/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/170307.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, March 7, 2017, Vol. 18, No. 047 Headlines C R O A T I A AGROKOR DD: S&P Lowers CCR to 'B-' on Rising Refinancing Risks F R A N C E SOLOCAL GROUP: Completes EUR400-Million Rights Issue G E R M A N Y ADAM OPEL: PSA Reaches Deal with GM to Buy Lossmaking Business I C E L A N D BRUNEGG: Files for Bankruptcy, Employees Laid Off I R E L A N D DECO 9 - PAN EUROPE: S&P Lowers Ratings on 3 Tranches to CCC- TORO EUROPEAN 3: Fitch Assigns B-(EXP) Rating to Cl. F Notes M A L T A VITTORIOSA GAMING: Declared Bankrupt, Faces Liquidation R U S S I A NIZHNIY NOVGOROD: Fitch Affirms 'BB' IDRs, Outlook Stable PENZA REGION: Fitch Withdraws BB LT Issuer Default Ratings S P A I N AYT HIPOTECARIO BBK I: Fitch Hikes Rating on Class C Notes to BB+ S W I T Z E R L A N D MATTERHORN TELECOM: Moody's Affirms B2 CFR, Outlook Negative MATTERHORN TELECOM: S&P Affirms B CCR on Planned Recapitalization U K R A I N E VECTOR BANK: Declared Insolvent by Nat'l Bank of Ukraine U N I T E D K I N G D O M AGENT PROVOCATEUR: Bought Out of Administration by Sports Direct DUBOIS NAVAL: Assets Sold at Auction Following Liquidation ********* ============= C R O A T I A ============= AGROKOR DD: S&P Lowers CCR to 'B-' on Rising Refinancing Risks -------------------------------------------------------------- S&P Global Ratings lowered its long-term corporate credit rating to 'B-' from 'B' on Croatia-based food retailer and food manufacturing group Agrokor d.d. The outlook is negative. S&P also affirmed its 'B' short-term corporate credit rating on Agrokor. At the same time, S&P lowered to 'B-' from 'B' its issue rating on the three senior unsecured bonds issued by Agrokor and due in 2019-2020. The downgrade reflects S&P's view that Agrokor's capital structure is negatively affected by rising refinancing risks linked to upcoming debt maturities in 2018. At the same time, the group remains highly leveraged (adjusted debt to EBITDA over 6x), with a lower-than-projected EBITDA base for 2016-2017 due to underperforming retail operations in Slovenia. Currently, access to capital markets also appears to be very uncertain. That said, S&P sees no short-term liquidity constraints for the group until early March 2018. The immediate refinancing risk, in S&P's view, is the EUR535 million subordinated PIK loan (not rated). The borrower is Adria Group Holding B.V. (held by Mr. Todoric, the main shareholder of Agrokor group) and this loan served to fund the EUR544 million acquisition of Slovenian retailer Mercator in June 2014. S&P understands that this loan, which can accrue at 10.5% per year, needs to be refinanced or extended by March 8, 2018, or Agrokor's senior lenders can ask for the immediate repayment of EUR840 million of Agrokor's bank debt. This would immediately weigh on the group's liquidity position and likely lead S&P to lower the ratings further. S&P also notes that bank debt covenants indicate that Agrokor group's debt leverage should decrease to 5.0x reported net debt to EBITDA by September 2018 (versus 5.8x as of September 2016), which S&P do not currently foresee in its current base case unless there is a change in the capital structure or a sustained uptick in the group's operating performance. Currently, S&P does not see debt levels decreasing substantially in 2017 while the group's operating performance has been slightly deteriorating, mostly due to its Slovenian retail business Mercator (40% of Agrokor group's revenues). Although Mercator has disposed of a number of noncore retail assets, increased competition should remain and S&P believes that a turnaround in Mercator's profitability will take more than 12 months. This has led S&P to slightly lower its forecasts for 2016-2017, with EBITDA interest coverage of about 1.7x-2.0x (compared to 2.1x- 2.5x) and adjusted debt to EBITDA of 6.0x-6.5x (compared to 5.5x- 6.0x). That said, S&P anticipates that the group's free operating cash flow (FOCF) will remain positive in 2016-2017. S&P sees current high market volatility as limiting the group's ability to raise new debt or equity on capital markets, and potentially making negotiations to change the capital structure more challenging. That said, S&P views positively that Agrokor refinanced EUR840 million of senior bank debt (20% of total debt including the PIK loan) in 2016 and that there are no large senior debt maturities in 2017-2018. Still, in the medium term, Agrokor appears to be quite reliant on its two main lenders, VTB and Sberbank, to refinance large debt maturities due in 2019- 2020. S&P understands that the group is actively working on prolonging its upcoming debt maturities and optimizing its financing costs. S&P also notes that Agrokor is one of the largest employers in Croatia with more than 30,000 employees and accounts for 16% of the country's GDP. S&P's new base-case projections for 2016-2017 assume: -- Flat revenues of Croatian kuna (HRK) 49 billion (EUR6.6 billion), reflecting a slight revenue decline in retail operations (mostly from Mercator) and low revenue growth from food manufacturing. S&P Global Ratings- adjusted EBITDA margin of about 10%, reflecting lower profitability at Mercator, offset by cost saving measures and higher earnings due to the growth in the beverages and ice creams businesses which are higher margin. Positive FOCF of HRK800 million-HRK1,000 million (EUR108 million- EUR135 million) annually, with capital expenditure (capex) of about 3% of revenues. Adjusted debt of HRK31 billion- HRK33 billion (EUR4.2 billion-EUR4.5 billion), which includes borrowings in the consolidated group, PIK toggle loans at Adria Group Holding, operating lease commitments, and net pension deficit against which we net out unrestricted cash balances. Based on these assumptions, S&P arrives at these credit measures: -- EBITDA interest coverage of 1.7x-2.0x; and -- Adjusted debt to EBITDA of 6.0x-6.5x. The negative outlook mainly reflects S&P's view that Agrokor's PIK loan negotiations and plans to improve its debt structure might take time to resolve in 2017. Despite the rising refinancing risk for the upcoming debt maturities, S&P believes the group faces manageable short-term liquidity constraints until early March 2018 and limited senior debt maturities in 2017-2018. S&P would consider a negative rating action if Agrokor does not actively and rapidly manage the upcoming debt maturities, such as the PIK loan, which needs to be refinanced before March 2018. S&P could also lower the ratings if there was a continued decline in operating performance -- below S&P's base-case scenario--in the retail operations. This would negatively affect FOCF generation and potentially the group's liquidity position. S&P could revise the outlook back to stable if Agrokor, in a timely manner, takes the appropriate financial measures to address its upcoming debt maturities and progress in deleveraging its capital structure. S&P would also view positively a stabilization in Agrokor's operating performance thanks to an improvement in the profitability of Mercator's retail operations and continued solid earnings growth in the ice creams and beverages businesses. This could translate into adjusted debt to EBITDA stabilizing or decreasing toward 5.0x, on a sustainable basis, and EBITDA interest coverage of at least 2.0x. =========== F R A N C E =========== SOLOCAL GROUP: Completes EUR400-Million Rights Issue ---------------------------------------------------- Aidan Gregory at Global Capital reports that SoLocal Group has completed its EUR400 million rights issue, which involved a debt-for-equity swap. According to Global Capital, the recapitalization, which was managed by Deutsche Bank, was a key plank of the company's restructuring effort to reduce its debt from EUR1.1 billion to around EUR400 million and place it on a secure financial footing for the future. About SoLocal Group Solocal Group is a French directories publisher. * * * The Troubled Company Reporter-Europe reported on Jan. 06, 2017, that Moody's Investors Service assigned a limited default (LD) indicator to SoLocal Group S.A.'s Ca-PD probability of default rating (PDR). The PDR has therefore been changed to Ca-PD/LD. Concurrently, Moody's has affirmed SoLocal's Ca corporate family rating (CFR) and the Ca rating on the PagesJaunes Finance & Co. S.C.A.'s senior secured notes. Moody's said the outlook on all ratings remains negative. As reported by the TCR-Europe on Aug. 15, 2016, Fitch Ratings downgraded French media group Solocal Group SA's (SLG) Long-Term Issuer Default Rating to 'C' from 'CC'. At the same time the agency has downgraded the senior secured bonds issued by PagesJaunes Finance to 'C'/'RR4' from 'CCC-'/'RR3'. The downgrades reflect management's announced plans to restructure debt, include an equity rights issue of up to EUR400 mil., debt for equity exchange and write-down of existing borrowings, the gross amount of which currently stands at EUR1,164 mil. ============= G E R M A N Y ============= ADAM OPEL: PSA Reaches Deal with GM to Buy Lossmaking Business -------------------------------------------------------------- Michael Stothard and Peter Campbell at The Financial Times report that Peugeot owner PSA Group has announced a EUR2.2 billion agreement to buy General Motors' lossmaking Opel division in a deal that will reshape the European car industry. According to the FT, the deal to combine France's PSA and Germany-based Opel, which owns the Vauxhall brand in the UK, will allow PSA to ramp up its international development. It will also create the second-largest European carmaker after Volkswagen and one of Europe's largest manufacturing groups, the FT notes. For GM, which has owned Opel for almost 90 years, the deal announced on March 6 is part of its strategy to streamline global operations, with its European business having racked up more than $8 billion in losses since 2010, the FT states. GM will receive EUR1.32 billion for the Opel manufacturing business, of which EUR650 million is in cash and EUR670 million in PSA share warrants, the FT discloses. PSA and French bank BNP Paribas will pay a further EUR900 million for the Opel financing arm and operate it as a joint venture, fully consolidated by BNP, the FT says. According to the FT, GM will retain most of Opel's pensions deficit, which the company says is US$9.3 billion, despite efforts by GM earlier in the talks to load it on to PSA. The companies said on March 6 that only some smaller pension funds would be transferred to PSA, along with EUR3 billon to cover their full settlement, the FT relays. PSA Group is a French manufacturer of Citroen and Peugeot cars. Adam Opel GmbH -- http://www.opel.com/-- is General Motors Corp.'s German wholly owned subsidiary. Opel started making cars in 1899. Opel makes passenger cars (including the Astra, Corsa, and Vectra) and light commercial vehicles (Combo and Movano). Its high-performance VXR range includes souped-up versions of Opel models like the Meriva minivan, the Corsa hatchback, and the Astra sports compact. Opel is GM's largest subsidiary outside North America. ============= I C E L A N D ============= BRUNEGG: Files for Bankruptcy, Employees Laid Off ------------------------------------------------- Vala Hafstad at Iceland Review, citing RUV, reports that the owners of the egg farm Brunegg have filed for bankruptcy. All employees have been laid off, Iceland Review relays, citing a press release, which also states that almost all sale of eggs from the farm came to a halt, following a Kastljos news program about the farm, which aired on Nov. 28 last year. According to Iceland Review, in the press release, the owners state, "No business can survive losing all its income just about overnight, and be left with related cost and expenses." The Kastljos news analysis program revealed deplorable conditions at egg farms operated by the company: poor ventilation, crowding of hens and their poor condition, as well as unsanitary conditions at the farms, which were, among other things, invested with mice, Iceland Review relates. ============= I R E L A N D ============= DECO 9 - PAN EUROPE: S&P Lowers Ratings on 3 Tranches to CCC- ------------------------------------------------------------- S&P Global Ratings lowered its credit ratings on DECO 9 - Pan Europe 3 PLC's class B, C, and D notes. At the same time, S&P has affirmed its ratings on all other classes of notes. The rating actions reflect the increasing risk of a payment default due to the legal final maturity being less than five months away, in July 2017. DECO 9 - Pan Europe 3 closed in August 2006, with notes totaling EUR1.154 billion. The original 11 loans were secured on commercial properties in Germany and Switzerland. Since closing, 10 loans have repaid. The notes have a current outstanding balance of EUR130.50 million and their legal final maturity date is in July 2017. The remaining loan (Treveria I) was transferred to special servicing in July 2010, when insolvency and enforcement proceedings were initiated. This loan is secured by eight properties, which are mainly in small cities and towns in Western Germany. Although the remaining properties are currently under offer, the legal complexities and ongoing administrative processes suggest that the sale process is unlikely to complete before the transaction's legal final date. RATING RATIONALE S&P's ratings on the DECO 9 - Pan Europe 3 notes address the timely payment of interest (payable quarterly in arrears) and the payment of principal no later than the July 2017 legal final maturity date. Due to the approaching legal final maturity date, the class B to G notes have become more vulnerable to nonpayment; S&P believes there is at least a one-in-three likelihood of default. S&P has therefore lowered to 'CCC- (sf)' its ratings on the class B, C, and D notes, and affirmed S&P's 'CCC- (sf)' ratings on the class E, F, and G notes, in line with S&P's criteria for assigning 'CCC' category ratings. S&P has also affirmed its 'D (sf)' ratings on the class H and J notes as they have experienced interest shortfalls and are highly vulnerable to principal losses. RATINGS LIST Class Rating To From DECO 9 - Pan Europe 3 PLC EUR1.154 Billion Commercial Mortgage-Backed Floating-Rate Notes Ratings Lowered B CCC- (sf) B- (sf) C CCC- (sf) CCC+ (sf) D CCC- (sf) CCC (sf) Ratings Affirmed E CCC- (sf) F CCC- (sf) G CCC- (sf) H D (sf) J D (sf) TORO EUROPEAN 3: Fitch Assigns B-(EXP) Rating to Cl. F Notes ------------------------------------------------------------ Fitch Ratings has assigned Toro European CLO 3 DAC's notes the following expected ratings: Class A: 'AAA(EXP)sf'; Outlook Stable Class B-1: 'AA(EXP)sf'; Outlook Stable Class B-2: 'AA(EXP)sf'; Outlook Stable Class B-3: 'AA(EXP)sf'; Outlook Stable Class C-1: 'A(EXP)sf'; Outlook Stable Class C-2: 'A(EXP)sf'; Outlook Stable Class D: 'BBB(EXP)sf'; Outlook Stable Class E: 'BB(EXP)sf'; Outlook Stable Class F: 'B-(EXP)sf'; Outlook Stable Subordinated notes: not rated Toro European CLO 3 is a cash flow collateralised loan obligation (CLO). Net proceeds from the notes issue will be used to purchase a EUR350 million portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Chenavari Credit Partners LLP. The reinvestment period is scheduled to end in 2021. The assignment of final ratings is contingent on the receipt of documents conforming to information already received. KEY RATING DRIVERS 'B'/'B-' Portfolio Credit Quality Fitch places the average credit quality of obligors in the 'B'/'B-' range. The agency has public ratings or credit opinions on all the obligors in the identified portfolio. The Fitch weighted average rating factor (WARF) of the identified portfolio is 33.4, below the covenanted maximum for assigning the expected ratings of 34. High Expected Recoveries The portfolio will be at least 90% senior secured obligations. The weighted average recovery rate (WARR) of the identified portfolio is 64.3%, below the covenanted minimum for assigning expected ratings of 65% as the portfolio has not yet been fully ramped up. Payment Frequency Switch The notes pay quarterly, while the portfolio assets can be reset to semi-annual from quarterly or monthly. The transaction has an interest-smoothing account but no liquidity facility. Liquidity stress for the non-deferrable class A and B notes, stemming from a large proportion of assets potentially resetting to semi-annual in any one quarter, is addressed by switching the payment frequency of the notes to semi-annual in such a scenario, subject to certain conditions. Limited Interest Rate Risk Exposure Between 0% and 10% of the portfolio can be invested in fixed-rate assets, while 2.7% liabilities pay a floating-rate coupon. Fitch modelled both 0% and 10% fixed-rate buckets and found that the rated notes can withstand the interest rate mismatch associated with each scenario. Hedged Non-Euro Asset Exposure The transaction is permitted to invest up to 30% of the portfolio in non-euro assets, provided perfect asset swaps can be entered into. Documentation Amendments 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 the structure considers the confirmation to be given if Fitch declines to comment. RATING SENSITIVITIES A 25% increase in the obligor default probability could lead to a downgrade of up to two notches for the rated notes. A 25% reduction in expected recovery rates could 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 Recognized Statistical Rating Organizations 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. ========= M A L T A ========= VITTORIOSA GAMING: Declared Bankrupt, Faces Liquidation ------------------------------------------------------- Neil Camiller at Independent reports that one of three companies taken to court by the government over unpaid ground rent for the Casino di Venezia site in Vittoriosa has been declared bankrupt by a court and is to be liquidated. The company, Vittoriosa Gaming Ltd (VGL), also owns all the shares in another of the companies that are being sued, Independent notes. According to a court judgment handed down last week, VGL had run into considerable financial difficulties and was unable to even pay its utility bills, Independent relates. It was taken to court by one of its shareholders, Casino Municipale di Venezia (CMV), which owns 40% of VGL's shares, Independent discloses. A company called Bet Live Ltd owns the remaining 60%, Independent notes. According to Independent, the court documents show that VGL, which operated the Casino di Venezia, had fallen on difficult times and owes millions to its creditors. A court heard how revenue from online gaming fell from EUR3 million to EUR700,000, while casino revenue fell from EUR2.1 million to EUR600,000, Independent relays. Between January and October 2012, VGL incurred a gross loss of EUR766,000 and a net loss of EUR1.3 million, Independent discloses. The company failed to audit its accounts for a number of years but a 2012 exercise showed that VGL owed EUR783,000 to the Social Security Department, EUR411,000 to its employees, EUR123,000 to the Lotteries and Gaming Authority and over to EUR200,000 to ARMS Ltd., Independent notes. The company also owes its creditors some EUR4.7 million, Independent states. The Lotteries and Gaming Authority (now Malta Gaming Authority) suspended the casino's license over unpaid games tax, but CMV had stepped in, paying over EUR533,000 to the authority on VGL's behalf, Independent relates. However, the bills stacked up again and the license was suspended for a second time early in 2013, Independent discloses. The casino finally closed down in April, Independent recounts. For a time, VGL was involved in remote (online) gaming operations but all activity has since ceased, Independent relays. In court, VGL, as cited by Independent, said it was in the process of finding a buyer, insisting that this was a better solution for its creditors. But the court, seeing that all operations had ceased and no bright future appeared to be in sight, declared the company insolvent and ordered its liquidation, Independent recounts. =========== R U S S I A =========== NIZHNIY NOVGOROD: Fitch Affirms 'BB' IDRs, Outlook Stable --------------------------------------------------------- Fitch Ratings has revised Russian Nizhniy Novgorod Region's Outlook to Stable from Negative and affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'BB' and Short-Term Foreign Currency IDR at 'B'. The Outlook on the region's National Long-Term Rating has been revised to Stable from Negative, while the rating has been affirmed at 'AA- (rus)' and withdrawn. The region's senior debt ratings have been affirmed at long-term local currency 'BB'. The region's senior debt National long-term rating has been affirmed at 'AA- (rus)' and withdrawn. The revision of the Outlooks reflects better-than-expected operating performance, which resulted in a smaller deficit before debt variation and deceleration of debt growth. The affirmation reflects Fitch's baseline scenario that the region will maintain sound operating performance and moderate direct risk. The National ratings are being withdrawn because Fitch has withdrawn its Russian National-scale ratings in response to a new regulatory framework for credit rating agencies in Russia (see Fitch Ratings Withdraws National Scale Ratings in the Russian Federation dated 23 December 2016). KEY RATING DRIVERS The 'BB' ratings reflect the sound budgetary performance of Nizhniy Novgorod Region with a positive operating balance, but also its concentrated maturity profile and ongoing budget deficit. The ratings further take into account a large and diversified local economy, albeit prone to cyclicality. The rating action reflects the following rating drivers and their relative weights: High: Improved Budgetary Performance In 2016, Nizhniy Novgorod Region's operating balance improved to a sound 11.7% from 6.1% a year earlier. This was driven by a 21% yoy increase in corporate income tax proceeds, mainly from the financial sector amid profit growth from a low base in 2014-2015. Other contributors were excise duties, which rose 28% due to a tariff increase for petrochemicals and an increase in alcohol production, while personal income tax proceeds grew 7.7% yoy amid broad growth of salaries across all sectors. Deficit before debt variation also narrowed to a modest 3.3% in 2016 from 7.5% in 2015. Fitch forecasts the region will stabilise its operating margin above the historical level of 10% over the medium-term due to an acceleration of tax revenue. Its diversified economy will gain from an economic recovery in Russia. Fitch projects Russia's GDP will return to growth at 1.3% in 2017. Fitch forecasts the region's current margin at 7%-8% for 2017-2019, but high interest payments at about 4% of operating revenue will put pressure on the region's ratings. The region will run a modest deficit of 3%- 5% over the medium term, leading to broadly stable debt. Medium: Debt Growth Deceleration In 2016, the region's direct risk stabilised at 62.4% of current revenue (2015: 63.5%) while the debt payback ratio significantly improved to 8.3 years from 30.1 years. According to Fitch's baseline scenario, the region's direct risk will stabilise at below 63% of current revenue by 2019, as the administration limits capex following the completion of major capital-intensive projects for Football World Cup 2018. Refinancing Risk Reduced The average maturity of the region's debt improved in 2015-2016 to 2.5 years from 1.9 years in 2014. The region reduced the share of bank loans to 30% in February 2017 from 44% in 2015, while the share of bonds increased to 43% from 36% and subsidised budget loans to 27% from 20%. Fitch takes a positive view of the change of debt structure, but the region remains under pressure from refinancing risk as most of the bank loans remain short-term revolving facilities. The maturity profile is concentrated, as 78% of the region's direct risk will mature in 2017-2019. As of 1 February 2017 the region's refinancing needs for this year stood at RUB30.2 billion (41% of outstanding debt), but these are mitigated by RUB41 billion available revolving bank credit facilities and RUB9 billion standby short-term credit facilities from the Federal Treasury. The administration plans to refinance debt via a combination of bank loans, budget loans and RUB12 billion domestic bond placements later this year. The ratings also consider the following rating factors: Diversified Local Economy Nizhniy Novgorod has a diversified economy with a fairly well- developed industrialised sector, supporting wealth metrics near the national median. In 2016 the 10 largest taxpayers contributed 17% of all tax revenues, underlining a broad tax base. The region is among the top 15 Russian regions in gross regional product (GRP) volume and has a population of 3.3 million people (1.7% of Russia's). Nizhniy Novgorod Region's economy is driven by internal demand and therefore prone to cyclicality and correlated with the national economy. GRP saw mild growth of 0.7% in 2016, which was better than the wider Russian economy (a 0.4% fall). According to the administration's forecast the region's GRP will grow 1% in 2017 and accelerate to 2%-2.5% in 2018-2019, following the national trend. Weak Institutional Framework Fitch views the region's credit profile as being constrained by the weak Russian institutional framework for sub-nationals, which has a shorter record of stable development than many of its international peers. The predictability of Russian local and regional governments' budgetary policy is hampered by the frequent reallocation of revenue and expenditure responsibilities within government tiers. RATING SENSITIVITIES Sound operating performance with an operating margin above 10% on a sustained basis, accompanied by a decrease in direct risk below 40% of current revenue and lower reliance on short-term bank financing, could lead to an upgrade. An increase in direct risk to above 70% of current revenue, accompanied by ongoing refinancing pressure or an inability to maintain a sustainable positive current balance, could lead to a downgrade. PENZA REGION: Fitch Withdraws BB LT Issuer Default Ratings ---------------------------------------------------------- Fitch Ratings has withdrawn Russian Penza Region's 'BB' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) with Stable Outlooks and the region's 'B' Short-Term Foreign Currency IDR. The agency has also withdrawn the region's 'AA-(rus)' National Long-Term Rating with a Stable Outlook. Fitch has withdrawn the ratings of Penza Region for commercial reasons and due to a lack of information. Fitch will no longer provide ratings or analytical coverage on Penza Region. ========= S P A I N ========= AYT HIPOTECARIO BBK I: Fitch Hikes Rating on Class C Notes to BB+ ----------------------------------------------------------------- Fitch Ratings has upgraded AyT Hipotecario BBK I's class B and C notes and affirmed AyT Hipotecario BBK II, as follows: AyT Hipotecario BBK I: Class A notes (ISIN ES0312364005): affirmed at 'AA+sf'; Outlook Stable Class B notes (ISIN ES0312364013): upgraded to 'AA-sf' from 'Asf'; Outlook Stable Class C notes (ISIN ES0312364021): upgraded to 'BB+sf' from 'BBsf'; Outlook Stable AyT Hipotecario BBK II: Class A notes (ISIN ES0312251004): affirmed at 'AA+sf'; Outlook Stable Class B notes (ISIN ES0312251012): affirmed at 'Asf'; Outlook Stable Class C notes (ISIN ES0312251020): affirmed at 'BBsf'; Outlook Stable The transactions comprise residential mortgages originated and serviced by Kutxabank, S.A. (BBB/OutP/F3). KEY RATING DRIVERS Increasing Credit Enhancement (CE) All notes are currently amortising sequentially, leading to increases in credit enhancement throughout the capital structures. As such the class A notes of AyT Hipotecario BBK I now benefit from 32% of subordination, compared with 29% a year ago. The upgrade on the class B and C notes of BBK I reflects the notes' subordination now being sufficient to withstand stresses at higher rating levels. This compares with an increase on AyT Hipotecario BBK II's class A notes to 24% from 22% over the last 12 months. Credit enhancement on the class C notes of AyT Hipotecario BBK II has remained stable due to the currently amortising reserve fund. Stable Arrears Performance Fitch expects gross cumulative defaults for AyT Hipotecario BBK I and AyT Hipotecario BBK II to remain stable at around 1.1% and 1.8% of the original balances, respectively, which remains significantly below the average observed for Spanish RMBS transactions of 5.5%. This is supported by arrears over 90 days continuing to decline over the last 12 months. AyT Hipotecario BBK I's 90+ day arrears, excluding defaults, are now 0.43% of the outstanding portfolio balance, down from 0.75% a year ago. The same metric for BBK II fell to 0.24% from 0.52%. Restructured Loan Exposure Fitch has received additional data on modifications of the underlying portfolio and has found that both transactions have been subject to maturity extensions worth 0.5% (BBK I) and 0.2% (BBK II) of the current outstanding balances. While the majority of the loans subject to such extensions have not been in arrears over the past four years, Fitch has applied hits for those loans that have shown to be in arrears in accordance with its Spanish criteria addendum. RATING SENSITIVITIES A worsening of the Spanish macroeconomic environment, especially employment conditions or an abrupt shift of interest rates, could jeopardise the underlying borrowers' affordability. The ratings of the class A notes in both transactions are sensitive to changes in Spain's Country Ceiling of 'AA+' and consequently changes to the highest achievable 'AA+sf' rating for Spanish structured finance notes. The ratings of both class C notes have shown to be sensitive to changes in excess spread. Further decreases in excess spread could lead to negative rating actions. 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 Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ===================== S W I T Z E R L A N D ===================== MATTERHORN TELECOM: Moody's Affirms B2 CFR, Outlook Negative ------------------------------------------------------------ Moody's Investors Service has changed the outlooks on Matterhorn Telecom Holding SA's and Matterhorn Telecom SA's ratings to negative from stable, following the announcement that MTH plans to pay CHF500 million worth of extraordinary dividends to its 100% owner, NJJ Capital. MTH and MT are the ultimate holding company and intermediate holding company of Salt Mobile SA, respectively. The proposed dividend recapitalization will be funded through a combination of cash and CHF400 million of incremental debt, which is expected to consist of 50%-50% senior secured and senior unsecured debt. Concurrently, Moody's has affirmed MTH's B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating (PDR) and the Caa1 rating on its EUR181 million 4.875% senior unsecured notes due 2023. Moody's has also affirmed the B2 rating on MT's CHF411 million 3.625% senior secured notes due 2022, EUR1,000 million 3.875% senior secured notes due 2022, and EUR265 million floating rate senior secured notes due 2022. RATINGS RATIONALE The change of outlook to negative reflects the company's more aggressive financial policy than anticipated, as demonstrated by the proposed payment of this extraordinary dividend which increases leverage above Moody's ratio guidance levels for the B2 rating of adjusted gross debt/EBITDA of 5x. The more aggressive financial policy is also evidenced by the company's re-leveraging above its maximum 4.5x debt incurrence ratio. Following this dividend payment, Moody's estimates that NJJ Capital has recovered around 60% of its initial equity invested in the business since its acquisition of Salt in February 2015. Moody's expects the proposed dividend re-capitalisation will increase gross adjusted debt/EBITDA to 5.2x on a pro-forma basis for 2016, up from the estimated 4.3x pre-transaction level. Although leverage could gradually reduce organically supported by growing EBITDA, this reduction could be slow as future revenue growth could remain under pressure, and the company may have to rely on additional cost saving initiatives than currently planned. Moody's recognizes the material improvement in Salt's EBITDA and free cash flow reported in 2016, which has led to a substantial reduction in leverage before the proposed dividend re- capitalisation. Although Moody's recognises that the execution risks in Salt's transformation exercise have diminished on the back of the strong figures reported in 2016, some risks remain in light of the expectation of changes in competitive dynamics. In particular, Moody's believes that Salt can be vulnerable to pressures on underlying revenues because (1) the company is predominantly a mobile player with the third largest market share; (2) Moody's expects increasing convergence in Switzerland could put pressure on mobile prices; and (3) the competitive environment will remain challenging given the significant investments that Salt's competitors have made and will continue to make to support strong quality networks. Salt's cash flow metrics such as Retained Cash Flow (RCF)/debt and Free Cash Flow remain adequately positioned for the rating level despite the increase in leverage. However, Moody's believes there is uncertainty around the capacity to sustain cash flow generation supported by improving margins and the maintenance of structurally low levels of capex given the strong investments and high-quality networks of Swiss peers. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook on the ratings reflects the increase in leverage to levels above the ratio guidance for the B2 rating of adjusted gross debt/EBITDA of 5x. The negative outlook also reflects that the rating is initially weakly positioned with limited room for operating underperformance. WHAT COULD CHANGE THE RATING UP/DOWN Downward pressure could be exerted on the rating if the company's operating performance weakens such that its adjusted debt/EBITDA rises above 5.0x and its RCF/adjusted debt falls below 10% on a sustained basis. In addition, downward pressure could be exerted on the rating if Moody's becomes concerned about the group's liquidity -- including, but not limited to, a reduction in covenant headroom. The rating is on negative outlook and therefore upward rating pressure is unlikely in the near term. However, the outlook could be stabilised if Salt demonstrates that operating performance continues to improve and leads to a gradual de-leveraging path towards gross adjusted debt/EBITDA sustainably below 5x with continuing improvement in financial metrics and main KPIs (such as subscriber growth, reductions in churn rate, etc). LIST OF AFFECTED RATINGS Affirmations: Issuer: Matterhorn Telecom Holding SA -- LT Corporate Family Rating, Affirmed B2 -- Probability of Default Rating, Affirmed B2-PD -- Backed Senior Unsecured Regular Bond/Debenture, Affirmed Caa1 Issuer: Matterhorn Telecom SA -- Backed Senior Secured Regular Bond/Debenture, Affirmed B2 Outlook Actions: Issuer: Matterhorn Telecom Holding SA -- Outlook, Changed To Negative From Stable Issuer: Matterhorn Telecom SA -- Outlook, Changed To Negative From Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. MTH and MT are the ultimate holding company and intermediate holding company of Salt Mobile SA, respectively. Salt is the number three mobile network operator in Switzerland, with a subscriber market share of around 17% in post-paid mobile subscribers. The company has approximately 1.9 million mobile customers. For the year ended December 2016, the company reported revenues of CHF1.1 billion and adjusted EBITDA of CHF438 million. MATTERHORN TELECOM: S&P Affirms B CCR on Planned Recapitalization ----------------------------------------------------------------- S&P Global Ratings said that it had affirmed its 'B' long-term corporate credit rating on Swiss wireless telecommunications network operator Matterhorn Telecom Holding S.A. and its subsidiary Matterhorn Telecom S.A. The outlook is stable. Matterhorn Telecom Holding S.A. and Matterhorn Telecom S.A. together are planning to issue about Swiss franc (CHF) 400 million incremental debt to pay a CHF500 million dividend to NJJ Capital. The dividend recapitalization is subject to the group receiving lenders' consent to amend certain clauses of the debt documentation. Although the dividend recapitalization will result in higher adjusted leverage, this is mitigated by stronger-than-expected operating performance in 2016 stemming from continued focus on costs and capital expenditure efficiencies. At the same time, S&P affirmed its 'B' issue rating on Matterhorn's senior secured debt, with a recovery rating of '3', reflecting S&P's expectation of meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default. S&P has also affirmed its 'CCC+' issue rating on the senior unsecured notes, with a recovery rating of '6', reflecting S&P's expectations of negligible recovery (0%-10%; rounded estimate: 0%) in the event of a payment default. The affirmation reflects S&P's expectation that the higher adjusted leverage resulting from the dividend recapitalization will, in S&P's view, be offset by: -- Better operating performance than we initially expected; -- S&P's expectations that management will further improve margins and free operating cash flow (FOCF) generation in 2017 through its continuous focus on costs and capital expenditure (capex) efficiencies; and -- A slightly growing subscriber base. Since it acquired the business in April 2015, NJJ Capital has worked closely with Matterhorn's management to simplify and rationalize the group's structure and operations and substantially lower its cost base. Matterhorn has indeed launched a simplified post-pay offering, rationalized its commercial and marketing approach, focused on the direct distribution channel (either physical or online) and re-insourced network maintenance tasks. This resulted in the reported EBITDA margin improving to about 38.0% in 2016 from 26.4% in 2015 and stronger FOCF on lower capex and better collections. What's more, S&P views positively the fact that the company has reduced its churn rate and that the group's post-pay subscriber base started increasing again since the third quarter of 2015. S&P also believes that the group benefits from a nationwide and good quality 4G network, supported by ongoing and targeted investments, and can leverage significantly larger spectrum per user than peers to underpin its data-rich contracts. "That said, we continue to assess Matterhorn's business risk profile as weaker than that of its two main competitors, the strong incumbent Swisscom AG followed by the challenger Sunrise Communication Holdings S.A. Indeed, Matterhorn remains the No.3 player with a post-pay subscriber market share of 16.6% in September 2016, slightly up by 30 basis points since December 2015. What's more, although decreasing, the subscriber churn rate remains high and slightly higher than that of peers, and average revenues per user (ARPU) has decreased following the introduction of Matterhorn's Plus offer. We also think its network is still lagging behind that of its main competitors in terms of indoor coverage," S&P said. S&P anticipates that mobile revenues will continue to decrease in 2017. This is because the expected growth in the subscriber base will not compensate for the decline in ARPU, given that slightly less than one-fourth of the customer base still has to be transferred to Matterhorn's lower price offerings. Finally, S&P believes that, for Matterhorn to maintain its margin and improve its credit metrics, it will have to demonstrate its ability to continuously gain post-pay subscribers and also at least maintain its current level of costs and capex efficiency in order to offset some remaining repricing in the base and the structural decline of pre-pay contract ARPUs. S&P notes that the group has recently reached an agreement with Swiss Fiber Net for accessing its fiber-to-the-home network, setting the basis for the group to offer fixed-line services and allowing Matterhorn to cross-sell to its existing mobile subscriber base. However, S&P currently has an only limited understanding of the group's strategy around the commercial offer and competitors' reactions are also very unclear at this stage. As a result, meaningful operational performance and execution risks exist in S&P's view, as the group will have to pay a fixed commitment of Swiss franc (CHF) 104 million over the next six to seven years to access the fiber network. As per S&P's revised base-case scenario, it anticipates that Matterhorn's adjusted debt to EBITDA will peak at 5.5x-5.6x in 2017 and FOCF to debt will remain above 5%. The stable outlook on Matterhorn reflects S&P's view that the group will sustain its recently strengthened EBITDA margin, gradually soften its revenue decline, thanks to its revamped commercial strategy and the launch of fixed offers, and maintain ample liquidity. Following the dividend recapitalization, S&P expects that its adjusted debt-to-EBITDA ratio will be above 5x in 2017-2018, and that the FOCF-to-debt ratio will remain above 5%. S&P could consider a one-notch upgrade if Matterhorn achieves modest revenue growth, maintains an S&P Global Ratings-adjusted EBITDA margin of about 45%, and sustainably reduces its adjusted debt to EBITDA to about 5x or below. Overall, any future rating upside would likely be limited to one notch, given the lack of information about the capital structure of the private holding company NJJ Capital. S&P could consider a negative rating action if Matterhorn failed to sustain the current level of profitability, adopted an even more aggressive financial policy, or weakened its liquidity profile. In particular, if the group's post-pay base were to shrink, this would not bode well for the group's future performance. S&P could also consider a negative rating action if Matterhorn's adjusted debt to EBITDA deteriorated to more than 6x. ============= U K R A I N E ============= VECTOR BANK: Declared Insolvent by Nat'l Bank of Ukraine -------------------------------------------------------- Interfax-Ukraine report that the National Bank of Ukraine on March 3 declared Vector Bank insolvent. According to Interfax-Ukraine, decision No. 112-rsh/BT was made by the NBU board on March 2 over the large reduction of liquidity of the bank and submission of untrue statistics reports. The NBU said, referring to the statistics report of Vector Bank, that ending stocks on its correspondent account in the central bank is critical: as of March 1, 2017 there were UAH76,000 on it or 0.1% of the bank's liabilities, Interfax-Ukraine relates. The only owner of the bank did not provide for the financial support to prevent bank's insolvency, Interfax-Ukraine notes. When Vector Bank was placed on the list of troubled banks facts of hiding the unsettled transactions of clients in accounting reports were established, Interfax-Ukraine discloses. "Thus, Vector Bank is not able to implement legal claims of creditors in the full amount and in the terms approved over a lack of funds," Interfax-Ukraine quotes the NBU a saying. Vector Bank is based in Kyiv. =========================== U N I T E D K I N G D O M =========================== AGENT PROVOCATEUR: Bought Out of Administration by Sports Direct ---------------------------------------------------------------- Josie Cox at Independent reports that Agent Provocateur, the high-end lingerie chain popular with celebrities, entered administration on March 2 and was immediately snapped up by Mike Ashley, owner of discount retailer Sports Direct. According to Independent, AlixPartners, who had been appointed to manage the restructuring and administration, said in a short statement that it had sold the group to Four Holdings, Mr. Ashley's investment vehicle, but declined to reveal the terms of the deal. The company operates more than 100 stores but has for years been suffering weak sales hit by a slow-down in luxury high street spending, Independent relates. Agent Provocateur was founded in 1994 by Joe Corre, the son of fashion designer Vivienne Westwood. DUBOIS NAVAL: Assets Sold at Auction Following Liquidation ---------------------------------------------------------- The assets of the leading design firm set-up by world-renowned yacht designer Ed Dubois have been sold at auction. Insolvency and restructuring firm CVR Global were called into Dubois Naval Architects Ltd. earlier this year after the company hit financial trouble following the death of Mr. Dubois in March 2016. Terry Evans and Simon Lowes from CVR Global were appointed joint-liquidators of Dubois Naval Architects of Lymington, Hampshire, on February 2, 2017. CVR Global instructed auctioneers Marriott & Co to hold an online auction of Dubois Naval Architects' assets, which included the iconic company's name and its intellectual property rights, its drawings and designs. The auction, held on February 28, 2017, attracted world-wide interest and resulted in all lots being sold exceeding the reserve prices. Terry Evans, from CVR Global's Southampton office, said: "The death of Mr. Dubois had a dramatic impact on the fortunes of Dubois Naval Architects, and the financial constraints the company experienced in a difficult market resulted in our appointment. "Following an assessment of the company's affairs, it was clear the business could not continue to trade and we subsequently instructed Marriott & Co to hold an auction of the company's business assets. "We are in the process of completing the procedure, and early indications are that the outcome will result in the secured creditor being paid in full. If the work in progress is completed satisfactorily, the end result may provide a dividend to the remaining creditors. "There has been world-wide interest in the Dubois assets, and we believe the auction process exceeded expectations." Gavin Marriott, director of Marriott & Co, added: "We are pleased to say that the best bids for all the lots at the auction exceeded the reserve prices, and that we are in the process of completing the sales accordingly. "There has been world-wide interest in the Dubois assets, and we believe that the auction result was excellent." CVR Global was formed in 2015 following the management buyout of the business recovery division of Chantrey Vellacott. ********* 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 * * *