports that a potential takeover target, Iraqi-focused company Gulf Keystone Petroleum said it was offering up common shares in an effort to raise more capital. "The company announces that it has launched an open offer for up to 2,294,295,672 new common shares in the company at a price of 0.8314 pence ($1.08) per share, to raise up to $25 million," UPI quotes the company as saying in a statement. The company, which lists headquarters in London, reached an agreement last month with the majority of its creditors and shareholders to restructure its debt obligations, UPI recounts. Andrew Simon in July stepped down as chairman, opening the door for non-executive director Keith Lough to help steer a US$500 million debt conversion proposal, UPI recounts. The company, as cited by UPI, said the open offer for shares was in coordination with its restructuring efforts. 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. MELLON COUNTRY: Put Up for Sale Following Receivership ------------------------------------------------------ John Mulgrew at Belfast Telegraph reports that The Mellon Country Hotel in Omagh has been put up for sale for GBP450,000, after going into administrative receivership. Now, a detailed report from administrators Keenan Corporate Finance shows the losses and financial position of the hotel, Belfast Telegraph discloses. It says the 18-room hotel was kept open until June 30, but was then shut "due to its loss-making position and the inability to fund working capital", Belfast Telegraph relays. But it said that "all of the employees were made redundant", Belfast Telegraph notes. It's understood around 30 staff, mainly part-time, had worked at the hotel, Belfast Telegraph states. It left behind debts of more than GBP650,000 to KBC Bank Ireland, according to Belfast Telegraph. Its biggest debts were to unsecured creditors, amounting to more than GBP1 million, Belfast Telegraph says. According to Belfast Telegraph, the sale process of the hotel is "ongoing". And it says, based on initial estimates, "we do not anticipate that a dividend will be payable to unsecured non- preferential creditors", Belfast Telegraph notes. A creditors' meeting is now scheduled to take place in Belfast next month, Belfast Telegraph discloses. KBC Bank appointed Keenan Corporate Finance as administrative receiver to the company that owns the hotel, Mellon Country Hotel Limited, in June, Belfast Telegraph recounts. SOFTEX INTERNATIONAL: Atradius Payout Keeps Business Afloat ----------------------------------------------------------- Softex International Limited, based in Leicester, imports yarns for knitting with the final products ending up in the stores of Burberry, M&S, John Lewis, Laura Ashley, Debenhams, and New Look. In November last year, the firm was threatened with financial turmoil after one of its customers, a fashion manufacturer, went into administration. However, they received a pay out from trade credit insurer Atradius for over GBP55,000 which kept the business afloat. Today, Softex is continuing to trade successfully in the region. Kiran Yarashi, managing director of Softex which was established 15 years ago, said: "In an already extremely tough textile environment in the UK, had we not been able to recover this defaulted payment from Atradius, we would have been facing a very difficult financial situation ourselves. "The administration was unexpected. It was a long-standing customer with a reported turnover of GBP15 million and there were no signs that it was about to go under. The loss would have left a big hole in our finances and we couldn't have continued operating without the claims payout from Atradius." Softex's experience demonstrates that you can never assume that you're safe from the risks of insolvency. In an economic report earlier this year, Atradius predicted that there would be little improvement to the UK insolvency climate in 2016 despite being another year on from the recession. The volatility of recent weeks following the referendum is unlikely to have improved the predicted outlook with pre-Brexit forecasts indicating that insolvency levels in England & Wales were expected to hit 12,725 in 2016. While below the 12,855 compulsory liquidations and creditors' voluntary liquidations recorded last year, the drop is small at just 1%. High profile insolvencies already this year include BHS and Austin Reed. However, as Softex has experienced it is not only the failure of high-profile customers that can cause a financial headache. Tanya Giles, Regional Manager at Atradius, said: "The economy grew 0.6% in the three-month period to the end of June. However, as we review the impact of the weeks following the referendum we need to bear in mind that the effects of the recession continue to cast a shadow with business insolvencies still running at troubling levels. Businesses can be significantly impacted when they do not get paid. Insolvencies are brutal and leave a trail of destruction along the supply chain. Small businesses are particularly at risk as they may not be able to sustain the financial impact of unpaid invoices, nor indeed the loss of a customer from their book. "However, while some insolvencies may be a shock, there will often be tell-tale signs of an impending failure. The warning signs include customers failing to pay on time, permanently taking advantage of full credit lines asking to prolong overdue bills, changing banks or offering bills of exchange in lieu of payment. "The biggest single thing a business can do to mitigate the risks of non-payment is to protect themselves. Trade credit insurance provides simple, cost effective protection to your business against the risk of not getting paid. If you can't get paid, for instance if your customer becomes insolvent, defaults on the payment or is affected by political risk, you can make a claim to Atradius, reducing the need for bad debt provision and releasing money back into the business." As a trade credit insurer, Atradius protects businesses from the risks of non-payment and also advises businesses on trading risks and opportunities in the domestic and export markets using intelligence gathered from millions of firms around the world. Mr. Yarashi, of Softex which has been a customer of Atradius for a decade, added: "Atradius is always opening up limits for new customers for us. For instance, when I had the opportunity to supply a multimillion pound turnover company, I wanted to ensure I could supply them with whatever they needed -- with the right protection. Atradius gave me a large credit limit and we could start doing business immediately. That year, we turned over ú1m of business with that company; Atradius played a major role in our business' success. I would always take the opinion of Atradius whether to supply a customer as they can advise if I'm likely to get paid or not -- and I don't want to take a hit. They help me decide where to do business and where not to do business." Kiran Yarashi has further appreciated the support extended by long term dedicated Account Manager - Claire Bowen who understood his business and extended maximum support. Adjusting the policy premiums, extending maximum credit periods, quick and positive support for credit limits for customers where business was possible are some of the instances. This kind of an excellent understanding of the client's business by this dedicated manager helped Softex to sail through difficult times. TRAVELEX HOLDINGS: S&P Lowers CCR to 'B-', Outlook Stable --------------------------------------------------------- S&P Global Ratings lowered its corporate credit rating on U.K.- based foreign exchange services provider Travelex Holdings Ltd. to 'B-' from 'B'. The outlook is stable. At the same time, S&P lowered the issue rating on Travelex's GBP350 million senior secured notes due in 2018 to 'B-' from 'B'. S&P's recovery rating on the notes is unchanged at '4', indicating its expectation of recovery in the higher half of the 30%-50% range in the event of a payment default. S&P also lowered its issue rating on the GBP90 million super senior revolving credit facility (RCF) to 'B+' from 'BB-'. The recovery rating remains at '1', indicating S&P's expectation of very high recovery (90%-100%) in a default scenario. The downgrades reflect S&P's view that Travelex faces a number of business challenges that will result in material EBITDA contraction and significantly negative free operating cash flows (FOCF), in the current financial year. S&P anticipates a degree of recovery in 2017, but are uncertain that such recovery will sustain metrics consistent with a higher rating level. In the six months to June 30, 2016, Travelex reported a 58% drop in core group EBITDA (before exceptional items) due to lower wholesale banknote shipments to Nigeria resulting from the imposition of capital controls, continued challenging conditions in Brazil, the impact of terrorist attacks in Europe, and increased investments in the group's digital platforms. S&P sees these factors continuing, to varying degrees, into the second half of the year, which, in S&P's view, limits the visibility on the recovery that Travelex predicts in 2017. Positively, S&P expects the company to benefit from a weaker pound sterling through higher inbound traffic to the U.K. and revenues from U.K. value-added tax refunds. A lower sterling also improves the translation of profits for Travelex. Travelex's financial risk profile is constrained by high debt, consisting of GBP347 million in senior secured notes, a GBP90 million super senior RCF, and GBP681 million in payment-in-kind (PIK) notes and non-cash-pay preferred shares, all at the restricted group, as defined in the bond documentation. There is also a $490 million cash-pay loan at BRS Ventures & Holdings Ltd. (BRSV), Travelex's holding company. "As a result of EBITDA contraction, we forecast that our key measure of reported EBITDA interest coverage at the restricted group (including restructuring costs but excluding exceptional items) will fall to about 1.5x in 2016, compared with our previous forecast of about 2.0x. We exclude interest on the debt at BRSV from our calculation, because we understand that the upstreaming of dividends is currently restricted. We also anticipate a greater drop in FOCF in 2016 than we previously expected, as lower operating cash flows and increased investment in digital will be compounded by a one-time working capital outflow of about GBP35 million. This will result from the change in terms of a key bank notes supplier, and will only partially be offset by new alternative supply arrangements," S&P said. S&P's revision of Travelex's business risk profile to weak from fair reflects the pressures on Travelex's profitability, with the core group EBITDA margin before exceptional items declining to 4% in first half of 2016, from 9% in the first half of 2015. The business risk profile also reflects Travelex's exposure to the cyclical travel industry, the decreasing share of cash used by travelers, and the complex regulated environment in which Travelex operates. These business risk weaknesses are partly offset by the company's position as the largest nonbank provider of travel money worldwide, its product and geographic diversification, and strong franchise, coupled with favorable long-term trends for air travel volumes. In S&P's base case, it assumes: -- Mid-single-digit revenue growth, including the opening of new stores and ATMs, and an increase in outsourcing contracts. -- A four-to-five percentage point decline in the core group EBITDA margin in 2016, excluding exceptional expenses, due to lower wholesale shipments to Nigeria, declining activity in Brazil, higher investment in digital, and lower retail volumes due to European terror attacks. S&P anticipates stable to modestly improving EBITDA margins from 2017 onward. -- GBP8 million in exceptional expenses in 2016 related to the sale of Travelex to Dr. Shetty in 2015. -- Working capital requirement in 2016 of about GBP50 million, of which GBP35 million is a one-time outflow related to the change in terms of a key bank notes supplier, partly offset by new alternative supply arrangements. Disposal proceeds of GBP32 million in 2016 from the sale of Currency Select. -- Capital expenditures (capex) of about GBP30 million in 2016 and GBP20 million in 2017. -- No dividend payments to shareholders. Based on these assumptions, S&P arrives at these credit measures: -- Adjusted debt to EBITDA of about 9x in 2016 and 8x in 2017, including non-cash-pay shareholder loans and preferred shares of about GBP640 million, and the holding company's debt of $490 million. Unadjusted EBITDA cash interest coverage at the restricted group of about 1.5x in 2016 and 2x in 2017. S&P uses reported coverage ratios because its lease adjustments result in artificially improved metrics due to the importance of short-term lease commitments. -- S&P's forecast of FOCF after exceptional items at about negative GBP65 million in 2016 and positive GBP15 million in 2017. The stable outlook reflects S&P's opinion that Travelex's operating performance will progressively stabilize in the next 12 months, and that EBITDA in 2017 will moderately recover. S&P expects Travelex will report adjusted debt-to-EBITDA in 2016 of about 9x (including shareholder loans and holding company debt), and reported EBITDA cash interest coverage at the restricted group of about 1.5x (or about 2x on an adjusted basis, including the effect of operating leases). S&P also forecasts that FOCF will be materially negative in 2016 and broadly neutral in 2017, and that liquidity will stay adequate. S&P could lower the ratings if Travelex's earnings and FOCF deteriorated beyond S&P's current expectations, for example due to the loss of important wholesale contracts or a further deterioration of the geopolitical environment, resulting in increased leverage such that S&P no longer considered the capital structure to be sustainable. S&P could also lower the ratings if liquidity weakened, or if Travelex upstreamed cash to the holding company. An upgrade would require Travelex's operating performance to recover more strongly and quickly than S&P currently expects, with a broad based recovery in key markets and all business lines, resulting in EBITDA margins before exceptional items of clearly and sustainably in the double digits, and sustainably neutral-to-positive FOCF. An upgrade would also be contingent on leverage being at least stable. ********* 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 Ann L. Toledo, 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 * * *