/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/170421.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 Friday, April 21, 2017, Vol. 18, No. 79 Headlines B O S N I A DITA: Bingo Acquires Business for BAM7.7 Million C R O A T I A AGROKOR DD: Submits Extraordinary Administration Proposal F R A N C E NEWCO SAB: S&P Assigns 'B+' CCR, Outlook Stable G E R M A N Y ALBA GROUP: S&P Affirms 'B+' CCR then Withdraws Rating RICKMERS HOLDING: Reaches Agreement on Restructuring Term Sheet G R E E C E GREECE: May Fail to Meet Financial Targets Next Year, IMF Says I R E L A N D ALME LOAN III: Moody's Assigns B2 Rating to Class F Notes ALME LOAN III: Fitch Assigns B- Rating to Class F-R Notes CARLYLE GLOBAL 2015-1: Moody's Affirms B2 Rating on Class E Notes L U X E M B O U R G GARFUNKELUX HOLDCO: S&P Affirms B+/B Counterparty Credit Ratings N E T H E R L A N D S ARES EUROPEAN CLO VI: Moody's Assigns B2 Rating to Cl. F-R Notes BNPP IP 2015-1: Moody's Affirms B2(sf) Rating on Class F Notes BNPP IP 2015-1: Fitch Affirms B- Rating on Class F Senior Notes HALCYON LOAN 2014: Moody's Assigns B2 Rating to Class F-R Notes JUBILEE CLO 2014-XI: Moody's Assigns B2 Rating to Class F-R Notes T U R K E Y EMLAK KONUT: Fitch Assigns BB+ Long-Term Local-Currency IDR TURKEY: Referendum May Facilitate Economic Reform, Fitch Says U N I T E D K I N G D O M DRAX GROUP: Fitch Assigns 'BB+(EXP)' Issuer Default Rating MISYS NEWCO 2: S&P Affirms 'B' CCR, Outlook Revised to Negative NOMAD FOODS: S&P Assigns 'BB-' Rating to Proposed EUR500MM Notes TATA STEEL: Offers to Make GBP520M Payment Into UK Pension Scheme THAME AND LONDON: S&P Affirms 'B-' CCR, Revises Outlook to Stable TRAVELODGE: Moody's Rates Proposed GBP165MM Senior Sec. Notes B3 * Mark Griffiths Joins Kobre & Kim's Bankruptcy Disputes Group X X X X X X X X * BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles ********* =========== B O S N I A =========== DITA: Bingo Acquires Business for BAM7.7 Million ------------------------------------------------ SeeNews reports that Bosnia's largest retailer Bingo has purchased ailing detergent maker Dita for BAM7.7 million (US$4.2 million/EUR3.9 million) via a public settlement at the municipal court in Tuzla. Bingo has committed to keep all 75 workers currently employed by bankrupt Dita and to resume production, SeeNews relays, citing news portal Faktor.ba. Dita, once the largest detergent maker in the former Yugoslavia, used to employ some 700 people, SeeNews discloses. Following its privatization in the 90's, the company entered into decline which ended in bankruptcy in 2015, SeeNews recounts. To date, seven public calls have been held for Dita, but all to no avail, SeeNews notes. ============= C R O A T I A ============= AGROKOR DD: Submits Extraordinary Administration Proposal --------------------------------------------------------- Pursuant to the Law for the Extraordinary Administration for Companies with Systemic Importance for the Republic of Croatia (Official Gazette of the Republic of Croatia nr. 32/2017) as of April 7, 2017, the Management board of AGROKOR Group for company management, production and trade in agricultural products, a joint stock company, Zagreb (city of Zagreb), Zagreb, Trg Drazena Petrovica 3, Tax No. (OIB): 05937759187 (hereafter: Agrokor/Debtor), has submitted a proposal to initiate the procedure for extraordinary administration at the Zagreb Commercial Court. The Zagreb Commercial Court issued, on April 10, 2017, a decision to initiate the procedure for extraordinary administration over Agrokor and some of its affiliated or subsidiary companies. Ante Ramljak was appointed extraordinary commissioner/trustee for Agrokor, with rights and obligations of the Debtor, and who represents the Debtor independently and individually. The extraordinary commissioner/receiver independently manages business operations of the Debtor and carries out all procedural actions entrusted onto him in accordance with the Law for the Extraordinary Administration for Companies with Systemic Importance for the Republic of Croatia. Zagreb-based Agrokor is the biggest food producer and retailer in the Balkans, employing almost 60,000 people across the region with annual revenue of some HRK50 billion (US$7 billion). * * * The Troubled Company Reporter-Europe reported on April 10, 2017, that S&P Global Ratings said it lowered its long- and short-term corporate credit ratings on Croatian retailer Agrokor d.d. to 'CC/C' from 'B-/B'. The outlook is negative. At the same time, S&P lowered the issue rating on the senior unsecured notes to 'CC' from 'B-'. On April 2, 2017, a spokesperson for the Agrokor group said that the company reached an agreement with its bank creditors to freeze debt payments. The creditor group includes Sberbank, VTB, and Erste Bank, which together account for most of the EUR2.5 billion loan debt for the Agrokor group, as of Sept. 30, 2016. The TCR-Europe on March 31, 2017, reported that Moody's Investors Service downgraded the Croatian retailer and food manufacturer Agrokor D.D.'s corporate family rating (CFR) to Caa1 from B3 and its probability of default rating (PDR) to Caa1-PD from B3-PD. Moody's has also downgraded the senior unsecured rating assigned to the notes issued by Agrokor and due in 2019 and 2020 to Caa1 from B3. The outlook on the company's ratings remains negative. "Our downgrade of Agrokor's rating reflects Moody's views that the company is no longer able to sustain its high level of trade payables, which may constrain its liquidity position," says Vincent Gusdorf, a Vice President -- Senior Analyst at Moody's. "This comes at a time when the company has limited means to raise additional sources of liquidity owing to its restricted access to credit markets and its reliance on a limited number of banks." =========== F R A N C E =========== NEWCO SAB: S&P Assigns 'B+' CCR, Outlook Stable ----------------------------------------------- S&P Global Ratings said that it has assigned its 'B+' long-term corporate credit rating to NewCo Sab MidCo S.A.S. (NewCo MidCo), the parent company of France-based biological diagnostics laboratory operator Cerba Healthcare S.A.S. The outlook is stable. At the same time, S&P assigned its 'B+' issue rating to the EUR794 million term loan B and EUR175 million revolving credit facility (RCF) issued by NewCo Sab BidCo S.A.S.(NewCo Bidco). The recovery rating on these issues, which rank pari passu, is '4', indicating S&P's expectation of average recovery (30%-50%; rounded estimate: 45%) in the event of a payment default. S&P is also assigning its 'B-' issue rating to the subordinated EUR180 million senior unsecured notes issued by NewCo Midco. The recovery rating of '6' indicates S&P's expectation of negligible (0%-10%) recovery in the event of a payment default. These ratings are in line with S&P's preliminary ratings assigned on March 7, 2017. S&P has withdrawn its ratings on Cerba and Cerberus Nightingale 1 S.a.r.l. following the acquisition. S&P's rating on NewCo MidCo follows the completion of Partners Group and PSP Investments' takeover of French biological diagnostics operator, Cerba. NewCo MidCo issued EUR794 million of senior secured debt and EUR180 million of senior subordinated debt to partly fund the acquisition and refinancing of Cerba. The issuances will see the group's total debt increase by approximately EUR116 million, although S&P understands that these proceeds will also help fund recently agreed bolt-on acquisitions and increase cash balances. S&P maintains the view that this supports the group's ability to deleverage and continue to generate accretive earnings. "We continue to assess the group as having a highly leveraged financial risk profile because we view the group's new owners as financial sponsors. Private equity firms generally pursue an aggressive financial strategy to maximize shareholder returns and often drive value with debt-funded acquisitions. This assessment is supported by our forecast credit metrics for the group, including S&P Global Ratings-adjusted debt to EBITDA of 6x-7x and funds from operations (FFO) to debt of less than 10%. Our estimates of debt include the new debt instruments totaling EUR974 million, EUR106 million of bilateral loans and finance leases, and an additional EUR20 million of operating leases and pension obligations. We expect the group's EBITDA will total at least EUR150 million in 2017 before rising to approximately EUR170 million in 2018, given its strategic focus on increasing higher-margin specialty testing and continuous cost optimization. We forecast that the expanding EBITDA base will be supported by further bolt-on acquisitions that should help the group's deleveraging. We consider that the long-dated maturity profile of at least seven years limits refinancing risk. We also project that the group should comfortably cover its future interest obligations, given the pricing achieved on the debt tranches, with FFO to cash interest above 3.0x and fixed-charge coverage above 2.5x," S&P said. "We apply a positive comparable rating analysis modifier to reflect our view of the company's aggregate credit characteristics. In particular, we consider that NewCo MidCo's debt and free operating cash flow (FOCF) generation would provide additional headroom to manage any unexpected operational or financing challenges. We view a ratio of FFO to cash interest at the upper end of the 2x-4x range, and adjusted debt to EBITDA close to or below 6x, as strong relative to the 'b' anchor. Our base-case forecasts take account of the group's track record of successfully integrating newly acquired companies, while realizing planned synergies, gradually improving its EBITDA margin, and generating positive FOCF. Margins are already at the higher end of the range we view as average for healthcare service providers," S&P noted. The stable outlook reflects S&P's view that NewCo MidCo will continue to pursue an acquisition growth strategy to solidify its leading market positions, increase scale, and successfully expand its earnings base. S&P forecasts the group's profit margin will remain robust at above 20%, reflecting continued efficiency gains and focus on cost optimization, supplemented by increasing volumes from the higher-margin specialty tests. S&P views the group's ability to generate positive FOCF, despite pressure on reimbursement tariffs, and comfortably record adjusted FFO cash interest coverage at the upper end of the 2x-4x range, as commensurate with the 'B+' rating. S&P could take a negative rating action if the group's ability to comfortably cover its fixed-charge costs is reduced, specifically if adjusted FFO cash interest coverage dropped to the lower end of the 2x-4x range or if its FOCF cushion was materially reduced. This would most likely occur if operating margins deteriorated due to the group's inability to profitably integrate newly acquired operations; if there were stronger pricing pressure or lower test volumes (for example, as a result of doctors' strikes or a loss of key accounts); or if the group undertook a sizable debt-financed acquisition leading to increased funding costs that are not offset by earnings. An upgrade is unlikely over the next 12 months since S&P projects debt to EBITDA will remain above 5x, S&P's threshold for a highly leveraged financial risk profile. This assumption reflects that the company is operating in a consolidating industry and is likely to use available cash for acquisitions or other business investments. Nevertheless, S&P would likely take a positive rating action if the group was able to sustain adjusted debt to EBITDA lower than 5x, supported by a financial policy commitment on behalf of the shareholders. ============= G E R M A N Y ============= ALBA GROUP: S&P Affirms 'B+' CCR then Withdraws Rating ------------------------------------------------------ S&P Global Ratings said that it had affirmed its 'B+' long-term corporate credit rating on German waste management company ALBA Group plc & Co. KG. S&P also affirmed its 'B-' issue-level rating on the company's EUR203 million senior unsecured notes, for which the company recently issued a redemption notice and plans to settle the redemption with proceeds from the disposal transaction and newly arranged bank loans. The '6' recovery rating on the notes remains unchanged, with recovery of zero percent expected. S&P subsequently withdrew all its ratings on ALBA Group and its debt at ALBA Group's request. The outlook was positive at the time of the withdrawal. RICKMERS HOLDING: Reaches Agreement on Restructuring Term Sheet --------------------------------------------------------------- Rickmers Holding AG on April 19 reached an understanding on a term sheet regarding the restructuring of material financial liabilities of the Rickmers Group, that is still subject to corporate approvals of the creditors and contingent on restructuring of the bond 2013/2018 issued by Rickmers Holding AG ("Rickmers Bond"). The envisaged restructuring is to enable reorganization of the Rickmers Group on the basis of contributions of all relevant stakeholders, i.e. in particular the sole shareholder Bertram R.C. Rickmers, the financing banks and the bondholders. As contribution to the restructuring, under the term sheet Bertram R. C. Rickmers undertakes to make a cash contribution of EUR10 million, to relieve the Rickmers Group from a shipyard liability of a further USD10 million, to waive licensing fees up to the end of Q1 2021 and to procure a back-up loan facility of up to a further EUR10 million for possible future liquidity requirements of Rickmers Holding AG. The sole shareholder already made a cash contribution of EUR13 million into Rickmers Holding AG in 2016. Bertram R. C. Rickmers is also prepared to reduce his stake in Rickmers Holding AG from 100% to 24.9% in order to enable key creditors, i.e. HSH Nordbank AG, the bondholders and possibly one further bank, to acquire a total stake of 75.1% in Rickmers Holding AG as part of the restructuring plan. To this end, a Luxembourg vehicle ("LuxCo") shall assume all liabilities of Rickmers Holding AG under the Rickmers Bond, such that the LuxCo shall replace Rickmers Holding AG as the debtor of the bond. The LuxCo shall also assume as debtor a partial amount under a loan from HSH Nordbank AG. In connection with these assumptions the LuxCo shall acquire a 75.1% stake in Rickmers Holding AG. A joint representative yet to be appointed by the bondholders shall be authorized to approve a sale of shares in Rickmers Holding AG held by LuxCo following an investor solicitation process yet to be conducted and to distribute the proceeds to HSH Nordbank AG, the bondholders and possibly to one further bank, according to a defined allocation formula. Payment of the interest coupon of 8.875% on 11 June 2017 shall be exempt from the above debt assumption under the Rickmers Bond. The payment is to be made in full by Rickmers Holding AG on the condition that a resolution of the bondholders on the appointment and authorization of a joint representative has been passed by such time. Besides the above mentioned contributions by the shareholder and the consent to the assumptions of debt by LuxCo, the restructuring concept provides for contributions of other creditor banks and of one shipyard, inter alia in the form of deferrals of repayments, release of pledged funds and reduction of interest margins. The management board of Rickmers Holding AG has tasked a leading international auditing firm with providing an expert report on the possibility of successfully restructuring the Rickmers Group within the meaning of IDW Standard S6. In the current draft restructuring report, which is almost finalized, the auditing firm concludes that the Rickmers Group can be successfully restructured if all proposed restructuring measures are implemented. The restructuring report was prepared with the involvement of all relevant stakeholders, including the bondholders' designated joint representative. It enables a solvent continuation of Rickmers Holding AG at terms which, pursuant to the present liquidation value report, are considerably more favorable for the bondholders than an insolvency of Rickmers Holding AG would be. Should the corporate bodies of the creditors and/or the bondholders not approve the proposed restructuring, the restructuring would likely fail and the going concern forecast of Rickmers Holding AG would likely no longer apply. About the Rickmers Group The Rickmers Group is an international service provider in the maritime transport sector and a vessel owner, based in Hamburg. In the Maritime Assets segment the Rickmers Group is active as Asset Manager for its own vessels and also for those of third parties. The Group initiates and coordinates shipping projects, organizes financing and acquires, charters and sells ships. In the Maritime Services business segment the Rickmers Group provides ship management services for its own vessels as well as for those owned by third parties; these services comprise technical and operational management, crewing, newbuild supervision, consultancy and insurance-related services. =========== G R E E C E =========== GREECE: May Fail to Meet Financial Targets Next Year, IMF Says -------------------------------------------------------------- Gemma Tetlow at The Financial Times reports that Greece is likely to fail to meet one of its most closely watched financial targets next year, according to the International Monetary Fund, raising pressure on euro area countries to ease their demands on Athens if they want the fund to join their bailout program. According to the FT, the fund says a "largely temporary" boost to Greek revenues will dissipate and make it difficult for the country to hit a 2018 target for its primary budget surplus -- a measure that excludes debt service costs. Fiscal forecasts published by the IMF on April 19 showed they expect Greek government income to exceed spending, excluding debt interest, by 1.8% of national income this year, after a surplus of 3.3% in 2016, the FT discloses. But Athens' surplus is then forecast to increase only marginally to 2% in 2018 -- well short of the 3.5% target that is part of Greece's bailout program, the FT notes. The fund's view on Greece's fiscal position is much more downbeat than the European Commission's, the FT states. Greece is in the middle of its third bailout program since the financial crisis, the FT relays. It is set to receive a total of EUR86 billion from creditors during this phase, which is due to end next year. While the IMF joined the first two rounds of the bailout, it has so far refused to participate in this stage, the FT says. According to the FT, progress on getting the IMF on board was made this month when the Greek government agreed with euro area countries on a package of reforms to pensions and income tax, which will be implemented from 2019. But the fund also wants agreement on a target for Greece's primary surplus beyond 2018, according to the FT. The IMF's judgment that Greece will fail to achieve the 3.5% target set for 2018 could put more pressure on euro area governments to rein in their demands, the FT says. Germany has made clear that it cannot accept further aid being given to Athens without the IMF's involvement in the bailout, the FT notes. The fund also wants euro area governments to say what debt relief they would be willing to provide to Greece, the FT discloses. ============= I R E L A N D ============= ALME LOAN III: Moody's Assigns B2 Rating to Class F Notes --------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to eight classes of notes ("Refinancing Notes") issued by ALME Loan Funding III Designated Activity Company: -- EUR 2,000,000 Class X Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf) -- EUR 243,000,000 Class A Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf) -- EUR 27,000,000 Class B-1 Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR 20,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR 21,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned A2 (sf) -- EUR 21,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Baa2 (sf) -- EUR 26,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Ba2 (sf) -- EUR 12,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2030. The definitive ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Furthermore, Moody's is of the opinion that the collateral manager, Apollo Management International LLP ("Apollo"), has sufficient experience and operational capacity and is capable of managing this CLO. The Issuer has issued the Refinancing Notes in connection with the refinancing of the following classes of notes: Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, Class B-2 Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes due 2028 (the "Original Notes"), previously issued December 2014 (the "Original Closing Date"). On the Refinancing Date, the Issuer will use the proceeds from the issuance of the Refinancing Notes to redeem in full the Original Notes. On the Original Closing Date the Issuer also issued Participating Term Certificates, which will remain outstanding. ALME Loan Funding III Designated Activity Company is a managed cash flow CLO with a target portfolio made up of EUR 400,500,000 par value of mainly European corporate leveraged loans. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. The portfolio may also consist of up to 7% of fixed rate obligations. The portfolio is expected to be 100% ramped up as of the closing date and to be comprised predominantly of corporate loans to obligors domiciled in Western Europe. Apollo will actively manage the collateral pool of the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: EUR400,500,000 Defaulted par: EUR 0 Diversity Score: 38 Weighted Average Rating Factor (WARF): 2850 Weighted Average Spread (WAS): 3.90% Weighted Average Recovery Rate (WARR): 42% Weighted Average Life (WAL): 8 years As part of its analysis, Moody's has addressed the potential exposure to obligors domiciled in countries with a local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with a LCC of A1 or below cannot exceed 10%, with exposures to countries with LCCs of Baa1 to Baa3 further limited to 5% and none allowed below Baa3. Given this portfolio composition, the model was run with different target par amounts depending on the target rating of each class of notes as further described in the methodology. The portfolio haircuts are a function of the size of the exposure to countries with a LCC of A1 or below and the target ratings of the rated notes, and amount to 0.75% for the Class X and Class A Notes, 0.50% for the Class B-1 and Class B-2 Notes, 0.375% for the Class C Notes and 0% for Classes D, E and F Notes. Moody's has also tested the sensitivity of the ratings of the notes to haircuts to the par amount and the recovery assumption for current pay obligations within the portfolio (up to 5% in aggregate). CLOs typically define a current pay security as an obligation of an entity that is undergoing insolvency proceedings, that is current on its interest and principal payments, and that the manager believes will remain current. An instrument with a facility rating of at least Caa1/Caa2 and a market value of at least 80%/85% is typically eligible for current pay status. However, this transaction does not set a rating requirement for defaulted obligations to qualify as current pay obligations with full par treatment. Based on the results of Moody's analysis, Moody's do not expects this feature to have a material negative impact on the rated notes. The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Apollo's investment decisions and management of the transaction will also affect the notes' performance. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. Factors that would lead to an upgrade or downgrade of the ratings: The performance of the notes is subject to uncertainty. The performance of the notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the notes. Stress Scenarios: Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was a component in determining the definitive ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal. Percentage Change in WARF -- increase of 15% (from 2850 to 3278) Rating Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A Senior Secured Floating Rate Notes: 0 Class B-1 Senior Secured Floating Rate Notes : -2 Class B-2 Senior Secured Fixed Rate Notes : -2 Class C Senior Secured Deferrable Floating Rate Notes: -2 Class D Senior Secured Deferrable Floating Rate Notes: -1 Class E Senior Secured Deferrable Floating Rate Notes: 0 Class F Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF -- increase of 30% (from 2850 to 3705) Rating Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A Senior Secured Floating Rate Notes: -1 Class B-1 Senior Secured Floating Rate Notes : -3 Class B-2 Senior Secured Fixed Rate Notes : -3 Class C Senior Secured Deferrable Floating Rate Notes: -3 Class D Senior Secured Deferrable Floating Rate Notes: -2 Class E Senior Secured Deferrable Floating Rate Notes: -1 Class F Senior Secured Deferrable Floating Rate Notes: -1 Further details regarding Moody's analysis of this transaction may be found in the related new issue report, published after the Original Closing Date and available on Moodys.com. ALME LOAN III: Fitch Assigns B- Rating to Class F-R Notes --------------------------------------------------------- Fitch Ratings has assigned ALME Loan Funding III Designated Activity Company refinancing notes final ratings: Class X: 'AAAsf'; Outlook Stable Class A-R: 'AAAsf; Outlook Stable Class B-1-R: 'AAsf'; Outlook Stable Class B-2-R: 'AAsf'; Outlook Stable Class C-R: 'Asf'; Outlook Stable Class D-R: 'BBBsf'; Outlook Stable Class E-R: 'BBsf'; Outlook Stable Class F-R: 'B-sf'; Outlook Stable Participating term certificates: not rated ALME Loan Funding III Designated Activity Company is a cash flow collateralised loan obligation (CLO). Net proceeds from the issuance of the notes were used to refinance the current outstanding notes of EUR368.3 million. The portfolio of assets is managed by Apollo Management International LLP. KEY RATING DRIVERS 'B' Portfolio Credit Quality Fitch considers the average credit quality of obligors to be in the 'B' category. Fitch has public ratings or credit opinions on all obligors in the identified portfolio. The weighted average rating factor of the identified portfolio is 32.6. High Recovery Expectations At least 90% of the portfolio comprises senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate of the identified portfolio is 66.1. Diversified Asset Portfolio During the refinancing process the issuer introduced a covenant that limits the top 10 obligors in the portfolio to 21% of the portfolio balance. In addition, the maximum industry exposure is restricted to 17.5% for the largest industry and 40% for the top three. This ensures that the asset portfolio will not be exposed to excessive obligor concentration. Partial Interest Rate Risk Unhedged fixed-rate assets cannot exceed 7% of the portfolio while fixed-rate liabilities account for 5% of target par. This provides a partial hedge against rising interest rates. 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 a 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 three notches for the rated notes. TRANSACTION SUMMARY The issuer has amended the capital structure and extended the maturity of the notes. The transaction's reinvestment period has been extended to 2021, four years after the refinancing. EUR2 million class X notes ranking pari-passu to the class A notes have been added to the structure. The principal amount of the class X notes is scheduled to amortise in equal instalments during the first four payment dates, using both interest and principal proceeds. Class X notional is excluded from the over- collateralisation tests calculation. DUE DILIGENCE USAGE 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 collateral administrator as at February 3, 2017 - Offering circular provided by the arranger as at March 6, 2017 REPRESENTATIONS AND WARRANTIES A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering documents for EMEA CLOs transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for EMEA CLOs transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016. CARLYLE GLOBAL 2015-1: Moody's Affirms B2 Rating on Class E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to six classes of notes ("Refinancing Notes") issued by Carlyle Global Market Strategies Euro CLO 2015-1 Designated Activity Company: -- EUR 273,500,000 Class A-1A-R Senior Secured Floating Rate Notes due 2029, Definitive Rating Assigned Aaa (sf) -- EUR 5,000,000 Class A-1B-R Senior Secured Fixed Rate Notes due 2029, Definitive Rating Assigned Aaa (sf) -- EUR 53,900,000 Class A-2A-R Senior Secured Floating Rate Notes due 2029, Definitive Rating Assigned Aa1 (sf) -- EUR 12,000,000 Class A-2B-R Senior Secured Fixed Rate Notes due 2029, Definitive Rating Assigned Aa1 (sf) -- EUR 28,600,000 Class B-R Senior Secured Deferrable Floating Rate Notes due 2029, Definitive Rating Assigned A2 (sf) -- EUR 27,600,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2029, Definitive Rating Assigned Baa2 (sf) Additionally, Moody's has affirmed the ratings on the existing following notes issued by the Issuer: -- EUR 28,600,000 Class D Senior Secured Deferrable Floating Rate Notes due 2029, Affirmed Ba2 (sf); previously on Mar 12, 2015 Definitive Rating Assigned Ba2 (sf) -- EUR 16,800,000 Class E Senior Secured Deferrable Floating Rate Notes due 2029, Affirmed B2 (sf); previously on Mar 12, 2015 Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's ratings of the notes address the expected loss posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. The Issuer has issued the Refinancing Notes in connection with the refinancing of the following classes of Original Notes: Class A-1A Notes, Class A-1B Notes, Class A-2A Notes, Class A-2B Notes, Class B Notes and Class C Notes due 2029 (the "Original Notes"), previously issued on March 12, 2015 (the "Original Closing Date"). On the refinancing date, the Issuer will use the proceeds from the issuance of the Refinancing Notes to redeem in full its respective Original Notes that will be refinanced. On the Original Closing Date the Issuer also issued the Class D Notes and the Class E Notes as well as one class of subordinated notes, which will remain outstanding. Carlyle Global Market Strategies Euro CLO 2015-1 Designated Activity Company is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured obligations and up to 10% of the portfolio may consist of senior unsecured loans, second-lien loans, mezzanine obligations, high yield bonds and senior unsecured bonds. The underlying portfolio is 100% ramped as of the refinancing date. CELF Advisors LLP (the "Manager") manages the CLO. It directs the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's reinvestment period. After the reinvestment period, which ends in April 2019, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations, and are subject to certain restrictions. In addition to the eight classes of notes rated by Moody's, the Issuer has issued EUR54M of subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The performance of the notes is subject to uncertainty. The performance of the notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the notes. Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. For modeling purposes, Moody's used the following base-case assumptions: Par amount: EUR 482,300,000 Diversity Score: 44 Weighted Average Rating Factor (WARF): 3384 Weighted Average Spread (WAS): 4.8% Weighted Average Coupon (WAC): 5% Weighted Average Recovery Rate (WARR): 44.7% Weighted Average Life (WAL): 6.2 years. As part of its analysis, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency government bond rating of A1 or below. According to the portfolio constraints, the eligibility criteria and the current sovereign ratings of eligible countries, the total exposure to countries with an equivalent local currency country risk bond ceiling ("LCC") below Aa3 may not exceed 10% of the total portfolio and there are no obligors domiciled in a country with an equivalent LCC below A3. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run without the need to apply portfolio haircuts as further described in the methodology. Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the provisional ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal. Percentage Change in WARF: WARF + 15% (to 3887 from 3384) Ratings Impact in Rating Notches: Class A-1A-R Senior Secured Floating Rate Notes: 0 Class A-1B-R Senior Secured Fixed Rate Notes: 0 Class A-2A-R Senior Secured Floating Rate Notes: -2 Class A-2B-R Senior Secured Fixed Rate Notes: -2 Class B-R Senior Secured Deferrable Floating Rate Notes: -1 Class C-R Senior Secured Deferrable Floating Rate Notes: -1 Percentage Change in WARF: WARF +30% (to 4394 from 3384) Ratings Impact in Rating Notches: Class A-1A-R Senior Secured Floating Rate Notes: 0 Class A-1B-R Senior Secured Fixed Rate Notes: 0 Class A-2A-R Senior Secured Floating Rate Notes: -3 Class A-2B-R Senior Secured Fixed Rate Notes: -3 Class B-R Senior Secured Deferrable Floating Rate Notes: -2 Class C-R Senior Secured Deferrable Floating Rate Notes: -2 Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. =================== L U X E M B O U R G =================== GARFUNKELUX HOLDCO: S&P Affirms B+/B Counterparty Credit Ratings ---------------------------------------------------------------- S&P Global Ratings said that it affirmed its 'B+/B' long- and short-term counterparty credit ratings on Luxembourg-based debt collection company Garfunkelux Holdco 2 S.A. (GH2). The outlook is negative. At the same time, S&P affirmed its 'B+' issue rating and recovery rating of '3' on the senior secured floating rate notes subject to the tap, issued by Garfunkelux Holdco 3 S.A. (GH3), indicating S&P's expectation of meaningful recovery (50%-70%; rounded estimate: 50%) in the event of payment default. The rating on the proposed tap is subject to S&P's review of the notes' final documentation. S&P also affirmed the 'B+' issue rating and recovery rating of '3' on the existing EUR365 million and ú565 million senior secured notes, indicating S&P's expectation of meaningful recovery (50%-70%; rounded estimate: 50%). S&P affirmed the 'BB' issue rating and recovery rating of '1' on the EUR200 million revolving credit facility (RCF) co-issued by Garfunkel Holding GmbH and Simon Bidco Ltd., indicating S&P's expectation of very high recovery (90%-100%; rounded estimate: 95%). S&P also affirmed the 'B-' issue rating and recovery rating of '6' on the GBP230 million senior unsecured notes issued by GH2, indicating negligible recovery (0%-10%; rounded estimate: 0%). All of S&P's rounded estimates on the various debt instruments reflect recovery expectations in the event of payment default. The rating actions reflect S&P's view that the proposed tap of GH3's existing EUR230 million senior secured floating rate notes does not materially affect S&P's existing rating and outlook on the group or S&P's existing forward looking view of its financial risk profile. S&P's forecast of GH2's financial risk profile incorporates an incremental weakening of GH2's credit metrics at the point of transaction closing. The weakening of its credit metrics is similar to the position that S&P highlighted following its debt- financed acquisition of Tesch in September 2016. S&P notes that in the two quarters that followed this acquisition, GH2 had begun to deleverage and that the proposed tap represents a divergence from this trend. However, S&P expects the impact to be temporary, and that the cash generative nature of GH2's activities and its increasing earnings capacity will allow the company to operate with credit metrics in line with S&P's existing expectations over the 12-month outlook horizon. S&P projects these: -- Gross debt to S&P Global Ratings-adjusted EBITDA of 4x-5x (adjusted EBITDA is gross of portfolio amortization); -- Funds from operations (FFO) to total debt of 12%-20%; and -- Adjusted EBITDA coverage of interest expense of 2x-3x. S&P's forward-looking analysis of the company's financial risk profile applies a 20% weight to year-end 2016 and 40% weights to year-end projections for both 2017 and 2018. S&P's forecast also includes the assumption that earnings generation from collections on purchased portfolios will lag the initial capital outlay. S&P therefore expects temporary and seasonal spikes in leverage when debt is issued, but that the subsequent customer engagement and cash flow generation over the following 12 months will begin to compensate for the initial increase in debt. S&P's base-case scenario assumes a deleveraging trend. However, S&P continues to believe that the acquisition of Tesch shortly after a transformational merger between Lowell and GFKL represents a potential increase in the group's overall risk appetite. This, when combined with the proposed debt issuance, could lead to an extended weakening of credit metrics, particularly if increased operational risks lead to slower cash flow generation than S&P's base-case scenario assumes. The negative outlook therefore signals a one-in-three chance that S&P could lower the ratings if the group's growth in total collections and third-party fee income is insufficient to reduce the group's leverage over the next 12 months. S&P could also lower the ratings if GH2 raises additional debt to finance brisk growth or merger and acquisition (M&A) activity, which further delays improvements in the group's credit metrics. S&P's 'b+' group credit profile (GCP) for the combined entity already incorporates a one-notch downward adjustment under S&P's negative comparable rating analysis modifier. While S&P considers the group's deleveraging plan as achievable, and the ongoing integration of Tesch to be manageable, S&P believes that the downward adjustment remains relevant at this time. This reflects the group's growth ambitions, which to date have been funded primarily through raising debt, and its recent debt- financed acquisition shortly after the transformational merger. S&P also believes that the industry will likely continue its phase of consolidation, which may lead to further debt-financed acquisitions. S&P's business risk profile assessment remains constrained by the regulatory and operational risks that GH2 faces, and S&P's view that the overall execution of the group's strategy is relatively immature given its recent formation. However, S&P continues to view the group as one of the largest credit management businesses operating across two of the large European markets. S&P believes that the group benefits from its scale and diversification, particularly its presence across a number of asset classes, and its increasing proportion of revenue from third-party servicing income. Given Tesch's modest size, its ongoing integration is complementary to the group's business risk profile, in S&P's view, as opposed to transformational. The negative outlook indicates that S&P could downgrade GH2 if, after the recent debt issuance and acquisition, growth in total collections and third-party servicing income is insufficient to improve its post-transaction leverage profile over the next 12 months. S&P currently considers the group's headroom under its financial risk profile to be limited as a result of recent activity. S&P could lower the ratings if it no longer expects that the group will improve its credit metrics over the next 12 months. S&P could revise its forward-looking financial risk profile assessment downward if it expects: -- Gross debt to adjusted EBITDA above 5x; -- FFO to gross debt below 12%; or -- Adjusted EBITDA to interest expense below 3x. Such a scenario could unfold if integration risks lead to a material unanticipated rise in costs or a lowering of the group's earnings capacity below S&P's current expectations. It could also occur if S&P saw further signs of an aggressive financial policy, for example the group raising additional debt to fund brisk growth or another material acquisition. S&P could revise the outlook back to stable if it saw evidence of an improving post-transaction leverage profile in line with S&P's expectations, providing more clarity on the group's financial policy. This would occur if S&P believed the following ratios would remain firmly and sustainably within the given ranges: -- Gross debt to adjusted EBITDA of 4x-5x; -- FFO to gross debt of 12%-20%; and -- Adjusted EBITDA to interest expense of 3x-6x. A stable outlook would also be supported by diminishing integration risks associated with the recent M&A activity and evidence that Permira's strategy as a financial sponsor will not hinder GH2's debt-servicing capabilities. ===================== N E T H E R L A N D S ===================== ARES EUROPEAN CLO VI: Moody's Assigns B2 Rating to Cl. F-R Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to notes ("Refinanced Notes") issued by Ares European CLO VI B.V., following a restructuring of the transaction which closed on September 2013: -- EUR 208,150,000 Class A-R Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf) -- EUR 39,250,000 Class B-1-R Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR 5,000,000 Class B-2-R Senior Secured Fixed Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR 21,700,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned A2 (sf) -- EUR 17,300,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Baa2 (sf) -- EUR 20,400,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Ba2 (sf) -- EUR 4,700,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's ratings of the rated notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2030. The ratings reflect the risks due to defaults on the underlying portfolio of loans given the characteristics and eligibility criteria of the constituent assets, the relevant portfolio tests and covenants as well as the transaction's capital and legal structure. Furthermore, Moody's is of the opinion that the collateral manager, Ares European Loan Management LLP ("Ares"), has sufficient experience and operational capacity and is capable of managing this CLO. The Issuer has issued the Refinanced Notes in connection with the refinancing of the following classes of notes: Class A notes, Class B notes, Class C notes, Class D notes and Class E notes due 2025 (the "Original Notes"), previously issued on September 3, 2013 (the "Original Issue Date"). On the Refinancing Date, the Issuer will use the proceeds from the issuance of the Refinanced Notes to redeem in full its respective Original Notes. On the Original Issue Date, the Issuer also issued one class of subordinated notes, which will remain outstanding. Ares VI is a managed cash flow CLO. At least 96% of the portfolio must consist of senior secured loans and senior secured bonds and up to 4% of the portfolio may consist of unsecured loans, second- lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be approximately 63% ramped up as of the refinancing closing date and to be comprised predominantly of corporate loans to obligors domiciled in Western Europe. Ares will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Ares' investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modeled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. Moody's used the following base-case modeling assumptions: Par amount: EUR 347,000,000 Diversity Score: 40 Weighted Average Rating Factor (WARF): 2895 Weighted Average Spread (WAS): 3.75% Weighted Average Recovery Rate (WARR): 43.5% Weighted Average Life (WAL): 8.5 years. Weighted Average Coupon (WAC): 6.00% Moody's has analysed the potential impact associated with sovereign related risk of peripheral European countries. As part of the base case, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency country risk ceiling of A1 or below. Following the effective date, and given the portfolio constraints and the current sovereign ratings in Europe, such exposure may not exceed 10% of the total portfolio. As a result and in conjunction with the current foreign government bond ratings of the eligible countries, as a worst case scenario, a maximum 10% of the pool would be domiciled in countries with A3 local currency country ceiling. The remainder of the pool will be domiciled in countries which currently have a local or foreign currency country ceiling of Aaa or Aa1 to Aa3. Stress Scenarios: Together with the set of modeling assumptions above, Moody's conducted additional sensitivity analysis, which was an important component in determining the ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal. Percentage Change in WARF: WARF + 15% (to 3329 from 2895) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: 0 Class B-1-R Senior Secured Floating Rate Notes: -2 Class B-2-R Senior Secured Fixed Rate Notes: -2 Class C-R Senior Secured Deferrable Floating Rate Notes: -2 Class D-R Senior Secured Deferrable Floating Rate Notes: -2 Class E-R Senior Secured Deferrable Floating Rate Notes: -1 Class F-R Senior Secured Deferrable Floating Rate Notes: -1 Percentage Change in WARF: WARF + 30% (to 3764 from 2895) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: -1 Class B-1-R Senior Secured Floating Rate Notes: -3 Class B-2-R Senior Secured Fixed Rate Notes: -3 Class C-R Senior Secured Deferrable Floating Rate Notes: -4 Class D-R Senior Secured Deferrable Floating Rate Notes: -3 Class E-R Senior Secured Deferrable Floating Rate Notes: -1 Class F-R Senior Secured Deferrable Floating Rate Notes: -2 Further details regarding Moody's analysis of this transaction may be found in the upcoming New Issue report, available soon on Moodys.com. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. BNPP IP 2015-1: Moody's Affirms B2(sf) Rating on Class F Notes -------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to six classes of notes ("Refinancing Notes") issued by BNPP IP EURO CLO 2015-1 B.V.: -- EUR176,236,000 Class A-1-R Senior Secured Floating Rate Notes due 2028, Definitive Rating Assigned Aaa (sf) -- EUR5,264,000 Class A-2-R Senior Secured Fixed Rate Notes due 2028, Definitive Rating Assigned Aaa (sf) -- EUR20,868,000 Class B-1-R Senior Secured Floating Rate Notes due 2028, Definitive Rating Assigned Aa1 (sf) -- EUR12,632,000 Class B-2-R Senior Secured Fixed Rate Notes due 2028, Definitive Rating Assigned Aa1 (sf) -- EUR17,500,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2028, Definitive Rating Assigned A1 (sf) -- EUR15,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2028, Definitive Rating Assigned Baa1 (sf) Additionally, Moody's has upgraded and affirmed the ratings on the existing following notes issued by BNPP IP: -- EUR21,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2028, Upgraded to Ba1 (sf); previously on Apr 16, 2015 Definitive Rating Assigned Ba2 (sf) -- EUR8,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2028, Affirmed B2 (sf); previously on Apr 16, 2015 Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's ratings of the notes address the expected loss posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. The Issuer has issued the Refinancing Notes in connection with the refinancing of the following classes of original notes: Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, Class B-2 Notes, Class C Notes and Class D Notes due 2028 (the "Original Notes"), previously issued on April 15, 2015 (the "Original Closing Date"). On the refinancing date, the Issuer will use the proceeds from the issuance of the Refinancing Notes to redeem in full its respective Original Notes that will be refinanced. On the Original Closing Date the Issuer also issued the Class E Notes and the Class F Notes as well as one class of subordinated notes, which will remain outstanding. The rating action on the Class E is primarily a result of the increase in the excess spread available to the transaction resulting from refinancing of Class A, Class B, Class C and Class D. BNPP IP is a managed cash flow CLO. The issued notes are collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 95% of the portfolio must consist of senior secured loans and eligible investments, and up to 5% of the portfolio may consist of second lien loans and unsecured loans. The underlying portfolio is 100% ramped as of the refinancing date. BNP Paribas Asset Management SAS (the "Manager") manages the CLO. It directs the selection, acquisition, and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's reinvestment period. After the reinvestment period, which ends in April 2019, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk obligations and credit improved obligations, subject to certain restrictions. In addition to the eight classes of notes rated by Moody's, the Issuer has issued EUR 32m of subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. For modeling purposes, Moody's used the following base-case assumptions: Par amount: EUR300,000,000 Diversity Score: 38 Weighted Average Rating Factor (WARF): 3106 Weighted Average Spread (WAS): 4.25% Weighted Average Coupon (WAC): n/a Weighted Average Recovery Rate (WARR): 45.27% Weighted Average Life (WAL): 6.00 years. As part of its analysis, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency government bond ratings of A1 or below. According to the portfolio constraints, the eligibility criteria, the total exposure to countries with a local currency country risk bond ceiling ("LCC") between A1 and A3 may not exceed 10% of the total portfolio and only obligation for which the obligor is domiciled in a country with a LCC of at least A3 can be purchased. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run without the need to apply portfolio haircuts as further described in the methodology. Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the provisional rating assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal. Percentage Change in WARF: WARF + 15% (to 3572 from 3106) Ratings Impact in Rating Notches: Class A-1-R Senior Secured Floating Rate Notes: 0 Class A-2-R Senior Secured Fixed Rate Notes: 0 Class B-1-R Senior Secured Floating Rate Notes: -2 Class B-2-R Senior Secured Fixed Rate Notes: -2 Class C-R Mezzanine Secured Deferrable Floating Rate Notes: -1 Class D-R Mezzanine Secured Deferrable Floating Rate Notes: -1 Percentage Change in WARF: WARF +30% (to 4038 from 3106) Ratings Impact in Rating Notches: Class A-1-R Senior Secured Floating Rate Notes: 0 Class A-2-R Senior Secured Fixed Rate Notes: 0 Class B-1-R Senior Secured Floating Rate Notes: -3 Class B-2-R Senior Secured Fixed Rate Notes: -3 Class C-R Mezzanine Secured Deferrable Floating Rate Notes: -3 Class D-R Mezzanine Secured Deferrable Floating Rate Notes: -2 Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the notes' performance. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. BNPP IP 2015-1: Fitch Affirms B- Rating on Class F Senior Notes --------------------------------------------------------------- Fitch Ratings has assigned BNPP IP EURO CLO 2015-1 B.V.'s refinancing notes final ratings and affirmed the others: Class A-1 senior secured floating rate notes due 2028: assigned 'AAAsf', Outlook Stable Class A-2 senior secured fixed rate notes due 2028: assigned 'AAAsf', Outlook Stable Class B-1 senior secured floating rate notes due 2028: assigned 'AAsf', Outlook Stable Class B-2 senior secured fixed rate notes due 2028: assigned 'AAsf', Outlook Stable Class C senior secured deferrable floating rate notes due 2028: assigned 'A+sf', Outlook Stable Class D senior secured deferrable floating rate notes due 2028: assigned 'BBBsf', Outlook Stable Class E senior secured deferrable floating rate notes due 2028: affirmed at 'BBsf', Outlook Stable Class F senior secured deferrable floating rate notes due 2028: affirmed at 'B-sf', Outlook Stable The transaction is a cash flow collateralised loan obligations securitising portfolios of mainly European leveraged loans. The transaction is not allowed to invest in bonds. The portfolio is managed by BNP Paribas Asset Management SAS. KEY RATING DRIVERS Transaction Summary The issuer has issued new notes to refinance part of the original liabilities. The refinancing notes bear interest at a lower margin over EURIBOR or lower fixed rate coupon than the notes being refinanced. The remaining terms and conditions of the refinancing notes (including seniority) are the same as the refinanced notes. The refinancing notes cannot be refinanced in part in a future date. However, all rated notes can be refinanced after the date one year prior to end of the reinvestment period in April 2019. The issuer has also amended the Fitch Tests Matrix. Average Portfolio Credit Quality Fitch assesses the average credit quality of obligors as being in the 'B' category. Fitch has credit opinions on all obligors in the underlying portfolio. The weighted average rating factor (WARF) of the underlying portfolio is 32.1, below the maximum WARF of 33.25. Average Recoveries At least 95% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate of the current portfolio is 68.0%, above the minimum of 66.1%. RATING SENSITIVITIES As the loss rates for the current portfolio are below those modelled for the stress portfolio, the sensitivities shown in the new issue report still apply. HALCYON LOAN 2014: Moody's Assigns B2 Rating to Class F-R Notes --------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to six classes of notes (the "Refinancing Notes") issued by Halcyon Loan Advisors European Funding 2014 B.V.: -- EUR 179,800,000 Class A-R Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf) -- EUR 39,700,000 Class B-R Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf) -- EUR 20,900,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned A2 (sf) -- EUR 15,400,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Baa2 (sf) -- EUR 17,750,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Ba2 (sf) -- EUR 9,300,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned B2 (sf) Moody's had assigned provisional ratings to the Refinancing Notes in this transaction on March 29, 2017. RATINGS RATIONALE Moody's definitive ratings of the notes address the expected loss posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. The Issuer has issued the Refinancing Notes in connection with the refinancing of the following classes of notes: Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes due 2027 (the "Original Notes"), previously issued on December 17, 2014 (the "Original Closing Date"). On the Refinancing Date, the Issuer will use the proceeds from the issuance of the Refinancing Notes to redeem in full its respective Original Notes. On the Original Closing Date, the Issuer also issued one class of Subordinated Notes, which will remain outstanding. Halcyon CLO is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds; up to 10% of the portfolio may consist of unsecured senior obligations, second-lien loans, high yield bonds and mezzanine obligations. The underlying portfolio is 100% ramped as of the second refinancing closing date. Halcyon Loan Advisors (UK) LLP (the "Manager") manages the CLO. It directs the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. After the reinvestment period, which ends in April 2021, the Manager may reinvest unscheduled principal payments and sale proceeds from credit risk and credit improved obligations, subject to certain restrictions. In addition to the six classes of notes rated by Moody's, the Issuer has issued EUR 31,000,000 of Subordinated Notes. Moody's has not assigned ratings to this class of notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Rothschild's investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modeled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. Moody's used the following base-case modeling assumptions: Par Amount: EUR304,500,000 Diversity Score: 36 Weighted Average Rating Factor (WARF): 2800 Weighted Average Spread (WAS): 4.00% Weighted Average Recovery Rate (WARR): 42% Weighted Average Life (WAL): 8 years. As part of the base case, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with local currency country risk ceiling ratings of A1 or below cannot exceed 10%, with exposures to countries local currency country risk ceiling ratings of Baa1 to Baa3 further limited to 5%. Following the refinancing date, and given these portfolio constraints and the current sovereign ratings of eligible countries, the total exposure to countries with a LCC of A1 or below may not exceed 10% of the total portfolio. As a worst case scenario, a maximum 5% of the pool would be domiciled in countries with LCC of A3 and 5% in countries with LCC of Baa3. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run with different target par amounts depending on the target rating of each class of notes as further described in the methodology. The portfolio haircuts are a function of the exposure size to peripheral countries and the target ratings of the rated notes and amount to 0.75% for the Class A Notes, 0.50% for the Class B Notes, 0.375% for the Class C Notes and 0% for Classes D, E and F Notes. Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the definitive ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal. Percentage Change in WARF: WARF + 15% (to 3220 from 2800) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: 0 Class B-R Senior Secured Floating Rate Notes: -2 Class C-R Senior Secured Deferrable Floating Rate Notes: -2 Class D-R Senior Secured Deferrable Floating Rate Notes: -2 Class E-R Senior Secured Deferrable Floating Rate Notes: 0 Class F-R Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF: WARF +30% (to 3640 from 2800) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: -1 Class B-R Senior Secured Floating Rate Notes: -3 Class C-R Senior Secured Deferrable Floating Rate Notes: -4 Class D-R Senior Secured Deferrable Floating Rate Notes: -2 Class E-R Senior Secured Deferrable Floating Rate Notes: -1 Class F-R Senior Secured Deferrable Floating Rate Notes: -1 The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Halcyon Loan Advisors (UK) LLP's investment decisions and management of the transaction will also affect the notes' performance. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. JUBILEE CLO 2014-XI: Moody's Assigns B2 Rating to Class F-R Notes ----------------------------------------------------------------- Moody's Investors Service announced that is has assigned the following definitive ratings to refinancing notes ("Refinancing Notes") issued by Jubilee CLO 2014-XI B.V.: -- EUR 2,000,000 Class X Senior Secured Floating Rate Notes due 2030, Assigned Aaa (sf) -- EUR 235,000,000 Class A-R Senior Secured Floating Rate Notes due 2030, Assigned Aaa (sf) -- EUR 46,500,000 Class B-R Senior Secured Floating Rate Notes due 2030, Assigned Aa2 (sf) -- EUR 36,500,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2030, Assigned A2 (sf) -- EUR 23,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Baa2 (sf) -- EUR 18,600,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Ba2 (sf) -- EUR 11,800,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2030, Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2030. The definitive ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Furthermore, Moody's is of the opinion that the collateral manager, Alcentra Limited ("Alcentra"), has sufficient experience and operational capacity and is capable of managing this CLO. The Issuer has issued the Refinancing Notes in connection with the refinancing of the following classes of notes: Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes due 2027 (the "Original Notes"), previously issued February 2014 (the "Original Closing Date"). On the Refinancing Date, the Issuer will use the proceeds from the issuance of the Refinancing Notes to redeem in full the Original Notes. On the Original Closing Date the Issuer also issued Subordinated Notes, which will remain outstanding. Jubilee CLO 2014--XI B.V. is a managed cash flow CLO with a target portfolio made up of EUR 400,000,000 par value of mainly European corporate leveraged loans. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. The portfolio may also consist of up to 10% of fixed rate obligations. The portfolio is expected to be 100% ramped up as of the closing date and to be comprised predominantly of corporate loans to obligors domiciled in Western Europe. Alcentra will actively manage the collateral pool of the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Factors that would lead to an upgrade or downgrade of the ratings: The performance of the notes is subject to uncertainty. The performance of the notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the notes. Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in October 2016. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. For modeling purposes, Moody's used the following base-case assumptions: Performing par and principal proceeds balance: EUR400,000,000 Defaulted par: EUR 0 Diversity Score: 42 Weighted Average Rating Factor (WARF): 2800 Weighted Average Spread (WAS): 3.90% Weighted Average Recovery Rate (WARR): 42% Weighted Average Life (WAL): 8 years As part of its analysis, Moody's has addressed the potential exposure to obligors domiciled in countries with a local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with a LCC of A1 or below cannot exceed 10%, with exposures to countries with LCCs of Baa1 to Baa3 further limited to 5% and none allowed below Baa3. Given this portfolio composition, the model was run with different target par amounts depending on the target rating of each class of notes as further described in the methodology. The portfolio haircuts are a function of the size of the exposure to countries with a LCC of A1 or below and the target ratings of the rated notes, and amount to 0.75% for the Class X and Class A-R Notes, 0.50% for the Class B-R Notes, 0.375% for the Class C-R Notes and 0% for Classes D-R, E-R and F-R. Stress Scenarios: Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was a component in determining the definitive ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal. Percentage Change in WARF -- increase of 15% (from 2800 to 3220) Rating Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A-R Senior Secured Floating Rate Notes: 0 Class B-R Senior Secured Floating Rate Notes : -1 Class C-R Senior Secured Deferrable Floating Rate Notes: -2 Class D-R Senior Secured Deferrable Floating Rate Notes: -2 Class E-R Senior Secured Deferrable Floating Rate Notes: 0 Class F-R Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF -- increase of 30% (from 2850 to 3640) Rating Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A-R Senior Secured Floating Rate Notes: -1 Class B-R Senior Secured Floating Rate Notes : -2 Class C-R Senior Secured Deferrable Floating Rate Notes: -3 Class D-R Senior Secured Deferrable Floating Rate Notes: -3 Class E-R Senior Secured Deferrable Floating Rate Notes: -1 Class F-R Senior Secured Deferrable Floating Rate Notes: 0 Further details regarding Moody's analysis of this transaction may be found in the related new issue report, published after the Original Closing Date and available on Moodys.com. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in October 2016. =========== T U R K E Y =========== EMLAK KONUT: Fitch Assigns BB+ Long-Term Local-Currency IDR ----------------------------------------------------------- Fitch Ratings assigned a Long-Term Local-Currency Issuer Default Rating (IDR) of 'BB+' and National Rating of 'AA(tur)' to Turkish residential developer Emlak Konut Gayrimenkul Yatirim Ortakligi A.S. (Emlak Konut). The Outlooks are Stable. Fitch had assigned Emlak Konut a Long-Term Foreign-Currency IDR of 'BB+' on April 3, 2017. The ratings reflect Emlak Konut's unique revenue sharing model (RSM), which generates guaranteed income and a share of upside gains, and passes nearly all design, building, financing and marketing risks to developers. Emlak holds a competitive advantage owing to its privileged position with its controlling shareholder, Turkey's Housing Development Administration (TOKI). Other credit strengths include a significant land bank, largely in Istanbul, as well as sound financials. The ratings also reflect the company's exposure to potential volatile housing demand and prices, as well as regulatory and political risks. The risk of contractor failure is also mitigated by a number of protections. The Stable Outlooks reflect Fitch expectations that Emlak Konut will be able to maintain its operating margins and financial metrics, despite a downturn in the economy and probable volatility in the housing market. KEY RATING DRIVERS Revenue-Sharing Model Secures Revenue: Emlak Konut primarily uses a low-risk revenue-sharing model (RSM) to develop most projects which provides strong revenue visibility and protects the company from short-term market volatility. This is unique among its peer group. Under the RSM, Emlak Konut passes operational risk through to contractors. Contractors must guarantee Emlak Konut's minimum revenue, as well as a share of any upside gains. Emlak Konut supervises the project and collects and distributes all project cash flows including the contractor's revenue share at defined milestones. Self-Development Limited: Ninety-two percent of Emlak Konut's revenues were driven by the RSM in 2016. It generally self- develops projects outside Istanbul. In this case, the company passes only building risk to contractors. The company can also use this approach to increase interest in developing areas, which will allow the use of the RSM for future projects. Competitive Advantage: Emlak Konut's exclusive priority agreement with the Housing Development Administration (TOKI) enables it to buy land from TOKI at independently appraised values without a tendering process. The company's quick access to large, attractive parcels of land provides a significant advantage over other developers, particularly in Istanbul where housing demand is high. Mutually Beneficial Relationship: Any deterioration in relations with TOKI would affect Emlak Konut's operations, but this risk appears low as the arrangement is mutually beneficial: Emlak Konut's access to valuable land sustains its own business model; the resulting dividends help TOKI fund its development programme. Significant Land Bank: Emlak Konut has a 10 million square metre land bank valued at nearly TRY5.2 billion, largely in key or developing areas of Istanbul where demand is high. This is in spite of completing or still developing more than 70 projects. The land bank ensures the company will continue to have the ability to develop projects, which it must do to sustain its operations, and the good locations mean contractors, as well as consumers, are like to be attracted to its projects. Exposure to Contractor Performance: Under the RSM, contractors are responsible for virtually all development risks. Emlak Konut is substantially exposed to contractor failure. It has a two- stage mechanism in place to ensure only financially strong companies are contracted. Participants must first submit financial and technical requirements before moving to the second stage if they meet the requirements. In the second stage, bidders must propose estimated project values and revenue sharing. The preferred bidder is obliged to provide a down payment of generally about 10% of the minimum revenue, as well as a letter of guarantee equating to 6% of the estimated total project value. Strong Fundamentals: Turkish house values have risen steeply in recent years, driven by strong economic growth and a housing shortage. Fundamentals including a young and growing population, improvements in the housing stock, requirements to meet earthquake-proof building regulations, steadily increasing mortgage take-up as well an increase in foreign buyers all support continued demand. Revenue Protected: Guaranteed revenue under the RSM would protect the company in the near term if house prices fall. In addition, the government has demonstrated a willingness to support the sector through various incentives and tax relief. A steep fall in the housing values could depress long-term returns and affect the company's ability to attract contractors to their projects. Financial Strength: Emlak Konut has healthy financials, generating sound EBITDA margins and steadily expanding the value multiplier under the RSM business. Its total returns on completed RSM projects have steadily increased, averaging 2x the appraised value of the land since 2012. Emlak Konut's strong cash generation means the company has large cash holdings with little debt, helping it manage volatile working capital, but also to react quickly to new land opportunities. RATING DERIVATION Emlak Konut's operational model carries lower risk than most peers' and includes guaranteed minimum revenue irrespective of a project's success. By passing nearly all project risks to contractors, the company is able to develop multiple projects simultaneously with lower operating costs than developments of comparable size. This means margins and profits are higher than peers', reflecting the level of risk. Emlak Konut has a competitive advantage compared to other developers, owing to its preferential position with TOKI. This also exposes Emlak Konut to potential political or regulatory risks that do not affect other peers. Like all developers, a decline in the housing market will affect operations, but the guaranteed revenue stream would cushion the impact in the short to medium term. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for Emlak Konut include: - healthy EBITDA margin averaging 38% supported by the revenue sharing model; - significant growth in 2016 revenues supported by two large projects; - significant cash outflow in 2017 exceeding TRY4 billion with some recovery in 2019 FCF; - flexible dividend policy up to 40% of net income for the next four years. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - Consistently strong economic and GDP growth, along with political stabilisation. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - Gross debt to work-in-progress (WIP) ratio consistently above 50% - Any material change in the relationship with TOKI causing deterioration in the financial profile and financial flexibility of Emlak - Deterioration in liquidity profile over a sustained period of time - Order backlog to WIP ratio below 150% over a sustained period of time - EBITDA margin below 30% for a sustained period LIQUIDITY Healthy Liquidity: Emlak Konut has low debt with upcoming scheduled payments only in 2018, which the company will service by readily available cash. It reported TRY2.5 billion of cash at year end 2016, of which Fitch views TRY1.5 billion as being restricted. Restricted cash mainly constitutes TRY368 million of deposits related to contractor's portion of the residential unit sales, as per the RSM agreement, and TRY1.1 billion relating to the cost of land purchased by Emlak Konut, held in its accounts on behalf of TOKI, until the payment is dispersed Our forecasts for cash balances, which are adjusted for working capital swings and land purchases, amount to TRY2 billion pa. for 2016-2020. The company has undrawn, available facilities totalling TRY4.8 billion, but these are all not formally committed and have no commitment fees. TURKEY: Referendum May Facilitate Economic Reform, Fitch Says ------------------------------------------------------------- Turkey's constitutional referendum is part of a political shift that has been negative for the country's sovereign credit profile, but may facilitate a revival of credit-positive economic reforms, Fitch Ratings says. The 16 April referendum approved, by a narrow margin (51.4%), 18 constitutional amendments that will increase the executive powers of the presidency. The opposition CHP said it will demand a partial recount and has criticised the "unfair conditions" in which the vote was held. Earlier this year, Fitch downgraded Turkey's sovereign rating to BB+/Stable reflecting, among other things, the erosion of checks and balances and institutional independence in Turkey in recent years. At the time of the downgrade, Fitch assumed the constitutional amendments would be approved. The referendum may complete an extended political cycle now that President Recep Tayyip Erdogan has accomplished a key long- standing political goal of increasing presidential powers. New presidential and parliamentary elections are not required until late 2019. This timeframe should allow the economy to move back up the ruling AKP's policy agenda. Turkey's volatile political and security environment damaged economic performance in 2016. A better-than-expected 4Q16 and revisions to 9M16 outturns mean growth was stronger than Fitch forecast, but it still halved to 2.9%. The AKP has a developed economic reform programme, but little has been implemented in recent years due to the fluid political backdrop, and structural weaknesses (including high net external debt and external financing requirements and poor composition of growth) have become more pronounced. Deputy Prime Minister Mehmet Simsek said before the referendum that the removal of political uncertainty would enable the government to "accelerate reforms starting [in] May 2017" to improve Turkey's investment environment and the tax system. Successful economic reform was a feature of the first half of Erdogan's rule. The government may also loosen fiscal policy to lift growth. The political commitment to fiscal prudence has been strong (additional revenue raising measures were introduced last year to keep the deficit within its target, for example), and Turkey has some fiscal headroom. Its general government debt/revenue ratio is under half the 'BB' category median due to primary surpluses and a broader revenue base. Nevertheless, use of off-balance- sheet stimulus picked up ahead of the referendum, most notably through credit guarantees that are increasing the sovereign's contingent liabilities, albeit from a low base. The relative weight given to different policy options and their success in promoting stable and sustainable growth will be an important part of Fitch sovereign rating assessment. Implementation of reforms that address structural deficiencies and reduce external vulnerabilities is a positive rating sensitivity. A weakening of public and external finances reflected in a deterioration of the government debt/GDP ratio or heightened external financing vulnerabilities are negative rating sensitivities. Fitch's next scheduled review of Turkey's sovereign rating is due on July 21, 2017. =========================== U N I T E D K I N G D O M =========================== DRAX GROUP: Fitch Assigns 'BB+(EXP)' Issuer Default Rating ---------------------------------------------------------- Fitch Ratings has assigned a 'BB+(EXP)' Expected Issuer Default Rating (IDR) to Drax Group Holdings Ltd. The Outlook on the IDR is Stable. Fitch also assigned a 'BB+(EXP)' expected rating to the upcoming GBP500 million senior secured notes due 2022 and a 'BBB-(EXP)' expected rating to the GBP350 million super senior secured revolving credit facility (RCF). The assignment of the final rating is subject to receipt of final loan and note documentation being substantially on the terms as presented to Fitch. The new notes issued by Drax Group Holdings Ltd will be used to refinance its GBP200 million drawn from its acquisition bridge facility and around GBP300 million of loans and private placements. The new notes will be contractually subordinated to the RCF and will benefit from security over the assets and shares of Drax Group Holdings Ltd and its material subsidiaries. KEY RATING DRIVERS Regulatory Support: Drax benefits from regulatory support for biomass power generation, through the Renewables Obligation (RO) and contracts for difference (CfD). This support accounts for around 55% of EBITDA. The schemes provide Drax with earnings stability and predictability until 2027 when both support mechanisms end. However, the government's current energy policy excludes biomass from bidding at capacity market auctions and from CfD auctions in 2017. Increasingly Volatile Coal-fired Generation: Fitch views Drax's coal generation as significantly more volatile in terms of volumes and spreads than baseload energy production. Drax's coal generation provides power on an increasingly intermittent basis supporting periods of peak power demand. Coal capacity also allows grid support service contracts with National Grid as an additional revenue stream. However, under current government policy all coal generation must shut down by 2025. The capping of the increase in the carbon price floor supports the competitiveness of coal capacity, but this was offset by the removal of the LECs (exemption from climate change levy) for renewables, lowering full year EBITDA by GBP60 million in 2015. Capacity market and ancillary services contribute up to 15% to group EBITDA. Hedging Limits Power Price Exposure: Fitch estimates that around 30% of 2017 generation revenues are exposed to wholesale commodity price risk, potentially leading to price volatility with a significant impact on cash flows. However, Drax hedges forward biomass output up to 18 months ahead, but coal is largely unhedged and EBITDA should benefit from the recent recovery in UK power prices. However, Fitch expects low power prices, as Fitch believes UK baseloads continue to be affected by a structurally oversupplied gas market. Acquisitions to Increase Security of Supply: At 16% of renewables output in the UK, Drax's biomass conversion of 1.8GW capacity is a ground-breaking achievement in a relatively new market. There is no meaningful spot market for wood pellets and uninterrupted availability of high-quality fuel supplies is key to maintaining generation output and cash flow. Procurement is on a long-term fixed cost basis, with the longest dated contracts expiring in 2027. Plans to increase self-supply from around 10% to at least 30% by organic and external growth will reduce risk in its supply chain. Most biomass is sourced in the US. This entails hedging shipping and bunker-fuel costs and above all currency to protect margins. Drax has limited ability to pass through cost increases in biomass fuel costs. Supply Offers Diversification, Cash-Flow Benefits: The acquisition of SME power supplier Opus in February 2017 partly diversifies earnings away from generation and enables the company to improve its working-capital position by selling Renewable Obligation Certificates (ROCs) more quickly. Fitch expects supply to contribute about 10%-15% of EBITDA longer term. Fitch expects UK supply margins to be under pressure from the increasingly competitive environment. Manageable Execution Risk: There is execution risk in integrating the acquisition of Opus Energy, but the risk is spread across various IT billing systems partners and over a relatively long time. The acquisition of Open Cycle Gas Turbine (OCGT) development projects for the capacity market may also further diversify generation away from coal, however its development is contingent upon being awarded capacity market contracts and is not included in Fitch ratings case. Dividend Policy Under Review: Following the recent approval of the CfD on one of its biomass units, Drax is reviewing its dividend payout, currently at 50% of underlying earnings. Fitch understanding is that the company will probably retain a certain level of cash to fund future growth opportunities, with a net debt/ EBITDA target for end 2017 of 2x. Fitch believes there may be potential political obstacles to an aggressive dividend policy. Fitch currently expect funds from operations (FFO) adjusted net leverage to be around 2.7x in 2017. Declining Capex: Fitch expects FFO adjusted net leverage to fall from 2.7x in 2017 on steady free cash-flow generation to possibly well below 1.5x by 2020, notwithstanding acquisitions of GBP432 million and a peak in capex (including acquisitions accounted as capex) of GBP185 million in 2017 (but falling thereafter to around GBP65 million a year). However, this currently excludes any further acquisitions, growth capex (OCGT) and or any change in dividend policy. DERIVATION SUMMARY Fitch views Drax's business profile as comparable to peers like Melton Renewable Energy UK PLC (IDR 'BB', Stable) and Viesgo Generacion (IDR 'BB', Stable), which reflects its focus on generation activity. Biomass generation has regulatory support until 2027. Drax's growth in retail offers some diversification, but supply in the UK remains competitive, pressuring margins. Fitch expects Drax's FFO adjusted net leverage to be between 2x and 3x during 2017 and 2018, and later below the negative rating sensitivity at 2.5x, potentially to a significant extent. Fitch considers that the capital expenditure requirements of the group are minimal and expect Drax to generate significant free cash flows. However, potential changes to dividend policy or leverage targets may limit deleveraging below the level Fitch expects for the next two years. KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: - power prices between GBP40-45/MWh between 2017-20; - ROC recycle price to remain at around GBP2/MWh; - UK RPI to remain slightly above 3%; - cost of new debt around 5%; - coal generation volumes to decline, based on the challenging outlook for dark green spreads; - EBITDA margins improving to around 9% by 2019 based on a positive price effect from the CfD, integration of the Opus acquisition and further growth of the supply business; - unchanged dividend policy (payout ratio 50% of underlying earnings); - capex kept at around GBP65 million per year; - Drax will reduce its utilisation under its factoring programmes ver the forecast period to around GBP90 million in 2019; - no allowance is made for OCGT capex or EBITDA contribution. RATING SENSITIVITIES Future developments that may, individually or collectively, lead to positive rating action: - Increased wholesale electricity prices or output above Fitch's expectations leading to FFO net adjusted leverage sustainably below 1.5x, against 1.9x in the financial year to December 2016, supported by a strong commitment to strengthened capital structure, along with no adverse regulatory change. Future developments that may, individually or collectively, lead to negative rating action: - lower wholesale electricity prices or output below Fitch's expectations leading to FFO adjusted net leverage sustainably above 2.5x and FFO fixed charge cover below 5x; - changes to the regulatory framework with a material negative impact on profitability and cash flow. LIQUIDITY Adequate Liquidity: Drax Holdings Limited will refinance its existing debt with GBP500 million of senior secured notes, a new GBP350 million super senior RCF of which GBP35 million is a drawn term loan. All debt is secured against the assets of and shares in Drax Group Holdings Limited and its material subsidiaries. Based on the draft documentation, the RCF has a limit of GBP200 million for drawings not used to cash collateralise letters of credit and other hedging transactions. Therefore Fitch only use GBP200 million in liquidity calculations as this represents the amount available for repaying debt and interest. The RCF, senior secured bonds and private placement will all be party to a new intercreditor agreement and covenant package. The draft document events of default include pro forma fixed-charge cover of 2x and springing covenant with EBITDA requirement above GBP170 million if the RCF is 25% drawn which do not significantly support the rating, in Fitch views. FULL LIST OF RATING ACTIONS Drax Group Holdings Limited -- Expected Long-Term IDR 'BB+(EXP)' assigned, Stable Outlook -- Super Senior secured revolving credit facility 'BBB-(EXP)' assigned -- Senior secured notes 'BB+(EXP)' assigned MISYS NEWCO 2: S&P Affirms 'B' CCR, Outlook Revised to Negative --------------------------------------------------------------- S&P Global Ratings said it has revised its outlook on U.K.-based software company Misys Newco 2 S.a.r.l to negative from stable. At the same time, S&P affirmed its 'B' long-term corporate credit rating on Misys. S&P assigned its 'B' long-term corporate credit rating to Tahoe Subco 1 Ltd., a new holding company for the group. The outlook is negative. S&P also assigned its 'B' issue-level rating to the proposed $4.2 billion-equivalent senior first-lien term loan and $400 million revolving credit facility (RCF) expected to be issued by Almonde Inc., Tahoe Canada Bidco Inc., and Misys Europe SA. The recovery rating on these facilities is '3' (rounded estimate: 60%). S&P also assigned its 'CCC+' issue-level rating to the proposed $1.150 billion-equivalent second-lien term loan available to the same borrower group. The recovery rating is '6' (rounded estimate: 0%). S&P expects to withdraw the corporate rating on Misys and the ratings on the existing debt instruments after the merger with D+H is completed. The issue ratings on the proposed debt instruments are subject to S&P's satisfactory review of the final documentation. The affirmation reflects S&P's view that if execution of the merger between Misys and D+H goes as planned, S&P anticipates: -- Short-term deleveraging over the first 12-24 months following the closing after an initial meaningful increase in leverage; -- Relatively solid free cash flow generation for the combined company in excess of $200 million in financial 2018 (ending on May 31), growing to more than $300 million in financial 2019 despite expected integration costs and higher cash interest expenses; and -- Cash interest coverage of more than 2x. This is also supported by a continued trend of outsourcing by financial institutions, as banks continue to be under pressure to cut costs and increase compliance. S&P expects that this will support continued demand for Misys' and D+H's core products. Nevertheless, S&P views the proposed transaction financing as aggressive, resulting in an increase in the pro forma adjusted debt to EBITDA to about 8.6x for the combined group (excluding debt outside the restricted group) from about 5.9x expected for stand-alone Misys in financial 2017. S&P also sees significant execution risks stemming from the integration process, as Misys is merging with a company with a larger revenue base and is planning to achieve significant cost efficiencies and synergies. Misys has a track record of successfully integrating companies while creating meaningful efficiencies. Nevertheless, S&P believes that such a large-scale transaction still involves a large degree of risk, including employee retention risks and potential commercial issues while the company is focused on the integration process. S&P adjusts the company's EBITDA for capitalized development costs, which S&P assumes to be $85 million-$100 million for the combined group. In addition, S&P has included payment-in-kind preferred equity certificates (PECs) and an unsecured loan (both of which will be issued outside the restricted group) to the company's adjusted debt. S&P includes the PECs as they will be callable after two years. On March 13, 2017, Misys announced the acquisition of D+H for C$25.50/share in cash by its owner Vista Equity Partners. This constitutes a total enterprise value of $3.6 billion. Vista plans to merge Misys with D+H and fund the transaction with $5.35 billion in secured term loans (a $4.2 billion first-lien term loan and $1.15 billion second-lien term loan), as well as the PECs and unsecured loan outside the restricted group. D+H is a fintech company that sells software solutions--mainly linked to lending and core banking--to banks and financial institutions. D+H operates globally, but its key market is North America. In S&P's view, the addition of D+H adds meaningful scale and solid positions in North America, where there is the most demand for new capabilities and products. However, D+H also brings in some more transactional revenues, which could be subject to volatility during stressed periods (compared with stand-alone Misys, which operates under fixed contracts), especially in lending solutions like car loans. In addition, D+H's check printing business could experience accelerated declines as payment alternatives grow, though S&P expects this part of the business to contribute below 10% of the combined group revenues going forward. S&P's base-case assumptions include: -- A 2%-3% revenue decline for Misys in the financial year ending May 2017 following a slower sales cycle in the second quarter; -- Flat pro forma revenue growth for the combined group in financial 2018, as S&P assumes that some pick-up from the previous year's sales will be offset by slower sales at D+H following the integration process and continued declines from the legacy check printing business; -- A decline in the adjusted EBITDA margin to about 30% in financial 2018 following the combination of D+H and meaningful integration costs, improving to 38%-39% in financial 2019 due to the benefit of synergies and lower integration and restructuring costs; and -- Annual capital expenditure of about 1.5% of revenues, excluding capitalized development costs. Based on these assumptions, S&P arrives at these credit measures: -- Debt to EBITDA of about 8.6x in financial 2018 and 6.5x in financial 2019, excluding the PECs and unsecured loan, corresponding to total leverage of about 10.6x and 8.0x, respectively; -- Adjusted FOCF to debt of about 3% in financial 2018, increasing to about 5% in 2019; and -- EBITDA cash interest coverage of about 2x in financial 2018, increasing to about 2.5x financial 2019. The negative outlook reflects the potential for a downgrade over the 12 months after the closing of the acquisition, if S&P no longer expects the combined group to reduce adjusted leverage toward 7x at the restricted group level (about 8.5x total leverage based on financial 2019 adjusted EBITDA), generate solid cash flows in line with S&P's base-case FOCF to debt of about 3% in 2018 and 5% in 2019, and maintain cash interest coverage of at least 2x. S&P could lower the rating if the group deviates significantly from S&P's base-case expectations after the transaction's closing. This could occur, for example, from weaker-than-expected margins due to execution risks resulting in higher-than-expected and prolonged integration costs. It could also stem from a reduced pace of synergy realization, coupled with consistently declining revenues due to increasing competition and lower-than- expected cross-selling and upselling opportunities. S&P could revise the outlook to stable if the group successfully maintains good FOCF generation and focuses on debt reduction. Signs of continued revenue growth during the integration and synergies being realized in line with plans could also support a stable outlook. NOMAD FOODS: S&P Assigns 'BB-' Rating to Proposed EUR500MM Notes ---------------------------------------------------------------- S&P Global Ratings said that it has assigned its 'BB-' issue rating and '3' recovery rating to the proposed EUR500 million senior secured notes to be issued by Nomad Foods BondCo PLC and guaranteed on a senior basis by Nomad Foods Ltd (BB-/Stable/--), a U.K.-headquartered branded frozen food manufacturer. S&P understands that the proceeds from the new notes -- along with a recently issued EUR970 million secured term loan, the EUR80 million secured revolving credit facility, and cash on Hand -- will be used to complete the refinancing of the previous capital structure (including amounts outstanding under Nomad Foods' senior credit facilities agreement) and redeem in full the existing notes. RECOVERY ANALYSIS The issue rating of 'BB-' is in line with the corporate credit rating on Nomad Foods Ltd. and the recovery rating of '3' indicates S&P's expectation of meaningful (50%-70%; rounded estimate 50%) recovery in the event of a payment default. The issue and recovery ratings on the proposed senior notes are supported by a fairly comprehensive security package, including certain fixed assets and intellectual property rights, but are constrained by the significant amount of senior secured debt in the capital structure. The documentation for the notes is standard for this type of debt issuance, with a limited number of conditions and restrictions. S&P highlights that the notes' documentation permits additional debt and, given that recovery prospects are borderline (rounded estimate 50%), any additional debt incurrence could result in a deterioration of S&P's recovery estimate. S&P's hypothetical default scenario envisages increased competitive pressures from large retailers and private labels, as well as adverse macroeconomic developments in the U.K. S&P values the company as a going concern, given its leading market positions in Western Europe and well-known brands. S&P has valued the business using an EBITDA multiple approach, as it do for peers. Simulated Default Assumptions -- Year of default: 2021 -- Jurisdiction: U.K. Simplified Waterfall -- Emergence EBITDA: EUR153 million -- Capex represents 2% of average sales -- No cyclicality adjustment -- Operational adjustment of 35% to reflect that the lower EBITDA at emergence is due to lower interest expenses, while S&P's base-case indicates stable EBITDA -- Multiple: 6.0x -- Gross recovery value: EUR915 million -- Net recovery value for waterfall after unfunded pension liabilities and admin expenses (5%): EUR793 million -- Estimated first-lien debt claims: EUR1,584 million -- Recovery range: 50%-70% (rounded estimate 50%) -- Recovery rating: 3 TATA STEEL: Offers to Make GBP520M Payment Into UK Pension Scheme ----------------------------------------------------------------- Josephine Cumbo and Michael Pooler at The Financial Times report that Tata Steel has offered to make a one-off payment of GBP520 million into its UK pension scheme, in its latest effort to make a clean break from its large British retirement liabilities. The Indian steelmaker has put the offer to the trustees of the UK scheme -- called British Steel Pension Scheme -- as part of moves by Tata to try to hive off the retirement fund, the FT notes. According to the FT, the proposed GBP520 million payment into the BSPS is intended to release a guarantee the scheme holds over some of Tata's Dutch assets. This charge is a significant barrier to efforts by Tata and ThyssenKrupp, its German rival, to combine their European steelmaking operations, including the Indian group's UK assets, the FT states. Tata has been holding talks with ThyssenKrupp over merging their European assets after deciding to drop previous plans to sell its UK business, which is centered on Port Talbot in south Wales. The unit has struggled for years with weak earnings, the FT relays. The BSPS is one of the largest private sector defined benefit pension schemes in the UK, with 130,000 members, and Tata regards it as a significant financial drag on the British business, the FT says. In January, the BSPS trustees warned the deficit in the scheme could increase to between GBP1 billion and GBP2 billion if it could not secure more cash from Tata, the FT recounts. Tata Steel is the UK's biggest steel company. THAME AND LONDON: S&P Affirms 'B-' CCR, Revises Outlook to Stable ----------------------------------------------------------------- S&P Global Ratings revised its rating outlook on U.K.-based Thame and London Ltd. (Travelodge) to stable from positive and affirmed its 'B-' corporate credit rating on the company. At the same time, S&P assigned an issue rating of 'B-' and a recovery rating of '3' to the proposed GBP165 million senior secured notes due to mature in May 2023 to be issued by TVL Finance PLC, a finance vehicle fully owned by Travelodge. The recovery rating of '3' indicates our expectation of meaningful recovery prospects (50%-70%, rounded estimate 65%) in case of default. S&P has affirmed the 'B-' issue rating on Travelodge's existing senior secured notes. The '3' recovery rating on these notes is unchanged. S&P also affirmed the issue rating of 'B+' on the existing GBP50 million super senior revolving credit facility (RCF) issued by TVL Finance PLC. The recovery rating is unchanged at '1'. The outlook revision follows slower-than-expected deleveraging at the company, due to slower operating improvements. In S&P's view, the hotel industry is facing a more uncertain future due to Brexit, which could slow growth in the U.K. economy. There are also cost pressures associated with the U.K.'s National Living Wage and business rates. Travelodge's performance during 2016 was sound, with like-for- like revenue per available room (RevPAR) up 2.5%. The company's revenues improved by 6.8% during 2016, and its EBITDA rose by 4.8% over the year. This performance shows the success of the strategy the company has implemented in recent years. It has modernized its hotel portfolio, reducing the differential between it and market leader Premier Inn; relaunched the brand; and implemented dedicated revenue management and cost-control initiatives. Travelodge's operating margins, at about 17%, remain modest, however, reflecting high rental payments. Travelodge has found it difficult to meaningfully reduce its financial leverage. At year-end 2016, S&P calculated that S&P Global Ratings-adjusted debt to EBITDA was approximately 8.6x and adjusted EBITDA interest coverage was about 1.6x (4.0x and 1.9x, respectively, on a reported basis). These ratios reflect the company's high operating lease payment obligations. Almost all its hotels are on large, long-term operating leases lasting 25 to 35 years. Travelodge has also a policy of making dividend distributions -- it distributed GBP20 million on account of 2015's net profit, and expects to pay up to GBP35 million on account of 2016's net profit. Encouragingly, the company generated neutral (GBP4 million) free operating cash flow in 2016. Travelodge's business risk profile continues to reflect its position as the second-largest operator in the U.K. budget hotel industry, the success of its refurbishment program, and significant capacity coming onstream (19 hotels opened during 2016). These factors are tempered by the company's exposure to the highly competitive and cyclical lodging industry, which is correlated to GDP growth and is exposed to consumer discretionary spending, and by its concentration in the budget hotel segment in the U.K. Travelodge is owned by Golden Tree, Avenue Capital, and GS Funds. S&P's base case assumes: -- Annual revenue growth of 6% in 2017-2018, with slightly lower RevPAR given Brexit uncertainties, but supported by rising room numbers, particularly in 2018. Uncertainty will spike in 2019, when the U.K. actually leaves the EU. -- Reported EBITDA margins of about 16%-17% over the same period, including the increase in wages and cost pressures. The growth in the average room rate (ARR) is expected to slow as the refurbishment of the room interiors is now complete. Capital expenditure (capex) of about GBP55 million in 2017, as the company invests in its information technology infrastructure and refitting in line with the normal seven-year refurbishment cycle, following completion of the modernization program. -- Up to GBP35 million dividend payments to shareholders. -- Operating leases rising in line with inflation. -- Investor loan of GBP138.1 million meets S&P's criteria for equity treatment. Based on these assumptions, S&P arrives at these credit measures: -- Adjusted debt-to-EBITDA of about 8.8x in 2017 and 2018, including the leases on new hotels opened. -- Adjusted EBITDA interest cover of about 1.8x in 2017 and 2018. The stable outlook reflects S&P's assumption that market conditions for Travelodge will remain supportive in the next 12 months, such that RevPAR and reported EBITDA will continue to rise. S&P now anticipates a slower rate of increase than it previously expected, caused by the slowing U.K. lodging market and cost pressures that include the increased National Living Wage and higher business rates. S&P's base case forecasts that adjusted EBITDA interest cover will be about 1.8x in the next two years, and that adjusted debt to EBITDA will remain slightly below 9.0x. S&P would consider a downgrade if market conditions were to weaken, for example, if Brexit caused GDP to decline, or if debt was to materially increase, such that adjusted EBITDA interest cover fell clearly below 1.5x for a sustained period. S&P could also consider a downgrade if Travelodge's liquidity significantly weakened, for example, as a result of significantly negative free operating cash flow. Although S&P considers an upgrade less likely, given the slowing pace of EBITDA growth, S&P would consider it if the U.K. lodging market demonstrated renewed momentum, with rising RevPAR and occupancy rates. Coupled with strong cost management by Travelodge, this could result in adjusted EBITDA interest cover rising comfortably above 2.0x on a sustainable basis. Any upgrade would be contingent on Travelodge maintaining at least adequate liquidity and material positive free cash flow generation. TRAVELODGE: Moody's Rates Proposed GBP165MM Senior Sec. Notes B3 ---------------------------------------------------------------- Moody's Investors Service assigned B3 rating to the proposed GBP165 million senior secured floating rate notes due 2023 to be issued by TVL Finance plc, a wholly-owned, indirect subsidiary of Thame and London Limited (Travelodge). Travelodge's corporate family rating (CFR) of B3 and Probability of Default Rating (PDR) of B3-PD are unchanged. Also unchanged is the Ba3 rating of the Super Senior Revolving Credit Facility and Letter of Credit Facility issued by Full Moon Holdco 7 Limited, a wholly-owned, indirect subsidiary of Thame and London Limited. The outlook is stable. Travelodge plans to use the proceeds from the proposed issuance to refinance its outstanding GBP100 million floating rate notes and partially refinance its existing GBP290 million fixed rate notes as well as a portion (up to GBP35 million) of the shareholder loan which Moody's views as equity. RATINGS RATIONALE The assignment of a B3 rating to Travelodge's proposed senior secured notes due 2023, which is in line with the company's B3 CFR, reflects the asset light nature of the business and the fact that together, the floating and fixed rate notes, which are pari passu with each other, comprise the majority of funded debt. Travelodge's B3 CFR also continues to reflect (1) the company's leading position in the UK budget hotel industry; (2) the success of the refit programme which has delivered four years of positive results. The rating also takes into account (3) the company's exposure to cyclical demand drivers and material operating leverage; and (4) Travelodge's weak but improving financial metrics which include high leverage and low interest coverage ratios. In 2016, Travelodge continued successfully growing its like-for- like RevPAR (2.5%) and outperforming its market segment (1.2% versus STR Midscale and Economy according to the company). This growth in fundamentals helped Travelodge achieve a 6.8% increase in revenues and 4.8% rise in EBITDA as reported by the company. The results were helped by weak sterling attracting tourists to London but counterbalanced by the negative pressure from the National Living Wage; additional pressure from business rates increase is expected in 2017. Also, from December 2013, the end of the first full year of the post-CVA restructuring plan, to March 2017, Travelodge grew its development pipeline by 69% with 50% of the sites secure (contracts exchanged and planning in process). Notwithstanding Travelodge's good performance, the company's leverage remains material owing to both GBP390 million of funded debt as well as to the material lease adjustment Moody's makes to Travelodge's financials reflecting the fact that its portfolio is leased. Pro forma for the transaction, Travelodge's debt/EBITDA will remain at approximately 8.0x (including Moody's standard adjustments). Moody's expects the company to deleverage as its EBITDA continues to grow; however, this will be offset by the increasing lease adjustment as the company pursues its expansion by signing additional lease contracts. Travelodge is a hotel company that operates almost all of its properties in the UK and as such its operations are sensitive to the UK economic cycles as well as other significant events affecting the UK, such as Brexit. The fall in the sterling following the Brexit vote was a positive for the company's London portfolio because it attracted tourists; however, should the labour market be negatively affected as a result of the Brexit negotiations, Travelodge could be adversely impacted along with other hospitality businesses. In addition, a sharp growth in the number of new competitive hotel rooms would be a concern. Travelodge's intention to repay up to GBP35 million of the shareholder loan is a testament to a shareholder-friendly posture particularly given the overall high leverage. This could become a challenge down the line should the positive operating trajectory slow down or reverse. RATIONALE FOR THE STABLE OUTLOOK The stable rating outlook reflects Moody's expectation that Travelodge will sustain its improved operations while maintaining sufficient liquidity. WHAT COULD CHANGE THE RATING UP/DOWN Upward rating pressure could result from further operational improvements driven by continued outperformance and successful execution of the development strategy such that Moody's adjusted leverage declines toward 6.5x and free cash flow remains positive on a sustained basis. Adequate liquidity would also be important. Negative rating pressure could arise from operational setbacks such that Moody's adjusted leverage fails to decline from the current level of approximately 8.0x and free cash flow becomes negative on a sustained basis. Any liquidity challenges would also be viewed negatively, as would any additional shareholder distributions. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Business and Consumer Service Industry published in October 2016. Travelodge is a top two independent budget hotel chain in the UK operating over 540 hotels and 40,000 rooms across the UK, Ireland and Spain. In 2016, Travelodge reported revenues of GBP598 million and EBITDA of GBP110 million. * Mark Griffiths Joins Kobre & Kim's Bankruptcy Disputes Group -------------------------------------------------------------- Global disputes and investigations firm Kobre & Kim has strengthened its multijurisdictional insolvency disputes capabilities with the addition of senior lateral hire Mark Griffiths in London. Mr. Griffiths, an English solicitor, brings deep experience in conducting cross-border insolvency investigations and related asset recovery. "Bringing Mark on board is key to our strategy for serving as the premier disputes and investigations team for cross-border insolvency cases," said firm co-founder Michael S. Kim. "Mark is a seasoned and well-respected professional in this area, and brings useful expertise in dealing with English insolvency matters." The firm's Bankruptcy & Debtor-Creditor Disputes group often serves as special litigation counsel and international asset recovery counsel in insolvencies originating from various jurisdictions, including Brazil, the Cayman Islands, Delaware, England, Hong Kong, New York, and Spain. The team's representations include clawback actions, priority contests, intercreditor disputes, and investigating and recovering assets of insolvent entities, often in simultaneous legal proceedings in multiple countries. "Having witnessed and admired Kobre & Kim's expansion in the insolvency litigation realm from afar, I am thrilled to now be part of that growth," Mr. Griffiths said. "I look forward to bringing my ability to handle insolvencies and related investigations, as well as my experience practicing in the UK and the Caribbean, to bolster the firm's global insolvency offerings." About Kobre & Kim Kobre & Kim -- http://www.kobrekim.com/-- is a global law firm that focuses on disputes and investigations, often involving fraud and misconduct. The firm's insolvency disputes team has experience litigating in courts around the world and includes U.S. litigators (including former U.S. government lawyers); offshore lawyers qualified in key jurisdictions, including the Cayman Islands, the British Virgin Islands, Turks and Caicos Islands, St. Vincent and the Grenadines, the Bahamas, and Bermuda; Hong Kong solicitors; and English barristers and solicitors (including three English Queen's Counsel). Often working with other law firms as special counsel, it has extensive experience litigating in contentious, multijurisdictional insolvency matters that involve competing stakeholders. =============== X X X X X X X X =============== * BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles ----------------------------------------------------------- Author: Sallie Tisdale Publisher: BeardBooks Softcover: 270 pages List Price: $34.95 Review by Henry Berry Order your own personal copy at http://is.gd/9SAfJR An earlier edition of "The Sorcerer's Apprentice" won an American Health Book Award in 1986. The book has been recognized as an outstanding book on popular science. Tisdale brings to her subject of the wide and engrossing field of health and illness the perspective, as well as the special sympathies and sensitivities, of a registered nurse. She is an exceptionally skilled writer. Again and again, her descriptions of ill individuals and images of illnesses such as cancer and meningitis make a lasting impression. Tisdale accomplishes the tricky business of bringing the reader to an understanding of what persons experience when they are ill; and in doing this, to understand more about the nature of illness as well. Her style and aim as a writer are like that of a medical or science journalist for leading major newspaper, say the "New York Times" or "Los Angeles Times." To this informative, readable style is added the probing interest and concern of the philosopher trying to shed some light on one of the central and most unsettling aspects of human existence. In this insightful, illuminating, probing exploration of the mystery of illness, Tisdale also outlines the limits of the effectiveness of treatments and cures, even with modern medicine's store of technology and drugs. These are often called "miracles" of modern medicine. But from this author's perspective, with the most serious, life-threatening, illnesses, doctors and other healthcare professionals are like sorcerer's trying to work magic on them. They hope to bring improvement, but can never be sure what they do will bring it about. Tisdale's intent is not to debunk modern medicine, belittle its resources and ways, or suggest that the medical profession holds out false hopes. Her intent is to report on the mystery of serious illness as she has witnessed it and from this, imagined what it is like in her varied work as a registered nurse. She also writes from her own experiences in being chronically ill when she was younger and the pain and surgery going with this. She writes, "I want to get at the reasons for the strange state of amnesia we in the health professions find ourselves in. I want to find clues to my weird experiences, try to sense the nature of being sick." The amnesia of health professionals is their state of mind from the demands placed on them all the time by patients, employers, and society, as well as themselves, to cure illness, to save lives, to make sick people feel better. Doctors, surgeons, nurses, and other health-care professionals become primarily technicians applying the wonders of modern medicine. Because of the volume of patients, they do not get to spend much time with any one or a few of them. It's all they can do to apply the prescribed treatment, apply more of it if it doesn't work the first time, and try something else if this treatment doesn't seem to be effective. Added to this is keeping up with the new medical studies and treatments. But Tisdale stepped out of this problemsolving outlook, can-do, perfectionist mentality by opting to spend most of her time in nursing homes, where she would be among old persons she would see regularly, away from the high- charged atmosphere of a hospital with its "many medical students, technicians, administrators, and insurance review artists." To stay on her "medical toes," she balanced this with working occasional shifts in a nearby hospital. In her hospital work, she worked in a neonatal intensive care unit (NICU), intensive care unit (ICU), a burn center, and in a surgery room. From this combination of work with the infirm, ill, and the latest medical technology and procedures among highly-skilled professionals, Tisdale learned that "being sick is the strangest of states." This is not the lesson nearly all other health-care workers come away with. For them, sick persons are like something that has to be "fixed." They're focused on the practical, physical matter of treating a malady. Unlike this author, they're not focused consciously on the nature of pain and what the patient is experiencing. The pragmatic, results-oriented medical profession is focused on the effects of treatment. Tisdale brings into the picture of health care and seriously-ill patients all of what the medical profession in its amnesia, as she called it, overlooks. Simply in describing what she observes, Tisdale leads those in the medical profession as well as other interested readers to see what they normally overlook, what they normally do not see in the business and pressures of their work. She describes the beginning of a hip-replacement operation, the surgeon "takes the scalpel and cuts -- the top of the hip to a third of the way down the thigh -- and cuts again through the globular yellow fat, and deeper. The resident follows with a cautery, holding tiny spraying blood vessels and burning them shut with an electric current. One small, throbbing arteriole escapes, and his glasses and cheek are splattered." One learns more about what is actually going on in an operation from this and following passages than from seeing one of those glimpses of operations commonly shown on TV. The author explains the illness of meningitis, "The brain becomes swollen with blood and tissue fluid, its entire surface layered with pus . . . The pressure in the skull increases until the winding convolutions of the brain are flattened out...The spreading infection and pressure from the growing turbulent ocean sitting on top of the brain cause permanent weakness and paralysis, blindness, deafness . . . ." This dramatic depiction of meningitis brings together medical facts, symptoms, and effects on the patient. Tisdale does this repeatedly to present illness and the persons whose lives revolve around it from patients and relatives to doctors and nurses in a light readers could never imagine, even those who are immersed in this world. Tisdale's main point is that the miracles of modern medicine do not unquestionably end the miseries of illness, or even unquestionably alleviate them. As much as they bring some relief to ill individuals and sometimes cure illness, in many cases they bring on other kinds of pains and sorrows. Tisdale reminds readers that the mystery of illness does, and always will, elude the miracle of medical technology, drugs, and practices. Part of the mystery of the paradoxes of treatment and the elusiveness of restored health for ill persons she focuses on is "simply the mystery of illness. Erosion, obviously, is natural. Our bodies are essentially entropic." This is what many persons, both among the public and medical professionals, tend to forget. "The Sorcerer's Apprentice" serves as a reminder that the faith and hope placed in modern medicine need to be balanced with an awareness of the mystery of illness which will always be a part of human life. ********* 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 * * *