TCREUR_Public/170613.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

           Tuesday, June 13, 2017, Vol. 18, No. 116



AIR FRANCE-KLM: Egan-Jones Raises Sr. Unsecured Ratings to B


AIR BERLIN: Germany Evaluates State Loan Guarantee Request


GREECE: Parliament Okays Extra Reforms Demanded by Creditors


NURBANK JSC: S&P Lowers Counterparty Credit Rating to 'B-'


INTERGEN NV: S&P Puts 'B' CCR on CreditWatch Negative


POLYUS GOLD: S&P Puts 'BB-' ICR on CreditWatch Positive
RED GATES: Liabilities Exceed Assets, Assessment Shows
SETL GROUP: S&P Assigns 'B+/B' CCRs, Outlook Stable


BANCO POPULAR ESPANOL: Moody's Cuts LT Deposit Ratings to Ba1
RMBS SANTANDER 4: S&P Lowers Rating on Class C Notes to 'D'


AQERI AB: 75% of Owners Won't Finance Business Further


DUFRY AG: Fitch Revises Outlook to Stable & Affirms BB- IDR


AKBANK TAS: Fitch Affirms BB+ Long-Term Issuer Default Rating
DOGUS HOLDING: S&P Affirms 'BB-/B' CCRs, Outlook Negative
SEKERBANK TAS: Fitch Assigns 'B(EXP)' Rating to Tier 2 Notes


BANK PIVDENNYI: Fitch Affirms Then Withdraws CCC Long-Term IDR

U N I T E D   K I N G D O M

CONSOLIDATED MINERALS: S&P Withdraws 'CCC+' CCR After Acquisition
HEATHROW FINANCE: Fitch Assigns BB+ Rating to GBP275MM Notes
LANDMARK MORTGAGE NO.2: Fitch Affirms 'CCC' Rating on Cl. D Notes
LEYTON ORIENT: High Court Dismisses Winding-Up Petition

RSA INSURANCE: Fitch Hikes Restricted Tier 1 Notes Rating to BB+



AIR FRANCE-KLM: Egan-Jones Raises Sr. Unsecured Ratings to B
Egan-Jones Ratings, on May 23, 2017, raised the local currency
and foreign currency senior unsecured ratings on debt issued by
Air France-KLM to B from B-.

Air France-KLM is a Franco-Dutch airline holding company
incorporated under French law with its headquarters at Charles de
Gaulle Airport in Tremblay-en-France, near Paris.


AIR BERLIN: Germany Evaluates State Loan Guarantee Request
Gernot Heller at Reuters reports that the German government on
June 9 said it was evaluating Air Berlin's request for state loan
guarantees with two regional governments, noting any support
would be contingent upon a sustainable business model for the
struggling airline.

The federal government stepped in a day after Air Berlin said it
had made a request to the states of Berlin and North-Rhine
Westphalia (NRW) to consider loan guarantees, Reuters relates.

Most of loss-making Air Berlin's roughly 8,000 German staff are
located in Berlin and NRW, Reuters discloses.

Air Berlin's request comes amid signs of waning support from
Etihad Airways, its biggest shareholder, Reuters notes.

Air Berlin Plc is a Germany-based airline that is registered in
the United Kingdom.


GREECE: Parliament Okays Extra Reforms Demanded by Creditors
Kerin Hope and Eleftheria Kourtali at The Financial Times report
that Greece's parliament has approved a handful of extra reforms
demanded by creditors in order to unlock more than EUR7 billion
of aid and complete a much delayed second review of the country's
EUR86 billion current bailout program.

While the leftwing Syriza government pushed a package of 120
fiscal and structural reforms through parliament last month,
another 20 measures still had to be implemented either through
legislation or administrative decrees, the FT notes.

The five amendments voted on June 9 included several measures
delayed because of opposition from Syriza politicians, the FT

Greece hopes to receive approval for the aid payment at a meeting
of eurozone finance ministers on June 15, the FT states.  The
review was due to be completed last November but dragged on amid
disagreements over pension and tax reforms, the FT notes.

One measure clarified that collective wage-bargaining will not be
automatically resumed after the current EUR86 billion bailout
ends in 2018, the FT relays.  Another set up a transparent
framework for the financing of political parties, which typically
are kept afloat by handouts to party leaders from prominent
businesspeople, the FT states.

According to the FT, Euclid Tsakalotos, the finance minister,
rebuffed claims by lawmakers that the additional measures would
allow the EU and International Monetary Fund to exert excessive
surveillance over the handling of the economy.

"We made an official protest to the institutions [the EU and IMF]
about so much supervision at the micro level . . . And we reserve
the right to take institutions that have overstepped the
boundaries of European law to the European Court," the FT quotes
Mr. Tsakalotos as saying.

The remaining measures will be implemented through decree, the FT


NURBANK JSC: S&P Lowers Counterparty Credit Rating to 'B-'
S&P Global Ratings said that it had lowered its long-term
counterparty credit rating on Kazakhstan-based Nurbank JSC to
'B-' from 'B'.  The outlook is negative.  S&P affirmed the 'B'
short-term counterparty credit rating.

At the same time, S&P lowered its Kazakhstan national scale
rating to 'kzB+' from 'kzBB'.

The rating action reflects Nurbank's track record of continued
poor earnings, which puts pressure on its capital buffers, and
has led to an absence of positive dynamics in terms of market
share over the past five years.  S&P has therefore revised its
assessment of Nurbank's business position to weak from moderate.
S&P doesn't expect that Nurbank's profitability will improve to
the levels comparable with that of peers, and S&P doesn't expect
improvements in its market share within the next two years, given
ongoing consolidation and intensifying competition in
Kazakhstan's banking sector.

The bank's performance is poor, in S&P's view, in comparison with
peers in Kazakhstan.  Nurbank's significant legacy problem loans
generated prior to 2008 have been pressuring its net interest
margin and have required additional provisions.  This has also
restricted Nurbank's ability to generate new business, given
sharply reduced growth prospects in 2014-2016.  The bank lost
market share to aggressive rapidly growing small and midsize
banks (1.5% of total system assets as of May 1, 2017, versus 2%
as of year-end 2011).

Despite a significant reduction of non-performing loans (NPLs;
loans over 90 days overdue) in 2013-2014 and 2016 through
write-off and sale of problem loans to third parties, Nurbank's
net interest margin has deteriorated to approximately 0.7% in the
first quarter of 2017 from 1.9% as of year-end 2016 and 2.8% at
year-end 2015.  S&P believes that weaker asset quality than
peers' will continue to constrain the bank's development in the
next two years.  According to S&P's estimates, Nurbank's NPLs
accounted for about 16% of the total loan book under
International Financial Reporting Standards as of April 1, 2017,
and S&P expects NPLs to make up 14%-17% of total loans over the
next 12 months.  The loan-loss provisioning ratio was only 78% at
year-end 2016.  An attempt to increase provisioning coverage
toward 100% in the absence of additional capital support from
shareholders, if attempted within the next two years, would
result in a negative financial result and significant negative
impact on S&P's risk-adjusted capital (RAC) ratio for Nurbank.

S&P believes it is highly unlikely that Nurbank can sustainably
develop its franchise in the absence of shareholder capital
support, and S&P doesn't expect significant improvements in the
bank's profitability over the next 12 months.  S&P expects return
on assets to remain below 0.2% in 2017-2018, and S&P would not
exclude the possibility of a negative financial result if the
bank had to create additional provisions in 2017-2018.

Finally, possible unexpected pressures on funding and liquidity
amid observed uncertainty of the external environment might
further distort the stability of Nurbank's operations.  S&P has
observed that some small and midsize banks in Kazakhstan have
experienced unforeseen outflows of funding, including deposits
from government-related entities, since the beginning of 2017.

The negative outlook reflects S&P's concerns regarding Nurbank's
ability to sustain its funding and liquidity base, develop new
business, and generate sufficient stable revenues to maintain its
moderate capital position over the next 12 months.  It also
reflects negative trends on the economic and industry risks in
Kazakhstan's banking sector.

S&P could lower the rating over the next 12 months if it

   -- Rapid outflows of customer funds leading to deterioration
      of liquidity metrics;

   -- Increased NPLs to levels much worse than the system
      average, further disturbing stability of operations; or

   -- Reduced loss-absorption capacity, due to higher
      provisioning expenses than S&P currently assumes or
      material one-time charges that reduce its projected RAC
      ratio to below 5%.

S&P could revise the outlook to stable over the next 12 months if
the bank is able to improve its capitalization to adequate
levels, with S&P's projected RAC ratio increasing to sustainably
above 7%, or if S&P sees marked improvements in the bank's growth
prospects and profitability that would relieve financial
pressures on Nurbank.


INTERGEN NV: S&P Puts 'B' CCR on CreditWatch Negative
S&P Global Ratings said it placed its ratings, including its 'B'
corporate credit rating, on InterGen N.V. on CreditWatch with
negative implications.  The CreditWatch negative listing means
S&P could affirm or lower the ratings following its review.

The CreditWatch negative listing reflects the potential for S&P
Global Ratings to affirm or lower the corporate credit and issue-
level ratings on InterGen, depending on S&P's assessment of the
changes from this potential sale on the company's financial risk
and business risk profiles, including its ownership structure,
diversity, capital structure, financial policy, and liquidity
profile.  Further, S&P will assess if InterGen still meets the
minimal criteria to be considered a project developer following
the sales, or if S&P's corporate methodology will be more
applicable on a pro forma basis.  The potential methodology
change in and of itself would not likely affect the rating.

InterGen is an open-ended portfolio with interests in 12
operating power plants, three gas compression facilities, and a
65-km gas pipeline.  The portfolio consists of 5,608 net
megawatts of capacity in four countries.  The company is 50%
owned by Ontario Teachers' Pension Plan and 50% by China Huaneng
Group/Guangdong Yudean Group.

"The CreditWatch with negative implications listing reflects our
view that the announced sale of InterGen's Mexican assets could
have a negative affect on the developer's credit quality," said
S&P Global Ratings credit analyst Kimberly Yarborough.  "The sale
of these key assets will reduce portfolio diversity and is likely
to negatively affect our assessment of the business risk profile.
While we expect the company to use the proceeds from the sale to
repay upcoming debt maturities, we need to assess the extent of
potential deleveraging.  We plan to resolve the CreditWatch
within three months."


POLYUS GOLD: S&P Puts 'BB-' ICR on CreditWatch Positive
S&P Global Ratings placed its 'BB-' issuer credit ratings on
Russia-based miner Polyus Gold International Ltd. and its core
subsidiary Polyus PJSC on CreditWatch with positive implications.
At the same time, S&P placed its 'BB-' issue ratings on the
group's senior unsecured debt on CreditWatch positive.

On June 5, 2017, Polyus announced its plan to conduct a secondary
public offering (SPO) of at least 7% of its shares within the
next few months.  S&P thinks that this transaction, when
completed, would reduce the risk of high special dividends or
share buybacks, which we currently factor into the rating.  At
this stage, the timing and the pricing of the SPO remain unclear,
but S&P assumes that the offering will be completed within the
next two months.  Based on its current market share price, the
SPO could raise about $700 million, which S&P assumes might be
used by Polyus and its major shareholders for deleveraging.

The SPO was declared soon after the company announced another
equity deal at the end of May.  According to Polyus, the company
has negotiated a sale of up to 15% stake (including the option
for up to 5% of Polyus' shares, exercisable by end of May 2018)
to a consortium of Chinese investors led by Fosun for a total
consideration of about $1.4 billion.  The deal has yet to be
approved by the Chinese regulators, but S&P understands this
could be finalized by the end of this year.

Polyus has also updated its dividend policy, which now specifies
the semiannual payment of 30% of its EBITDA or $550 million for
each of 2017-2019 and $650 million for 2020-2021, whichever is
greater; this is largely in line with S&P's previous dividend
expectations, which S&P incorporated into its base-case forecast.

In S&P's view, the two transactions that have been announced both
signal the company's commitment to more-conservative financial
policies and suggest that the risk that it will make aggressive
shareholder distributions has fallen.  This risk became more
important to our ratings analysis after the company's acquisition
by Wandle Holdings Ltd. in November 2015 and gained further
weight after the share buyback in March 2016, which was worth
$3.2 billion.  S&P understands that the acquisition by Wandle was
largely debt-financed.  S&P currently adjust the stand-alone
credit profile down by two notches because of its concerns
regarding the financial policy.

Although S&P anticipates that these financial policy risks will
diminish, it do not expect them to disappear completely in the
medium term, because S&P has not been able to obtain a clear view
of the debt amount and capital structure at the shareholder level
and because S&P expects the current shareholder will retain
control.  As such, although S&P may reduce its current two-notch
downward adjustment for the financial policy to one notch, it
does not expect financial policy to become a neutral factor for
the rating in the medium term.

The ratings are also supported by S&P's view of the company's
operational and financial results for 2017 and beyond.
Production levels increased in 2016 to about 2.0 million ounces
of gold (from 1.8 million ounces in 2015).  S&P expects further
above-peer average growth in 2017-2019.  Combined with the
company's strong profitability (buttressed by devaluation of the
Russian ruble, efficiency gains, and manageable capital
expenditure [capex] levels), this translates into consistently
positive free operating cash flow (FOCF) generation of about $500
million-$600 million a year in 2017-2018 and moderate leverage.
S&P anticipates that the company will continue to demonstrate low
cash operating costs of below $400 per ounce (/oz) in the next
two years, even though the ruble has strengthened over the past
12 months.  This ensures the company will remain at the bottom of
the global gold miners' cost curve.

The company has a solid market position as the eighth-largest
gold producer globally by output and second-largest by reserves
(based on Joint Ore Reserves Committee estimates).  It boasts a
long reserves life of more than 30 years and low production
costs. These positive factors are mitigated by the exposure to a
single commodity and high country risk in Russia, where the
company's operating assets are located.  S&P assesses Polyus'
business risk as fair, which is similar to S&P's assessment on
many of Polyus' Russia-based peers in the metals sector, such as
Evraz Group S.A., PAO Severstal, and NLMK PJSC.

In S&P's base case, it assumes:

   -- A gold price of $1,200/oz for 2017-2019.
   -- Total attributable production of 2.1 million-2.4 million
      ounces in 2017-2018, in line with the company's guidance.
      This incorporates the ramp-up of some of the company's
      investment projects, notably Natalka in 2018.
   -- A U.S. dollar to Russian ruble exchange rate of about
      RUB63-RUB65 to the dollar in 2017-2019.
   -- Capex of about $0.6 billion-$1.0 billion annually.
   -- Annual dividend payout in 2017-2019, in line with the
      announced policy of paying the higher of 30% of EBITDA and
      $550 million.

Based on these assumptions, S&P arrives at these credit measures
in 2017-2018:

   -- A ratio of funds from operations (FFO) to debt of 40%-45%.
   -- Adjusted debt to EBITDA of about 1.5x-2.0x.
   -- Consistent positive FOCF generation.

S&P plans to resolve the CreditWatch upon the completion of the
SPO and finalization of the transaction with Fosun, most likely
within the next three months.  For an upgrade, S&P would also
need to observe a combination of:

   -- The company refraining from extra shareholder distributions
      on top of the approved dividend payout ratio.

   -- Moderate leverage, with FFO to debt comfortably in the 30%-
      45% range through the cycle.

   -- Consistent positive FOCF that enables gradual deleveraging
      at the company and shareholder level.

If the company proceeds with the SPO and for any reason withdraws
from the deal with Fosun, S&P would consider an upgrade to be
less likely in the short term.  S&P will continue to monitor
Polyus' track record and the developments in its financial
policies over time.

RED GATES: Liabilities Exceed Assets, Assessment Shows
The provisional administration of Joint-stock Commercial Bank Red
Gates (joint-stock company) appointed by virtue of Bank of Russia
Order No. OD-4839, dated December 29, 2016, following the
revocation of its banking license, in the course of examination
of the bank's financial standing has established low quality of
the bank's assets as a result of issuing loans to companies with
dubious solvency, not able to perform their obligations, and to
shell companies, according to the press service of the Central
Bank of Russia.

Besides, prior to the banking license revocation, the bank's
management had executed several transactions bearing the evidence
of moving out assets by making agreements to assign receivables
and by selling the bank's liquid assets to third parties.

According to the estimate by the provisional administration, the
assets of JSCB Bank Red Gates (JSC) do not exceed RUR2.8 billion,
whereas the bank's liabilities to its creditors amount to RUR4.2

On March 28, 2017, the Court of Arbitration of the city of Moscow
ruled to recognize JSCB Bank Red Gates (JSC) insolvent (bankrupt)
and initiate bankruptcy proceedings with the state corporation
Deposit Insurance Agency appointed as a receiver.

The Bank of Russia submitted the information on financial
transactions bearing the evidence of the criminal offence
conducted by the former management and owners of JSCB Bank Red
Gates (JSC) to the Prosecutor General's Office of the Russian
Federation, the Ministry of Internal Affairs of the Russian
Federation and the Investigative Committee of the Russian
Federation for consideration and procedural decision making.

SETL GROUP: S&P Assigns 'B+/B' CCRs, Outlook Stable
S&P Global Ratings assigned its 'B+/B' long- and short-term
corporate credit ratings to Russia-based property developer Setl
Group LLC.  The outlook is stable.

Setl is a large Russian residential developer with sales of
Russian ruble (RUB) 61 billion (about $1 billion) in 2016,
concentrated on Russia's second-largest city, St. Petersburg, and
the surrounding Leningrad Oblast, which accounted for 97% of the
company's revenues.  Since its foundation, the company has
completed and delivered over 3.5 million square meters of
residential and commercial real estate and currently has a
project portfolio with gross building area of 6.3 million square
meters under planning and construction. Setl completed 953,000
square meters of gross building area and 656,000 square meters of
net selling area in 2016.

Setl's business is exposed to high country risk associated with
operating in Russia, and the moderately high industry risk of the
real estate development industry.  Russia's macroeconomic
environment remains weak, in S&P's view, with still-falling real
disposable incomes and consequently sluggish demand for
residential real estate.  Although there is a structural demand
for new homes in Russia, it remains highly correlated with GDP
growth.  S&P projects Russia's GDP will increase by 1.4% in
2017 -- a slight rebound compared with the 1% decline in 2016.

Setl boasts one of the highest market shares in St. Petersburg
and the surrounding Leningrad Oblast (14% in terms of delivery in
square meters in 2016).  The company's large size in the sector
nationally puts it among the top three residential developers.
Still, on the national scale, the residential development market
in Russia remains fragmented and Setl's market share is about 1%.
Furthermore, Setl's product range is relatively narrow as it
mostly focuses on apartments in a number of large master plan
development projects in the suburbs of St. Petersburg; the
company has a limited operating track record outside St.
Petersburg and surrounding regions.  S&P considers Setl's
profitability, with an EBITDA margin of 10%-15%, to be somewhat
below that of its vertically integrated peers who mostly use
their own construction companies, such as PIK Group and Etalon

At the same time, S&P acknowledges Setl's successful track record
of profitable growth: Revenues have increased from RUB20 billion
in 2013 to RUB61 billion in 2016, with EBITDA of close to
RUB10 billion in 2016.  In S&P's opinion, rating strengths
include Setl's strategy of focusing on comfort class apartments
with a wide addressable consumer market and its sound land bank.
S&P regards Setl's effective sales network, established track
record of selling apartments through its proprietary sales
agency, and knowledge of the market as additional supports for
the rating.

S&P's view of Setl's financial risk profile reflects its base-
case expectation of strong interest coverage and leverage ratios,
with gross debt to EBITDA below 1.5x in 2017-2018 and EBITDA
interest coverage of about 6x in 2017-2018.  At the same time,
S&P also takes into account the company's looser financial policy
of maintaining gross debt to EBITDA of less than 2x, which allows
for some debt growth in case of opportunistic land acquisitions.
Setl's private ownership restricts the company's access to equity
capital markets and limits its financial flexibility.  Moreover,
S&P believes Setl's dividend policy to be quite aggressive, with
a target payout ratio of 75% of net income.  In S&P's view, this
leads to weak debt-to-capital ratios, such as it observed in 2016
when debt to debt plus equity stood at 79%.  As such, S&P's
negative assessment of the company's financial policy is a rating

In addition, the inherent volatility of cash flows, arising from
a long operating cycle, weighs on Setl's financial risk profile,
in S&P's view.  S&P takes into account the multiyear volatility
of working capital, which is specific to developers and
homebuilders, due to the capital-intensive business and length of
projects. Still, S&P believes that the company's established
market position in St. Petersburg and relatively large scale
somewhat limit this volatility.  S&P also notes the analytical
complexity associated with the International Financial Reporting
Standards (IFRS) completed-contract method of accounting, which
creates a time gap between cash flow and earnings reporting.
Setl's public disclosure is somewhat limited, owing to its
private ownership, and its financials are audited by a small
local auditing firm.

S&P considers that the company's credit standing is weaker than
that of its peers with ratings in S&P's 'BB' category; it rather
stands in the higher end of S&P's 'B' category.  This is
consistent with S&P's assessment of larger peers in the Russian
residential real estate development industry, reflecting the
company's relatively low debt leverage and comparatively large

Regarding revenues and profitability metrics, S&P forecasts
revenue growth of 15% in 2017, followed by stable revenues in
2018.  S&P bases its estimates on Setl's planned development
schedule and unsold stock as well, as S&P's view that selling
prices will rise marginally over 2017-2018.  S&P forecasts a
lower EBITDA margin of 14% in 2017 and 12% in 2018, assuming that
company's product mix becomes less profitable owing to a higher
share of costs related to development of social infrastructure.

S&P estimates that Setl will generate broadly neutral free
operating cash flow (FOCF) in 2017 because of a large amount of
work-in-progress in the development pipeline and a higher amount
of land purchases.  S&P expects positive FOCF in 2018.

The stable outlook on Setl points to the company's adequate
liquidity and S&P's view that strong interest coverage metrics
should support its current credit quality.  S&P forecasts that
Setl's established business model should enable the company to
maintain competitiveness and perform in line with S&P's base-case
assumptions.  In particular, S&P expects that sound revenue
growth, alongside EBITDA margins stabilizing at around 12%, will
support a ratio of debt to EBITDA below 1.5x, EBITDA interest
coverage of about 6x, and debt to debt plus equity of less than
75% over the next two years.

Rating upside is currently remote, but could follow a substantial
increase in scale and better diversification.  S&P could also
raise the ratings if it saw a steady and sustainable improvement
in Setl's EBITDA margin to a level comparable with that of its
vertically integrated peers, in the 20%-30% range.  Rating upside
might also come from a financial policy that leans toward a more
conservative approach, in terms of maximum debt to EBITDA and
dividend pay-out ratio, with substantial improvement in the
debt-to-debt plus equity ratio.

S&P might take a negative rating action on Setl if debt to EBITDA
were to exceed 2x because of weaker operating performance brought
about by unfavorable industry trends or aggressive expansion.
Additionally, rating pressure could rise if the company's
external financial flexibility deteriorated and its overall
liquidity management became more aggressive.


BANCO POPULAR ESPANOL: Moody's Cuts LT Deposit Ratings to Ba1
Moody's Investors Service has affirmed all of Banco Santander
S.A. (Spain)'s (Banco Santander) and its supported entities'
ratings: (1) The A3/Prime-2 deposit and senior debt ratings; (2)
the (P)Baa2 subordinated debt ratings; (3) the Baa2 junior senior
unsecured debt ratings; (4) the Ba1(hyb) and Ba2(hyb) preference
shares ratings; (5) the bank's baseline credit assessment (BCA)
and adjusted BCA of baa1; and (6) its Counterparty Risk
Assessment (CR Assessment) of A3(cr)/Prime-2(cr). The outlook for
the long-term senior debt and deposit ratings remains stable.

At the same time, Moody's has taken actions on the following
ratings of Banco Popular Espanol, S.A. (Banco Popular): (1)
upgraded the bank's long-term deposit ratings to Ba1 from B2 and
placed these on review for further upgrade; (2) upgraded the
long-term senior programme ratings to (P)Ba1 from (P)B3 and
placed these on review for further upgrade; and (3) upgraded the
bank's CR Assessment to Baa3(cr)/Prime-3(cr) from Ba3(cr)/Not
Prime(cr) and placed these on review for further upgrade. Banco
Popular's short-term ratings of Not Prime have also been placed
on review for upgrade.

As part of the rating actions on Banco Popular, Moody's has also:
(1) downgraded the bank's BCA to ca; (2) upgraded the adjusted
BCA to b1 on review for upgrade from caa1; (3) downgraded the
bank's subordinated debt ratings to C from Caa2, and (4)
downgraded various ratings of preference stock to C(hyb) from
Ca(hyb), which are guaranteed by Banco Popular and issued by
several issuing vehicles. Moody's will subsequently withdraw the
ratings of Banco Popular's subordinated debt and preference

The rating actions were triggered by the announcement made on
June 7, 2017 by the Single Resolution Board (SRB) and the Spanish
resolution authority (the FROB or "Fondo de Reestructuracion
Ordenada Bancaria") that they had taken a resolution action in
respect of Banco Popular. As part of the resolution scheme
adopted for the bank, the resolution authorities have decided to
transfer Banco Popular to Banco Santander. Prior to the transfer,
all of Banco Popular's existing shares and the Additional Tier 1
instruments were written down, while the Tier 2 instruments were
converted into shares and acquired by Banco Santander for the
price of EUR1.

As part of the acquisition of Banco Popular, Banco Santander has
announced a fully underwritten capital increase for around EUR7
billion, that will offset the negative impact of integrating
Banco Popular.



The affirmation of Banco Santander's standalone BCA at baa1
follows Moody's assessment that Banco Santander's capital
position remains broadly unchanged after the acquisition of Banco
Popular. The rating agency considers that the impact of acquiring
a materially weaker institution will be largely offset by the
announced EUR7 billion rights issue that has been fully
subscribed. Banco Popular accounted for 10.9% of Santander's
total assets at end-March 2017.

The acquisition of Banco Popular has a negative impact on
Santander's asset risk metrics with non-performing loans (NPLs)
to total gross loans increasing to 5.9% for the combined entity
from 4.2% for Banco Santander at end-March 2017. At the same
time, the level of non-performing assets (NPAs, defined as NPLs
plus real estate assets) increases to 9.4% from 6.1%. However,
Moody's notes positively that the level of provisions of Banco
Popular's NPAs has significantly increased by EUR7.9 billion,
resulting in a coverage ratio of 67% up from 45% prior to the
acquisition. Moreover, Banco Santander is targeting the disposal
of the totality of Banco Popular's NPAs by 2022 with 50% to be
accomplished in 18 months.

With this acquisition, Banco Santander will significantly
strengthen its market positioning in the more profitable SME
market in Spain achieving a 24.8% market share up from 11.1%.
Banco Santander will also become Spain's leading domestic bank by
loans and customer funds.

The combined group's profitability will be negatively impacted by
restructuring charges that are estimated at EUR1.3 billion,
although no decision has been taken regarding the timing of its
materialization. Banco Santander targets EUR500 million of pre-
tax efficiency gains by 2020, which represents one-third of Banco
Popular's existing cost base and approximately 10% of that of the
combined entity.

The affirmation of Banco Santander's deposit and senior debt
ratings reflects: (1) the affirmation of the bank's standalone
BCA at baa1; (2) the outcome of Moody's Advanced Loss-Given-
Failure (LGF) analysis that results in two notches of uplift
respectively for the deposit and debt ratings; and (3) Spain's
sovereign rating of Baa2 stable, which caps Banco Santander's
deposit and senior ratings, in turn, at A3, which is two notches
above the sovereign rating.


The downgrade of Banco Popular's BCA to ca follows the resolution
of the bank which according to Moody's definitions constitutes an
event of default. The bank's adjusted BCA has been upgraded to b1
to reflect Moody's assessment of a very high probability of
affiliate support coming from Banco Santander. Moody's considers
that Banco Popular's senior creditors could benefit from Banco
Santander's affiliate support following the acquisition,
therefore mitigating the risks emerging from the bank's extremely
weak standalone credit profile. The adjusted BCA is on review for
further upgrade to reflect the upcoming merger of Banco Popular
into Banco Santander.

The upgrade of Banco Popular's deposit ratings to Ba1 (and
placement on review for further upgrade) from B2 and the bank's
and its supported entities' senior unsecured debt ratings to Ba1
(and placement on review for further upgrade) from B3 reflect:
(1) the upgrade of adjusted BCA to b1 (and placement on review
for further upgrade); (2) the result of the rating agency's
Advanced LGF analysis; and (3) Moody's assessment of moderate
probability of government support for Banco Popular, which
results in one notch of uplift for both the deposit and the
senior debt ratings. As a domestic subsidiary of Banco Santander,
Moody's considers both entities to be subject to the same
resolution perimeter and therefore applies the Advanced LGF
analysis of Banco Santander, which now results in two notches of
uplift for the deposit and senior debt ratings from one notch and
no uplift respectively previously.

The downgrade of Banco Popular's subordinated debt and preference
share ratings to C and C(hyb) reflects the decision taken by the
resolution authorities to bail-in these instruments to address
the shortfall in the valuation of Banco Popular and as part of
the resolution scheme approved for the bank. The ratings on these
instruments will consequently be withdrawn.


As part of the rating action, Moody's has also affirmed at
A3(cr)/Prime-2(cr) the CR Assessment of Banco Santander, one
notch above the adjusted BCA of baa1 and reflecting the cushion
provided by the volume of bail-in-able debt and deposits (20% of
tangible banking assets at end-December 2016), which would likely
support operating obligations in resolution. The CR Assessment is
capped at A3(cr), two notches above Spain's sovereign rating.

At the same time, Moody's has upgraded Banco Popular's CR
Assessment to Baa3(cr)/Prime-3(cr) and placed it on review for
further upgrade, in line with the review for upgrade of the
bank's b1 adjusted BCA. The CR Assessment is driven by the bank's
b1 adjusted BCA, Banco Santander's Advanced LGF analysis that
provides three notches of uplift and a moderate likelihood of
systemic support, leading to another notch of uplift for the CR


Upward pressure on Banco Santander's ratings are primarily
dependent on an upgrade of the government of Spain as the bank's
home country sovereign, given that Moody's current A3 long-term
debt and deposit ratings already exceed the sovereign ratings by
two notches and are constrained at that level under the rating
agency's methodology.

In terms of BCA, Moody's assessment already incorporates some
expected further improvement in the bank's fundamentals, and as
such, the rating agency does not expect to increase the BCA over
the medium term. In addition, any upward pressure on Santander's
BCA is unlikely to materialise as long as the Spanish
government's bond rating remains at Baa2, because the bank's BCA
already exceeds the Spanish sovereign rating by one notch.

Banco Santander's current BCA already incorporates Moody's
expectation for an improvement in its financial fundamentals. A
weakening or reversal in the positive trajectory could,
therefore, have negative rating implications. In relation to
Banco Santander's acquisition of Banco Popular, challenges on the
group's asset risk and profitability could stem from a slower
than expected disposal of Banco Popular's NPAs, higher
provisioning needs in relation to its NPAs portfolio and
litigations costs.

A downgrade of Spain's government rating could also lead to the
downgrade of Banco Santander's BCA and of its deposit and senior
unsecured ratings. The bank's debt and deposit ratings are linked
to the standalone BCA; as such, any change to the BCA could also
affect these ratings.

Banco Popular's debt and deposit ratings will be aligned to those
of Banco Santander once the merger effectively takes place.

A downgrade of Banco Popular's debt and deposit ratings is highly
unlikely given the current review for upgrade.


Issuer: Banco Santander S.A. (Spain)


-- Long-term Counterparty Risk Assessment, affirmed A3(cr)

-- Short-term Counterparty Risk Assessment, affirmed P-2(cr)

-- Long-term Bank Deposits, affirmed A3 Stable

-- Short-term Bank Deposits, affirmed P-2

-- Long-term Issuer Rating, affirmed A3 Stable

-- Senior Unsecured Medium-Term Note Program, affirmed (P)A3

-- Senior Unsecured Shelf, affirmed (P)A3

-- Junior Senior Unsecured Medium-Term Note Program, affirmed

-- Junior Senior Unsecured Shelf, affirmed (P)Baa2

-- Junior Senior Unsecured Regular Bond/Debenture, affirmed Baa2

-- Subordinate Medium-Term Note Program, affirmed (P)Baa2

-- Subordinate Shelf, affirmed (P)Baa2

-- Preferred Stock Non-cumulative, affirmed Ba1(hyb)

-- Commercial Paper, affirmed P-2

-- Adjusted Baseline Credit Assessment, affirmed baa1

-- Baseline Credit Assessment, affirmed baa1

Outlook Action:

-- Outlook remains Stable

Issuer: Banco Espanol de Credito, S.A. (Banesto)


-- Preferred Stock Non-cumulative, affirmed Ba2 (hyb) (assumed
    by Banco Santander, S.A. (Spain))

Outlook Action:

-- No Outlook assigned

Issuer: Banesto Holdings, Ltd.


-- Backed Preferred Stock Non-cumulative, affirmed Ba2 (hyb)

Outlook Action:

-- No Outlook assigned

Issuer: Santander International Products PLC


-- Backed Senior Unsecured Medium-Term Note Program, affirmed

-- Backed Senior Unsecured Regular Bond/Debenture, affirmed A3

-- Backed Other Short Term, affirmed (P)P-2

-- Backed Commercial Paper, affirmed P-2

Outlook Action:

-- Outlook remains Stable

Issuer: Banco Santander, S.A., London Branch


-- Long-term Counterparty Risk Assessment, affirmed A3(cr)

-- Short-term Counterparty Risk Assessment, affirmed P-2(cr)

-- Long-term Deposit Note/CD Program, affirmed (P)A3

-- Short-term Deposit Note/CD Program, affirmed (P)P-2

Outlook Action:

-- No Outlook assigned

Issuer: Emisora Santander Espana S.A.U


-- Backed Senior Unsecured Regular Bond/Debenture, affirmed A3

-- Backed Senior Unsecured Medium-Term Note Program, affirmed

Outlook Action:

-- Outlook remains Stable

Issuer: Santander Central Hispano International Ltd


-- Backed Commercial Paper, affirmed P-2

-- Backed Senior Unsecured Medium-Term Note Program, affirmed

-- Backed Other Short Term, affirmed (P)P-2

Outlook Action:

-- No Outlook assigned

Issuer: Santander Central Hispano Issuances Ltd.


-- Backed Subordinate Medium-Term Note Program, affirmed (P)Baa2

-- Backed Subordinate Shelf, affirmed (P)Baa2

Outlook Action:

-- No Outlook assigned

Issuer: Santander Commercial Paper, S.A. Unipersonal


-- Backed Commercial Paper, affirmed P-2

Outlook Action:

-- No Outlook assigned

Issuer: Santander Finance Capital, S.A. Unipersonal


-- Backed Preferred Stock, affirmed Ba2(hyb)

-- Backed Preferred Stock Non-cumulative, affirmed Ba2(hyb)

Outlook Action:

-- No Outlook assigned

Issuer: Santander Finance Preferred, S.A. Unipersonal


-- Backed Preferred Stock Non-cumulative, affirmed Ba2 (hyb)

Outlook Action:

-- No Outlook assigned

Issuer: Santander International Preferred, S.A.U.


-- Backed Preferred Stock Non-cumulative, affirmed Ba2 (hyb)

Outlook Action:

-- No Outlook assigned

Issuer: Santander Int'l Debt, S.A. Unipersonal


-- Backed Senior Unsecured Medium-Term Note Program, Affirmed

-- Backed Other Short Term, affirmed (P)P-2

-- Backed Senior Unsecured Regular Bond/Debenture, affirmed A3

Outlook Action:

-- Outlook remains Stable

Issuer: Santander Issuances S.A. Unipersonal


-- Backed Subordinate Medium-Term Note Program, affirmed (P)Baa2

-- Backed Subordinate Shelf, affirmed (P)Baa2

-- Backed Subordinate Regular Bond/Debenture, affirmed Baa2

Outlook Action:

-- No Outlook assigned

Issuer: Santander Perpetual, S.A. Unipersonal


-- Backed Junior Subordinated Regular Bond/Debenture, affirmed

Outlook Action:

-- No Outlook assigned

Issuer: Santander US Debt, S.A. Unipersonal


-- Backed Senior Unsecured Regular Bond/Debenture, affirmed A3

-- Backed Senior Unsecured Shelf, affirmed (P)A3

Outlook Action:

-- Outlook remains Stable

Issuer: Banco Popular Espanol, S.A.

Placed on Review for Upgrade:

-- Short-term Bank Deposits, currently NP

-- Other Short Term, currently (P)NP

-- Commercial Paper, currently NP

Upgraded and placed under Review for further Upgrade:

-- Long-term Bank Deposits, upgraded to Ba1 from B2, outlook
    changed to Ratings under Review from Negative

-- Long-term Counterparty Risk Assessment, upgraded to Baa3(cr)
    from Ba3(cr)

-- Short-term Counterparty Risk Assessment, upgraded to Prime-
    3(cr) from NP(cr)

-- Senior Unsecured Medium-Term Note Program, upgraded to (P)Ba1
    from (P)B3

-- Adjusted Baseline Credit Assessment, upgraded to b1 from caa1


-- Baseline Credit Assessment, downgraded to ca from caa1

-- Subordinate Medium-Term Note Program, downgraded to (P)C from
    (P)Caa2, to be withdrawn at close

-- Subordinate Regular Bond/Debenture, downgraded to C from
    Caa2, to be withdrawn at close

-- Preferred Stock Non-cumulative, downgraded to C(hyb) from
    Ca(hyb), to be withdrawn at close

Outlook Action:

-- Outlook changed to Ratings under Review from Negative

Issuer: BPE Finance International Limited

Upgraded and placed under Review for further Upgrade:

-- Backed Senior Unsecured Regular Bond/Debenture, upgraded to
    Ba1 from B3, outlook changed to Ratings under Review from

Outlook Action:

-- Outlook changed to Ratings under Review from Negative

Issuer: BPE Financiaciones, S.A.


-- Backed Subordinate Medium-Term Note Program, downgraded to
    (P)C from (P)Caa2, to be withdrawn at close

-- Backed Subordinate Regular Bond/Debenture, downgraded to C
    from Caa2, to be withdrawn at close

Upgraded and placed under Review for further Upgrade:

-- Backed Senior Unsecured Medium-Term Note Program, upgraded to
    (P)Ba1 from (P)B3

-- Backed Senior Unsecured Regular Bond/Debenture, upgraded to
    Ba1 from B3, outlook changed to Ratings under Review from

Outlook Action:

-- Outlook changed to Ratings under Review from Negative

Issuer: Banco Pastor, S.A.


-- Subordinate Regular Bond/Debenture, downgraded to C from Caa2
    (assumed by Banco Popular Espanol, S.A.), to be withdrawn at

Outlook Action: No Outlook assigned

Issuer: Pastor Particip. Preferent., S.A. Unipersonal


-- Backed Preferred Stock Non-cumulative, downgraded to C (hyb)
    from Ca (hyb), to be withdrawn at close

Outlook Action: No Outlook assigned

Issuer: Popular Capital, S.A.


-- Backed Preferred Stock Non-cumulative, downgraded to C(hyb)
    from Ca(hyb), to be withdrawn at close

Outlook Action:

No Outlook assigned


The principal methodology used in these ratings was Banks
published in January 2016.

RMBS SANTANDER 4: S&P Lowers Rating on Class C Notes to 'D'
S&P Global Ratings lowered to 'D (sf)' from 'CC (sf)' its credit
rating on Fondo de Titulizacion, RMBS Santander 4's class C

The transaction features a combined interest and principal
priority of payments.  The class C notes are fully subordinated
to the reserve fund in the priority of payments.  This class of
notes amortizes by an amount equal to the positive difference
between the outstanding balance of the class C notes and the
required reserve fund on that payment date.  The level of
cumulative defaults over the original portfolio balance increased
to 0.47% on the March 2017 interest payment date.  As a
consequence, the reserve fund was used for the first time to
provision for defaults.  Therefore, as the class C notes'
interest is paid after topping-up the reserve fund, the issuer
was unable to pay interest on the class C notes due to the lack
of excess spread.

S&P's ratings in RMBS Santander 4 address the timely payment of
interest and principal during the transaction's life.  S&P
expects the interest shortfalls to last for a period of more than
12 months.  Therefore, in line with S&P's temporary interest
shortfall criteria, it has lowered to 'D (sf)' from 'CC (sf)' its
rating on the class C notes.

At closing, the class C notes' issuance proceeds were used to
fund the reserve fund and were not collateralized.

RMBS Santander 4 is a Spanish residential mortgage-backed
securities (RMBS) transaction, which closed in July 2015.  The
collateral comprises Spanish residential mortgage loans, which
Banco Santander S.A. and Banco Espanol de Credito S.A. (Banesto)


AQERI AB: 75% of Owners Won't Finance Business Further
The Board of Aqeri Holding AB has received confirmation that 75%
of the owners are not willing to finance the company further.

Headquartered in Spanga, Sweden, Aqeri Holding AB (publ) develops
and supplies rugged computers and communication equipment for
defense, industrial, automotive, and public safety markets in
Sweden and internationally.


DUFRY AG: Fitch Revises Outlook to Stable & Affirms BB- IDR
Fitch Ratings has revised the Outlook on Dufry AG's Issuer
Default Rating to Stable from Negative and affirmed the IDR at
'BB-'. Fitch has also affirmed Dufry Finance SCA's senior notes
at 'BB-'.

The change of the Outlook to Stable from Negative reflects
Fitch's view as regards the success of Dufry's integrated
transformational acquisitions and Fitch expectations of
sustainably improving free cash flows and margins; these factors
should drive de-leveraging towards 5.0x on a funds from
operations (FFO)-adjusted gross basis in the medium term, a level
Fitch considers more comfortable with the rating given the
cyclical demand profile in line with the economic cycle. The
rating action critically relies on management's rigorous
execution of operational improvement measures and its commitment
to its target net debt to EBITDA of 3.0x.


Accelerating Organic Growth: Fitch projects low single digit
organic growth for Dufry's operations, supported by the
implementation of the Business Operating Model (BOM) to stimulate
sales and operating margins. The issuer's intension to explore
the benefits of digitalisation, which has become indispensable in
traditional retail and which has been underutilised in travel
retail, as well as the active management of customer data will be
beneficial to the mobilisation of incremental sales. Realisation
of additional synergies of CHF20 million through streamlining of
certain corporate functions and business processes would add up
to 50bp to the EBITDA margin in the medium term.

Supportive Macro-Economic Environment: A generally stable macro-
economic environment with strong performance in the developed
markets in combination with improving consumer confidence in the
emerging markets along with stabilisation of the national
currencies, particularly in Latin America and Russia, should
provide additional impetus for growth. The lift of a travel ban
for Russian tourists going to Turkey has reversed the regional
performance to positive in 2H16, supporting Fitch expectations of
a strong 2017 trading performance.

Recovery Uncertainty in Brazil: Given Dufry's considerable
exposure to Brazil, which Fitch estimates at around 5% of group
revenues, Fitch remain cautious on the pace of the economic
recovery and restoration of consumer confidence in Brazil, due to
the political uncertainties related to President Michel Temer.
Fitch expects a steady, albeit slow recovery this year of 0.5%,
further accelerating to 2.5% in 2018.

Focus on Execution: The Stabilisation of the Outlook reflects the
evidence of adequate execution skills of Dufry's management and
its adherence to stated financial policies. The disciplined
execution of two transformational acquisitions, with fully
realised synergies, provides confidence for the timely
implementation of the operational improvement measures contained
in the BOM. An early redemption of the USD500 million senior
notes in December 2016 signals the issuer's commitment to the
leverage target of 3.0x. An inability to improve operating
performance by the end-2018 as planned, coupled with stagnating
deleveraging would put ratings under pressure.

Leverage Still Stretched: Projected FFO-adjusted leverage of 5.9x
at the end of 2017 remains an outlier for an IDR of 'BB-', and is
in line with a lower non-investment grade for the retail sector.
In the absence of contractual debt amortisation, deleveraging
relies solely on Dufry's ability to continuously improve sales
and operating margins. Through the implementation of sales and
profitability strengthening initiatives outlined in the BOM,
Fitch projects FFO-adjusted leverage will reduce towards 5.0x in
2020, and become more comfortable for the assigned rating.

For the purposes of FFO-adjusted leverage calculation, Fitch
capitalises only the Minimum Guarantee Payments under the
concession contracts estimated at 5% of sales multiplied by eight

Modified FFO Fixed-Charge Cover Ratio: In line with the change to
the calculation of the FFO Fixed-Charge Cover introduced by Fitch
in 2016, the agency continues to capitalise the entire amount of
concession fees. The resulting ratio of 1.3x is materially below
peers in the 'BB' rating category for the sector. However, Fitch
considers the ratio of 1.3x in the context of largely flexible
concession fees, linked to Dufry's underlying operating
performance, which does not imply a constrained financial
flexibility of the issuer; on the contrary Fitch expects greater
resilience through the economic cycle as both sales and
concession fees would reduce albeit not in perfect
synchronization. Due to its expected stability through the cycle,
the modified FFO Fixed-Charge Cover levels have no impact on the

Further Acquisitions Likely: Fitch considers bolt-on acquisitions
to be part of the business development strategy. Fitch has
therefore included in Fitch ratings case an annual acquisition
budget of CHF200 million starting in 2018, after Dufry has fully
absorbed the transformational acquisitions of recent years.
Larger acquisitions would be considered as event risk.


Dufry's IDR of 'BB-' reflects a low investment grade business
risk profile, evident in scale, the quality of the concession
portfolio and strong cash flow generation, constrained by an
elevated indebtedness level which is more in line with the 'B'
rating category. Similarly to traditional retailers, Dufry is
exposed to changes in consumer confidence, or volume risk,
expressed in the number of travellers, while carrying little
price risk as the company benefits from the captive and generally
more affluent air travel audience. At the same time, travel
retailers tend to be more cyclical and seasonal than conventional
general retailers. The uniqueness of Dufry's P&L structure is the
largely flexible cost of its concessions, linked to certain
operating performance parameters such as sales. Such flexibility
allows the company to maintain an FFO fixed-charge cover ratio at
about 1.3x, without compromising its financial flexibility.


Fitch's key assumptions within the rating case for Dufry include:

  - annual organic growth of 3%-4% until 2020
  - EBITDA margin gradually improving towards 13% in the medium
  - capex at 3.5% of sales, in line with management guidance
  - common dividends assumed at CHF100 million-CHF200 million a
    year based on the results of 2018 when Fitch projects Dufry
    will approach its net leverage target of 3.0x
  - minority dividends of 5% of EBITDA
  - net trade working capital rising in line with sales, leading
    to an average cash outflow of CHF20 million a year
  - bank debt maturing in July 2019 is assumed to be refinanced
    at maturity on the same terms
  - add-on acquisitions of CHF200 million a year from 2018


Developments That May, Individually or Collectively, Lead to
Positive Rating Action

- Sustained positive organic sales growth and EBITDA margins
   improving towards 15%.
- Pre-dividend free cash flows sustainably at high single digit
- FFO adjusted leverage decreasing to <4.5x, or FFO adjusted net
   leverage to <4.0x.
- FFO fixed charge cover improving towards 1.4x.

Developments That May, Individually or Collectively, Lead to
Negative Rating Action

- Stagnating sales and EBITDA margins remaining below 12% as a
   result of an inability to realise planned business improvement
   measures or address operational challenges.
- Execution of a sizeable predominantly debt-funded acquisition
   jeopardising de-leveraging.
- Leverage persistently in excess of 5.5x on FFO adjusted gross
   basis, or FFO-adjusted net leverage staying above 5.0x.
- FFO fixed charge cover tightening towards 1.2x.


Comfortable Liquidity, Low Refinancing Risk: Fitch projects
comfortable organic liquidity of CHF300 million to CHF400 million
per annum, leading to average non-restricted cash reserves of
CHF350 million until 2020. According to management guidance, the
cash drawdown under the revolving credit facility of CHF372
million at the end of 2016 will be reduced to zero during 2017.
Restricted cash reserves have been kept at CHF100 million. In
light of the good access to public debt and equity markets, and
investors' familiarity with Dufry's business model, refinancing
risk is considered low.


AKBANK TAS: Fitch Affirms BB+ Long-Term Issuer Default Rating
Fitch Ratings has affirmed the ratings of Akbank T.A.S. (Akbank),
Turkiye Is Bankasi (Isbank), Turkiye Garanti Bankasi (Garanti)
and Yapi ve Kredi Bankasi (YKB). The Outlooks on all four banks
are Stable.

Isbank's and Akbank's 'BB+' Long-Term Issuer Default Ratings
(IDRs) are driven by the respective banks' standalone
creditworthiness, as captured by their respective 'bb+' Viability
Ratings. Garanti's and YKB's 'BBB-' Long-Term IDRs are driven by
potential support from the banks' controlling shareholders, Banco
Bilbao Vizcaya Argentaria (A-/Stable) and Unicredit (BBB/Stable),

The ratings of all four banks' domestic subsidiaries and of
Akbank A.G. are equalised with those of their parent institutions
and have been affirmed with Stable Outlooks.



The four banks' 'bb+' VRs ' - in line with the sovereign Long-
Term Foreign Currency IDR - reflect their solid franchises (the
banks had market shares of between around 9% and 12% of sector
assets at end-Q117) and generally reasonable financial metrics in
terms of performance and capitalisation, notwithstanding a
challenging operating environment. However, the banks' credit
profiles are under moderate pressure from the weaker growth
outlook in Turkey and the potential impact of this on their asset
quality, performance and sufficiency of capital and liquidity

The four banks reported reasonable headline asset quality ratios
with non-performing loan (NPL) ratios (defined as loans overdue
by 90 days/gross loans) ranging from a low 2.2% (Isbank) to a
moderate 4.3% (YKB) of gross loans at end-1Q17 (sector average:
3.2%). This ratio does not take into account significant
regulatory group 2 "watch-list" loans, however, which ranged from
2.6% (Akbank) to 4.8% (Garanti) of gross loans at end-1Q17 and
could result in NPL growth as loans season, in Fitch's view. A
significant portion of "watch-list" loans - the most high-risk
part of banks' performing loans - had also been restructured. In
addition, headline NPL ratios do not reflect annual NPL sales,
without which NPL ratios would have been moderately higher.

Specific reserves coverage of NPLs was reasonable at end-1Q17,
ranging from 76%-78% at Isbank, Garanti and YKB, broadly in line
with the sector average of 78%, to a solid 97% in the case of
Akbank. This resulted in generally low net NPLs-to-equity in all
four banks. However, reserves coverage is weaker after adjusting
for watch-list loans. At end-1Q17, including both specific and
general reserves (held on the liabilities side of the balance
sheet in accordance with local accounting standards) total
reserve coverage of NPLs and group 2 watch list loans across the
banks ranged from a fairly low 48% (Garanti) to a reasonable 76%

Furthermore, the banks' asset quality ratios are likely to remain
under pressure, as for the sector, given the weaker growth
outlook and the banks' exposure, to varying degrees, to SMEs
(which have proven among the most sensitive to a weakening
operating environment). High foreign currency (FC) lending also
increases credit risk given the recent rapid depreciation of the
Turkish lira; FC lending ranged from 38% to 43% of the banks'
gross loans at end-1Q17 and reflected exposure to some high-risk
sectors such as energy-related project finance and
construction/real estate lending. In addition, single-name
concentration risk could bring volatility to the banks' asset
quality ratios in the event that large exposures become non-

Nevertheless, the banks saw a decline in their NPL origination
rates (defined as new NPLs-to- average performing loans) in 1Q17
(annualised basis) versus 2016 to between 0.9% (Akbank) and 1.7%
(YKB). Net of loan recoveries, NPL generation rates were lower,
at between 0.5% and 0.9% of average performing loans in 1Q17,
reflecting increased collections and loan recovery efforts.

The banks' performance has held up to date, despite the
challenging operating environment, underpinned by solid
franchises, economies of scale, a focus on cost control and
generally above-sector-average margins. Reported returns on
equity (ROEs) ranged from 15.1% (YKB) to 17.2% (Akbank, Garanti)
in 1Q17 (sector average: 18.3%), supported by margin expansion,
generally improving cost efficiency ratios and loan growth.
Lending picked up in 1Q17 (nominal growth ranged from 4% to 8% at
the four banks), primarily reflecting SME loans disbursed under
the Credit Guarantee Fund, but to a lower extent at YKB. As a
result of the latter, the banks could exceed their 2017 loan
growth targets of 10%-13%.

Nevertheless, performance ratios could weaken due to the weaker
growth outlook and ongoing asset-quality weakness, which could
drive up loan impairments as loans season. Reported ROEs should
also be considered in light of the inflationary environment in
Turkey. The banks' margins are tighter after adjusting for costs
related to FC swaps; banks make opportunistic use of these
according to need and pricing, and they can be significant at

Fitch views the banks' capitalisation generally as sufficient to
absorb moderate shocks to performance and asset quality and
potential further local currency depreciation. However, the
quality of the banks' capital is sound (primarily Tier 1); Fitch
Core Capital (FCC) ratios stood at a reasonable 11.8% (Isbank),
12.9% (Garanti) and 13.4% (Akbank) at end-Q117, but an only
adequate 10.3% at YKB. Capitalisation is supported by reasonable
internal capital generation - which improved in 2016 at all four
banks - and generally low net NPLs-to-FCC. Pre-impairment profit
provides a significant buffer to absorb losses, ranging from 24%
to 29% of the banks' average equity in 2016.

The banks have broad deposit franchises, which accounted on
average for 66% of non-equity funding (excluding derivatives) at
end-1Q17. However, the banks report generally high loans/deposits
ratios as a result of significant FC wholesale funding attracted
mainly on international markets. These stood at 115% (Akbank),
125% (Garanti), 130% (YKB) and 139% (Isbank) at end-1Q17 versus
the sector average of 125%. However, the four banks'
loans/deposits ratios were below sector average on an
unconsolidated basis. FC wholesale funding comprised between
around 21% and 27% of the banks' non-equity funding at end-1Q17.
This has risen significantly since 2011 and a sizable component
is short term, heightening refinancing risks. However, in general
the banks are endeavouring to extend the tenor of FC wholesale
funding and fund loan growth with customer deposits. Their long-
term local currency funding is limited, as it is for the sector.

Fitch regards the FC liquidity positions of the four banks as
adequate. Available FC liquidity - consisting primarily of
placements with the Turkish Central Bank under the reserve option
mechanism and maturing FC swaps - were broadly sufficient to
cover short-term maturing liabilities at all four banks at end-
2016. Nevertheless, liquidity profiles could come under pressure
from a prolonged market stress. The presence of foreign
shareholders provides additional comfort in this respect in the
case of YKB and Garanti.


YKB's and Garanti's IDRs and senior debt ratings are driven by
potential support from Unicredit, (BBB/Stable), and BBVA (A-
/Stable), respectively. Unicredit owns a 50% stake in YKB's
holding company (which in turn holds an 82% stake in YKB). BBVA
holds a 49.85% stake in Garanti but has full management control,
a majority of seats on the board of directors and Garanti is
fully consolidated into its financial statements.

Fitch views Garanti and YKB as strategically important
subsidiaries for their parent banks, as reflected in their '2'
Support Ratings. Garanti's Long-Term FC IDR is constrained by
Turkey's 'BBB-' Country Ceiling.


The 'B+' SRFs of Akbank and Isbank reflect the sovereign's modest
ability to provide support in FC, considering the sovereign's
moderate level of FC reserves. The banks' '4' SRs take into
account their systemic importance and solid market shares, which
stood at 9% (Akbank) and 12% of sector assets (Isbank),
respectively, at end-1Q17.


The 'BB+' subordinated notes ratings of YKB and Garanti are
notched down once from their support-driven IDRs, while the 'BB'
subordinated notes ratings of Isbank and Akbank are notched down
once from their VRs. The notching includes one notch for loss
severity and zero notches for non-performance risk in the case of
all four banks.


The ratings of Akbank AG, Ak Finansal Kiralama A.S., Ak Yatirim
Menkul Degerler A.S., Is Finansal Kiralama A.S., Is Faktoring
A.S., Is Yatirim Menkul Degerler A.S., Garanti Faktoring A.S.,
Garanti Finansal Kiralama A.S., Yapi Kredi Finansal Kiralama
A.O., Yapi Kredi Yatirim Menkul Degerler A.S. and Yapi Kredi
Faktoring A.S. are equalised with those of their respective
parents, on the basis of support. Fitch believes all these
entities are core, highly integrated subsidiaries and that
support from parent banks should be forthcoming in times of need.

Akbank AG's Deposit Ratings are aligned with the bank's IDR. In
Fitch's opinion, debt buffers do not afford any obvious
incremental probability of default benefit over and above the
support benefit factored into the bank's IDR. Given the limited
standalone profiles of all subsidiaries, Fitch has not assigned
them any VRs.

In all cases, the subsidiaries are majority-owned (above 75%
stakes in most cases) by their respective parents, or group
companies. The subsidiaries offer core products and services
(including leasing, factoring and investment banking/brokerage)
in core markets (all in Turkey, with the exception of Akbank AG,
which is domiciled in Germany) reflecting their key roles in the
groups. Akbank AG has strong synergies with its parent and serves
a primarily Turkish customer base. All subsidiaries share the
same branding as their parents, are highly integrated into their
banking groups in terms of risk and IT systems, and their senior
management and underwriting practices are mostly drawn from
parent banks.

The subsidiaries are typically small relative to their parents,
meaning any required support should be immaterial to the ability
of the parent to provide it. The only entity to exceed 5% of its
group's total assets at end-2016 was Akbank AG (7%).



Garanti's and YKB's IDRs are sensitive to a downgrade of Turkey's
'BBB-' Country Ceiling. A downgrade of Unicredit would also
likely result in a downgrade of YKB. Garanti's ratings would also
likely be downgraded if there is a more than two-notch downgrade
of BBVA. A sharp reduction in either of the parent banks'
propensity to support their subsidiaries (not Fitch's base case)
would also result in a downgrade of the subsidiary banks.
Garanti's ratings could be upgraded in case of an upgrade of
Turkey's Country Ceiling.


The VRs of all four banks remain sensitive to a further weakening
of the operating environment and the potential negative impact of
this on their asset quality and performance and the sufficiency
of their capital and liquidity positions. Likewise, if Turkish
banks' access to wholesale funding markets becomes significantly
restricted for a prolonged period, resulting in a deterioration
of the four banks' FX liquidity positions, this could also result
in VR downgrades.

Upside for the banks' VRs is limited in the near term, given the
challenging operating environment and that VRs are already at the
level of the sovereign FC rating. Isbank's and Akbank's IDRs,
National ratings and debt ratings are primarily sensitive to a
change in their VRs.


The SRFs of Isbank and Akbank could be revised down if either (i)
the Turkish sovereign is downgraded; (ii) the FC positions of the
banks, or more generally Turkey's external finances, deteriorate
considerably, or (iii) Fitch believes the sovereign's propensity
to support the banks has reduced. The introduction of bank
resolution legislation in Turkey aimed at limiting sovereign
support for failed banks could also negatively impact Fitch's
view of support propensity, and hence the banks' SRs and SRFs,
but Fitch does not expect this in the short term.

Upward revisions of the banks' SRFs are unlikely unless there is
a marked strengthening of the sovereign's ability to support the
banks in FC.


The notes' ratings are primarily sensitive to changes in their
anchor ratings, namely the VRs of Isbank and Akbank and the IDRs
of YKB and Garanti. The ratings are also sensitive to a change in
respective notching due to a revision in Fitch's assessment of
the probability of the notes' non-performance risk or in its
assessment of loss severity in case of non-performance.


The subsidiaries' ratings are sensitive to changes in (i) the
parents' IDRs and National Ratings; and (ii) Fitch's view of the
ability and propensity of the parents to provide support in case
of need.

The ratings could be notched from their respective parents' if i)
the subsidiaries become materially larger relative to the
respective parents' ability to provide support or ii) the
subsidiaries' strategic importance is materially reduced through,
for example, a substantial reduction in business referrals or
integration. However, these considerations do not form part of
Fitch's base case given the subsidiaries' small sizes relative to
their parents and key roles within their respective groups.

DOGUS HOLDING: S&P Affirms 'BB-/B' CCRs, Outlook Negative
S&P Global Ratings affirmed its 'BB-/B' long- and short-term
corporate credit ratings and 'trA/trA-1' long- and short-term
Turkey national scale ratings on Turkey-based Dogus Holding S.A.
The outlook on the long-term corporate credit rating is negative.

At the same time, S&P removed the long-term global scale and the
national scale ratings from CreditWatch negative, where it placed
them on March 1, 2017.

Dogus has completed the sale of 9.95% of Turkiye Garanti Bankasi
A.S. (BB/Negative/--) and collected $910 million in sale
proceeds. The stake in Garanti bank was, in S&P's view, the
strongest, most creditworthy, asset in Dogus' portfolio, and S&P
therefore believes that Dogus' business risk profile has
weakened.  The average credit quality of Dogus' investees has
further declined and S&P believes it's unlikely that the sale
will be offset by any new investment with similar credit quality
in the near term.  The proportion of listed shares in the
portfolio has been shrinking over recent years, and now stands
around 13%, which is lower than most other investment holding
companies that S&P rates.  However, S&P don't exclude that listed
assets will increase over time since it understands management
may decide to float unlisted assets.

Furthermore, of the remaining portfolio investee companies, only
Dogus Automobile generates meaningful EBITDA (reported Turkish
lira [TRY]879 million -- about $250 million -- in 2016).  Dogus
holds a 73% stake in this automotive business, which is now the
key listed asset.  EBITDA at the media and the construction
entities stood at negative TRY34 million and TRY51 million,
respectively, for full-year 2016.

The Dogus investee company that focuses on the tourism and
restaurant sectors has increased its investments, and the number
of hotels abroad has significantly risen to about 50% of the
total.  While EBITDA and dividends are still fairly limited,
management expects dividend income to the holding company from
the tourism group to increase to about EUR25 million within the
next three years, more than offsetting the dividend from Garanti
bank (about EUR14 million or TRY57 million in 2016).  However,
S&P believes Dogus needs to build a track record of sustainable
dividend income from tourism before S&P considers revising the
outlook to stable.

S&P believes that the overall credit quality of Dogus' investee
companies is now in S&P's 'B' category.  While diversification
has shrunk following the Garanti bank sale, S&P nevertheless
continues to view Dogus as a relatively diversified holding
company, with its three largest assets constituting about 43% of
the total portfolio.

Management has used a material part of the sale proceeds for debt
reduction, mitigating the negative effect on the business risk
profile to some extent.  According to management, net debt after
the Garanti bank transaction stands at around $340 million (gross
debt of about $1 billion and cash on hand of $670 million).  This
compares favorably with Dogus' asset value, which stood around $5
billion (after our 50% haircut on unlisted assets and adjusting
for the bank transaction).  Although net debt has been lowered
materially, asset value also shrank over 2016, limiting the
impact on the loan to value (LTV).  In S&P's analysis, it
continues to apply a 50% haircut to unlisted assets values
provided by management, since S&P believes there may be
significant swings in asset values because of exposure to the
volatile Turkish market. Currently LTV stands around 23-24%.  S&P
continues to focus on debt at the holding company level, which
now has a longer maturity profile after the recent transaction,
with about $100 million-$116 million due annually for the next
two years.

The group is exposed to exchange-rate swings because a large
portion of its financing is denominated in euros.  This is
somewhat mitigated by cash in hard currency and by part of the
group's operating activities being in a currency other than
Turkish lira.  However, since most assets are denominated in
lira, S&P expects the ratios to be affected by the dollar-to-lira
exchange rate.  Management has recently changed its only
financial covenant, which now stipulates that consolidated net
bank debt should be below $7.5 billion.  According to management,
net debt is currently around $4.7 billion for the consolidated
group, so headroom is significant.

"All in all, we believe that Dogus' business risk profile stands
at the lower end of our weak category, and that there will
continue to be material swings in the value of unlisted assets.
Recent years' volatility in asset prices clearly indicates that
Dogus is highly exposed to the Turkish market, which faces
increased political turmoil, policy constraints, rising
inflation, and exchange rate and domestic tensions that may very
well continue to restrain growth and asset prices over the medium
term. By nature there is also more uncertainty around the
valuation of unlisted assets.  We therefore apply a negative
modifier to the 'bb' anchor to arrive at our 'BB-' rating," S&P

The negative outlook on Dogus reflects the risk that recent
investment in tourism will not develop in line with management's
expectations and that, due to the inherent volatility in the
Turkish market, portfolio assets could weaken further.

S&P could lower the ratings if its LTV calculation for Dogus
rises above its 30% threshold for the current rating, but also if
material weakening in asset prices were to occur.  S&P could also
lower the ratings if economic prospects for Turkey worsen and
limit any turnaround of more fragile and subdued businesses
within the group's portfolio of assets.  Depreciation of the
Turkish lira may also put pressure on the ratings.

Over time, continued weak performance of key assets could also
lead to a one-notch downgrade.

Conversely, S&P could revise the outlook to positive or raise the
ratings if Dogus improved its average asset credit quality or
meaningfully increased the level of listed investees.  An outlook
revision to positive would also hinge on stronger-than-expected
improvements in the Turkish economy in 2017 and 2018, leading to
a positive impact on the operating performance of Dogus' main

SEKERBANK TAS: Fitch Assigns 'B(EXP)' Rating to Tier 2 Notes
Fitch Ratings has assigned Sekerbank T.A.S.'s ('B+/Stable/b+)
planned issue of Basel III-compliant Tier 2 capital notes an
expected rating of 'B(EXP)'. The bonds' Recovery Rating is 'RR5'.
The size of the issue is likely to be in the range of USD85

The final rating is subject to the receipt of the final
documentation conforming to information already received by

The notes qualify as Basel III-complaint Tier 2 instruments and
contain contractual loss absorption features, which will be
triggered at the point of non-viability of the bank. According to
the draft terms, the notes are subject to permanent partial or
full write-down upon the occurrence of a non-viability event
(NVE). There are no equity conversion provisions in the terms.

An NVE is defined as occurring when the bank has incurred losses
and has become, or is likely to become, non-viable as determined
by the local regulator, the Banking and Regulatory Supervision
Authority (BRSA). The bank will be deemed non-viable when it
reaches the point at which either the BRSA determines that its
operating licence is to be revoked and the bank liquidated, or
the rights of Sekerbank's shareholders (except to dividends), and
the management and supervision of the bank, should be transferred
to the Savings Deposit Insurance Fund on the condition that
losses are deducted from the capital of existing shareholders.

The notes have an expected 10-year maturity and a call option
after five years.


The notes are rated one notch below Sekerbank's Viability Rating
(VR) of 'b+' in accordance with Fitch's "Global Bank Rating
Criteria". The notching includes zero notches for incremental
non-performance risk relative to the VR and one notch for loss

Fitch has applied zero notches for incremental non-performance
risk, as the agency believes that write-down of the notes will
only occur once the point of non-viability is reached and there
is no coupon flexibility prior to non-viability.

The one notch for loss severity reflects Fitch's view of below-
average recovery prospects for the notes in case of an NVE. Fitch
has applied one notch, rather than two, for loss severity, as
partial, and not solely full, write-down of the notes is
possible. In Fitch's view, there is some uncertainty as to the
extent of losses the notes would face in case of an NVE, given
that this would be dependent on the size of the operating losses
incurred by the bank and any measures taken by the authorities to
help restore the bank's viability.


As the notes are notched down from Sekerbank's VR, their rating
is sensitive to a change in this rating. The notes' rating is
also sensitive to a change in notching due to a revision in
Fitch's assessment of the probability of the notes' non-
performance risk relative to the risk captured in Sekerbank's VR,
or in its assessment of loss severity in case of non-performance.

Sekerbank's ratings are listed below:

Long-Term Foreign Currency (FC) and Local Currency (LC) IDRs
'B+'; Outlook Stable

Short-term FC and LC IDRs 'B'

Viability Rating 'b+'

Support Rating '5'

Support Rating Floor 'No Floor'

National Long-term Rating 'A/(tur)'; Outlook Negative

Basel III-compliant Tier 2 notes: 'B(EXP)'; Recovery Rating


BANK PIVDENNYI: Fitch Affirms Then Withdraws CCC Long-Term IDR
Fitch Ratings has affirmed Bank Pivdennyi's Long-Term Issuer
Default Rating (IDR) at 'CCC' and Viability Rating (VR) at 'ccc'.

At the same time, Fitch has withdrawn the bank's ratings for
commercial reasons. Fitch will no long provide rating and
analytical coverage of Pivdennyi.


Pivdennyi's IDRs are driven by the bank's standalone credit
profile, as expressed by the 'ccc' VR. The VR factors in the
bank's weak asset quality, limited additional loss absorption
capacity and modest core profitability that make the bank's
credit profile highly vulnerable to further recognition of asset

Individually impaired loans (including 7% of loans more than 90
days overdue) remained significant, at 25% of gross loans at end-
2016, only moderately (52%) covered by impairment reserves, as
the bank relies on loan collateral. Additional downside risks to
asset quality stem from high borrower concentrations and FX
lending (64% of net loans), mostly to weakly-hedged borrowers.
Fitch does not expects material improvements in asset quality
metrics in the near term as Ukraine's economic recovery is only
moderate and operating conditions remain challenging both for
banks and businesses.

Pivdennyi's regulatory capital buffer (regulatory total capital
ratio of 10% at end-3Q16) provides low loss absorption capacity,
while the bank is yet to complete its medium-term
recapitalisation programme, as agreed with the National Bank of
Ukraine in 2015. Fitch expects pressure on the bank's capital to
remain significant in light of large unreserved impaired loans
(estimated at 75% of Fitch Core Capital at end-2016) and modest
core pre-impairment profits (net of non-core revenues) equal to
1.7% of average gross loans in 2016.

Pivdennyi's deposit funding remained generally stable in 2016-
1Q17, in line with sector trends, while reliance on wholesale
markets is limited. The bank's liquidity management, in
particular in FX, is highly dependent on access to FX liquidity
through the bank's Latvian subsidiary and certain non-resident
companies (together comprising about 30% of Pivdennyi's
liabilities at end-1Q17). Should access to this funding become
constrained, the bank's FX liquidity position would likely weaken


Not applicable.

The following ratings of Pivdennyi were affirmed and withdrawn:

Long-Term IDR: 'CCC'
Short-Term IDR: 'C'
Support Rating: '5'
Support Rating Floor: 'No Floor'
Viability Rating: 'ccc'

U N I T E D   K I N G D O M

CONSOLIDATED MINERALS: S&P Withdraws 'CCC+' CCR After Acquisition
S&P Global Ratings withdrew its 'CCC+' corporate credit and issue
ratings, which were on CreditWatch with developing implications,
on Jersey-incorporated manganese ore producer Consolidated
Minerals Ltd. (Jersey) (ConsMin) at the company's request.  The
withdrawal follows the completion of ConsMin's acquisition by
China Tian Yuan Manganese Limited, a subsidiary of Ningxia
Tianyuan Manganese Industry Co., Ltd. (TMI).  The corporate
credit and issue ratings on ConsMin were on CreditWatch
developing at the time of the withdrawal.

S&P was unable to resolve the CreditWatch before withdrawing the
ratings due to lack of sufficient financial information about
TMI, the new parent company of ConsMin.

S&P has been informed that more than 99.9% of the outstanding
nominal $400 million rated bonds due 2020 are now held by either
ConsMin or China Tian Yuan Manganese Limited, following a
successful offer to purchase the notes.

HEATHROW FINANCE: Fitch Assigns BB+ Rating to GBP275MM Notes
Fitch Ratings has assigned Heathrow Finance plc's new GBP275
million of high yield (HY) notes a 'BB+' final rating. The
Outlook is Stable. Fitch has also affirmed Heathrow Finance plc's
existing HY notes at 'BB+' with Stable Outlook, Heathrow Funding
Limited's existing class A notes at 'A-' and class B notes at
'BBB', both with Positive Outlooks.

The issuance of the HY notes does not change the credit risk
profile of the existing notes. Since 2014, Fitch has expected
their issuance, albeit at a later date in 2019, and included them
in Fitch cash flow analysis at Fitch last reviews in October
2016. In Fitch ratings action commentary dated October 16, 2014,
Fitch reviewed the option available to management to gradually
increase the net debt-to-regulatory asset base (RAB) ratio of the
HY notes in the medium term to 87.5% from 85% which allowed a
gradual transfer to Heathrow Finance of all the debt at the
holding company ADI Finance 2 Limited (ADIF2).

In light of favourable debt market conditions, management brought
forward the issuance of the HY notes to refinance GBP275 million
of the remaining GBP310 million of ADIF2 debt. As a result, net
debt-to-RAB increases to 87.3% from 85.5%. For the next two years
only around 2.5pp of headroom will remain. However, from
September 2019, the headroom will mechanically increase back to
5pp as per management's historical guidance when the HY notes
(GBP263 million outstanding) containing the net debt-to-RAB
covenant level of 90% matures. The remaining HY notes issued
since 2014 have a net debt-to-RAB covenant of 92.5%.

The affirmation of the existing notes reflects Heathrow's
continued solid operational performance together with the
favourable terms of the new debt issued since Fitch's last
review. Passenger traffic of 75.7 million in 2016 was marginally
ahead of Fitch's base case by 0.4%. Management also secured over
GBP500 million of cheaper senior debt than forecast saving
between GPB20 million and GBP25 million per year. Similarly, the
refinancing of the ADIF2 debt is brought forward at a
significantly lower cost than Fitch assumed.

Heathrow's strong credit metrics, which on their own could
warrant an upgrade, underpin the Positive Outlook on the class A
and B bonds. However, the uncertainties around the new regulatory
regime 'H7', with the current 'Q6' ending in 2019, and the full
impact of Brexit prevent immediate rating action. The deeply
structural and contractual subordinated nature of the HY bonds
prevents any foreseeable upgrades.


Large Hub with Resilient Traffic: Volume Risk - Stronger
Heathrow is a large hub/gateway airport serving a strong origin
and destination market. Heathrow benefits from resilient traffic
performance with a maximum peak-trough fall in annual traffic of
just 4.4% through the last major economic crisis in 2008, one of
the smallest declines in the industry, due to a combination of
factors. This includes the attractiveness of London as a world
business centre; the role of Heathrow as a hub offering strong
yield for its resident airlines; its location and connectivity
with the well-off western and central districts of the city; and
unsatisfied demand as underlined by its capacity constraint.

Regulated and Inflation-Linked: Price Risk - Midrange
Heathrow is subject to economic regulation, with a price cap
calculated under a single till methodology based on RPI+X,
currently set by the Civil Aviation Authority (CAA) at RPI-1.5%
for the current regulatory period 'Q6' extended by one year to
December 2019. Part of the CAA's duties is to ensure that airport
operations and investments remain financeable, but the price cap
is highly sensitive to assumptions on cost of capital, traffic
and operational efficiency. For example, the traffic forecast for
'Q5' calculated before the 2007-2008 crisis proved overly
optimistic. However, this was partly offset by higher-than-
planned inflation.

Well Maintained but Capacity Constrained: Infrastructure
Development/Renewal - Stronger

Heathrow agreed a detailed capital investment plan with the
regulator. Fitch believes that the airport will be able to
deliver the GBP3.5 billion 'Q6' capital plan based on its track
record to date such as the successful delivery of the brand new
terminal T2 in 2014. The regulated asset base approach allows for
the self-financing of the investments through tariffs.

Refinancing Risk Mitigated: Debt Structure - Midrange (Class A);
Midrange (Class B); Weaker (HY)

The issuer's strong capital market access, due to an established
multi-currency debt platform and the use of diverse maturities
mitigates hedging and refinancing risks. Class A debt benefits
from its seniority, security, and protective debt structure with
covenants ring-fencing all cash flows from Heathrow and limiting
leverage. The class B bonds benefit from many of the strong
structural features of the class A bonds apart from seniority.
The HY bonds have a weaker debt structure due to their deep
structural and contractual subordination.


Heathrow is one of the most robust assets in the global sector.
It has higher leverage than its European peers (Aeroports de
Paris at A+/Stable), albeit with a better debt structure for
senior debt. Compared with Gatwick (BBB+/Stable), Heathrow's
class A and B bonds benefit from a stronger revenue risk profile.


Future developments that may, individually or collectively, lead
to positive rating action include:

Class A bonds: net debt-to-EBITDA below 7x and average post
maintenance interest cover ratio (PMICR) above 1.8x.

Class B bonds: net debt-to-EBITDA below 8x and average PMICR
above 1.5x.

HY bonds: An upgrade is unlikely given Heathrow's management of
its capital structure and subsequent targeting of HY investors.

Future developments that may, individually or collectively, lead
to negative rating action include:

Class A bonds: net debt-to-EBITDA consistently above 8x and
average PMICR below 1.6x.

Class B bonds: net debt-to-EBITDA consistently above 9x and
average PMICR below 1.3x.

HY notes: net debt-to-EBITDA above 10x, PMICR below 1.15x and
dividend cover below 3.0x.

Exposure to Aviation Downturn

The Positive Outlook reflects Fitch's expectations that Heathrow
will continue to post stable performance, despite uncertain
economic prospects. A marked and durable degradation of the
British economy as a result of uncertainties regarding Brexit
negotiations, among others, could derail Heathrow's resilience.
Evidence of recessionary prospects over a two-year horizon could
prompt a revision of the Outlook to Stable or Negative.


Performance Update

Heathrow's strong operational and financial performance is in
line with Fitch's base case. Traffic is improving again strongly
this year, rising by 2.2% year-on-year in 1Q17. This follows
growth of 1% in 2016, 2.2% in 2015, 1.1% in 2014 and 3.4% in

The decision on the potential third runway at Heathrow has been
taken by the Prime Minister. However, many legal hurdles remain
and Fitch believes that the planning process could take another
four years before any works can begin. In the short- to medium-
term, Fitch does not expect any impact on the notes' ratings but
will closely monitor developments.

Fitch Cases

Fitch's rating case (FRC) between 2015 and 2020 reflects a
traffic five-year CAGR of 0.6%, which occurred through the last
economic cycle between 2006 and 2011. Fitch assumed fewer
efficiency savings in addition to increasing the cost of new debt
by 200bp in 2019 to reflect adverse financing conditions.
Heathrow outperformed CAA's 'Q6' final decision for traffic,
which assumed potential traffic shocks. Under the FRC, Fitch
expects EBITDA to reach GBP1,735 million in 2019, up from
GBP1,682 million in 2016, representing a CAGR of 1%.

The five-year average PMICR under the FRC remains unchanged at
2.0x for the class A bonds, 1.6x for the class B bonds and 1.4x
for the HY debt. Average five-year net debt-to-EBITDA also
remains unchanged except for the HY notes, which marginally
increases to 8.0x from 7.8x due to the debt issuance being
brought forward. The class A notes' average leverage remains 6.3x
and the class B notes 7.2x. The dividend/interest cover ratio at
Heathrow Finance level also far exceeds the 3.0x typically
observed for 'BB+' utilities holdco debt rating.

Asset Description

Heathrow is a major global hub airport with significant origin
and destination traffic and resilience due to its status as the
preferred London airport and capacity constraints. Peers include
Aeroports de Paris in terms of size and Gatwick in terms of
location and debt structure.

Revenues are regulated and subject to an inflation price cap on a
single till basis. Fitch views the structured, secured and
covenanted senior debt as offsetting some of the higher expected
five-year average leverage under FRC for the class A and B bonds
compared with peers. The HY bonds are, by nature, structurally

Fitch Ratings has downgraded International Personal Finance plc's
(IPF) Long-Term Issuer Default Rating (IDR) and senior debt
ratings to 'BB' from 'BB+' and removed the ratings from Rating
Watch Negative (RWN). The Outlook on the Long-Term IDR is
Negative. Fitch has affirmed IPF's Short-Term IDR at 'B'.

The downgrade primarily reflects Fitch's view that IPF's capacity
to ensure stability of earnings has reduced, in the light of
increased regulatory pressure on its business model and less
consistent performance in some of its home-collected credit
markets, at a time when it is still building its newer digital

Fitch placed the ratings on RWN in December 2016 following the
Polish Ministry of Justice's initiation of a 14-day consultation
period for a draft bill limiting non-interest costs chargeable
for unsecured consumer loans. At that time, Fitch expected to
resolve the RWN early in 2017, either on the implementation of a
new law or the withdrawal of such plans, but progress on a final
decision has since stalled.

It remains Fitch's view that any enactment of such a law could
have a material impact on IPF's business, in addition to that now
reflected in the downgrade. At the same time, IPF is also facing
a challenge to past tax provisions in Poland. The Negative
Outlook reflects these uncertainties and the lack of a clear
timeline as to when they will be resolved.



IPF's IDRs reflect its business model's exposure to adverse
regulatory developments in its major markets and the
concentration of its funding on potentially confidence-sensitive
wholesale sources. They also take account of IPF's low balance
sheet leverage by conventional finance company standards, and its
management's significant experience in conducting unsecured
consumer lending in emerging markets.

IPF's traditional home-collected credit business involves the
provision of small unsecured short-term cash loans, with
repayments typically collected from the customer's home on a
weekly basis by agents. The limited credit profile of the
customer base leads to significant levels of impairment, which in
conjunction with the high servicing costs of the collection
system, requires high charges to make the model economic.

IPF's business is spread across a number of different countries,
each with its own regulatory regime, but in recent years caps
both on permissible interest rates and on service fees have
become more widespread. Notably in 2015 these were announced in
Slovakia, where the group decided to close its business, and in
IPF's largest market, Poland. IPF calculated that applying the
new pricing regime to its Polish loan portfolio written in the 12
months to 30 June 2015 would have reduced its profit by
approximately GBP30 million, but that mitigating strategies
within its subsequently revised product structure could offset up
to half the negative financial impact. If enacted, the December
2016 Ministry of Justice proposal would represent a further
tightening of the cap, requiring additional product modification.
It also further demonstrates the susceptibility of the business
model to such interventions.

The impact of regulatory shocks in any one country is to a degree
softened by the geographic spread of IPF's operations, but recent
performance has also shown some setbacks in countries not
affected by new laws. FY16 pre-tax profit in Mexico, a key growth
market now that some Eastern European countries have reached
maturity, reduced by 47% to GBP11.7 million (2015: GBP21.9
million) following disappointing collections performance in 1H16.
This was addressed in 2H via greater focus on the quality of new
lending, and in its 1Q17 trading statement the group reported a
continuation of Mexico's 2H16 improvement in impairment as a
percentage of revenue. However, at the same time competitive 1Q17
conditions also prompted a 23% contraction in credit issued in
the Czech Republic, previously one of the group's more stable

To complement its home-collected credit business, IPF has
invested significantly in developing its online business, IPF
Digital, where credit issued grew by 41% on a pro forma basis in
2016, and by 61% in 1Q17 relative to 1Q16. However, with ongoing
investment of GBP8 million-GBP10 million scheduled in 2017, an
overall positive contribution to earnings across IPF Digital's
markets in aggregate is not expected until 2018.

IPF's funding is spread across a range of bonds and bank
facilities, but each is subject to the inherent associated
refinancing risks. At end-FY16 the group had substantially
committed undrawn bank facilities totalling GBP152 million, and
an average period to maturity on its bonds and committed
borrowing facilities of 3.3 years (2015: 4.0 years). However, in
January 2017, GBP35 million of the undrawn headroom was used to
fund payments to the District Administrative Court in Poland,
required ahead of appealing decisions by the Polish Tax Chamber
in respect of IPF's FY2008 and FY2009. The timetable for the
appeal process is uncertain.

The Chamber's challenges relate to intra-group transfer pricing
and the timing of taxation of home collection fee revenues. Each
is strongly refuted by IPF on the basis of professional advice
and the agreed treatment of prior years, but an unsuccessful
appeal could expose the group to claims for further payments in
respect of subsequent years. If its available funding headroom
was eroded, IPF's liquidity is boosted by the short duration of
much of its lending, enabling it to run down the size of its loan
book relatively quickly if required.

IPF's ratio of debt to tangible equity strengthened in FY16 to
1.67x (2015: 1.98x), despite 12% growth in borrowings to GBP622
million (2015: GBP557 million) as its loan book expanded. This
reflected earnings retention in part, but also the boost within
reserves of GBP65 million of gains on foreign currency
translation. Leverage is low for a lending business, but
necessarily tailored to reflect the impairment risks within the
customer base. The sum lodged with the authorities pending the
Polish tax appeals is held as a non-current financial asset
rather than having been charged against equity.

The rating of IPF's senior unsecured notes is in line with the
group's Long-Term IDR, reflecting Fitch's expectation for average
recovery prospects given that IPF's funding is predominantly



The ratings could be downgraded if Poland proceeds with a tighter
rate cap law, placing further constraint on the capacity of IPF's
business model to generate the revenues required to
counterbalance its operating costs and impairment risks.

The ratings could also be downgraded if IPF were to lose its
Polish tax case, thereby reducing its capital via previously
unforeseen charges and eroding its funding headroom through need
to make additional payments.

In the normal course of the group's business, IPF's ratings also
remain sensitive to new regulatory restrictions in its markets
outside Poland, and could be negatively impacted by non-renewal
of key funding lines.

The Negative Outlook could be revised to Stable if the Polish
rate cap and tax issues are resolved without material adverse
impact. An upgrade is unlikely while these negative uncertainties
remain unsettled, but the ratings could benefit over time from
successful development of IPF Digital into a provider of stable
recurring earnings streams less susceptible to regulatory
pressures on its business model than the group's high cost home
collected credit operations.

The senior debt rating is primarily sensitive to a change in
IPF's Long-Term IDR.

In accordance with Fitch's mapping table, IPF's Short-Term IDR is
only sensitive to a downgrade of IPF's Long-Term IDR to below 'B-


The analysis supporting IPF's 'BB' IDR includes a variation from
Fitch's "Global Non-Bank Financial Institutions Rating Criteria".
Fitch's impaired and nonperforming loans benchmark ratio for
asset quality is usually calculated as gross impaired loans as a
proportion of gross loans, but in IPF's case Fitch uses net
impaired customer receivables as a proportion of net customer
receivables, in accordance with the company's accounting

LANDMARK MORTGAGE NO.2: Fitch Affirms 'CCC' Rating on Cl. D Notes
Fitch Ratings has upgraded one tranche of the Landmark RMBS
series and affirmed the rest as follows:

Landmark Mortgage Securities No.1 plc (LMS1):
Class Aa (XS0258051191): affirmed at 'AAAsf'; Outlook Stable;
Class Ac (XS0260674725): affirmed at 'AAAsf'; Outlook Stable;
Class B (XS0260675888): affirmed at 'AAsf'; Outlook Stable;
Class Ca (XS0258052165): affirmed at 'BBBsf'; Outlook Stable
Class Cc (XS0261199284): affirmed at 'BBBsf'; Outlook Stable
Class D (XS0258052751): affirmed at 'B+sf'; Outlook Stable

Landmark Mortgage Securities No.2 Plc (LMS2):
Class Aa (XS0287189004): affirmed at 'Asf'; Outlook Stable;
Class Ac (XS0287192727): affirmed at 'Asf'; Outlook Stable;
Class Ba (XS0287192131): affirmed at 'BBsf'; Outlook Stable;
Class Bc (XS0287193451): affirmed at 'BBsf'; Outlook Stable;
Class C (XS02871922141): affirmed at 'Bsf'; Outlook Stable
Class D (XS0287192644): affirmed at 'CCC'; RE 100%

Landmark Mortgage Securities No.3 Plc (LMS3):
Class A (XS1110731806): affirmed at 'Asf'; Outlook Stable
Class B (XS1110738132): affirmed at 'BBBsf'; Outlook Stable
Class C (XS1110745004): upgraded to 'B+sf' from 'Bsf'; Outlook
Class D (XS1110750699): affirmed at 'CCCsf'; RE 90%

The transactions are UK non-conforming and backed by mixed pools
originated by Amber Home Loans, Infinity Mortgages and Unity


Stable Asset Performance
Delinquent loans (three month plus arrears) have been falling in
all three transactions with the portion of loans in arrears by
more than three months as of end-April 2017 down at around 11%
for LMS 1 and 2 (vs. 15% and 13% in June 2015) and around 4% for
LMS 3 (vs. 6% in July 2015). However, this drop is mostly due to
an increase in repossession rather than loans returning to
performing status. Currently the level of delinquent loans in LMS
1 and 2 is close to the Fitch Non-Conforming (NC) Index while it
is below for LMS 3. Cumulative repossessions are 16% for LMS 1
(vs. 15% in June 2015), slightly higher than 20% for LMS 2 (vs.
19% in June 2015) and 16% for LMS 3 (vs. 15% in July 2015), well
above the Fitch Non-Conforming (NC) index that is at 10%.

Solid Credit Enhancement (CE)
The transactions closed in 2006 (LMS 1) and 2007 (LMS 2, LMS 3)
and are well-seasoned. As a result CE has built up through note
amortisation, and all the transactions currently have fully
funded reserve funds. LMS 1 and LMS 2 currently amortise pro
rata, and consequently both transactions are not expected to
build up CE. Fitch expects in the long term an increase in
weighted average foreclosure frequency (WAFF) as the interest-
only (IO) concentration is high and increasing over time, while
CE remains stable.

Documentation Counterparty Breach (LMS 3)
Following the downgrade of Royal Bank of Scotland (RBS) on May
19, 2015, the documentation has not been amended, implying a
breach of the account bank trigger without taking remedial
actions. The account bank rating is 'BBB+'/'F2' while the rating
trigger is 'A'/'F1' .

As per counterparty criteria, the note ratings will be capped at
the higher of: (i) the counterparty rating; and (ii) the rating
that can be supported by the transaction cash flows assuming that
the amounts are lost. The higher rating in this case is the
latter, implying a rating cap of 'A'.

IO Loan Concentration
The transactions all have a large portion of IO loans (85.8% for
LMS 1, 89.6% for LMS 2 and 93% for LMS 3) and a concentration of
more than 20% of IO loans maturing within a three-year period. As
per criteria, Fitch carried out a sensitivity analysis assuming a
50% increase in default probability for these loans and found
that current CE is able to accommodate such stresses.

Unhedged BBR and SVR Loans
A significant portion of the loans in LMS 1 are linked to SVR,
and in line with its criteria Fitch has applied an adjustment to
the SVR, resulting in a reduction in excess spread.

Tail Risk
LMS 1 has fewer than 370 borrowers remaining in the pool and as
such the decreased granularity could lead to a destabilisation in
performance, limiting future upgrades.


In Fitch's opinion, borrower affordability is being supported by
the low interest-rate environment. This is evidenced by declining
three-month-plus arrears balances. However, low constant
prepayment rates suggest that borrowers have been unable to
refinance, leaving performance of the pools highly sensitive to
future interest increases.

Future deterioration in the WAFF is expected for LMS1 and LMS2 as
they are amortising pro-rata and they have very high IO
concentrations. This will lead to an increase in the WAFF over
time while CE will remain stable.

LEYTON ORIENT: High Court Dismisses Winding-Up Petition
BBC News reports that a winding-up petition against Leyton Orient
has been dismissed at a High Court hearing in London.

Orient owed money to four creditors on the petition, having
resolved unpaid taxes with HM Revenue & Customs, BBC discloses.

Owner Francesco Becchetti was given until Monday, June 12, to pay
off debts or sell the relegated League Two club following a
previous High Court hearing in March, BBC relates.

Those creditors on the petition have been paid, although it is
understood other creditors remain, BBC notes.

According to BBC, there is no indication as to how many other
creditors there are, but they did not support the winding-up

Following the dismissal of the petition, Matt Roper from the
Leyton Orient Fans' Trust (LOFT) urged Italian Becchetti to sell
the club "urgently to any new responsible owner", BBC relays.

RSA INSURANCE: Fitch Hikes Restricted Tier 1 Notes Rating to BB+
Fitch Ratings has affirmed Royal & Sun Alliance Insurance plc's
(RSA) Insurer Financial Strength (IFS) Rating at 'A' and Long-
Term Issuer Default Rating (IDR) at 'A-'. At the same time, the
agency has upgraded RSA Insurance Group plc's Long-Term IDR to
'A-' from 'BBB+'. The Outlooks on the IFS rating and IDRs are

The subordinated debt and capital securities guaranteed by RSA
(GBP46.97 million 2039, GBP400 million 2045, and GBP27.96 million
perpetual) have been affirmed at 'BBB'. Restricted Tier 1 notes
issued by RSA Insurance Group plc (SEK2,500 million, DKK650
million) have been upgraded to 'BB+' from 'BB'.

Fitch previously applied a difference of one notch between
operating and holding company IDRs as more than 30% of RSA's
earnings and capital were sourced from countries that are
expected to ring-fence regulatory capital resources in a stressed
scenario (even if a group solvency approach is applied locally).
However, as RSA has now completed its disposals and restructuring
programme, the proportion of earnings and capital associated with
"ring-fence" regulatory environments is less than 30% and Fitch
expects this to remain stable as RSA is focusing its strategy on
the core markets - the UK and Ireland, Scandinavia and Canada.
Therefore, Fitch has now compressed the notching between the
operating company and holding company IDRs to reflect Fitch
expectations of lower probability of default at the holding


The ratings of RSA reflects its strengthened capital position,
improving underwriting performance and a leading position in its
core markets, along with a low-risk investment portfolio.
Offsetting factors are RSA's low debt servicing ability driven by
weak operating performance due to ongoing restructuring costs
since 2013.

At end-2016, RSA's risk-adjusted capitalisation was 'Very
Strong', as measured by Fitch's Prism Factor Based Model (FBM).
At end-2016 RSA remained at the upper end of its target Solvency
II coverage range of 130%-160% with a coverage of 158% (end-2015:
143%). RSA strengthened its capital position by replacing GBP200
million of subordinated debt with SEK2,500 million and DKK650
million restricted Tier 1 (RT1) contingent convertible notes
issued in March 2017. This action is positive for RSA's Fitch-
calculated financial leverage ratio and capital adequacy.

RSA reported a group underwriting profit of GBP380 million in
2016 (2015: GBP220 million) and a combined ratio of 94% (2015:
97%). This was underpinned by strong performance of the three
core segments: the UK, Scandinavia and Canada. The robust
underwriting results were supported by a number of initiatives
RSA implemented recently, including optimising pricing and claims
processes, investing in new IT infrastructure and focusing on
underwriting discipline and cost control.

RSA's debt servicing ability is low for the ratings, with a
Fitch-calculated fixed-charge coverage ratio of 2x due to ongoing
restructuring costs. RSA's operating performance improved in
2016, although these improvements were offset by restructuring
and debt buy-back costs. Net income fell to GBP27 million (2015:
GBP235 million) equivalent to 1% return on equity (ROE). As RSA
has now completed its three-year restructuring programme, Fitch
expects its overall performance and fixed-charge coverage to
improve in 2017.

Fitch believes that RSA's ability to achieve and maintain a
leading position in the group's core markets is a positive rating
factor, as it offers greater flexibility and influence over the
premium rating environment in these territories. The group has
leading positions in its main markets - it is the third-largest
non-life insurer in the UK, with the fifth- and sixth-largest
market positions in Scandinavia and Canada, respectively.

RSA continues to adhere to a conservative investment strategy,
with a focus on high quality fixed income instruments. Fitch
believes RSA has a high-quality investment portfolio, which does
not expose the insurer's capital to significant risks. The
portfolio is focused on fixed-income instruments and cash with
limited exposure to equities.


Failure to maintain a Fitch-calculated combined ratio lower than
100% (2016: 95%) could lead to a downgrade. The ratings could
also be downgraded if the net income ROE remains below 6% on a
sustained basis (2016: 1%).

Continued improvement in operating performance as evidenced by a
net income ROE greater than 10%, combined with a Prism FBM score
of 'Very Strong', could lead to an upgrade.


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  Go to 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 Joseph Cardillo at

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