/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/170202.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, February 2, 2017, Vol. 18, No. 24 Headlines F R A N C E JIC FIRMIANA: Fitch Withdraws 'B' Issuer Default Rating VIVARTE SAS: To Convert EUR800MM of Old Debt Into Equity * FRANCE: Number of Business Failures Down 8.3% in 2016 G E R M A N Y STABILITY CMBS 2007-1: Fitch Cuts Rating on Cl. E Notes to 'Csf' I R E L A N D ST. PAUL CLO VII: Fitch Assigns 'B-' Rating to Class F Notes TALISMAN-7 FINANCE: S&P Lowers Rating on Class D Notes to D I T A L Y ALITALIA SPA: Etihad Executives to Meet with Italian Ministers MARCOLIN SPA: S&P Raises CCR to 'B' on Improved Cash Flow MONTE DEI PASCHI: Germany Expresses Concerns Over State Rescue N E T H E R L A N D S MUNDA CLO I: S&P Affirms 'CCC+' Rating on Class E Notes R U S S I A PERESVET BANK: To Issue Subordinated Bonds to Creditors T U R K E Y TURKIYE IS: S&P Revises Outlook to Neg; Affirms 'BB' LT CCR U N I T E D K I N G D O M ROAD MANAGEMENT: S&P Revises Outlook to Pos. & Affirms B+ Rating * UK: Corporate Insolvency Numbers Up in 2016, R3 Says U Z B E K I S T A N IPAK YULI: Fitch Hikes Long Term Issuer Default Rating to 'B' X X X X X X X X * Downward Trend in Global Insolvencies Coming to an End ********* =========== F R A N C E =========== JIC FIRMIANA: Fitch Withdraws 'B' Issuer Default Rating ------------------------------------------------------- Fitch Ratings has withdrawn JIC Firmiana SAS's Issuer Default Rating of 'B'/Stable. Fitch has withdrawn the ratings for commercial reasons and due to lack of information. Accordingly, Fitch will no longer provide ratings or analytical coverage for JIC Firmiana. VIVARTE SAS: To Convert EUR800MM of Old Debt Into Equity -------------------------------------------------------- David Whitehouse at Bloomberg News reports that Vivarte CEO Patrick Puy told Le Figaro in an interview that EUR800 million of old debt will be converted into equity, and EU572 million of debt taken on in 2014 will have its maturity extended by two years to 2021. According to Bloomberg, Mr. Puy said the board will be almost completely overhauled as part of the agreement. As reported by the Troubled Company Reporter-Europe on Feb. 19, 2016, Bloomberg News related that Vivarte won a waiver to terms of a EUR535 million (US$596 million) loan after terror attacks in Paris and warm winter weather hurt the company's earnings late last year. The company in 2014 was taken over by creditors who agreed to restructure EUR2.8 billion of loans after France's sluggish economy and high unemployment took its toll on earnings, Bloomberg disclosed. Vivarte SAS is a French fashion retailer. It owns brands including Kookai and Naf Naf. * FRANCE: Number of Business Failures Down 8.3% in 2016 ------------------------------------------------------- Rudy Ruitenberg at Bloomberg News reports that fewer French businesses failed last year than at any time since the 2008 financial crisis, the latest sign that the euro area's second- largest economy is strengthening. A total of 57,844 French companies filed for protection for creditors, entered receivership or went bankrupt in 2016, Bloomberg relays, citing Altares, which analysis corporate data. That's down 8.3% from 2015, Bloomberg notes. The number of jobs threatened by insolvencies fell 15% to 200,000, Bloomberg discloses. Thierry Millon, director of studies at Altares, said the pace of business failures should decline again this year, falling to around 54,000, Bloomberg relates. In the construction industry, failures fell 13%, Bloomberg states. For trading companies, a 9.5% drop was led by a recovery for vendors of machinery, construction equipment and home- improvement goods, Bloomberg notes. According to Bloomberg, in manufacturing and processing, insolvencies declined 8.3%, with a better performance for suppliers of wood and construction materials, metallurgy and mechanical materials, and textile, clothes and leather. Not all areas of the economy did better, with insolvencies for people-transport companies jumping 31%, mainly in the taxi business, according to Altares, Bloomberg says. In agriculture, the number of insolvent livestock farmers increased 7.8%, according to Bloomberg. ============= G E R M A N Y ============= STABILITY CMBS 2007-1: Fitch Cuts Rating on Cl. E Notes to 'Csf' ---------------------------------------------------------------- Fitch Ratings has downgraded Stability CMBS 2007-1 GmbH's class E notes due 2022 to 'Csf' from 'CCsf' and revised the Recovery Estimate (RE) to 40% from 80%. The transaction is a synthetic securitisation of commercial mortgage loans originated by IKB Deutsche Industriebank AG. Kreditanstalt fuer Wiederaufbau (AAA/Stable/F1+) acts as intermediary, providing credit protection under a CDS with IKB while transferring the credit risk to the issuer and ultimately the noteholders. KEY RATING DRIVERS The transaction has EUR16.9 million of outstanding loans to five borrower groups, of which EUR8.6 million appears to provide over- collateralisation for the class E notes. However, EUR12 million is unsecured with limited recovery prospects. Fitch believes that the servicer is still seeking to claw back funds from 'borrower 48' that had reportedly been paid to shareholders prior to debt repayment. However, the agency believes that even a successful clawback, alongside full repayment of the other loans, would still leave the class E notes facing inevitable loss, which is reflected in downgrade. To date a loss of EUR6 million has been absorbed by the non-rated class F notes. Since the last rating action in February 2016 six loans were resolved, incurring a EUR1.2 million loss. The associated principal repayment of EUR27.4 million has amortised the balance of the class E notes and reduced potential further recoveries. This is reflected in the lower RE, which are based on the quality of the seven other loans. Four loans are heavily or fully amortising, with another expected to be redeemed via fixed instalments by its maturity in June. A fifth loan scheduled to repay in March is reportedly in the process of being refinanced. These five loans should be repaid in full (repaying EUR0.5 million). The other two are to 'borrower 24', secured on a single office building located in Germany, which has been 60% vacant for over a year. Applying a yield of 11% to reported income would result in a sizeable loss - compounded by the appreciation of CHF, in which around half the securitised loan is denominated. Fitch assumes that 10% of the loan balance will be lost solely on converting CHF back into EUR. Fitch estimates 'Bsf' recoveries of EUR3.4 million. RATING SENSITIVITIES Successful recourse to 'borrower 48' for the leaked payments should increase ultimate recoveries. Improved recovery prospects could also follow successful re-letting of the 'borrower 24' collateral. The class E notes will be downgraded to 'Dsf' once a loss is incurred and the rating will then be withdrawn within 11 months. DUE DILIGENCE USAGE Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. SOURCES OF INFORMATION The information below was used in the analysis. - Investor reporting provided by IKB Deutsche Industriebank AG as at end-January 2017 ============= I R E L A N D ============= ST. PAUL CLO VII: Fitch Assigns 'B-' Rating to Class F Notes ------------------------------------------------------------ Fitch Ratings has assigned St. Paul's CLO VII Designated Activity Company notes expected ratings: EUR229.4 million class A-1 notes due 2030: 'AAA(EXP)sf'; Outlook Stable EUR10.6 million class A-2 notes due 2030: 'AAA(EXP)sf'; Outlook Stable EUR23.15 million class B-1 notes due 2030: 'AA(EXP)sf'; Outlook Stable EUR9.5 million class B-2 notes due 2030: 'AA(EXP)sf'; Outlook Stable EUR21.1 million class B-3 notes due 2030: 'AA(EXP)sf'; Outlook Stable EUR5 million class C-1 notes due 2030: 'A(EXP)sf'; Outlook Stable EUR15 million class C-2 notes due 2030: 'A(EXP)sf'; Outlook Stable EUR21 million class D notes due 2030: 'BBB(EXP)sf'; Outlook Stable EUR25.25 million class E notes due 2030: 'BB(EXP)sf'; Outlook Stable EUR10 million class F notes due 2030: 'B-(EXP)sf'; Outlook Stable EUR44 million subordinated notes: not rated The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. St. Paul's CLO VII Designated Activity Company is a cash flow collateralised loan obligation (CLO). KEY RATING DRIVERS 'B'/'B-' Portfolio Credit Quality Fitch expects the average credit quality of obligors to be in the 'B'/'B-' category. The agency has public ratings or credit opinions on all the obligors in the identified portfolio. The weighted average rating factor (WARF) of the identified portfolio, which represents 72.3% of the target par amount, is 32.2, below the covenanted maximum WARF for assigning the expected ratings of 33. High Recovery Expectations At least 90% of the portfolio will comprise senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured, and mezzanine assets. Fitch has assigned Recovery Ratings to all obligations in the identified portfolio. The average recovery rate (WARR) of the identified portfolio is 68.4%, above the covenanted minimum for assigning the expected ratings of 66.75%. Diversified Asset Portfolio The transaction contains a covenant that limits the top 10 obligors in the portfolio to 20% of the portfolio balance. This ensures that the asset portfolio will not be exposed to excessive obligor concentration. Limited Interest Rate Risk Unhedged fixed-rate assets cannot exceed 15% of the portfolio while fixed-rate liabilities represent 5% of the target par amount. The transaction is therefore partially hedged against rising interest rates. Unhedged Non-Euro Assets Exposure The transaction is allowed to invest up to 2.5% of the portfolio in non-euro-denominated primary market assets without entering into an asset swap on settlement, subject to principal haircuts. Unhedged assets may only be purchased if after the applicable haircuts the aggregate balance of the assets is above the reinvestment target par balance. Additionally, no credit in the overcollateralisation (OC) tests is given to assets left unhedged for more than 180 days after settlement. TRANSACTION SUMMARY Net proceeds from the notes will be used to purchase a EUR400m portfolio of mainly euro-denominated leveraged loans and bonds. The transaction has a four-year reinvestment period. The underlying portfolio of assets will be managed by Intermediate Capital Managers Limited. The transaction documents may be amended, subject to rating agency confirmation or noteholder approval. Where rating agency confirmation relates to risk factors, Fitch will analyse the proposed change and may provide a rating action commentary if the change has a negative impact on the ratings. Such amendments may delay the repayment of the notes as long as Fitch's analysis confirms the expected repayment of principal at the legal final maturity. If in the agency's opinion the amendment is risk-neutral from a rating perspective Fitch may decline to comment. Noteholders should be aware that confirmation is considered to be given if Fitch declines to comment. The class B-3 and C-2 notes are not subject to 0% Euribor floor during the non-call period, which ends in April 2019 and the spreads on the notes will be 0.3% higher than the spreads on class B-1 and C-1 notes. After the non-call period, the class B-3 and C-2 notes will have a 0% Euribor floor and the spreads will step down to the same level as class B-1 and C-1 respectively. RATING SENSITIVITIES A 25% increase in the obligor default probability would lead to a downgrade of up to two notches for the rated notes. A 25% reduction in expected recovery rates would also lead to a downgrade of up to two notches for the rated notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. - Loan-by-loan data provided by the arranger as at 12 January 2017. - Offering circular provided by the arranger as at 30 January 2017 TALISMAN-7 FINANCE: S&P Lowers Rating on Class D Notes to D ----------------------------------------------------------- S&P Global Ratings lowered its credit ratings on Talisman-7 Finance Ltd.'s class C and D notes. At the same time, S&P has affirmed its 'D (sf)' ratings on all other classes of notes. The rating actions reflect interest shortfalls on the class D to J notes that occurred on the January 2017 interest payment date (IPD) and the increasing risk of a payment default due to the legal final maturity being less than three months away in April 2017. Talisman-7 Finance closed in June 2007, with notes totaling EUR1.8 billion. The original 10 loans were secured on commercial properties in Germany. Since closing, five loans have repaid. The notes have a current outstanding balance of EUR254.1 million and their legal final maturity date is in April 2017. All five remaining loans are in special servicing. The sales process is continuing for three of the loans, and the properties securing the other two loans have already been sold, but are being wound down. This was the first quarter that the class D notes have experienced interest shortfalls. RATING RATIONALE S&P's ratings in Talisman-7 Finance address the timely payment of interest (payable quarterly in arrears) and the payment of principal no later than the April 2017 legal final maturity date. Due to the approaching legal final maturity date, the class C notes have become more vulnerable to nonpayment, and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. S&P believes there is at least a one-in-three likelihood of default. S&P has therefore lowered to 'CCC- (sf)' from 'CCC (sf)' its rating on this class of notes. This is in line with S&P's criteria for assigning 'CCC' category ratings. Interest shortfalls have occurred on the class D notes for the first time at the January 2017 interest payment date. The interest shortfalls represent a failure of the notes to pay timely interest, which S&P believes is unlikely to be repaid. S&P has therefore lowered to 'D (sf)' from 'CCC (sf)' its rating on these notes, in line with its criteria. In line with these criteria, S&P has affirmed its 'D (sf)' ratings on all other classes of notes. These classes continue to experience interest shortfalls and for the class H, I, and J notes, principal losses have also been applied. RATINGS LIST Talisman-7 Finance Ltd. EUR1.826 bil commercial mortgage-backed floating-rate notes Rating Class Identifier To From C XS0304911224 CCC- (sf) CCC (sf) D XS0304911901 D (sf) CCC (sf) E XS0304912388 D (sf) D (sf) F XS0304912891 D (sf) D (sf) G XS0304912974 D (sf) D (sf) H XS0304913352 D (sf) D (sf) I XS0304913436 D (sf) D (sf) J XS0304913949 D (sf) D (sf) ========= I T A L Y ========= ALITALIA SPA: Etihad Executives to Meet with Italian Ministers -------------------------------------------------------------- Transport Weekly reports that executives from key investor Etihad Airways and Alitalia, which went bankrupt in 2008 and again was on the edge of collapsing in 2014, will meet with Italian ministers. According to Transport Weekly, three people familiar with the discussions said talks will be centered on new restructuring measures with development and transportation ministers in Rome. The plan could include as many as 1,600 job cuts, according to two of the people, who asked not to be identified before an official announcement, Transport Weekly relays, citing Bloomberg. Less than three years after Etihad bought a 49% stake as part of a plan to revive the Italian airline, Alitalia was notified in December by investors and creditors that it had 60 days to come up with a viable cost-cutting plan, Transport Weekly recounts. Alitalia has also authorized Etihad to pump in an additional US$231 million in funding via "semi-equity" financial instruments that lack voting rights, according to minutes of an extraordinary shareholders' meeting for the Italian carrier held on Dec. 22, Transport Weekly discloses. The Rome-based carrier said Dec. 22 that after reaching an agreement with shareholders, which include short-term financing deals with Italy's two biggest banks, Intesa Sanpaolo SpA and UniCredit SpA, Alitalia plans talks with labour unions, suppliers, aircraft leasing companies and other partners on potential spending reductions, including a road map for job cuts, Transport Weekly relays. Two people, as cited by Transport Weekly, said after losing EUR200 million (US$211 million) in 2015, Alitalia's deficit for last year could be near EUR400 million. About Alitalia Alitalia-Compagnia Aerea Italiana has navigated its way through a successful restructuring. After filing for bankruptcy protection in 2008, Alitalia found additional investors, acquired rival airline Air One, and re-emerged as Italy's leading airline in early 2009. Operating a fleet of about 150 aircraft, the airline now serves more than 75 national and international destinations from hubs in Fiumicino (Rome), Milan, Turin, Venice, Naples, and Catania. Alitalia extends its network as a member of the SkyTeam code-sharing and marketing alliance, which also includes Air France, Delta Air Lines, and KLM. An Italian investor group owns a majority of the company, while Air France- KLM owns 25%. MARCOLIN SPA: S&P Raises CCR to 'B' on Improved Cash Flow --------------------------------------------------------- S&P Global Ratings said that it raised to 'B' from 'B-' its long- term corporate credit rating on Italy-based eyewear manufacturer Marcolin SpA. The outlook is stable. At the same time, S&P upgraded to 'B+' from 'B' the issue rating on the existing EUR30 million revolving credit facility. The '2H' recovery rating on the debt is unchanged. S&P also upgraded to 'B' from 'B-' the issue rating on Marcolin's existing EUR200 million senior secured notes, with the '4H' recovery rating unchanged. At the same time, S&P assigned its 'B' issue rating to Marcolin's proposed EUR250 million senior secured floating rate notes maturing in 2023, with a recovery rating of '4L' indicating S&P's expectation of recovery prospects of around 35%. The upgrade reflects S&P's view that the company is improving its market position in the global eyewear industry, and that -- thanks to good operating performance -- it will generate positive cash flow from the 2016 full-year results. Additionally, S&P believes that the newly announced joint venture (JV) agreement with LVMH Group is supportive from a business standpoint. Finally, the proposed refinancing transaction (with EUR250 million senior secured notes and a EUR40 million of super senior revolving credit facility [RCF]) will allow the company to extend its debt maturity profile and to reduce the cost of debt, improving the EBITDA interest coverage ratio. The newly announced JV will be dedicated to the design, manufacture, and distribution of certain LVMH eyewear brands. Initially, from January 2018, the JV will manage the license of Celine and the production agreement with Louis Vuitton. S&P expects that additional opportunities from LVMH's luxury brand portfolio could materialize in the near future, given the JV's aim to become the preferred partner of LVMH in the eyewear business. As a result, S&P expects that the JV will start to have a critical mass in terms of size from 2020. Total equity contributions to the JV from Marcolin are expected to be about EUR20 million-EUR25 million over the next four years. Remaining funding to the JV is expected to come from debt raised at the JV level and a LVMH equity contribution. S&P notes that debt funding for the JV will have no recourse to Marcolin. Marcolin will have a 49% stake in the JV's equity, accounting for the minority investment in the JV with the equity method, whereas LVMH Group will maintain the control with 51%. In 2028-2029, Marcolin could exercise a put option over its JV's ownership stake, whereas LVMH has been granted a call option. In addition to the partnership under the JV, LVMH Group will inject about EUR22 million of cash equity into Marcolin's capital. Post-transaction, LVMH Group will hold 10% of Marcolin's equity, becoming the second-largest shareholder after the controlling stake (about 72%) owned by PAI Partners, the private equity sponsor. This transaction reinforces the strategic sense and support to the JV potentially coming from LVMH Group. S&P's rating action is also supported by Marcolin's improved cash conversion driven mainly by the underlying growth in its top-line and EBITDA, and optimization of its working capital management. Under S&P's base case, it assumes the company will be able to generate positive cash flow from 2016 (about EUR10 million- EUR20 million per year). The company has a clear long-term license maturity schedule, with the licenses for its two key brands, Tom Ford and Guess, ending in 2029 and 2025, respectively. Marcolin's brand portfolio also seems to be well balanced between diffusionand luxury segments. However, the Tom Ford and Guess brands represent high revenue concentration as they account for more than 50% of sales, and the contribution of the property brand is very limited. The company has also experienced a certain degree of volatility in its profitability metrics in past years, and we highlight how the U.S. market (about 40% of the company's sales) is currently experiencing some negative trends, offset by positive dynamics in Europe. Finally, S&P notes that the new proposed refinancing (with repayment of EUR200 million senior secured notes and outstanding amount under the current RCF) will extend Marcolin's maturity debt profile and improve its EBITDA interest coverage ratio due to lower expected average cost of debt. S&P continues to assess Marcolin's financial risk profile as highly leveraged, reflecting fully S&P Global Ratings-adjusted debt to EBITDA of above 5.0x and Marcolin's ownership by PAI Partners. In S&P's base case, it assumes: -- Mid-single-digit growth in sales for 2016 and 2017, mainly thanks to the new license agreements and good performance of the luxury segment. Adjusted EBITDA margin of about 12% over the next two years. -- About EUR20 million of annual capital expenditure (capex) at year-end 2016, down from the peak of EUR25 million in 2015. -- Total cash-out for the new JV with LVMH Group for about EUR24 million to be paid over 2017-2020. -- No dividend payments or acquisitions. Based on these assumptions, S&P arrives at these credit measures: -- Adjusted debt to EBITDA of around 5.5x over the next two years. -- Adjusted EBITDA interest coverage above 2.5x over 2017-2018. The stable outlook on Marcolin reflects S&P's view that the company will be able to post positive cash flow generation and to moderately improve its top-line base and profitability supported by the long-term maturity schedule of its brand licenses. In S&P's base-case scenario, it projects that Marcolin will maintain an adjusted debt-to-EBITDA ratio above 5.0x and that the EBITDA interest coverage will be in the upper end of the 2.0x-3.0x range. S&P could consider a negative rating action if the company did not meet S&P's expectation of positive discretionary cash flow generation over 2017-2018. This could occur from deterioration in its profitability, for example, if Marcolin faced continued difficulties in emerging markets due to higher competition, as well as a sharp slowdown in European markets where the company generates about 35% of its sales. S&P could also take a negative rating action if it saw deterioration in Marcolin's liquidity or a material reduction in its EBITDA interest coverage ratio below 2.0x. A positive rating action appears remote at this stage. S&P could consider such an action if the company deleveraged significantly so that its adjusted debt-to-EBITDA fell sustainably below 5.0x driven, for example, by a material improvement in its EBITDA. In addition, for S&P to consider an upgrade, the company should be able to increase its revenue diversification by main brands. MONTE DEI PASCHI: Germany Expresses Concerns Over State Rescue -------------------------------------------------------------- Boris Groendahl at Bloomberg News reports that German officials and lawmakers are concerned the state rescue of Banca Monte dei Paschi di Siena SpA is stretching the credibility of the European Union's new regime for too-big-to-fail banks. Wolfgang Schaeuble's Finance Ministry remains skeptical about Italy's plan to protect individual investors and would prefer them to seek individual compensation through the courts rather than en masse as Italy plans, Bloomberg relays, citing officials familiar with internal discussions, who asked not to be identified because the talks are private. Lawmakers from the ruling coalition urged the European Commission to fully enforce the rules for failing banks, Bloomberg relates. "Italy's plans are a provocation," Bloomberg quotes Carsten Schneider, the deputy head of the Social Democrat caucus in the Bundestag, Germany's lower house of parliament, as saying. "For the European Commission and the European Central Bank, this is the litmus test for whether the new European rules for bank resolution are enforced." In a bailout that is slated to cost EUR8.8 billion (US$9.5 billion), Italy is using a provision that allows state support for solvent banks in exceptional circumstances, Bloomberg discloses. To avoid misuse of that clause for old-style bail-outs, the law states that such support mustn't cover "losses that the institution has incurred or is likely to incur in the near future" and instead seeks to protect a sound bank against a shock from external influences out of its control, Bloomberg notes. According to Bloomberg, the officials said a key element that irks the Germans is Italy's plan for 40,000 individual investors who own Monte Paschi's Tier 2 subordinated bonds to receive EUR2 billion of senior notes in a transaction effectively funded by the Italian government. Italy justifies the deal by claiming that Monte Paschi mis-sold the securities, understating their risk, Bloomberg states. Other subordinated creditors will be forced to convert into equity, Bloomberg says. In a closed meeting with lawmakers, Mr. Schaeuble acknowledged that there is an option for state aid in the BRRD, saying that it was up to the commission to make sure the rules governing aid are observed, according to participants, who asked not to be named because the meeting was private, Bloomberg relates. According to Bloomberg, while Mr. Schaeuble stopped short of explicitly questioning the legality of Rome's plan, he said retail investors should seek redress individually. "The owners and the creditors must be the ones who cover the bank's losses," Bloomberg quotes Klaus Peter Willsch, a lawmaker for Mr. Schaeuble's and Chancellor Angela Merkel's Christian Democratic Union, as saying. "The bail-in regime mustn't be hollowed out. You can't create one exception after the other to limit the bail-in principle." The Germans' concern centers on the likelihood that the Monte Paschi bailout will set a bad example, opening a door for other nations to pass through, Bloomberg discloses. A second element of the Monte Paschi bailout that Germany dislikes comes from the fact that the bank's main problem is the towering pile of bad debt that accounts for about a third of its loan book, Bloomberg relays, citing one of the officials familiar with the discussions. The ECB has told the Italian lender to shrink the stack of soured loans by selling them, crystallizing further losses, according to Bloomberg. The official said Germany argues those losses have already been incurred, making them exactly the kind that's ineligible for state aid, Bloomberg relates. The same could be said about the program to compensate individual bondholders, which Berlin also considers a legacy loss that can't be offset using government cash, Bloomberg notes. The official, as cited by Bloomberg, said if taxpayer bailouts become the norm again, the link between sovereigns and banks that the EU has sought to sever would be reinforced, which goes against the idea behind the creation of a banking union. 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. ===================== N E T H E R L A N D S ===================== MUNDA CLO I: S&P Affirms 'CCC+' Rating on Class E Notes ------------------------------------------------------- S&P Global Ratings raised its credit ratings on Munda CLO I B.V.'s class A-1 and A-2 notes. At the same time, S&P has affirmed its ratings on the class B, C, D, and E notes. The rating actions follow S&P's review of the transaction's performance. S&P performed a credit and cash flow analysis and assessed the support that each participant provides to the transaction by applying S&P's current counterparty criteria. In S&P's analysis, it used data from the November 2016 performance report. From S&P's analysis, it has observed that the available credit enhancement has increased for all of the rated classes of notes (except the most junior rated class E notes), driven by the deleveraging of the senior notes after the end of the reinvestment period in January 2014. The weighted-average spread earned on Munda CLO I's collateral pool has also decreased to 2.7% from 2.8% at S&P's previous full review. Since S&P's previous review, the class A notes have further deleveraged. All classes of notes (including the deferrable class C to E notes) are paying timely interest, as they were at S&P's previous review. The class E notes include a turbo feature, which amortizes the principal amount outstanding of the notes if the class E par value test fails. Since closing, EUR4.16 million of class E notes have been redeemed due to the failure of the class E turbo par value test. The class E notes have redeemed by EUR2.93 million since S&P's previous review. All coverage tests are passing except for the class E notes, which is unchanged since S&P's previous review. At the same time, the transaction's weighted-average life has slightly increased to 4.8 years from 4.3 years and, the weighted-average recovery rates have decreased by about 100 to 300 basis points across the rating levels. The non-euro-denominated loans in the portfolio (0.1% of the performing balance) are hedged under cross-currency swap agreements. In S&P's opinion, the downgrade remedies for these cross-currency swaps do not fully comply with S&P's current counterparty criteria. Consequently, S&P has assumed for cash flow scenarios above 'AA-' rating stresses that the currency swap counterparty does not perform and where, as a result, the transaction is exposed to changes in currency rates. The cross- currency swap provider is JP Morgan Chase Bank N.A. (A+/Stable/A- 1). In S&P's previous analysis, it applied its (now superseded) nonsovereign ratings criteria. S&P gave no credit to the excess exposure of assets from the Kingdom of Spain and the Republic of Italy at the 'AAA' rating level. These criteria were replaced by S&P's structured finance ratings above the sovereign (RAS) criteria. Upon publishing S&P's RAS criteria, it placed those ratings that could potentially be affected under criteria observation. Following S&P's review of this transaction, its ratings that could potentially be affected by the criteria are no longer under criteria observation. Under S&P's RAS criteria, exposure to all of the sovereigns is within the allowable thresholds, except for the exposure to Spain. The current exposure to assets from Spain is more than 26% of the pool, which is higher than the threshold of 15%. In S&P's analysis, it has stressed this exposure using its CDO Evaluator model. "We subjected the capital structure to a cash flow analysis to determine the break-even default rates (BDRs) for each rated class of notes. In our analysis, we used the reported portfolio balance that we considered to be performing, the current weighted-average spread of the asset portfolio, and the weighted- average recovery rates for the performing portfolio. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category," S&P said. With the same weighted-average rating, the deleveraging of the portfolio, and the slightly longer weighted-average life, the scenario default rates (SDRs) have increased at senior rating levels. At the same time, with further deleveraging of both the class A and E notes, the timely payment of interest, the application of S&P's RAS criteria, and the lower exposure to non- euro-denominated assets have benefitted the BDRs. The SDRs represent expected default levels for the portfolio under the different stress scenarios associated with each rating level. The BDR represents the maximum amount of defaults that a tranche can withstand, while still being able to pay timely interest and ultimate principal to the noteholders. For a tranche to achieve a particular rating, S&P looks for the tranche to withstand the level of defaults projected by CDO Evaluator (i.e., the BDR should be higher than the SDR). S&P's analysis indicates that the available credit enhancement for the class A-1 and A-2 notes is commensurate with higher ratings than those currently assigned. S&P has therefore raised its ratings on these classes of notes. At the same time, S&P has affirmed its ratings on the class B, C, D, and E notes because its credit and cash flow analysis indicates that the available credit enhancement for these classes of notes is commensurate with S&P's currently assigned ratings. Munda CLO I is a managed cash flow collateralized loan obligation (CLO) transaction that securitizes loans to primarily European speculative-grade corporate firms. The transaction closed in December 2007 and is managed by Cohen & Co. Financial Ltd. RATINGS LIST Class Rating To From Munda CLO I B.V. EUR650 Million Senior Secured Floating-Rate And Deferrable Notes Ratings Raised A-1 AAA (sf) AA+ (sf) A-2 AAA (sf) AA+ (sf) Ratings Affirmed B AA+ (sf) C A+ (sf) D BB+ (sf) E CCC+ (sf) =========== R U S S I A =========== PERESVET BANK: To Issue Subordinated Bonds to Creditors ------------------------------------------------------- Anna Baraulina at Bloomberg News reports that Russia's central bank deputy governor, Vasily Pozdyshev, said Peresvet will issue subordinated bonds so that creditors can convert their debt. According to Bloomberg, the Bank of Russia will assess if Peresvet has need for central bank funding after the subordinated debt issue is completed. * * * As reported by the Troubled Company Reporter-Europe on Jan. 2, 2017, S&P Global Ratings lowered its issue ratings on all bonds issued by Russia-based JSCB Peresvet Bank to 'D' from 'CC'. S&P also lowered its Russia national scale issue ratings on the bonds to 'D' from 'ruCC'. S&P affirmed its 'D' long-term counterparty credit and Russia national scale ratings on the bank. The Central Bank of Russia imposed temporary administration and a six-month payment moratorium on Peresvet Bank on Oct. 22, 2016. The bank's official disclosures state that as of Dec. 1, 2016, its negative equity dropped to more than RUB35.1 billion (about US$542 million), indicating a major gap between the value of its liabilities and assets. Consequently, the bank failed to pay the Dec. 21, 2016, coupons on its bonds, including the senior unsecured bond we rate (ISIN: RU000A0JUP97) due June 22, 2017. On Oct. 27, 2016, the Troubled Company Reporter-Europe reported that Fitch Ratings downgraded Russia-based CJSC Peresvet Bank's Long-Term Issuer Default Ratings (IDRs) to 'D' from 'B+' and removed them from Rating Watch Negative (RWN). Jan. 26 Peresvet Creditors to Convert Debt Into Subordinated Bonds By Anna Baraulina (Bloomberg) -- Peresvet will issue subordinated bonds so that creditors can convert their debt, central bank deputy governor Vasily Pozdyshev tells reporters in Moscow. Bank of Russia to assess if Peresvet has need for central bank funding after subordinated debt issue is completed NOTE: Bank of Russia Extends Peresvet Moratorium by 3 Months jan. 27 =========== T U R K E Y =========== TURKIYE IS: S&P Revises Outlook to Neg; Affirms 'BB' LT CCR ----------------------------------------------------------- S&P Global Ratings said that it revised its outlook to negative from stable on these five Turkish financial institutions: -- Turkiye Is Bankasi A.S. (Isbank); -- Turkiye Garanti Bankasi A.S. (Garanti); -- Garanti Finansal Kiralama A.S. (Garanti Leasing); -- Yapi ve Kredi Bankasi A.S. (YapiKredi); and -- Turkiye Vakiflar Bankasi TAO (VakifBank). At the same time, S&P affirmed the 'BB' long-term counterparty credit ratings on all five financial institutions and the 'B' short-term ratings on Isbank, Garanti Leasing, YapiKredi, and VakifBank. S&P also lowered its long-term Turkey national scale ratings on Isbank, VakifBank, and YapiKredi to 'trAA-' from 'trAA'. S&P affirmed its 'trA-1' short-term Turkey national scale ratings on these entities. The outlook revision follows that on the Republic of Turkey. The outlook revision on Turkey reflects the risk that sustained inflationary and currency pressures could weaken the financial strength of Turkey's companies and banks, undermining growth and fiscal outcomes during a period of rising global interest rates. The stand-alone credit profiles (SACPs) of Garanti, Isbank, VakifBank, and YapiKredi remain unchanged at 'bb+'. Ongoing currency depreciation is increasing indirect credit risks for Turkish banks, in S&P's view. Although banks don't carry material open foreign currency positions, they have a substantial amount of loans denominated in foreign currency. It helps that this is almost entirely lent to nonfinancial private-sector corporates, but these carry an open position in foreign currency that is close to 27% of Turkey's GDP. S&P understands that only a small portion of this foreign currency debt is short term and most of it is owed by large blue-chip corporates and multinationals, mitigating risks. However, since S&P's last review of its ratings on Turkey on Nov. 4, 2016, the Turkish lira has depreciated by 18% against the U.S. dollar. This means that the indebtedness of the entities with foreign currency loans is growing at an unprecedented pace, in an environment of decreasing economic growth, geopolitical instability in key neighboring markets, and rising interest rates. S&P therefore has concerns around the asset quality of banks, despite the only modest deterioration of asset quality so far and from a strong base in the last two years. The system's ratio of nonperforming loans (NPLs; loans over 90 days delinquent) stood at 3.3% as of year-end 2016. However, when adjusted for NPLs sales and restructured loans that are closely monitored by the regulator (classified as group II loans); S&P estimates the ratio of problem assets to be slightly above 5% of systemwide loans. The ongoing slide of the lira versus hard currencies is also taking its toll on the regulatory capital ratio (CAR) of banks. According to S&P's estimate, a 10% depreciation of the lira would consume about 50-60 basis points (bps) of the systemwide CAR. Turkish banks also remain vulnerable to potential shifts in global debt and capital markets, notably in terms of the rollover and cost of their external debt, which still funds a higher share of assets than most peers. Positively, the pace of loan growth is now more in line with that of deposits. While the demand for new credit from both retail and corporate sectors remains subdued, S&P understands that systemwide loan growth in 2016 reached 16%, mostly because of weak performance of the lira inflating foreign-currency-denominated loans. S&P still believes that Turkish banks will remain resilient to the country's signs of economic weakness. Although Turkish banks operate in a relatively high-risk operating environment, their sound asset quality, earnings, and capitalization provide a good buffer to absorb any potential moderate volatility without dramatically damaging the banks' financial profiles. The negative outlooks on these entities reflect the negative outlook on Turkey. In S&P's opinion, Turkish banks' financial profiles and performance will remain highly correlated with the sovereign's creditworthiness, owing to their significant holdings of government securities and exposure to the domestic environment. Bank-specific factors that might lead S&P to revise its ratings on these five financial institutions are therefore limited, and future rating actions on these entities would be mainly contingent on S&P's rating actions on Turkey. Although S&P's SACPs on Garanti, Isbank, VakifBank, and YapiKredi are at 'bb+', S&P do not rate any Turkish bank above our foreign currency sovereign credit ratings on Turkey. Therefore, a lowering of the foreign currency rating on the sovereign would trigger a lowering of the ratings on these five financial institutions. S&P would revise the outlooks on these entities to stable if it revised its outlook on the sovereign to stable. ========================== U N I T E D K I N G D O M ========================== ROAD MANAGEMENT: S&P Revises Outlook to Pos. & Affirms B+ Rating ---------------------------------------------------------------- S&P Global Ratings said that it had revised its outlook to positive from stable on the issue rating of the GBP165 million fixed-rate bonds due 2021 issued by U.K.-based limited purpose entity Road Management Consolidated PLC (RMC). S&P affirmed the issue rating at 'B+'. The recovery rating remains at '1'. The outlook revision reflects strong traffic performance in 2016 in which total traffic volumes across the two roads rose by over 3% in 2016, outperforming the U.K.'s economic performance indicators for a third consecutive year and above our 2% 2016 growth forecast. The project continues to retain sizable trapped cash reserves, including GBP13.8 million (as of Dec. 31, 2016,) in the special reserve account (SRA), that have built up over time as a result of historical contractual lock-up and can be used to support senior debt service. Under S&P's base case, it forecasts that the percentage of total trapped cash in the senior debt service reserve account (DSRA) and the SRA -- currently around 30% of the GBP106 million outstanding senior debt as of Dec. 31, 2016 -- will continue to strengthen as the senior debt is repaid to more than 60% ahead of full senior debt repayment in 2021. Additional protection is provided by a six-month DSR letter of credit from Barclays Bank. Therefore, in S&P's opinion, the likelihood of the notes being fully repaid at maturity has increased. S&P's 'B+' rating continues to reflect the project's weak financial performance that results from low traffic volumes, with annual consolidated debt service coverage ratios (DSCRs) forecast to remain marginally below 1x, per S&P's base case. However, the risk of weak cash flow ratios is partially mitigated by the strength of the project under S&P's downside sensitivity stress case, thanks to the support provided by the cash balances in the DSRA and the SRA, which enables the project to withstand an extended period of stress. RMC issued the fixed-rate bonds to fund the construction of two shadow toll roads: the A1(M) between Alconbury and Peterborough; and the A419/A417 between Swindon and Gloucester. Construction of both roads was completed in 1998. The two road projects are cross-collateralized. The project's revenues are derived from traffic volumes via a shadow toll mechanism. The project's ordinary vehicle volumes were significantly below the original expectations at financial close in 1996, and S&P forecasts that they will remain in the lowest payment band for both roads for the remainder of the concession. S&P continues to maintain its 1% base-case estimates for traffic growth, but could revise this upward if traffic growth remains in line with recent historical performance in 2017. The SRA must hold the equivalent to the next 12 months of debt service costs for a period of two to four years, depending on the level of the backward contractual ratios: A contractual ratio of less than 1.35x means that the SRA must hold a balance equal to the debt service costs for 24 months; and for 48 months for a ratio of less than 1.25x. The contractual ratio calculation differs materially from S&P Global Ratings' cash flow-based ratio definition. However, S&P anticipates that the project will retain the SRA in place until the senior debt has been fully repaid in June 2021. The bonds retain an unconditional and irrevocable guarantee provided by Ambac Assurance Corp. (Ambac) of payment of scheduled interest and principal. According to S&P's criteria, the rating on a monoline-insured debt issue reflects the higher of either the rating on the monoline or the Standard & Poor's underlying rating (SPUR). Therefore, the long-term rating on the bonds reflects the SPUR, as S&P Global Ratings no longer rates Ambac. The SPUR is driven by the operations phase stand-alone credit profile, given that the project is not exposed to construction risk. The positive outlook reflects S&P's opinion of RMC's strengthening credit quality and our expectations of a higher likelihood of the notes being repaid in full by maturity in June 2021. S&P forecasts that the percentage of total trapped cash in the SRA and DSRA relative to the balance of senior debt will continue to increase over the next five years as the senior debt principal is fully repaid. Senior debt principal repayment will average 20% per year. An upgrade of at least one notch is dependent upon the project continuing to exhibit robust traffic growth on the two roads and retaining sizable trapped cash reserves, over and above the 12- month DSR amount, which provides material protection to lenders. S&P could revise the outlook to stable or lower the rating if traffic volumes are materially below S&P's base-case assumptions, leading to a reduction in trapped cash below its base-case expectations. An increase in lifecycle expenditures or deteriorated liquidity due to a release of funds from the SRA could also negatively affect the rating, as it would remove the protection currently afforded to lenders. * UK: Corporate Insolvency Numbers Up in 2016, R3 Says ------------------------------------------------------ Commenting on the rising personal and corporate insolvency statistics in 2016, announced by the government on Jan. 27, Andrew Tate, president of insolvency and restructuring trade body R3, says: Corporate insolvencies "The corporate insolvency numbers have been skewed by a wave of personal service companies being closed in the last quarter. It may have been just the closure of a handful of companies run by an umbrella provider which led to the spike. When you look beyond that though, 2016 had more or less the same number of insolvencies as last year." "Despite a number of challenges for businesses in 2016 -- the fall in the value of the pound since June's EU referendum and the introduction of the National Living Wage among them -- there is still a lot of downward pressure on corporate insolvency numbers to balance these out." "Businesses are enjoying a significant safety net: compared to the pre-financial crisis economy, creditors -- particularly banks -- are much more patient with their borrowers, businesses are benefiting from record low borrowing costs, and an increased focus by the insolvency and restructuring profession on early intervention has helped businesses avoid formal insolvency procedures." "Businesses are in a position where they can sit on cash or take on new borrowing. R3's regular surveys of business distress have found that key signs of business distress are near their record lows, and that almost one-in-ten (8%) businesses are paying off only the interest on their debts." "The fall in the value of the pound since the summer will undoubtedly have been a shock to some smaller businesses though -- almost half our members have said Brexit has come up in discussion with struggling businesses since June." "After half a decade of falling insolvencies, insolvency levels are lower now than they were even before the financial crisis. However, the decline now seems to have stalled and we've had a very small increase instead -- that's the first increase in insolvencies since 2011." "2017 will be an important test: many larger firms will have been protected from the pound's fall by currency hedges or long-term fixed-price contracts, but these will unwind or end this year. Businesses have been buoyed by resilient consumer spending since the EU referendum but much of this is on the back of increased borrowing -- it's not clear how sustainable this will be. Firms in the South East and London will also have to adjust to new, higher business rates from April." Personal insolvencies "Increasing access to statutory personal insolvency procedures has been the story behind 2016's rising personal insolvency numbers. It's not necessarily that more people have needed a personal insolvency procedure, but that more people are able to enter a debt solution appropriate to their situation." "There are still some significant downward pressures on personal insolvency numbers though, which have helped reduce insolvencies since the last quarter." "Despite a recent acceleration in consumer borrowing, personal finances are not too bad at the moment. R3's last survey of British adults' personal finances found that 38% of British adults were at least fairly worried about their current level of debt -- a proportion that has fallen steadily from the 46% in the same position in March 2015. And while businesses have some pressing Brexit concerns, any financial impact of the EU referendum result, such as higher inflation, will take a little while to filter through to wallets and purses." "Compared to last year, however, insolvency numbers are much higher. This is mostly thanks to changes in the way insolvency procedures work." "Access to Debt Relief Orders (DROs) was widened at the end of 2015 -- as campaigned for by R3 -- allowing more people on low incomes and with few assets to deal with small, but problem debts. DRO numbers have been correspondingly higher throughout 2016 as a result." "Similarly, bankruptcy applications moved online in April 2016, improving accessibility, slightly reducing the application cost, and removing some of the stigma involved in the bankruptcy process. The fall in bankruptcy numbers is lower than it has been recently." "IVAs leapt during 2016, but with real wage growth continuing and inflation still historically low, albeit rising, it is more likely the increase is down to changes in the debt management plan market than wider economic factors. Non-statutory debt management plans have come under increased scrutiny from the FCA and elsewhere, which has seen those in long-term versions of these plans switching to more appropriate statutory debt solutions, typically IVAs. IVAs must be overseen by a licensed insolvency practitioner." "It's important to remember that the government's personal insolvency statistics do not include the thousands of people who are still in non-statutory debt management plans. These are now regulated by the FCA, but no numbers are published which would help us understand their usage." "And while a debt management plan may be suitable for some users, others may be better suited to a formal insolvency procedure that they cannot access. To enter bankruptcy, for example, costs ú680 in up-front government fees. Making these fees payable by instalments over the course of a bankruptcy would help those who need to access a formal insolvency procedure more suited to their situation." R3 is the trade body for Insolvency Professionals, and represents the UK's Insolvency Practitioners. =================== U Z B E K I S T A N =================== IPAK YULI: Fitch Hikes Long Term Issuer Default Rating to 'B' ------------------------------------------------------------- Fitch Ratings has upgraded the Long-Term Issuer Default Ratings (IDR) of Ipak Yuli Bank (IY) and PJSB Trustbank (TB) to 'B' from 'B-' and Universalbank (UB) to 'B-' from 'CCC'. The Outlooks are Stable. The upgrades of the banks' ratings mainly reflect their extended records of reasonable performance and asset quality, partly owing to Uzbekistan's stable economic environment, which has been resilient amid the regional downturn. However, the ratings still factor in structural weaknesses in the economy, the country's tightly regulated FX market and the banks' modest and fairly concentrated franchises in the state-dominated banking sector. Franchise limitations are more acute for UB, which is rated one notch lower than its peers given its very small scale, concentrated balance sheet and somewhat higher risk-appetite. The Stable Outlooks reflect Fitch's view that the banks' credit profiles are unlikely to deteriorate significantly in the near term, supported by continued economic growth in Uzbekistan (Fitch forecasts 7% in 2017) and generally reasonable capital or pre- impairment profitability buffers. KEY RATING DRIVERS Asset quality remains adequate in all three banks, with non- performing loans (NPLs, 90 days overdue) staying in low single digits at end-3Q16 (IY: 1.3% of loans; TB: nil; UB: 3%). However, this should be viewed in light of rapid loan book growth (33%-55% for 2016) and limitations in local GAAP disclosure in the case of UB (whose latest IFRS accounts are for 2015). NPL reserve coverage was strong in IY (3x by total reserves, 30% by specific reserves) and moderate in UB (50% both by total and specific reserves), while TB's reserves were 4% of gross loans. Beyond that, comfortable additional loss absorption capacity is available from the banks' capital cushions and pre-impairment operating profits (IY: 9% of average loans, TB: 15%, and UB: 9% based on annualised 9M16 results). Borrower concentration levels are moderate in IY (the top 25 borrowers accounted for 21% of loans at end-3Q16), but high in TB (50%) and UB (57%). Fitch assesses IY's and TB's largest exposures as moderate risk working-capital loans to manufacturing companies, while UB's are somewhat higher-risk due to weaker underwriting and limited access to higher-quality borrowers. Foreign-currency (FC) lending is moderate at IY (21% of loans) and low at TB and UB (1% and 0% of loans). Additional risk stems from FC letters of credit covered by local-currency deposits (11% of Fitch Core Capital (FCC) at IY and 8% of FCC at TB), although according to management most FC loans and letters of credit were issued to exporters who have access to FC. Banks keep moderate long FC positions (below 15% of equity), which mitigates FC risks. Official exchange-rate depreciation has been moderate recently (13% in 2016, 14% in 2015), but the potential shift to a more flexible FX regime may trigger a sharper devaluation. Capital buffers were moderate relative to the banks' risk profiles. FCC ratios were 13% at IY at end-3Q16, 17% at TB at end-1H16, and 25% at UB at end-2015. The end-2016 regulatory total capital ratio was rather tight at IY (12.9%; regulatory minimum 12.5% from January 2017), but should improve by about 0.4 pps after planned subordinated debt injections. Ratios were more adequate at TB (15.5%) and UB (19.1%). The banks' funding was sourced mainly from customer deposits (79% of total liabilities at IY, 98% at TB and UB), which are short term, but have been broadly stable at all three banks. Depositor concentrations are high at TB (the largest 20 deposits accounting for 67% of total customer funding at end-3Q16) while IY's and UB's deposits are more granular (31 and 43% respectively). IY is the only bank with meaningful borrowings from international financial institutions (16% of liabilities), but foreign debt repayments are manageable (3% of total liabilities in 2017) and linked to loan repayments. Liquidity profiles were reasonable at all banks due to solid buffers (at end-2016 liquid assets, net of near-term repayments, were in the range of 30%-50% of customer deposits at all three banks). All three banks hold large FC liquidity buffers sufficient to withstand substantial (above 50%) reductions in FC- denominated customer funding. The banks' Support Rating Floors of 'No Floor' and their '5' Support Ratings reflect thei banks' limited systemic importance and Fitch's view that extraordinary support from the Uzbek authorities is therefore unlikely. The ability of the banks' shareholders to provide support cannot be reliably assessed and therefore this support is not factored into the ratings. RATING SENSITIVITIES Upside for the banks' ratings is currently limited, but could arise in case of an overall improvement in the operating environment. UB's ratings may be also upgraded if the bank diversifies its franchise significantly along with a tightening of risk policies. The banks' ratings could be downgraded in case of significant deterioration in the operating environment or a weakening of asset quality and capital metrics. Fitch does not anticipate changes to the Support Ratings and SRFs given the banks' limited systemic importance. The rating actions are: Ipak Yuli Bank Long-Term Foreign and Local Currency IDRs upgraded to 'B' from 'B-'; Outlook Stable Short-Term Foreign and Local Currency IDRs affirmed at 'B' Viability Rating upgraded to 'b' from 'b-' Support Rating affirmed at '5' Support Rating Floor affirmed at 'No Floor' Trustbank Long-Term Foreign and Local Currency IDRs upgraded to 'B' from 'B-'; Outlook Stable Short-Term Foreign and Local Currency IDRs affirmed at 'B' Viability Rating upgraded to 'b' from 'b-' Support Rating affirmed at '5' Support Rating Floor affirmed at 'No Floor' Universalbank Long-Term Foreign and Local Currency IDRs upgraded to 'B-' from 'CCC'; Outlook Stable Short-Term Foreign and Local Currency IDRs upgraded to 'B' from 'C' Viability Rating upgraded to 'b-' from 'ccc' Support Rating affirmed at '5' Support Rating Floor affirmed at 'No Floor' =============== X X X X X X X X =============== * Downward Trend in Global Insolvencies Coming to an End -------------------------------------------------------- In 2016, companies struggled to stay resilient despite robust support from policymakers, according to Euler Hermes, the worldwide leader in trade credit insurance. Strong deflationary pressure and subdued global demand made life harder for businesses. After two years of substantial declines in insolvencies, the Euler Hermes 2016 Global Insolvency Index -- which weighs countries based on their GDP and represents 84% of world GDP -- should record a limited decrease of -2%. "The downward trend in global insolvencies is coming to an end," said Ludovic Subran, chief economist at Euler Hermes. "This is happening because global growth is not accelerating and will linger below +3% in the coming years. Companies are therefore more vulnerable to external shocks." At a global level, the contained return of inflation should provide only limited relief to corporate revenues, while companies will face higher input costs, upward wage pressure and tighter financing conditions. Businesses absorbed the 2008-2009 shock, but remain vulnerable to the lack of a solid macroeconomic and financial environment. In 2016 they faced major global headwinds: -- A sluggish global economy (real GDP growth +2.5% in 2016 vs. +2.7% in 2015) -- A sharp slowdown in global trade (+1.9%) -- Fierce price competition -- Volatile exchange rates and international financial flows. "Bankruptcies are on the rise in Asia Pacific and the Americas, and Europe's improvement is fading. We expect global insolvencies to rise by +1% in 2017," continued Mr. Subran. Europe appeared immune to the gloom in the rest of the world in 2016, with insolvencies decreasing by -5%. Meanwhile, Latin America should post its fifth consecutive increase in insolvencies (+18%), impacted by recession in Argentina, Brazil and Venezuela, low commodity prices and currency depreciations. In Asia Pacific, the Chinese slowdown and a rebound in insolvencies and protectionism will impact companies. In North America, the steady decline in insolvencies has come to an end. The +45% surge in the number of major bankruptcies (over EUR 50 mn) registered in the first three quarters of 2016, compared to the same period in 2015, is a source of second-round turbulence. Large bankruptcies will have a domino effect, with adverse implications for fragile suppliers, particularly for energy companies. Europe is the most at risk in terms of number of cases, while North America reported the largest number in terms of cumulative turnover. Furthermore, state-owned enterprises (SOEs) -- i.e. companies in which the state directly owns 50%+ of share capital -- are not immune to bankruptcy. Their relative weight in the economy, their level of indebtedness, their inefficiencies and the existence of an exit strategy constitute their major risk factors. "More than 160 out of the 2,000 largest companies in the world can be defined as SOEs," added Mr. Subran. "Overall, SOEs in China present the highest risk profile, followed by Brazil and Russia." ********* 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 L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2017. 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 * * *