/raid1/www/Hosts/bankrupt/TCREUR_Public/170705.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
Wednesday, July 5, 2017, Vol. 18, No. 132
Headlines
A R M E N I A
ARMENIA: Fitch Affirms B+ Long-Term IDR, Outlook Stable
B E L A R U S
BELARUS: Fitch Assigns B- Rating to USD1,400MM Notes
F R A N C E
CMA CGM: S&P Affirms 'B' CCR, Revises Outlook to Positive
G E R M A N Y
NORDDEUTSCHE LANDESBANK: Moody's Cuts Subordinate Rating to B1
RWE AG: Moody's Affirms Ba2 Rating of Subordinated Securities
G R E E C E
GREECE: National Insurance Stake Sold Under Restructuring Plan
I R E L A N D
ARBOUR CLO III: Fitch Confirms 'B-sf' Rating on Class F Notes
CVC CORDATUS V: Moody's Assigns (P)B2 Rating to Class F-R Notes
DUNCANNON CRE I: Fitch Withdraws 'Dsf' Ratings on 4 Note Classes
* IRELAND: Struggling SMEs Ignore Friendly Examinership Program
I T A L Y
ANTICHI PELLETTIERI: July 5 Expressions of Interest Deadline Set
CMC DI RAVENNA: S&P Affirms 'B' CCR, Outlook Stable
L U X E M B O U R G
AWAS FINANCE: Moody's Reviews Ba2 Sr. Debt Rating for Upgrade
N E T H E R L A N D S
GREEN STORM 2016: Fitch Hikes Rating on Class E Notes to BB+
OZLME B.V.: S&P Affirms B- Credit Rating on Class F Notes
R U S S I A
ANKOR BANK: Liabilities Exceed Assets, Assessment Shows
CB NKB: Liabilities Exceed Assets, Assessment Shows
CB TALMENKA-BANK: Liabilities Exceed Assets, Assessment Shows
EUROPLAN JSC: Fitch Withdraws BB- LT Issuer Default Ratings
RN BANK: Fitch Affirms & Withdraws BB+ Long-Term IDR
S P A I N
BANCO POPULAR: Spain Passes Write-offs Responsibility to ECB
BBVA CONSUMO 7: DBRS Confirms BB Rating on Series B Notes
CAIXABANK CONSUMO: DBRS Confirms BB(sf) Rating on Series B Debt
SOCIEDADE DE TITULARIZACAO 1: DBRS Rates Class C Notes BB (low)
S W E D E N
SAS AB: S&P Affirms 'B' LT CCR on Additional Efficiency Measures
U N I T E D K I N G D O M
CO-OPERATIVE BANK: Moody's Puts Ca Rating on Review for Upgrade
CO-OPERATIVE BANK: Fitch Keeps B- IDR on Rating Watch Evolving
RESIDENTIAL MORTGAGE 30: Moody's Rates Class X1 Notes (P)Ca
SOHO HOUSE: Moody's Withdraws Caa2 CFR, Negative Outlook
TRAVELPORT WORLDWIDE: S&P Affirms 'B+' LT Corporate Credit Rating
*********
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A R M E N I A
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ARMENIA: Fitch Affirms B+ Long-Term IDR, Outlook Stable
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Fitch Ratings has affirmed Armenia's Long-Term Foreign- and
Local-Currency Issuer Default Ratings (IDR) at 'B+' with Stable
Outlook. The issue ratings on Armenia's senior unsecured foreign-
currency bonds have also been affirmed at 'B+'. The Country
Ceiling has been affirmed at 'BB-' and the Short-Term Foreign-
and Local-Currency IDRs at 'B'.
KEY RATING DRIVERS
Armenia's ratings are supported by strong income per capita and
governance indicators relative to peers, a credible monetary
policy framework, reduced external imbalances and a favourable
government debt structure. The ratings are constrained by high
net external debt, high fiscal deficits leading to a rising
public debt burden, exposure to external shocks, a highly
dollarised banking sector and tensions in relations with some
neighbouring countries.
The country is continuing to adjust following the external shock
in 2014-15 from the drop in commodity prices and remittances from
Russia. GDP growth has recovered strongly reaching 6.5% in 1Q17,
after the sharp deceleration to 0.2% in 2016. Fitch has revised
its growth projection up to 3.4% for 2017, with upside risks from
stronger than expected public sector capital spending and faster
export growth. Growth could accelerate further in 2018-19, but
improving the country's medium-term growth prospects is likely to
require further progress in improving the investment climate, as
total investment is low at 18.4% of GDP.
Armenia's exports are growing strongly, which helped its current
account deficit to remain roughly stable at 2.7% of GDP in 2016.
A favourable international environment characterised by a
recovery in commodity prices, improved export diversification and
stabilisation of the Russian economy will benefit export and
remittances receipts, leading the current account deficit to
average 2.1% in 2017-2018, almost half the expected 'B' median.
Lower current account deficits help mitigate external
vulnerabilities given Armenia's small size and commodity
dependence, as well as helping to support stabilisation of the
country's high net external debt of 46.7% of GDP vs 20% for the
rating category median.
Fitch expects Armenia's general government deficit to narrow to
3.3% of GDP in 2017 after ballooning to 5.5% of GDP in 2016,
compared with an original target of 3.5%. As government debt
exceeded 50% of GDP in 2016, the government has targeted a 2017
deficit of 2.8% of GDP, which must be lower than 3% of the
previous three years' average GDP to comply with the Law of
Public Debt. Strong GDP and revenue performance year-to-date has
afforded the government space to increase capital spending
without modifying the original deficit.
Nevertheless, in consultation with IFIs authorities are
considering possible modifications to the current fiscal rule in
order to increase its flexibility and smooth the fiscal
consolidation path to avoid a negative impact on growth. Changes
could be implemented before the end of the year, leading to
higher than previously targeted deficits in 2017 and 2018. A
predictable and credible fiscal consolidation strategy are
important to stabilise debt dynamics and regain policy space
given Armenia's vulnerability to external shocks.
Public debt rose to 56.6% of GDP in 2016. Debt has barely
surpassed the 55.7% 'B' median, but Armenia's debt has risen by
13pp of GDP since 2014 averaging 15% annual growth. The debt
structure is favourable as the majority is concessional (66% of
total debt) and medium to long term. Nevertheless, Fitch notes
that rapid debt accumulation has pushed up interest costs in
terms of both GDP and total government revenue, thus further
reducing space for improved quality of fiscal spending. Currency
risk is high as 82.3% of government debt is foreign currency
denominated.
Armenia is exposed to external shocks but has shown a capacity to
absorb them, helped by a credible monetary policy framework.
After 16 months, the country exited deflation in April. Inflation
could average 1.6% in 2017, significantly below 'B' and 'BB'
levels, and will likely remain moderate over the forecast period.
After lowering its policy rate by 25bps to 6% in February (425bp
cumulative reduction since November 2015), the central bank will
likely calibrate monetary policy taking into account the
convergence of inflation out-turns towards its target (4%) in
2018-2019, its impact on expectations and exchange rate
volatility.
Banks have raised minimum capital levels, in line with the
central bank's requirements, leading to strengthened
capitalisation (CAR 19.9% in April), mostly through shareholder
contributions and with no need of sovereign support. Non-
performing loans (up to 270 days overdue) equalled 7.3% in April.
Foreign-currency credit and deposit levels remain above 60%. The
banking system's FX position is balanced and regulations are in
place to prevent foreign-currency lending to non-foreign-currency
generators.
International reserves are close to USD2 billion (above four
months of current external payments). Fitch estimates that
Armenia's liquid assets as a share of short-term liabilities (at
125% in 2017) will remain below the 'B' category median. Exchange
rate flexibility, reduced external imbalances and access to
external financing reduce the risk of near-term balance of
payments pressures. After finalising its IMF EFF agreement with
the Fund this year, Fitch expects the authorities to seek a
continued engagement with the Fund.
Armenia's April parliamentary elections took place peacefully
with the results accepted by opposition parties. In April 2018,
constitutional reforms will come into effect, with the prime
minister becoming the head of state and the president being
elected indirectly by an electoral college/parliament. In the
event of changes to the composition of government, Fitch expects
the general direction of economic policy to be unaffected.
Following the April 2016 four day military conflict, incidents
between Azerbaijan and Nagorno-Karabakh have picked up in
magnitude and frequency since late 2016. As formal negotiations
over Nagorno-Karabakh issue seem to be at a standstill, further
escalation is a material risk.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Armenia a score equivalent to a
rating of 'B+' on the Long-Term FC IDR scale. Fitch's sovereign
rating committee did not adjust the output from the SRM to arrive
at the final LTFC IDR.
Fitch's SRM is the agency's proprietary multiple regression
rating model that employs 18 variables based on three year
centred averages, including one year of forecasts, to produce a
score equivalent to a LTFC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within
Fitch criteria that are not fully quantifiable and/or not fully
reflected in the SRM.
RATING SENSITIVITIES
The Stable Outlook reflects Fitch's assessment that upside and
downside risks to the rating are currently balanced. Nonetheless,
the following risk factors could, individually or collectively,
trigger positive rating action:
- A downward trajectory in the government debt-to-GDP ratio.
- Faster growth that supports convergence towards income levels
of higher rated sovereigns without increasing macroeconomic
imbalances.
- A sustained improvement in the external balance sheet.
The following risk factors could individually or collectively,
trigger negative rating action:
- Continued increased in the government debt to GDP ratio, for
example due to failure to achieve fiscal consolidation and/or
growth underperformance.
- A sustained fall in foreign exchange reserves.
- An escalation in the Nagorno-Karabakh conflict if it were to
have a material impact on the Armenian economy or public
finances.
KEY ASSUMPTIONS
Fitch assumes that Armenia will continue to experience broad
social and political stability.
Fitch assumes that the Russian economy will grow by 1.6% and 2.0%
in 2017 and 2018, respectively.
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B E L A R U S
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BELARUS: Fitch Assigns B- Rating to USD1,400MM Notes
----------------------------------------------------
Fitch Ratings has assigned Belarus's USD800 million 6.875% notes
maturing 2023 and USD600 million 7.625% notes maturing 2027 'B-'
ratings.
Proceeds from this issuance will be used to refinance public
external debt.
KEY RATING DRIVERS
The bond rating is in line with Belarus's Long-Term Foreign
Currency Issuer Default Rating (IDR) of 'B-'.
RATING SENSITIVITIES
The bond rating would be sensitive to changes in Belarus's Long-
Term Foreign Currency IDR, which Fitch affirmed at 'B-' with a
Stable Outlook on February 3, 2017.
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F R A N C E
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CMA CGM: S&P Affirms 'B' CCR, Revises Outlook to Positive
---------------------------------------------------------
S&P Global Ratings revised its outlook on France-based container
liner CMA CGM S.A. to positive from negative and affirmed its 'B'
corporate credit rating on the company.
S&P said, "We also affirmed our 'CCC+' issue rating on the
company's senior unsecured debt. The recovery rating remains at
'6', reflecting our expectation of negligible recovery in the 0%-
10% range in the event of payment default.
"The outlook revision reflects the recent recovery in container
shipping freight rates. This, combined with our expectation that
CMA CGM will be able to realize further cost efficiencies and
extract synergies from its 2016 merger with a container liner
Neptune Orient Lines (NOL) resulting in a lower unit cost (as a
measure to offset freight rate volatility), prompted our base-
case amendment for the company. We forecast that, if the recent
improvement in freight rates holds , CMA CGM could significantly
expand its EBITDA to about $1.5 billion-$1.6 billion in 2017
(from about $530 million in 2016). This would result in stronger
liquidity coverage and credit metrics that are consistent with a
higher rating, such as S&P Global Ratings' adjusted funds from
operations (FFO) to debt of 12%-14% in 2017 (from about 6% in
2016). This is predicated on our base-case assumptions pointing
to capital investments and gradual deleveraging from the proceeds
of asset disposals. We nevertheless believe that the pace and
magnitude of a rebound in CMA CGM's credit measures is
susceptible to sustainability of the most recent improvement in
freight rates in the context of the containership overcapacity
and slowed expansion of global trade.
"We expect that improved trade dynamics, higher bunker fuel
prices, and industry supply-side adjustments will likely underpin
the positive trend in freight rates and the company's operating
performance. We expect vessel demolition or lay-up and
rationalization of networks as a consequence of recent dynamic
consolidation between liners to further support the industry
conditions. However, we expect strong deliveries of ultra-large
containerships during 2017-2018. These were ordered a few years
ago when the trade volume prospects were brighter and pose a risk
to the sustainability in freight rates, which will also depend on
the supply discipline of the leading players.
In S&P's base case, it assumes:
-- An average global GDP growth rate of about 2.8% in 2017 and
2.9% in 2018 compared with 2.4% last year. However, this
average hides wide regional variations. China, a key engine
of shipping growth, and many European economies including the
eurozone are slowing down. Brazil and Russia are emerging
from recession, and we expect a return to positive real GDP
growth n 2017-2019. Furthermore, on continued strength in job
gains, accelerating wage inflation, and a relatively healthy
economy, the pace of U.S. economic expansion will likely
continue into next year. We expect U.S. GDP growth of 2.3%
this year and 2.4% in 2018 (from 1.6% in 2016) (see "U.S.
Economic Forecast: I'm Still Standing!" published on
March 30, 2017 on RatingsDirect). General economic growth is
vital to the shipping industry. Given the global nature of
shipping sector demand, S&P considers the GDP growth of all
major contributors to trade volumes.
-- Annual growth rates in CMA CGM's transported volumes of 2%-4%
in 2017 and 2018, also reflecting growth in the company's
fleet capacity.
-- An increase in bunker prices (fuel to run ships and CMA CGM's
one of major cost positions) flowing directly to bottom-line
earnings in 2017. S&P said, "We estimate that CMA CGM will
spend about $260-$270 per ton in 2017 and 2018, compared with
about $230 per ton in 2016. This largely follows our
estimates for crude oil prices, which are typically a good
indicator of bunker price performance (see "S&P Global
Ratings Raises Its Oil And Natural Gas Prices Assumptions For
2017," published in Dec. 14, 2016)."
-- About 6% increase in freight rates in 2017, from historical
lows in 2016, reflecting the trend in the last six months,
and stable rates in 2018.
-- The realization of additional cost efficiencies and synergies
unlocked from CMA CGM's takeover of NOL from 2016.
-- Annual cash-paid and lease-
-- Asset disposal of about $800 million in 2017 with proceeds
allocated to the early repayment of debt or strengthening the
cash balance.
Based on these assumptions, S&P arrives at the following credit
measures:
-- A weighted-average ratio of S&P Global Ratings-adjusted FFO
to debt of 13%-14% in 2017-2018, compared with about 6% in
2016.
-- A weighted-average ratio of adjusted debt to EBITDA of about
4.5x-5.0x in 2017-2018, compared with about 8.5x in 2016.
S&P said, "Our assessment of CMA CGM's business risk profile is
constrained by the shipping industry's high risk and the
company's volatile profitability.
"While we acknowledge that CMA CGM has achieved significant cost
savings over the past several quarters and continues its
proactive efforts to improve cost efficiencies, which will prop
up earnings, we expect its operating margins and returns on
capital to remain volatile. This is tied to the industry's
cyclical swings; the company's heavy exposure to fluctuations in
bunker fuel prices; and its fairly low short-term flexibility to
adjust its operating cost base. These weaknesses are partly
mitigated by CMA CGM's top-tier market positions and global
footprint through a broad and strategically located route
network. CMA CGM also benefits from an attractive fleet profile
supported by a large, young, and diverse fleet, and strong
customer diversification incorporating the acquisition of NOL.
"The positive outlook reflects that we could upgrade CMA CGM in
the next 12 months if we believed that the recent recovery in
freight rates would hold, which would support CMA CGM's
deleveraging and improvement in credit measures during 2017-2018.
"We would raise the rating in the next 12 months if CMA CGM
delivered consistent EBITDA growth, maintained its liquidity
position, and reduced its financial leverage. This would result
in an improvement of its credit ratios to the level that we
considered commensurate with the higher rating, such that
adjusted FFO to debt strengthened and remained above 12%."
This would follow a sustained improvement in freight rates, and
CMA CGM's realization of further cost efficiencies, extraction of
synergies, and EBITDA generation that appeared to be in line or
above our projections. S&P said, "In addition, the stable outlook
is contingent on our view of whether the company will manage its
capital expenditures, disposal proceeds, and adjusted debt in a
manner that supports a gradual deleveraging. Furthermore, given
the underlying industry's inherent volatility, we consider
maintaining adequate liquidity to be a critical and stabilizing
rating factor.
"We would revise the outlook to stable if, in our view, the
recent uptick in freight rates were not likely to hold, which
would preclude CMA CGM from improving its credit measures to a
level we consider commensurate with a 'B+' rating."
This could happen if average freight rates remained at about
$1,080 per twenty-foot equivalent unit (TEU) and cost per TEU
(including bunker) increased by 4%-5% resulting in adjusted FFO
to debt to remain below 12%.
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G E R M A N Y
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NORDDEUTSCHE LANDESBANK: Moody's Cuts Subordinate Rating to B1
--------------------------------------------------------------
Moody's Investors Service has downgraded by one notch the ratings
of Norddeutsche Landesbank GZ (NORD/LB) and of its rated
subsidiaries Deutsche Hypothekenbank (Actien-Gesellschaft)
(Deutsche Hypo), Bremer Landesbank Kreditanstalt Oldenburg GZ
(BremerLB) and NORD/LB Luxembourg S.A. Covered Bond Bank (NORD/LB
CBB). Among the ratings affected by rating action were, as far as
assigned to each entity, the banks' long-term deposit and senior
senior unsecured ratings which were downgraded to Baa2 from Baa1,
the long-term senior unsecured debt and issuer ratings which were
downgraded to Baa3 from Baa2, and the subordinated debt ratings,
which were downgraded to B1 from Ba3. Furthermore, Moody's
downgraded the banks' assessments by one notch, including the
long-term Counterparty Risk (CR) Assessments to Baa2(cr) from
Baa1(cr), the baseline credit assessments (BCA) to b2 from b1,
and the adjusted BCAs to ba3 from ba2. The rating agency
confirmed all short-term ratings, including all debt and deposit
ratings at P-2, all programme ratings at (P)P-2 and all CR
Assessments at P-2(cr). The banks' long-term deposit, senior
senior unsecured as well as senior unsecured and issuer ratings
carry a negative outlook.
The Aa1-rated guaranteed debt ratings of NORD/LB and BremerLB and
the Caa2(hyb) ratings of NORD/LB's non-cumulative preference
share vehicles, Fuerstenberg Capital GmbH (I) and Fuerstenberg
Capital II GmbH, were unaffected by rating actions.
"While NORD/LB made adequate progress in its de-risking program,
supported by a less adverse shipping market environment than in
2016 we believes that the bank will only gradually rebuild a
sufficient degree of resilience against adverse ship market value
and freight rates scenarios, leaving it significantly exposed to
solvency risks within the next 12 to 18 months" says Bernhard
Held, a Moody's Vice President.
The rating actions conclude the rating review for NORD/LB and its
affiliates opened on 18 April 2017, and reflect Moody's view that
the success of NORD/LB's measures to de-risk the bank and
stabilise its capitalisation depends to a significant degree on
the future development of shipping markets.
RATINGS RATIONALE
DOWNGRADE OF NORD/LB'S BASELINE CREDIT ASSESSMENT AND ADJUSTED
BCA
The downgrade of NORD/LB's BCA to b2 from b1 reflects the
vulnerability of its risk-weighted and absolute capitalisation to
setbacks in the tentative stabilization experienced year-to-date
of container and bulker ship freight rates and market values,
following a pronounced downturn in 2016 which continues to affect
the tanker ship segment.
The current b2 BCA also takes into account a set of measures
initiated by NORD/LB to fend-off solvency pressures and to
stabilise current capital levels. In Q1 2017, NORD/LB reduced its
gross shipping exposure to EUR15.9 billion from EUR16.8 billion
while maintaining its shipping non-performing loan coverage ratio
at 48% as of March 31, 2017 (31 December 2016: 48%), from which
the rating agency does not expect it to rise significantly going
forward. Taking into account additional ship sales agreed with
buyers, the bank is on track to achieve its shipping exposure
target range of EUR12 billion to EUR14 billion within the next 12
to 18 months.
NORD/LB's pluralistic ownership structure between public-sector
majority ownership and minority ownership by member
institutions/associations of the Sparkassen-Finanzgruppe
(Corporate Family Rating Aa2 stable, BCA a2) under the EU Bank
Recovery and Resolution Directive complicate the task of
stakeholder support provision in case of need. However, the
rating agency believes that ultimately, the probability of
emergency support forthcoming from the Sparkassen-Finanzgruppe in
case of need is high, leading to an unchanged two notches of
support for NORD/LB's adjusted BCA and its downgrade to ba3 from
ba2. NORD/LB is a direct member bank of the institutional
protection scheme of Sparkassen-Finanzgruppe.
DOWNGRADE OF THE LONG-TERM RATINGS OF NORD/LB AND ITS
SUBSIDIARIES
Driven by the one-notch downgrade of the bank's and its
subsidiaries' BCAs and adjusted BCAs, all long-term ratings of
the rated group members were downgraded by one notch.
The downgrade of Deutsche Hypo's, BremerLB's and NORD/LB CBB's
BCAs to b2 from b1 and of their adjusted BCAs to ba3 from ba2
reflects the alignment of the banks' standalone assessments with
that of parent bank NORD/LB.
NORD/LB aims to merge with BremerLB over the course of 2017,
leading to a full alignment of the ratings of both entities.
Deutsche Hypo's standalone financial profile compares favourably
with NORD/LB's, but due to the tight integration of this
subsidiary, Moody's caps Deutsche Hypo's BCA at the level of
NORD/LB's b2 BCA. NORD/LB maintains a control and profit-and-loss
transfer agreement with Deutsche Hypo, based on which the
subsidiary has been granted an exemption from regulatory minimum
capital requirements. Deutsche Hypo's adjusted BCA is also
aligned with NORD/LB's and accordingly downgraded to ba3 from
ba2.
Moody's considers NORD/LB CBB a highly integrated and harmonised
subsidiary of NORD/LB and accordingly the bank's BCA and adjusted
BCA are aligned and downgraded in parallel with NORD/LB's BCA and
adjusted BCA to b2 from b1 and to ba3 from ba2, respectively.
Moody's expects that NORD/LB and its three rated subsidiaries
will be subject to joint resolution in the case of failure. As a
result, the ratings of all four continue to reflect the
assumption of a joint group liability structure, leading to
identical notching results under Moody's Advanced Loss Given
Failure (LGF) analysis as well as unchanged and identical
moderate government support assumptions.
NEGATIVE OUTLOOK ON NORD/LB'S AND ITS AFFILIATES' LONG-TERM DEBT
AND DEPOSIT RATINGS
The long-term ratings of NORD/LB and its affiliates carry a
negative outlook reflecting the tail risk of another weakening of
shipping markets within the 12 to 18 months outlook horizon,
which would in Moody's view have a significant negative impact on
net income and capital development of NORD/LB. The negative
outlook also captures additional execution risk related to
strategic measures planned and targeted by NORD/LB to protect its
current capitalization levels.
The current b2 BCA of NORD/LB reflects that Moody's considers
current capital levels weak even in case of a successful
reduction in shipping risks towards the EUR12 billion to EUR14
billion announced target range for year-end 2018.
WHAT COULD CHANGE THE RATING - UP / DOWN
There is currently limited upward pressure on the ratings of
NORD/LB and its rated subsidiaries, as indicated by the negative
outlook.
Moody's may stabilise the outlook on NORD/LB's ratings, if the
bank continues to execute successfully on its de-risking plan
over the 12 to 18 months outlook horizon while preserving its
core capital above current levels and with a sufficient margin
above regulatory capital requirements.
Moody's may downgrade the long- and short-term ratings of NORD/LB
and its rated subsidiaries if NORD/LB's BCA and adjusted BCA are
downgraded. NORD/LB's BCA may be downgraded if (1) additional
loan loss provisioning needs in the context of NORD/LB's shipping
portfolio reduction cannot be sufficiently covered by underlying
pre-provision income, thereby negatively affecting capitalisation
or if (2) rating migration trends in its shipping portfolio
become worse than the rating agency's current expectations.
Furthermore, the long- and short-term ratings of NORD/LB and its
rated subsidiaries may be downgraded if, at the group level, the
amount of equal-ranking or subordinated debt for an individual
debt class was to decline beyond current expectations, leading to
a less favourable outcome under Moody's Advanced LGF analysis.
LIST OF AFFECTED RATINGS
Issuer: Norddeutsche Landesbank GZ
Downgraded:
-- LT Issuer Rating (Foreign), Downgraded to Baa3 from Baa2,
outlook changed to Negative from Rating Under Review
-- LT Bank Deposits (Local & Foreign), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Senior Unsecured (Local & Foreign), Downgraded to Baa3 from
Baa2, outlook changed to Negative from Rating Under Review
-- Senior Senior Unsecured (Local), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Subordinate (Local & Foreign), Downgraded to B1 from Ba3
-- Subordinate MTN (Local), Downgraded to (P)B1 from (P)Ba3
-- Senior Unsecured MTN (Local), Downgraded to (P)Baa3 from
(P)Baa2
-- Senior Senior Unsecured MTN (Local), Downgraded to (P)Baa2
from (P)Baa1
-- LT Counterparty Risk Assessment, Downgraded to Baa2(cr) from
Baa1(cr)
-- Adjusted Baseline Credit Assessment, Downgraded to ba3 from
ba2
-- Baseline Credit Assessment, Downgraded to b2 from b1
Confirmed:
-- ST Bank Deposits (Local & Foreign), at P-2
-- Other Short Term (Local), at (P)P-2
-- ST Deposit Note/ CD Program (Local), at P-2
-- Commercial Paper (Local & Foreign), at P-2
-- ST Counterparty Risk Assessment, at P-2(cr)
Outlook Action:
-- Outlook changed to Negative from Rating Under Review
Issuer: Bremer Landesbank Kreditanstalt Oldenburg GZ
Downgraded:
-- LT Issuer Rating (Foreign), Downgraded to Baa3 from Baa2,
outlook changed to Negative from Rating Under Review
-- LT Bank Deposits (Local & Foreign), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Senior Unsecured (Local), Downgraded to Baa3 from Baa2,
outlook changed to Negative from Rating Under Review
-- Subordinate MTN (Local), Downgraded to (P)B1 from (P)Ba3
-- Senior Unsecured MTN (Local), Downgraded to (P)Baa3 from
(P)Baa2
-- LT Counterparty Risk Assessment, Downgraded to Baa2(cr) from
Baa1(cr)
-- Adjusted Baseline Credit Assessment, Downgraded to ba3 from
ba2
-- Baseline Credit Assessment, Downgraded to b2 from b1
Confirmed:
-- ST Banks Deposits Rating (Local & Foreign), at P-2
-- Other Short Term (Local), at (P)P-2
-- Commercial Paper (Local), at P-2
-- ST Counterparty Risk Assessment, at P-2(cr)
Outlook Action:
-- Outlook changed to Negative from Rating Under Review
Issuer: NORD/LB Luxembourg S.A. Covered Bond Bank
Downgraded:
-- LT Issuer Rating (Local & Foreign), Downgraded to Baa3 from
Baa2, outlook changed to Negative from Rating Under Review
-- LT Bank Deposits (Local & Foreign), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Senior Unsecured MTN (Local), Downgraded to (P)Baa3 from
(P)Baa2
-- LT Counterparty Risk Assessment, Downgraded to Baa2(cr) from
Baa1(cr)
-- Adjusted Baseline Credit Assessment, Downgraded to ba3 from
ba2
-- Baseline Credit Assessment, Downgraded to b2 from b1
Confirmed:
-- ST Bank Deposits (Local & Foreign), at P-2
-- ST Issuer Rating (Local & Foreign), at P-2
-- ST Counterparty Risk Assessment, at P-2(cr)
Outlook Action:
-- Outlook changed to Negative from Rating Under Review
Issuer: Deutsche Hypothekenbank (Actien-Gesellschaft)
Downgraded:
-- LT Bank Deposits (Local & Foreign), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Senior Unsecured (Local), Downgraded to Baa3 from Baa2,
outlook changed to Negative from Rating Under Review
-- Senior Senior Unsecured (Local), Downgraded to Baa2 from
Baa1, outlook changed to Negative from Rating Under Review
-- Subordinate MTN (Local), Downgraded to (P)B1 from (P)Ba3
-- Senior Unsecured MTN (Local), Downgraded to (P)Baa3 from
(P)Baa2
-- Senior Senior Unsecured MTN (Local), Downgraded to (P)Baa2
from (P)Baa1
-- Subordinate (Local), Downgraded to B1 from Ba3
-- LT Counterparty Risk Assessment, Downgraded to Baa2(cr) from
Baa1(cr)
-- Adjusted Baseline Credit Assessment, Downgraded to ba3 from
ba2
-- Baseline Credit Assessment, Downgraded to b2 from b1
Confirmed:
-- ST Bank Deposits (Local & Foreign), at P-2
-- Other Short Term (Local), at (P)P-2
-- ST Counterparty Risk Assessment, at P-2(cr)
Outlook Action:
-- Outlook changed to Negative from Rating Under Review
Issuer: Norddeutsche Landesbank GZ, New York Branch
Downgraded:
-- LT Counterparty Risk Assessment, Downgraded to Baa2(cr) from
Baa1(cr)
Confirmed:
-- Commercial Paper (Local Currency), at P-2
-- ST Counterparty Risk Assessment, at P-2(cr)
Outlook Action:
-- Outlook changed to No Outlook from Rating Under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
published in January 2016.
RWE AG: Moody's Affirms Ba2 Rating of Subordinated Securities
-------------------------------------------------------------
Moody's Investors Service has affirmed the long- and short-term
senior unsecured (P)Baa3 MTN /Prime-3 commercial paper ratings of
German utility, RWE AG (RWE) and the Ba2 rating of its
Subordinated Hybrid Capital Securities (the hybrids). At the same
time, Moody's has assigned a Baa3 long term issuer rating to RWE.
The outlook has been changed to stable from negative(m).
The rating action follows the June 7 decision by the German
Federal Constitutional Court that a nuclear fuel tax imposed on
energy utilities was unconstitutional and void and the decision
by RWE to use a majority of the proceeds to bolster balance sheet
strength.
RATINGS RATIONALE
Affirmation of the ratings and the stable outlook reflect the
clarification of RWE's strategy in March to maintain a relatively
conservative financial policy, with limited third party debt over
the medium term and the likelihood that it would maintain its 77%
stake in innogy SE (innogy). This policy is reinforced by RWE's
announcement on 23 June to maintain most of the EUR1.7 billion
nuclear fuel tax compensation within the company to bolster its
financial strength, while paying an extraordinary dividend of
EUR615 million. This balanced financial profile mitigates the
business risk of the company's volatile generation, supply and
trading businesses.
Moody's expects RWE to receive dividends from innogy that will
represent around 30-50% of the company's adjusted EBITDA (on a
standalone basis) over the 2017-19 period. This rather stable
dividend stream should allow RWE to broadly cover the outflows
from its nuclear, pension and mining provisions. RWE currently
has no plans to sell down its 77% stake in innogy, valued at
around EUR15 billion, however the stock is fungible, if it should
choose to do so. The ability to sell down a stake provides RWE
with financial flexibility, although at the expense of future
income from the higher quality assets held within innogy.
Moody's continue to give 50% equity credit on the outstanding
hybrid securities but expects the company to reduce them to
around EUR2 billion (from 2016 levels) as soon as feasible,
having already exercised CHF400 million of call options this
year. By end 2019, the bulk of the intercompany loans from innogy
will have been paid, leaving the company with limited third party
debt, although the company will continue to require liquidity for
working capital and large collateral positions.
The rating also factors that the company has a large and well-
diversified generation portfolio, but EBITDA is likely to fall
significantly in 2018 as a result of (1) low power prices and
declining volumes in nuclear and lignite production; nuclear
plants will close by 2023 and the company will lose around 5.5
TWh of lignite production between 2017-2019 as certain older
plants are placed in the strategic lignite reserve; and (2) tight
margins on spread generation businesses. The supply and trading
businesses typically earn at least EUR200 million of EBITDA per
year but can be volatile. Pressure on earnings will be partially
mitigated by (1) the company's ongoing efficiency programme; (2)
its asset optimisation and hedging strategy designed to maximise
earnings potential; and (3) more stable capacity payments in the
UK which will increasingly underpin earnings in this market.
There is uncertainty over the future shape of the electricity
market in Germany but reducing capacity over the next few years
is likely to support higher and more volatile power prices
benefiting, in particular, RWE's newer and more flexible plants.
The future of the lignite industry, currently slated to close by
the mid-2040s, is likely to be further debated after the German
general election given the government's commitment to significant
decarbonisation targets by 2030. Policy developments are,
however, likely to take into account power market stability and
employment issues.
Nonetheless, certain political and legal risks related to nuclear
energy have been reduced. In addition to the nuclear fuel tax
compensation, on June 16 EU state clearance was finally received
to allow the establishment of the long-awaited state-backed fund
which will assume responsibility for long term nuclear waste
storage obligations. This should allow a significant political
risk to be lifted from RWE, and the other German nuclear
operators, albeit the companies will have to pay a premium to
cover a potential rise in costs. The companies will pay a
combined EUR24.1 billion into this fund on 1 July. Of this, RWE's
contribution will represent around EUR6.8 billion, including a
EUR1.8 billion premium.
Finally, in its analysis of RWE, Moody's factors certain
structural and other considerations including that (1) while
innogy dividends are subordinated to the claims of its creditors,
they are significant and provide meaningful diversification to
RWE's operating cash flows; (2) both RWE and innogy are pursuing
independent strategies, supported by an arm's length agreement;
and (3) innogy is a listed company with a large minority
shareholding.
WHAT COULD MOVE THE RATING UP/DOWN
The stable outlook assumes that RWE, on a stand-alone basis,
(taking into account innogy dividends) should generally maintain
FFO/net debt of at least in the mid-teens to mid-twenties in
percentage terms.
Positive pressure is unlikely to develop on the rating in the
medium term, given the uncertain outlook in RWE's core markets.
Any ratings upgrade is likely to require a significant reduction
in business risk and an improvement in its financial risk
profile. It is also likely to reflect a growing and successful
track record for the business in its new shape.
The rating could move down if (1) RWE's business or financial
risk profile were to significantly deteriorate. This could be,
for example, as a result of a weakening of its links with innogy
such as through a sizeable share sell down, that was not replaced
by earnings with a similarly stable risk profile; and/or (2)
business conditions were to deteriorate in its core generation
and supply and trading businesses.
RWE is a German energy company, headquartered in Essen. Its
principal businesses are European generation, supply and trading.
It holds a 77% stake in innogy. As at FYE 2016, it reported
adjusted EBITDA of EUR1.9 billion on a standalone basis.
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in May 2017.
LIST OF AFFECTED RATINGS
Assignments:
Issuer: RWE AG
-- LT Issuer Rating, Assigned Baa3
Affirmations:
Issuer: RWE AG
-- Senior Unsecured MTN Program, Affirmed (P)Baa3
-- Other Short Term, Affirmed (P)P-3
-- Commercial Paper, Affirmed P-3
-- Subordinate Regular Bond/Debenture, Affirmed Ba2
Outlook Actions:
Issuer: RWE AG
-- Outlook, Changed To Stable From Negative(m)
===========
G R E E C E
===========
GREECE: National Insurance Stake Sold Under Restructuring Plan
--------------------------------------------------------------
Kerin Hope at The Financial Times reports that shareholders in
National Bank of Greece have confirmed the sale of 75% of the
group's wholly-owned insurance subsidiary to Calamos-Exin, a US-
Dutch consortium, for EUR718 million.
According to the FT, National Insurance, the largest Greek
insurer, was offered for sale under a restructuring plan agreed
with the EU and International Monetary Fund as part of the
country's current EUR86 billion bailout.
NBG, the country's second-largest lender, undertook to dispose of
non-core assets and focus on domestic banking in line with
benchmarks set by creditors, the FT discloses.
It will retain a 25% per cent stake in National Insurance and
continue to distribute bancassurance products through its own
branch network, the FT states.
Calamos Investments, which has more than EUR20 billion under
management, teamed up with Exin Partners of the Netherlands, an
investment group that specializes in insurance, reinsurance and
asset management to make the acquisition, the FT relates.
=============
I R E L A N D
=============
ARBOUR CLO III: Fitch Confirms 'B-sf' Rating on Class F Notes
-------------------------------------------------------------
Fitch Ratings has confirmed Arbour CLO III Designated Activity
Company's ratings:
Class A-1 senior secured fixed rate notes due 2029: 'AAAsf';
Outlook Stable
Class A-2 senior secured floating rate notes due 2029: 'AAAsf';
Outlook Stable
Class B-1 senior secured fixed rate notes due 2029: 'AAsf';
Outlook Stable
Class B-2 senior secured floating rate notes due 2029: 'AAsf';
Outlook Stable
Class C senior secured deferrable floating rate notes due 2029:
'Asf'; Outlook Stable
Class D senior secured deferrable floating rate notes due 2029:
'BBBsf'; Outlook Stable
Class E senior secured deferrable floating rate notes due 2029:
'BBsf'; Outlook Stable
Class F senior secured deferrable floating rate notes due 2029:
'B-sf'; Outlook Stable
The collateral manager has amended the Fitch Test Matrix in line
with the documentation. In Fitch's view, the amendment to the
Fitch Test Matrix does not impact the notes' ratings.
Arbour CLO III closed in February 2016 and so the maximum
weighted average life of the portfolio assumed at closing has
fallen to 6.75 years from 8 years (rounded to the nearest
quarter). As a result Fitch's default assumptions, at each rating
stress, have fallen leading to lower weighted average recovery
rates in the Fitch Test Matrix. The agency has confirmed the
ratings despite shortfalls to the sub-investment grade tranches,
as the best pass ratings were sensitive to the back-loaded
default timing scenario. Fitch considered the shortfalls
immaterial and confirmed the ratings as the notes passed at the
current ratings in all other scenarios. The investment grade
notes passed the cashflow model analysis without shortfalls in
every scenario tested by the agency.
The agency has confirmed the ratings based on the strong credit
profile of the pool compared with similar European CLOs. The
portfolio has performed well since closing with zero defaults
during the period. The weighted average rating factor of 30.9 and
weighted average recovery rate of 70.4 are above market standard.
CVC CORDATUS V: Moody's Assigns (P)B2 Rating to Class F-R Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following provisional ratings to notes to be issued by CVC
Cordatus Loan Fund V Designated Activity Company:
-- EUR2,000,000 Class X Senior Secured Floating Rate Notes due
2030, Assigned (P)Aaa (sf)
-- EUR263,000,000 Class A-R Senior Secured Floating Rate Notes
due 2030, Assigned (P)Aaa (sf)
-- EUR32,000,000 Class B-1-R Senior Secured Floating Rate Notes
due 2030, Assigned (P)Aa2 (sf)
-- EUR30,000,000 Class B-2-R Senior Secured Fixed Rate Notes due
2030, Assigned (P)Aa2 (sf)
-- EUR30,000,000 Class C-R Senior Secured Deferrable Floating
Rate Notes due 2030, Assigned (P)A2 (sf)
-- EUR23,000,000 Class D-R Senior Secured Deferrable Floating
Rate Notes due 2030, Assigned (P)Baa2 (sf)
-- EUR28,000,000 Class E-R Senior Secured Deferrable Floating
Rate Notes due 2030, Assigned (P)Ba2 (sf)
-- EUR13,000,000 Class F-R Senior Secured Deferrable Floating
Rate Notes due 2030, Assigned (P)B2 (sf)
Moody's issues provisional ratings in advance of the final sale
of financial instruments, but these ratings only represent
Moody's preliminary credit opinions. Upon a conclusive review of
a transaction and associated documentation, Moody's will
endeavour to assign definitive ratings. A definitive rating (if
any) may differ from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the notes address the expected
loss posed to noteholders. The provisional ratings reflect the
risks due to defaults on the underlying portfolio of assets, the
transaction's legal structure, and the characteristics of the
underlying assets.
The Issuer will issue the Refinancing Notes in connection with
the refinancing of the following classes of notes: Class A Notes,
Class B Notes, Class C Notes, Class D Notes, Class E Notes and
Class F Notes due 2029 (the "Original Notes"), previously issued
on May 21, 2015 (the "Original Closing Date"). On the Refinancing
Date, the Issuer will use the proceeds from the issuance of the
Refinancing Notes to redeem in full its respective Original
Notes. On the Original Closing Date, the Issuer also issued
EUR47.8M of Subordinated Notes, which will remain outstanding.
CVC Cordatus V is a managed cash flow CLO. At least 90% of the
portfolio must consist of senior secured loans and senior secured
bonds and up to 10% of the portfolio may consist of unsecured
senior loans, second-lien loans, mezzanine obligations and high
yield bonds. The underlying portfolio is 100% ramped as of the
second refinancing closing date.
CVC Credit Partners Group Limited will manage the CLO. It will
direct the selection, acquisition and disposition of collateral
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's four-
year reinvestment period. Thereafter, purchases are permitted
using principal proceeds from unscheduled principal payments and
proceeds from sales of credit risk and credit improved
obligations, and are subject to certain restrictions.
The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to
pay down the notes in order of seniority.
Factors that would lead to an upgrade or downgrade of the
ratings:
The rated notes' performance is subject to uncertainty. The
notes' performance is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. CVC Credit Partners Groups
Limited's investment decisions and management of the transaction
will also affect the notes' performance.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using CDOEdge, a cash flow model
based on the Binomial Expansion Technique, as described in
Section 2.3 of the "Moody's Global Approach to Rating
Collateralized Loan Obligations" rating methodology published in
October 2016. The cash flow model evaluates all default scenarios
that are then weighted considering the probabilities of the
binomial distribution assumed for the portfolio default rate. In
each default scenario, the corresponding loss for each class of
notes is calculated given the incoming cash flows from the assets
and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum
product of (i) the probability of occurrence of each default
scenario and (ii) the loss derived from the cash flow model in
each default scenario for each tranche.
Moody's used the following base-case modeling assumptions:
Par Amount: EUR452,000,000
Diversity Score: 41
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 4.75%
Weighted Average Recovery Rate (WARR): 43.5%
Weighted Average Life (WAL): 8.5 years.
Stress Scenarios:
Together with the set of modelling assumptions above, Moody's
conducted an additional sensitivity analysis, which was an
important component in determining the provisional ratings
assigned to the rated notes. This sensitivity analysis includes
increased default probability relative to the base case. Below is
a summary of the impact of an increase in default probability
(expressed in terms of WARF level) on each of the rated notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds
to higher expected losses), holding all other factors equal.
Percentage Change in WARF: WARF + 15% (to 3278 from 2850)
Ratings Impact in Rating Notches:
Class X Senior Secured Floating Rate Notes: 0
Class A-R Senior Secured Floating Rate Notes: 0
Class B-1-R Senior Secured Floating Rate Notes: -2
Class B-2-R Senior Secured Fixed Rate Notes: -2
Class C-R Senior Secured Deferrable Floating Rate Notes: -2
Class D-R Senior Secured Deferrable Floating Rate Notes: -2
Class E-R Senior Secured Deferrable Floating Rate Notes: -1
Class F-R Senior Secured Deferrable Floating Rate Notes: 0
Percentage Change in WARF: WARF +30% (to 3705 from 2850)
Ratings Impact in Rating Notches:
Class X Senior Secured Floating Rate Notes: -1
Class A-R Senior Secured Floating Rate Notes: -1
Class B-1-R Senior Secured Floating Rate Notes: -3
Class B-2-R Senior Secured Fixed Rate Notes: -3
Class C-R Senior Secured Deferrable Floating Rate Notes: -4
Class D-R Senior Secured Deferrable Floating Rate Notes: --3
Class E-R Senior Secured Deferrable Floating Rate Notes: -2
Class F-R Senior Secured Deferrable Floating Rate Notes: -2
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in October 2016.
DUNCANNON CRE I: Fitch Withdraws 'Dsf' Ratings on 4 Note Classes
----------------------------------------------------------------
Fitch Ratings has downgraded Duncannon CRE CDO I plc's notes and
withdrawn the ratings:
Class D-2: downgraded to 'Dsf' from 'Csf' and withdrawn
Class D-3: downgraded to 'Dsf' from 'Csf' and withdrawn
Class E-1: downgraded to 'Dsf' from 'Csf' and withdrawn
Class E-2: downgraded to 'Dsf' from 'Csf' and withdrawn
The transaction was a managed cash securitisation of commercial
real estate assets creating a term matched funding solution for
an affiliate of the original portfolio manager (Eurocastle
Investment Ltd), consisting primarily of CMBS, commercial
mortgage B-notes and mezzanine mortgage loans.
KEY RATING DRIVERS
Following an extraordinary resolution of the controlling class
noteholders (class D-2 noteholders) on 20 June 2017, the proceeds
from the liquidation of the outstanding portfolio have been used
to partially repay the class D-2 notes that had amortised by
EUR10.1 million of their EUR18.4 million outstanding balance and
then extinguished. The class D-3, E-1 and E-2 notes have also
been extinguished, without any repayment of principal and/or
capitalised interest.
Fitch has therefore downgraded the notes to 'Dsf' and withdrawn
the ratings in accordance with its policies and procedures.
RATING SENSITIVITIES
Not applicable
* IRELAND: Struggling SMEs Ignore Friendly Examinership Program
---------------------------------------------------------------
The Times reports that legislation introduced in late 2013 to
provide an SME-friendly examinership program has failed to
improve take-up of the arrangement.
According to The Times, David Van Dessel --
dvandessel@deloitte.ie -- a partner in restructuring services at
Deloitte, said the legislation had "not had the intended effect
of encouraging more struggling SMEs" to enter examinership.
Examinership is a court-enforced moratorium on creditor action
which allows a brief period during which a company can be
restructured, The Times discloses.
Since the introduction of the 2013 legislation, the process is
overseen by the circuit court or High Court, which provides the
company with protection from its creditors during the
examinership period, The Times notes. This allows breathing space
to find fresh investment, The Times states.
=========
I T A L Y
=========
ANTICHI PELLETTIERI: July 5 Expressions of Interest Deadline Set
---------------------------------------------------------------
Mauro Macchiaverna and Damiano Manini, the court appointed
liquidators of Antichi Pellettieri S.p.A., which filed for
Composition with Creditors ("Concordato preventivo", approved on
May 24, 2014) call for expressions of interest for the sale of a
60% participation stake in Baldinini S.r.l. headquartered in San
Mauro Pascoli (FO), Via Rio Salto 1, share capital EUR93,000
fully paid in Tax code, VAT number and registration with the
Forli-Cesena Register of Companies 01727100404, currently owned
by Antichi Pellettieri S.p.A.
Baldinini designs, manufactures and sells luxury footwear and
accessories for men and women. The Company is active in more
than 35 countries with over 120 monobrand stores.
The expressions of interest to participate in the transaction may
be submitted by no later than July 5, 2017. Terms and
regulation of the binding offer, as well as detailed
information on the sale process are fully available (in Italian)
at: www.fallimentireggioemilia.com or www.antichipellettieri.it
The binding and irrevocable purchase offer must be submitted in a
closed envelope by no later than August 2, 2017.
The Court's Receiver will open and evaluate the binding and
irrevocable submitted purchase offers on September 5, 2017, at
11:0 a.m. CET at the Court of Reggio Emilia. On the same day the
Court's Receiver will proceed to draw up the ranking list of the
Offers and award the "Temporary Awarded Offeror".
CMC DI RAVENNA: S&P Affirms 'B' CCR, Outlook Stable
---------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term corporate credit
rating on Italy-based engineering and construction (E&C) company
CMC di Ravenna (CMC). The outlook is stable.
S&P said, "At the same time, we assigned our 'B' issue rating to
the proposed EUR250 million senior unsecured notes, and affirmed
our 'B' issue rating on the existing EUR300 million senior
unsecured notes. The recovery rating on both instruments is '4',
indicating our expectation of average recovery prospects (30%-
50%, rounded estimate 45%) in the event of a payment default.
"The rating affirmation reflects our expectation that the backlog
of projects that CMC has already secured will enable it to
increase revenues in 2017-2018, and the group will generate a
positive free operating cash flow (FOCF) and gradually repay
debt. The proposed refinancing doesn't affect our forecast credit
metrics, because the amount of gross debt is the same, but the
group's reliance on short-term debt, which currently makes up
about 20% of total gross debt, will significantly reduce. In our
view, this will improve CMC's liquidity position. At the same
time, the group's relatively high leverage levels continue to
constrain the ratings."
In 2014-2015, CMC suffered delays in collecting receivables from
a number of large projects in Italy and Africa, which led to
working capital outflows and higher borrowing. In 2016, the
situation improved--the group collected some overdue payables and
completed a large Ingula hydroelectric power plant in South
Africa, which allowed it to release inventories. CMC achieved
neutral FOCF, and we expect that it will continue to recover cash
from working capital in 2017-2018, and will use it to partly
repay debt.
At the same time, S&P said, "we expect its S&P Global Ratings-
adjusted EBITDA margin to reduce in 2017, mainly as a result of
completing the profitable Ingula project. The group will also
have to invest more in capital expenditure (capex) to acquire
equipment for ramping up new projects. Therefore, we forecast
that its leverage will peak in 2017, and that from 2018 credit
metrics will gradually start to recover and will remain
commensurate with the current 'B' rating.
"Our rating on CMC continues to reflect the moderately high risks
inherent in the cyclical, fragmented, and competitive engineering
and construction sector. It is also constrained by the group's
significant exposure to volatile emerging markets. At the end of
2016, Italy accounted for about 30% of backlog and 45% of
revenues, while about 40% of backlog and 35% of revenues came
from Africa (South Africa, Angola, and Kenya), and about 10% from
Asia. In our view, CMC is smaller and has a more limited scope of
activities compared with its larger and more-diversified global
peers. Based on our forecast revenues of about EUR1.2 billion and
backlog of about EUR3.6 billion in 2017, CMC is about 2.5x-3x
smaller than its Italy-based peers, Astaldi SpA and Salini
Impregilo SpA."
Over the past few years, CMC has gradually improved the diversity
of its contract portfolio by successfully completing several
large and profitable projects, and increasing the share of
international backlog up to almost 70%. S&P said, "In our view,
over the medium term this should lead to more stable, if lower,
profitability. We forecast adjusted EBITDA margins of about 12%-
12.5% in 2017-2019, compared with about 14.5%-15.5% in 2015-2016.
In 2016, CMC secured new contracts in Laos, Pakistan, Nepal,
Morocco, and the Philippines, which, in our view, will support
revenue growth of about 5% over the next three years."
CMC has strong expertise and a good track record in executing
complex transport and water infrastructure projects, with a
specific focus on underground tunneling and the construction of
dams. These projects are often funded by multilateral
institutions and do not tend to include fixed-price contracts,
which reduces execution risks.
In S&P's base case, it assumes:
-- Revenue growth of about 5%-6% in 2017-2018 on the back of
existing backlog and continued new order intake, especially
outside Italy.
-- Adjusted EBITDA margin to reduce to about 13% in 2017 from
more than 15.5% in 2016 due to the completion of several
large profitable projects, and to stay stable at about 12% in
2018 and beyond.
-- Working capital inflows of about EUR15 million-EUR20 million
in 2017-2018, reflecting collection of overdue payables,
which will be partly offset by outflows relating to ramping
up new projects.
-- Capex of about 7.5% of revenues (EUR85 million-EUR90 million)
per year.
-- Positive FOCF in 2017 and gradual reduction of gross debt
after that.
-- Only marginal dividend payments and bolt-on acquisitions.
Based on these assumptions, S&P arrives at the following credit
measures:
-- Adjusted funds from operations (FFO) to debt of about 11.5%-
12.5%.
-- Adjusted debt to EBITDA of about 4.7x-4.9x.
S&P said, "Our credit metrics are based on adjusted debt
calculation. As of Dec. 31, 2016, adjusted debt was about EUR770
million, including EUR300 million senior unsecured notes, about
EUR119 million drawn under a revolving credit facility (RCF),
about EUR262 million of other short- and long-term bank loans and
financial leasing, EUR73 million trade receivables factoring,
EUR12 million accrued interest, and about EUR13 million of
pension liabilities and operating leases.
"We revised our view of CMC's liquidity to adequate, assuming
that the proposed bond issuance goes ahead and the company repays
about EUR140 million of short-term debt and restores full
availability under its EUR165 million RCF which matures in
December 2019. In our view, this transaction will improve the
company's liquidity position, because reliance on short-term debt
will significantly reduce and this will increase flexibility for
absorbing any unexpected risks, such as working capital outflows,
which are typical for the E&C industry. We forecast that
following the refinancing, the company's sources of liquidity
will exceed uses by more than 3.5x."
S&P estimates that principal liquidity sources over the 12 months
from March 31, 2017, pro forma the refinancing, will include:
-- Cash of about EUR80 million;
-- Fully undrawn EUR165 million RCF;
-- Forecast unadjusted FFO of about EUR77 million; and
-- About EUR20 million working capital inflows from existing
projects.
S&P estimates principal liquidity uses over the same period as:
-- Short-term debt maturities of about EUR31 million; and
-- Maintenance capex of up to EUR65 million per year.
S&P said, "The stable outlook reflects our view that in 2017-2018
CMC will deliver its current projects without substantial delays
or cost overruns, and will continue to collect overdue
receivables and gradually repay debt, so that leverage will peak
in 2017. We expect that adjusted debt to EBITDA will not exceed
5x, and adjusted FFO to debt will stand at about 11.5%-12.5%.
"We could raise the rating over the next 12 months if the company
generated stronger FOCF and reduced leverage more rapidly than we
currently expect, so that adjusted FFO to debt was set to improve
to about 16% and adjusted debt to EBITDA decreased to 4.5x on a
sustainable basis. An upgrade would also require the company's
liquidity position to remain adequate, with sources comfortably
exceeding uses and adequate headroom under financial covenants.
"We could lower the rating over the next 12 months if CMC's
leverage metrics significantly weakened, with adjusted debt to
EBITDA exceeding 5.0x and adjusted FFO to debt reducing to less
than 12% for a sustained period of time, for example, due to
sudden outflows of working capital and higher borrowing. Reducing
covenant headroom could also put pressure on the ratings."
===================
L U X E M B O U R G
===================
AWAS FINANCE: Moody's Reviews Ba2 Sr. Debt Rating for Upgrade
-------------------------------------------------------------
Moody's Investors Service has assigned a B1 issuer rating to AWAS
Aviation Capital D.A.C. and placed its ratings and the ratings of
its issuing subsidiaries on review for upgrade after the
company's private equity sponsor Terra Firma and co-investors
including Canada Pension Plan Investment Board announced that
they had entered into an agreement to sell AWAS to Dubai
Aerospace Enterprises Ltd. (DAE) for an undisclosed sum. These
ratings include AWAS' Ba3 corporate family rating and the Ba2
secured debt ratings of AWAS Finance Luxembourg S.A. and AWAS
Finance Luxembourg 2012 S.A.
Issuer: AWAS Aviation Capital D.A.C.
-- Issuer Rating, Assigned, B1
-- Outlook, Assigned Review For Upgrade
-- LT Corporate Family Rating, Placed On Review For Upgrade,
currently Ba3
-- Outlook, Changed To Rating Under Review For Upgrade From
Review Direction Uncertain
Issuer: AWAS Finance Luxembourg 2012 S.A.
-- Senior Secured Bank Credit Facility, Placed On Review
Upgrade, currently Ba2
-- Outlook, Changed To Rating Under Review For Upgrade From
Review Direction Uncertain
Issuer: AWAS Finance Luxembourg S.A.
-- Senior Secured Bank Credit Facility, Placed on Review For
Upgrade, currently Ba2
-- Outlook, Changed To Rating Under Review For Upgrade From
Review Direction Uncertain
RATINGS RATIONALE
The B1 issuer rating reflects subordination of potential
unsecured debt to AWAS' senior secured debt with both a lower
priority of claim and weaker asset coverage.
Moody's review for upgrade of AWAS' ratings reflects that the
balance of considerations has become more positive based on the
financial profile of the acquirer DAE. Additionally, it reflects
Moody's expectations that the acquisition will improve AWAS'
ownership stability, a rating concern since Terra Firma began to
reduce and then exit its investment in the company two years ago.
In addition, the transaction will elevate the combined entity's
competitive positioning, as it will become one of the top ten
largest leasing companies globally, with a total owned fleet of
281 aircraft and 110 airline customers. Despite this, the
transaction also poses some challenges: the new owner DAE is a
smaller leasing company that has rapidly grown its fleet to 104
aircraft in the last few years and which provides few details
regarding its financial position and operating strategy,
resulting in uncertainty regarding the combined entity's
financial strength, aspirations for further growth and risk
appetite.
DAE indicated that it will finance the transaction with internal
resources and debt financing commitments and expects to close the
acquisition in the third quarter this year, subject to regulatory
approvals.
During its review of AWAS' ratings, Moody's will focus on the
effects of the transaction on AWAS' operating and funding
strategies, integration risks, and potential for capital support
resulting from its indirect ownership by the Dubai government.
Upon closing of the acquisition which is planned for the third
quarter of 2017, Moody's will withdraw AWAS corporate family
rating.
Moody's could upgrade AWAS' ratings if the company's acquisition
by DAE improves its prospects for strong operating results and
access to capital, if the combined entity's growth strategy and
risk appetite are reasonable and if the company remains committed
to a strong capital position. Ratings could also benefit should
Moody's determine that extraordinary support would be forthcoming
from the company's government-related owners. Moody's could
confirm AWAS' ratings if the transaction has a neutral effect on
the company's credit profile. Given the review for upgrade, a
rating downgrade is unlikely but could result from an escalation
of debt-funded growth, higher leverage, or weaker liquidity.
The principal methodology used in these ratings was Finance
Companies published in December 2016.
=====================
N E T H E R L A N D S
=====================
GREEN STORM 2016: Fitch Hikes Rating on Class E Notes to BB+
------------------------------------------------------------
Fitch Ratings has upgraded two tranches of Green Storm 2016 B.V.,
affirmed three tranches and revised the Outlook on the class C
note to Positive from Stable:
Class A (ISIN: XS1309695341) affirmed at 'AAAsf'; Outlook Stable
Class B (ISIN: XS1309697982) upgraded to 'AA+sf' from 'AAsf';
Outlook Stable
Class C (ISIN: XS1309698014) affirmed at 'Asf'; Outlook revised
to Positive from Stable
Class D (ISIN: XS1309698360) affirmed at 'BBBsf'; Outlook Stable
Class E (ISIN: XS1309698790) upgraded to 'BB+sf' from 'BBsf';
Outlook Stable
KEY RATING DRIVERS
Mortgages with Green Label
This is a 60-month seasoned portfolio consisting of mortgage
loans funding green properties that relate to the top 15% of the
Dutch residential mortgage market in terms of energy efficiency
or that have shown at least a 30% improvement in energy
efficiency. The portfolio has a weighted average (WA) original
LTV of 90.0% and a WA debt-to-income ratio of 25.3%.
Obvion does not differentiate the mortgage rates based on energy
efficiency and the portfolio's credit characteristics are
comparable with other STORM transactions rated by Fitch. Hence,
the agency did not differentiate between energy and non-energy
efficient borrowers in its analysis.
Higher Proportion of NHG Loans
Of the loans, 49.2% benefit from a Nationale Hypotheek Garantie
(NHG) guarantee, compared with an average of 32.5% across the
other 2016 Storm transactions (Storm 2016-I and 2016-II).
Based on historical NHG loan performance information made
available to Fitch, NHG loans originated between 2010 and 2015
show higher levels of defaults than non-NHG loans. Therefore, in
this analysis Fitch has not given credit to NHG loans in the
derivation of the foreclosure frequency of the portfolios.
Data on recoveries received from WEW has resulted in Fitch
applying a compliance ratio of 85% across all rating scenarios,
in line with criteria.
Stable Performance
The recent Storm transactions (issued since 2012) have generally
outperformed the market, with late-stage arrears (loans in
arrears by more than three months) in Green Storm 2016 currently
at 0bp. Loans in arrears up to three months have increased by a
modest amount since close (currently 1bp), which is expected in
the early years of a transaction's life.
The performance of the underlying portfolio is reflected in the
upgrade of the class B and E notes, and the revision of the
Outlook on the class C notes to Positive.
Guaranteed Excess Spread
Under the terms of the swap agreement with Obvion the structure
receives guaranteed excess spread of 50bp on a notional
equivalent to the outstanding balance of the notes less any
balance on the principal deficiency ledger (PDL).
Principal on the class E notes is entirely dependent on excess
spread and as there have been no losses to date, the class E
notes have amortised by 13% since transaction close. The
expectation of continued steady paydown of the class E notes is
reflected in the upgrade of the notes to 'BB+sf'.
Insurance Set-Off Risk
3.2% of the portfolio comprises loans with life insurance payment
vehicles attached. Upon insolvency of the insurance provider
there is a risk that the borrowers may try to set-off their
insurance claim against the lender. Fitch accounts for this risk
by assuming a capital build-up over 30 years and then analysing
the effect of a combined default of the insurance providers,
factoring in the affiliation of the insurance provider to the
original lender.
The most stressful scenarios were assessed and the maximum
exposure resulting from this calculation is then applied against
the net loss rate for the various rating levels in Fitch's
cashflow model. The insurance set-off exposure was found to have
a minimal effect on the rating outcome.
Commingling Risk
In the event of Rabobank's downgrade below 'A'/'F1', the bank
will have 30 calendar days to transfer the commingling reserve to
the transaction account. This timing exceeds Fitch's criteria,
which sets out that such transfers are expected to be completed
within 14 calendar days of the downgrade. The agency has assessed
the materiality of the 16 day exposure that the structure would
be exposed to, by taking into account the mechanics of the
structure of the payments and transfers. Fitch did not deem the
risk to be material.
RATING SENSITIVITIES
Adverse macroeconomic factors may affect asset performance. An
increase in foreclosures and losses beyond Fitch's stresses may
erode credit enhancement leading to negative rating actions.
Fitch rates to legal final maturity. At the call option date, as
per transaction documentation, the class B to D notes can be
called net of PDL. Material principal shortfalls in Fitch's cash
flow analysis over the life of the transactions may trigger
rating actions.
OZLME B.V.: S&P Affirms B- Credit Rating on Class F Notes
-----------------------------------------------------------
S&P Global Ratings affirmed its credit ratings on all classes of
notes issued by OZLME B.V. following the transaction's effective
date.
S&P said, "The collateral manager declared the effective date on
June 1, 2017, by which date it had committed to purchase a total
of EUR402.747 million of eligible assets according to the trustee
report available to us. The transaction documents contain
provisions directing the trustee to request S&P Global Ratings to
affirm the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating confirmation").
"The affirmations reflect our opinion that the portfolio
collateral purchased by the issuer, as reported to us by the
trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that we assigned on the transaction's
closing date. Our effective date report provides a summary of
certain information that we used in our analysis and the results
of our review based on the information presented to us.
"We have performed a quantitative and qualitative analysis of the
transaction in accordance with our criteria to assess whether the
initial ratings remain commensurate with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the percentile break-even
default rate (BDR) at each rating level, and the application of
our supplemental tests. The BDR represents our estimate of the
maximum level of gross defaults, based on our stress assumptions,
that a tranche can withstand and still fully pay interest and
principal to the noteholders.
"Following our review of the transaction, we have affirmed our
ratings on all classes of notes.
"After we issue an effective date rating affirmation, we will
periodically review whether, in our view, the current ratings on
the notes remain consistent with the credit quality of the
assets, the credit enhancement available to support the notes,
and other factors. We will subsequently take rating actions as we
deem necessary."
OZLME is a European cash flow corporate loan CLO securitization
of a revolving pool, comprising primarily euro-denominated senior
secured loans and bonds granted to broadly syndicated corporate
borrowers.
RATINGS LIST
OZLME B.V.
EUR413.00 Million Senior Secured Floating-Rate Notes And
Subordinated Notes
Class Rating
Ratings Affirmed
A AAA (sf)
B AA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
F B- (sf)
===========
R U S S I A
===========
ANKOR BANK: Liabilities Exceed Assets, Assessment Shows
-------------------------------------------------------
The provisional administration to manage Joint-stock Company
ANKOR BANK OF SAVINGS (JSC), appointed by Bank of Russia Order
No. OD-551, dated March 3, 2017, 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
loan portfolio, which comes as a result of loans having been
issued to companies with dubious solvency and unable to meet
their obligations, as well as to corporate borrowers which are
shell companies, according to the press service of the Central
Bank of Russia.
Beyond that, in the period before the license was revoked, the
bank's management had conducted a number of security operations
which bear the evidence of siphoning off of assets or were meant
to conceal assets previously siphoned off.
According to the estimate by the provisional administration, the
credit institution's assets total less than RUR2.9 billion,
whereas the bank's liabilities to its creditors amount to RUR6.5
billion.
On April 10, 2017, the Court of Arbitration of the Republic of
Tatarstan ruled to recognise Joint-stock Company ANKOR BANK OF
SAVINGS as insolvent (bankrupt) and initiate bankruptcy
proceedings. The State Corporation Deposit Insurance Agency was
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 Joint-stock
Company ANKOR BANK OF SAVINGS 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.
CB NKB: Liabilities Exceed Assets, Assessment Shows
---------------------------------------------------
The provisional administration to manage Commercial Bank NKB
Limited Liability Company as appointed by Bank of Russia Order
No. OD-4841, dated December 29, 2016, following banking license
revocation, has audited cash and valuables on hand and
established over RUR1 billion of shortage, according to the press
service of the Central Bank of Russia.
Furthermore, in the course of examination of the bank's financial
standing the provisional administration has found a number of
transactions to be indicative of the intention to siphon off
liquid assets by buying bad debt on loans extended to
individuals.
The provisional administration estimates the value of the Bank
assets to be under RUR0.1 billion, whereas its liabilities to
creditors amount to RUR1.2 billion, including RUR0.9 billion to
individuals.
On April 17, 2017, the Arbitration Court of the City of Moscow
recognized the bank as insolvent (bankrupt). The State
Corporation Deposit Insurance Agency was appointed as a receiver.
The Bank of Russia submitted the information on the financial
transactions bearing the evidence of criminal offence conducted
by the former management and owners of the Bank 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.
CB TALMENKA-BANK: Liabilities Exceed Assets, Assessment Shows
-------------------------------------------------------------
The provisional administration to manage Commercial Bank
Talmenka-bank Limited Liability Company, appointed by Bank of
Russia Order No. OD-107, dated January 23, 2017, following the
revocation of its banking license, has established undervalued
credit exposure related to loans extended to a number of
borrowers, according to the press service of the Central Bank of
Russia.
Furthermore, in the course of examination of the bank's financial
standing the provisional administration has found transactions
concluded by its former management and owners to be indicative of
the intention to siphon off assets, misappropriation of funds or
theft of property, for a total amount of about RUR780 million.
The provisional administration estimates the value of CB
Talmenka-bank assets to be no more than RUR0.5 billion, whereas
its liabilities to creditors amount to RUR1.7 billion, including
RUR1.2 billion to individuals.
On March 31, 2017, the Arbitration Court of the Altai Territory
recognised the Bank as insolvent (bankrupt). The State
Corporation Deposit Insurance Agency was appointed as a receiver.
The Bank of Russia submitted the information on financial
transactions bearing the evidence of criminal offence conducted
by the former management and owners of CB Talmenka-bank 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.
EUROPLAN JSC: Fitch Withdraws BB- LT Issuer Default Ratings
-----------------------------------------------------------
Fitch Ratings has withdrawn PJSC Europlan's ratings, including
its Long-Term Issuer Default Ratings (IDRs) of 'BB-'.
Simultaneously, the agency has assigned the newly created JSC
Leasing company Europlan (LC Europlan) Long-Term IDRs of 'BB-'
with a Stable Outlook.
The rating actions follow the completion of the reorganisation of
PJSC Europlan. The reorganisation involved the transfer from PJSC
Europlan to its new subsidiary LC Europlan of all financial
liabilities relating to its leasing business (including
outstanding bonds and bank loans) and all of its leasing assets,
but only a portion of its cash and liquid assets.
Fitch has withdrawn PJSC Europlan's ratings as it has undergone a
reorganisation. Accordingly, Fitch will no longer provide ratings
or analytical coverage for PJSC Europlan.
KEY RATING DRIVERS
The asset/liability transfer is the second stage of Europlan's
reorganisation, the ultimate purpose of which is to create a
holding company for the non-bank financial assets of Safmar
Group, which apart from Europlan include a 49% stake in VSK
Insurance (BB-/Stable), and a 100% stake in Safmar pension fund.
The first stage of the reorganisation was completed in December
2016, when Safmar contributed its stakes in the pension fund and
insurance company to PJSC Europlan, which additionally raised
RUB15 billion of equity contributed in cash via a secondary
public offering.
The rating actions reflect Fitch's view that LC Europlan's credit
profile does not significantly differ from that of PJSC Europlan
before it received stakes in the pension fund and VSK.
LC Europlan's management has informed us that there are no plans
to change the strategy of the company after the carve-out. The
company will continue to focus on retail financial leasing of
vehicles. LC Europlan will retain its core management team and
existing branding.
LC Europlan's 'BB-' Long-Term IDRs and senior debt rating reflect
the company's significant franchise in the Russian auto leasing
sector, so far conservative management and risk appetite, and
sound financial metrics. At the same time, the ratings also
reflect the high-risk Russian operating environment and contagion
risks resulting from Europlan's shareholder, Safmar Group
(previously known as B&N Group).
As per preliminary management accounts after the reorganisation,
LC Europlan's leverage (defined as debt/equity) has increased to
3.3x compared with 1.5x at PJSC Europlan prior to reorganisation,
as a result of PJSC Europlan retaining a sizable part of its cash
and liquid assets. However, Fitch views this leverage as
consistent with a 'BB-' rating.
LC Europlan's senior debt rating is aligned with the company's
Local-Currency IDR, reflecting Fitch's view of average recovery
prospects for unsecured senior creditors in case of default. This
in turn is driven by the moderate proportion of company assets
that have been pledged to secured creditors.
RATING SENSITIVITIES
An upgrade of LC Europlan's IDRs is currently unlikely given the
still challenging operating environment and expected further
increase in leverage from renewed business growth.
The company could be downgraded if its asset quality and
performance weaken significantly, to the extent that this results
in a marked increase in the company's leverage or compromises the
quality of its capital.
LC Europlan could be also downgraded if Fitch concludes that its
strategy, risk appetite, balance sheet structure and/or financial
metrics are likely to significantly weaken following shareholder
actions, or if the company become significantly exposed to
related parties, non-core assets or other contingent risks
arising from the other assets of its owner.
The senior debt rating could be downgraded in case of downgrade
of the company's Local-Currency IDR, or a marked increase in the
proportion of pledged assets, potentially resulting in lower
recoveries for unsecured senior creditors in a default scenario.
The rating actions are:
PJSC Europlan
Long-Term Foreign- and Local-Currency IDRs: 'BB-'; withdrawn
Short-Term Foreign-Currency IDR: 'B'; withdrawn
Senior unsecured debt: 'BB-'; withdrawn
JSC Leasing company Europlan
Long-Term Foreign- and Local-Currency IDRs: assigned at 'BB-';
Outlooks Stable
Short-Term Foreign-Currency IDR: assigned at 'B'
Senior unsecured debt: assigned at 'BB-'
RN BANK: Fitch Affirms & Withdraws BB+ Long-Term IDR
----------------------------------------------------
Fitch Ratings has affirmed Joint Stock Company RN Bank's (RNB)
Long-Term Issuer Default Rating (IDR) at 'BB+' with a Positive
Outlook and withdrawn the ratings.
Fitch has withdrawn RNB's ratings for regulatory reasons because
Marc Ladreit de Lacharriere, who is a greater than 10%
shareholder of Fitch Ratings, is also a director of Renault SA,
one of RNB's ultimate shareholders.
KEY RATING DRIVERS
RNB's IDRs and Support Rating reflect the potential support the
bank may receive, if needed, from its foreign shareholders. The
bank is owned by UniCredit S.p.A. (BBB/Stable) with a 40% stake;
by Renault SA (BBB-/Positive) through its subsidiary RCI Banque
with a 30% stake, and by Nissan Motor Co., Ltd. (BBB+/Stable)
with a 30% stake. The Positive Outlook reflects the Positive
Outlook on Renault.
In Fitch's view, the probability of support is underpinned by (i)
the strategic importance of the Russian market for Renault and
Nissan and the important role of RNB in supporting the two auto
companies' business; (ii) the track record of support, and in
particular the predominance of shareholder funding in RNB's
liabilities; and (iii) RNB's small size relative to the owners,
limiting the cost of potential support.
At the same time, RNB's Long-Term IDRs are notched down from
those of the bank's shareholders due to (i) each individual owner
being a minority shareholder, which may reduce their propensity
to provide support; and (ii) Fitch's view that reputational risks
for the owners would probably be containable in case of RNB's
default.
The senior unsecured debt (RUB-denominated local bonds) is rated
in line with the Long-Term IDR, according to Fitch's criteria for
rating such instruments.
RATING SENSITIVITIES
Not applicable.
=========
S P A I N
=========
BANCO POPULAR: Spain Passes Write-offs Responsibility to ECB
------------------------------------------------------------
Maria Tadeo and Esteban Duarte at Bloomberg News report that
Economy Minister Luis de Guindos said Spanish officials were
simply implementing the decisions of the European authorities
when they forced write-offs on Banco Popular Espanol SA investors
last month, as firms including Pacific Investment Management Co.
seek legal restitution for their losses.
According to Bloomberg, Mr. Guindos said it was European
institutions such as the Frankfurt-based central bank and the
Single Resolution Board that were calling the shots as Popular
was sold off, and not their Spanish counterparts.
"It's the European Central Bank, as the single supervisor, and
the SRB that executed all the decisions," Mr. Guindos, as cited
by Bloomberg, said in Madrid July 3, when asked by reporters if
the Spanish government is worried about potential lawsuits.
Pimco, Anchorage Capital Group, and Algebris Investments are
among a group of bondholders who hired the law firm Quinn Emanuel
Urquhart & Sullivan LLP to look at a possible claim for damages
over Popular's collapse, Bloomberg discloses. The bank's equity
and junior debt were wiped out last month before the lender was
sold to Banco Santander SA for one euro through Spain's bank
bailout fund, Bloomberg recounts.
In Spain, consumer associations and law firms are also seeking to
represent retail investors who were caught up in the bank's
collapse, Bloomberg says.
Popular was the first European bank to suffer a forced sale under
the European Union's bank resolution framework, Bloomberg notes.
Banco Popular Espanol SA is a Spain-based commercial bank. The
Bank divides its business into four segments: Commercial Banking,
Corporate and Markets; Insurance Activity, and Asset Management.
The Bank's services and products include saving and current
accounts, fixed-term deposits, investment funds, commercial and
consumer loans, mortgages, cash management, financial assessment
and other banking operations aimed at individuals and small and
medium enterprises (SMEs). The Bank is a parent company of Grupo
Banco Popular, a group which comprises a number of controlled
entities, such as Targobank SA, GAT FTGENCAT 2005 FTA, Inverlur
Aguilas I SL, Platja Amplaries SL, and Targoinmuebles SA, among
others. In January 2014, the Company sold its entire 4.6% stake
in Inmobiliaria Colonial SA during a restructuring of the
property firm's capital.
BBVA CONSUMO 7: DBRS Confirms BB Rating on Series B Notes
---------------------------------------------------------
DBRS Ratings Limited taken the following rating actions on the
bonds issued by BBVA Consumo 7, FT (the Issuer):
-- Series A Notes upgraded to A (high) (sf) from A (sf)
-- Series B Notes confirmed at BB (high) (sf)
The rating actions on the Series A and Series B Notes (together,
the Notes) follow an annual review of the transaction and are
based on the following analytical considerations as described
more fully below:
-- Portfolio performance, in terms of delinquencies and
defaults.
-- Updated default, recovery and loss assumptions on the
remaining receivables.
-- Current available credit enhancement to the Notes to cover
the expected losses at the A (high) (sf) and BB (high) (sf)
rating levels, respectively.
The Issuer is a securitisation of Spanish consumer loan
receivables originated and serviced by Banco Bilbao Vizcaya
Argentaria, S.A. (BBVA). The transaction closed in July 2015.
PORTFOLIO PERFORMANCE
As of April 2017, the 90+ delinquency ratio (excluding defaulted
loans) was 0.9%. The current cumulative default ratio is low at
0.1%.
PORTFOLIO ASSUMPTIONS
DBRS has conducted a loan-level analysis of the collateral pool
and increased its cumulative net loss assumption to 7.65% from
7.51%. The main driver for the increased loss assumption is
updated recovery data provided by BBVA.
CREDIT ENHANCEMENT
As of the March 2017 payment date, credit enhancement to the
Series A Notes was 21.0%, up from 19.0% at the DBRS initial
rating. Credit enhancement to the Series B Notes was 5.0%, up
from 4.5% at the DBRS initial rating. Credit enhancement is
provided by subordination of junior classes of notes and the Cash
Reserve.
The transaction benefits from a Cash Reserve, currently at the
target level of EUR 65.25 million. The Cash Reserve covers senior
fees, interest and principal on the Notes.
BBVA is the account bank for the transaction. The account bank
reference rating of "A" -- being one notch below DBRS's public
Long-Term Critical Obligations Rating of BBVA at A (high) --
complies with the Minimum Institution Rating given the rating
assigned to the Series A Notes, as described in DBRS's "Legal
Criteria for European Structured Finance Transactions"
methodology.
CAIXABANK CONSUMO: DBRS Confirms BB(sf) Rating on Series B Debt
--------------------------------------------------------------
DBRS Ratings Limited confirmed the ratings on the following notes
issued by Caixabank Consumo 2, FT (the Issuer):
-- Series A confirmed at A (low) (sf)
-- Series B confirmed at BB (sf)
The confirmations of the ratings on the Series A and Series B
notes reflect an annual review of the transaction and are based
on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults,
as of the April 2017 payment date.
-- Probability of default (PD) rate, loss given default (LGD)
rate and expected loss assumptions for the remaining
portfolio collateral.
-- Current available credit enhancement to the Series A and
Series B notes to cover the expected losses at the A (low)
(sf) and BB (sf) rating levels.
Caixabank Consumo 2, FT is a static securitisation of unsecured
consumer loans and mortgage consumer loans originated by
CaixaBank, S.A. (CaixaBank;). The mortgage consumer loans include
standard loans and current drawdowns of a revolving mortgage
credit line called Credito Abierto. The transaction follows the
Spanish Securitisation Law and closed in June 2016.
PORTFOLIO PERFORMANCE
The performance of the collateral portfolio is within DBRS's
expectations. As of 31 March 2017, the loans more than 90 days in
arrears are at 1.32% of the outstanding performing portfolio
collateral balance. Defaults are defined as loans in arrears for
more than 12 months; the current cumulative defaults are at 0.08%
of the initial portfolio collateral balance.
PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and
updated its PD and LGD base case assumptions on the remaining
portfolio collateral to 5.63% and 43.03%, respectively, for the
mortgage consumer pool and 12.69% and 78.5% (including sovereign
stress), respectively, for the unsecured consumer pool.
CREDIT ENHANCEMENT
The Series A notes are supported by the subordination of the
Series B notes and Reserve Fund, which provides liquidity support
and credit support to the Series A notes until the Series A notes
are paid in full, after which time the Cash Reserve will be
available to support the Series B notes. The Series B notes are
solely supported by the Reserve Fund. As of the April 2017
payment date, Series A and Series B notes credit enhancement was
at 18.31% and 5.14%, respectively. After the first two years from
closing, the reserve fund may amortise over the life of the
transaction subject to the reserve fund amortisation triggers.
CaixaBank is the Account Bank (as holder of the Treasury Account)
for this transaction. The Account Bank reference rating of "A,"
which is one notch below the DBRS Long-Term Critical Obligations
Rating of CaixaBank at A (high), complies with the Minimum
Institution Rating, given the rating assigned to the Series A
notes, as described in DBRS's "Legal Criteria for European
Structured Finance Transactions" methodology.
SOCIEDADE DE TITULARIZACAO 1: DBRS Rates Class C Notes BB (low)
---------------------------------------------------------------
DBRS Ratings Limited assigned the following provisional ratings
to the notes to be issued by SAGRES - Sociedade de Titularizacao
de Creditos, S.A. (Ulisses Finance No. 1) (the Issuer):
-- Class A Notes rated A (sf)
-- Class B Notes rated BBB (sf)
-- Class C Notes rated BB (low) (sf)
The ratings on the Class A, Class B and Class C Notes (the Notes)
address the risk that the Issuer will fail to satisfy its
financial obligations according to the terms under which the
Notes have been issued. DBRS has not assigned provisional ratings
to the Class D and Class E notes issued by Ulisses Finance No. 1.
These ratings are provisional. The ratings can be finalised upon
receipt of an executed version of the governing transaction
documents. To the extent that the documents and the information
provided to DBRS as of this date differ from the executed version
of the governing transaction documents, DBRS may assign a
different final rating to the Notes.
The transaction represents the issuance of notes backed by a pool
to be selected from an eligible pool of approximately EUR 141
million receivables related to auto loan contracts (the
receivables or, collectively, the portfolio) granted by 321
Credito - Instituicao Financeira de Credito, S.A. (321C or the
Originator) to borrowers in the Republic of Portugal. The
securitised portfolio will comprise receivables related to
standard amortising, interest bearing loans granted to retail and
commercial customers for the acquisition of either new or used
vehicles. There is no exposure to loan contracts with balloon
payments and there is no direct residual value risk.
The ratings are based on DBRS's review of the following
analytical considerations:
-- Transaction capital structure and form and sufficiency of
available credit enhancement, enabling the transaction to
withstand stressed cash flow assumptions and repay investors
according to the terms under which they have invested.
-- Relevant credit enhancement in the form of subordination and
a Cash Reserve fund.
-- Credit enhancement levels are sufficient to support the
expected credit net loss assumptions projected under various
stress scenarios at A (sf), BBB (sf) and BB (low) (sf)
standards for the Class A, Class B and Class C Notes,
respectively.
-- 321C capabilities with regard to originations, underwriting,
servicing, their financial strength and trading history.
-- The credit quality of the collateral and the servicer's
ability to perform collection activities on the collateral.
-- The operational risk review conducted on 321C.
-- The transaction parties' financial strength with regard to
their respective roles.
-- The sovereign rating of the Republic of Portugal, currently
at BBB (low).
-- The legal structure and presence of legal opinions addressing
the true sale of assets to the Issuer and the consistency
with DBRS's "Legal Criteria for European Structured Finance
Transactions" methodology.
The transaction was modelled in Intex DealMaker.
===========
S W E D E N
===========
SAS AB: S&P Affirms 'B' LT CCR on Additional Efficiency Measures
----------------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term corporate credit
rating on Sweden-based airline operator SAS AB. The outlook is
stable.
The affirmation follows a period of stabilized underlying
earnings and the recent announcement that SAS has doubled its
cost savings as well as increased its transparency around
financial targets. S&P said, "We view these measures positively
and believe they will help somewhat in dealing with tough market
conditions and improving funding conditions.
"SAS performed in line with our expectations in financial year
2016 (ending Oct. 20, 2016) with an adjusted EBITDA margin of
15.0%, funds from operations to debt of 13.7%, and debt to EBITDA
of 4.9x (all S&P Global Ratings-adjusted). We think that the
company will be able to improve credit metrics slightly this year
due to slightly increasing EBITDA (adjusted for gains from the
sale of two slot pairs and the payment to the European
Commission), lower financing costs, and slightly lower debt
levels. We view positively the company's announced cost savings
plan to save SEK3.0 billion by 2020 compared with the previous
target of SEK1.5 billion by 2019. We understand that SAS has
identified multiple areas of focus including increased
productivity among cabin crew and pilots by adapting to seasonal
patterns; efficiency gains in ground handling and technical
maintenance; and lower costs for IT and administration. In
addition, this year SAS has established a new air operator
certificate in Ireland with bases in Spain (Malaga) and London
(Heathrow), which is another attempt at increasing
competitiveness in the face of carriers with significantly lower
labor costs than SAS. Although this is still small scale -- with
nine aircraft -- we think it will help SAS' earnings over the
long term. We also view positively SAS' measures to broaden its
revenue base by establishing an independent company to capitalize
on its 5 million EuroBonus membership pool.
"Despite these positive measures, we think that SAS' business
model will continue to face ongoing challenges due to its
participation in the price-competitive, fragmented, cyclical, and
capital-intensive airline industry, and its exposure to volatile
fuel costs where increases can be difficult to pass through to
customers due to the competitive nature of the Scandinavian
airline market. The industry environment continues to be
difficult, as illustrated by the recent introduction of an
aviation tax on all flight tickets in Norway and plans in Sweden
to introduce one in early 2018. SAS estimates that the aviation
tax in Norway will impact SAS' earnings negatively by around
SEK600 million per year as it has resulted in lower ticket prices
across the industry. A possible tax in Sweden would have the
same effect, further highlighting the tough competitive
environment. SAS continues to face a lot of route-overlap with
Norwegian Air Shuttle, which has significantly lower unit costs
and is currently expanding, especially on long-haul operations.
In addition, we think that SAS suffers from weak revenue
diversification compared with peers (such as Deutsche Lufthansa)
whose multiple business lines provide some stability over the
economic cycle."
SAS' financial risk profile continues to be constrained by high
levels of adjusted debt (including operating leases and the
preference shares we treat as debt) and volatile earnings and
cash flow generation. Although volatility in fuel prices and
currency rates is somewhat mitigated by an internal hedging
program, earnings can swing markedly from year to year. S&P views
positively that SAS has increased its transparency with regards
to its financial targets: the 3.0x adjusted financial debt to
EBITDAR (SAS' definition) signals that the company aims to
improve leverage metrics from 4.0x as of April 30, 2017 (S&P's
adjusted debt to EBITDA ratio was 4.8x at the same time).
In S&P's base-case forecast it assumes:
-- Continued economic growth in Sweden in 2017 and 2018 (GDP
growth of 2.5% and 2.2%), while Denmark and Norway are
growing at a slower rate of 1.8% and 1.9%, and 1.1% and 1.3%,
respectively. S&P thinks that positive economic growth rates
and high disposable income will enable further market growth
in Scandinavia, especially in the leisure segment, because iy
typically sees a strong relationship between GDP growth rates
and air travel.
-- SAS' capacity, as measured by available seat kilometers
(ASK), will increase by about 7% in 2017 and about 5% in 2018,
largely reflecting expansion of long-haul operations and
enhanced productivity levels. Its revenue base is somewhat
supplemented by growth from high-yielding loyalty scheme
members, digitalization of services, an improved route
network, and upgraded fleet and lounges.
-- Ongoing pricing pressure from increasing competitive
pressures and lower fuel costs being passed on to customers
in the form on lower ticket prices. S&P expects the yield to
(ticket price per revenue passenger kilometer) to decrease by
around 5% in financial year 2017 and fall further in 2018,
especially if the envisaged aviation tax in Sweden is
implemented as suggested.
-- Average oil prices of $50/barrel in 2017 and 2018 (see "S&P
Global Ratings Raises Its Oil And Natural Gas Prices
Assumptions For 2017," published Dec. 14, 2016).
-- Unit costs excluding fuel to be relatively flat after
negative currency effects (due to the stronger U.S. dollar)
in financial year 2017 and to fall 3%-4% in financial year
2018 as cost savings are implemented. Zero net investments in
financial year 2017 and around SEK500 million to SEK1.5
billion in the coming years.
Based on these assumptions, S&P arrives at the following credit
measures:
-- FFO to debt of around 16% in 2017 and 2018;
-- Debt to EBITDA of 4.5x-4.8x; and
-- EBITDA interest coverage of 8.0x-8.5x.
S&P said, "We apply our negative comparable ratings analysis
modifier to take into account that SAS' business risk profile and
financial risk profile are at the lower end of the range for each
assessment. As a result, the corporate credit rating of 'B' is
one notch lower than the 'b+' anchor.
"The stable outlook reflects our expectation that SAS will be
able to maintain positive earnings before taxes and that this
will enable the company to maintain credit metrics at around
current levels. We expect SAS to continue to be exposed to
earnings volatility stemming from volatile fuel costs and a
fiercely competitive environment, but that the company will
continue to work toward its strategy of focusing on frequent
travelers while lowering its unit costs.
"We could consider an upgrade if SAS appeared likely to improve
its credit metrics such that FFO to debt would remain at around
20%. We think such a scenario is highly unlikely in the coming 12
months due to ongoing yield pressure and capacity expansion.
"We could lower the rating if SAS's operating performance
deteriorated significantly from the current levels, for example,
if we expect the company to report negative earnings for 2017 or
2018, and this, in turn, would lead to deteriorating credit
metrics. We would view a ratio of FFO to debt of less than 10% as
commensurate with a downgrade, if we do not expect the ratio to
return to a higher level in the near term. Any pressure on SAS'
liquidity profile could also lead to a downgrade."
===========================
U N I T E D K I N G D O M
===========================
CO-OPERATIVE BANK: Moody's Puts Ca Rating on Review for Upgrade
---------------------------------------------------------------
Moody's Investors Service has placed on review for upgrade Co-
Operative Bank Plc's Ca long-term senior unsecured debt rating,
reflecting Moody's expectation that the bank's recently announced
capital raising plan does not include a liability management
exercise on senior unsecured bonds, reduces the probability of
the bank being placed in resolution, and lowers the risk of loss
on these instruments. These developments are also reflected in
Moody's review for upgrade on the bank's ca standalone baseline
credit assessment (BCA), given the rating agency's expectations
that the bank's credit profile and risk-absorption capacity will
improve if the capital raising plan is implemented as announced.
Moody's has placed on review direction uncertain the Caa2 long-
term deposit ratings, reflecting a different balance of risks for
junior deposit holders, who would benefit from the
recapitalisation but would be at risk of loss in a resolution,
should the plan fail. The short-term deposit ratings were
unaffected by this action and remain at Not Prime.
Similarly, the bank's long-term Caa1(cr) Counterparty Risk
Assessment (CR Assessment) was placed on review direction
uncertain. The short-term CR Assessment was unaffected at Not
Prime(cr).
The rating action follows the bank's announcement on 28 June,
2017 that it plans to raise approximately GBP 700m of additional
CET1 capital through conversion of subordinated debt to equity
and further issuance of new equity, enabling the bank to meet its
regulatory capital requirements in the medium-term. The bank has
obtained support from 47% of Tier 2 noteholders and 52% of
shareholders for the recapitalisation and the Prudential
Regulation Authority (PRA) has accepted the plan. However,
uncertainty around the plan's execution remains while the
remaining shareholders and noteholders decide whether they will
also support the proposals. To become effective, the scheme
requires, amongst other things, the approval of 75% of each
relevant creditor class and that of the court.
The review will focus on the likelihood of the plan being agreed
and whether the proposed capital injection will be sufficient to
recapitalise the bank on a sustainable basis over the medium-
term, given that the bank remains loss-making.
The full list of affected ratings is at the end of this press
release.
RATINGS RATIONALE
-- RATIONALE FOR THE BCA
The review for upgrade of the bank's BCA of ca reflects Moody's
view that the bank's standalone creditworthiness will improve if
the announced recapitalisation plan is successful. Moody's
estimates that, if the plan is carried out, the bank's common
equity tier 1 (CET1) component of its Individual Capital Guidance
(ICG) would be met immediately and full ICG compliance (i.e.
Pillar 1 + 2A requirements set by the PRA) is expected from 2018
onwards following the proposed issuance of Tier 2 capital in
2018. The proposed recapitalisation will also improve the bank's
risk-absorption capacity which has been weighed down by a
sizeable non-core portfolio of corporate and commercial real
estate loans and residential mortgages (the Optimum book). This
non-core book's share of the bank's total credit risk-weighted
assets was around 30% of the total, at GBP 2 billion, as of
December 2016.
At the same time, Moody's expects the bank to remain loss-making
until 2018 and it therefore has little capacity for internal
capital generation. The review will focus on the sustainability
of the bank's capital position in the context of these continued
losses and its evolving regulatory capital requirements.
-- RATIONALE FOR SENIOR DEBT
The review for upgrade on the bank's long-term senior unsecured
debt ratings reflects the fact that the plan does not anticipate
a liability management exercise on its outstanding senior
unsecured debt and instead relies on the conversion of Tier 2
subordinated debt. If successful, the recapitalization diminishes
the probability of the bank being placed into resolution and the
risk of the bank's bonds will improve relative to the current Ca
rating, which was positioned in the rating agency's expectation
of a 35-60% loss rate under a liability management exercise or
resolution.
If the recapitalisation plan were to fail, Moody's believes that
the bank would likely be placed into resolution, which would
likely result in losses on senior debt consistent with the
current rating.
The review will focus on the likelihood of the plan succeeding.
-- RATIONALE FOR DEPOSITS
Moody's review with direction uncertain on the bank's long-term
deposit ratings of Caa2 reflect the different balance of risks
for the bank's wholesale uninsured deposits and will likewise
focus on the probability of the capital increase being accepted.
If it is successful, the risk of loss for these deposits would
likely diminish thanks to an increased capital cushion and the
rating agency could therefore upgrade them.
If on the other hand the proposed plan is rejected, Moody's
believes that bank would likely be placed in resolution. In this
scenario, the rating agency considers that junior depositors
would likely incur losses alongside the senior debt holders, and
would lower the long-term deposit rating accordingly.
RATIONALE FOR THE CR ASSESSMENT
As part of action, Moody's also placed on review direction
uncertain the bank's long-term CR Assessment of Caa1(cr). The
short-term CR Assessment was unaffected at Not Prime(cr).
The review on the CR Assessment is driven by the same
considerations as that on the bank's junior deposits. If the plan
succeeds, the bank's senior operating obligations will be better
protected from loss thanks to a greater capital cushion. If it
fails and the bank enters resolution, they will be exposed to a
higher risk of loss. The review will focus on the success of the
plan and degree to which operating obligations are shielded from
loss by other liabilities.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the low standalone BCA of ca, scope for further downgrade
is limited, but would be likely in the event that the bank were
placed in liquidation. This or a resolution would increase the
prospect of losses on outstanding senior unsecured debt and
deposit instruments, leading to lower ratings.
The BCA could be upgraded if the bank demonstrates that it has
been successful in improving its capitalisation on a sustainable
basis. A positive change in the BCA would likely lead to an
upgrade in all long-term debt and deposit ratings.
LIST OF AFFECTED RATINGS
Issuer: Co-Operative Bank Plc
Placed On Review for Upgrade:
-- Senior Unsecured Regular Bond/Debenture, currently Ca,
Outlook Changed To Rating Under Review From Developing
-- Senior Unsecured MTN Program, currently (P)Ca
-- Adjusted Baseline Credit Assessment, currently ca
-- Baseline Credit Assessment, currently ca
Placed On Review Direction Uncertain:
-- LT Bank Deposits (Local & Foreign Currency), currently Caa2,
Outlook Changed To Rating Under Review From Developing
-- LT Counterparty Risk Assessment, currently Caa1(cr)
Outlook Actions:
-- Outlook, Changed To Rating Under Review From Developing
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
published in January 2016.
CO-OPERATIVE BANK: Fitch Keeps B- IDR on Rating Watch Evolving
--------------------------------------------------------------
Fitch Ratings has maintained UK-based The Co-operative Bank
p.l.c.'s (Co-op Bank) 'B-' Long-Term Issuer Default Rating (IDR)
on Rating Watch Evolving (RWE) and revised the Rating Watch on
its 'B' Short-Term IDR to Negative (RWN) from Evolving. Fitch has
downgraded Co-op Bank's Viability Rating (VR) to 'c' from 'cc'.
The rating actions follow the announcement by of a capital
raising plan by Co-op Bank. Under the plan, which is subject to
approval by shareholders and regulatory approval by the PRA and
other parties, capital will be increased by approximately GBP700
million by way of a capital increase and the conversion of
subordinated debt (unrated) into equity.
The RWE on the Long-Term IDR reflects Fitch's opinion that the
rating may be upgraded, affirmed or downgraded. If the
transaction is completed as outlined, the bank's Long-Term IDR
could be upgraded or affirmed, depending on Fitch's assessment of
the credit profile of the newly recapitalised bank. However,
execution of the transaction is not certain, and a failure to
execute it will increase the risk of losses being suffered by
senior bondholders, which would result in a downgrade of the
Long-Term IDR. It is possible that even after recapitalisation,
the bank's risk profile could result in a downgrade of the Long-
Term IDR and a VR below 'b-'.
The RWN on the Short-Term IDR reflects Fitch's opinion that the
rating could be affirmed or be downgraded if the transaction does
not proceed. Fitch has revised the Rating Watch from Evolving it
is unlikely that the Long-Term IDR would be upgraded to
investment grade, which would be necessary for an upgrade of the
Short-Term IDR to a category higher than 'B' under Fitch
criteria.
The downgrade of the VR reflects Fitch's view that failure of the
bank under Fitch's definitions is imminent because the proposed
conversion of subordinated debt would be considered a distressed
debt exchange (DDE) under Fitch criteria. The subordinated debt
offers will represent a DDE because i) they will result in a
material reduction in terms (equity conversion or, for some
retail investors cash consideration for less than principal); and
ii) Fitch believes them to be necessary to avoid resolution or
insolvency. Fitch expects to downgrade the VR to 'f' if and when
the proposed scheme to increase capital has been completed.
We have removed the Support Rating (SR) from Rating Watch
Positive (RWP) as the bank has not found a new shareholder to
support the bank, which was a potential scenario when it
announced its sale plans in February 2017.
KEY RATING DRIVERS
IDRS, VR AND SENIOR DEBT
The VR primarily reflects clear deficiencies in the bank's
capital, which has been eroded because of losses and the plan to
strengthen capitalisation by approximately GBP700 million by way
of both a capital increase and the DDE of subordinated debt.
Fitch assessment of capitalisation has a high influence on the
bank's VR.
The bank has a niche but overall moderate franchise in the UK.
Its asset quality is weaker than many UK peers but has been
improving, in line with a reducing risk appetite, improved risk
controls, a benign operating environment, and due to legacy asset
deleveraging. The bank's customer deposits and loan/deposit
ratios were broadly stable in 2016 but may be prone to sudden
changes in sentiment. Fitch views of management and strategy
reflects the difficulties it has encountered in executing its
recovery plan. However, these considerations all have a lower
influence on the bank's VR at present.
Co-op Bank's CET1 ratio was 11% at end-2016 but the bank expected
this to fall and to remain below 10% over the medium term, unless
it raised capital externally. Fitch understand that despite the
new capital injection (itself broadly equivalent to 10% of end-
2016 risk weighted assets), the bank remains in regulatory
forbearance, as it does not meet its Individual Capital Guidance
and PRA Buffer. Part of the broader proposed capital raising
scheme agreed with stakeholders, but not yet voted on, is a clear
allocation of the assets and liabilities of the Pension Scheme
which is currently joint with the Co-operative group (The Co-
operative Pension Scheme, or PACE). A clear allocation of which
Pension Scheme assets and liabilities are allocated to the bank
and the removal of the bank's obligation to support the pension
liabilities of the rest of the group should result in a lower
Pillar 2A requirement, which is now particularly high (14.5% at
the last disclosure), and is a part of the bank meeting its
capital requirements over the life of the plan.
After recapitalisation, Fitch expects the bank's VR and Long-Term
IDR to remain under pressure from weak structural profitability,
which is correlated with the need to invest further in systems to
improve efficiency, risk controls and generate new better quality
and higher yielding mortgage loans. Impaired loans have reduced
materially, but the bank has retained a high proportion of non-
conforming mortgages in its Optimum loan portfolio and its
available for sale portfolios. Furthermore, reserve coverage of
impaired loans is low and renders the bank's capital somewhat
vulnerable to falling real estate prices.
Co-op Bank's Long-Term IDR and senior debt are rated three
notches above the VR to reflect Fitch's view that the probability
that senior creditors will have to bear losses is lower than the
probability of failure for the bank given the newly announced
scheme to recapitalise the bank without imposing losses on senior
bondholders. With the exception of Fitch assessment of
'capitalisation and leverage' ('c') and 'earnings and
profitability ('b-'), all VR factors are currently assessed as
being above Co-op Bank's Long-Term IDR.
Co-op Bank's senior debt is rated in line with its IDR,
reflecting Fitch's expectations of average recovery prospects for
senior debt holders in the event of default or resolution
(Recovery Rating of 'RR4').
SR AND SUPPORT RATING FLOOR (SRF)
Co-op Bank's SR and SRF reflect Fitch's view that senior
creditors cannot rely on extraordinary support from the UK
authorities in the event it is declared non-viable given
resolution legislation in place as well as its low systemic
importance.
RATING SENSITIVITIES
IDRS, VR AND SENIOR DEBT
Co-op Bank's VR is primarily sensitive to the conversion of
junior debt into equity and the material injection of external
capital, which Fitch would consider a combination of a DDE and
extraordinary capital support, both of which would initiate the
bank's failure according to Fitch definitions. At that point
Fitch expects to downgrade the VR to 'f' before upgrading it to a
level commensurate with the bank's subsequent risk profile and
capitalisation.
Co-op Bank's IDRs and senior debt ratings would be downgraded if
i) the scheme does not proceed in its current form and a senior
debt distressed debt exchange or regulatory intervention becomes
more likely; or ii) if the proposed capital injection is
insufficient to provide the bank with sufficient resilience to
absorb further losses before it can become structurally
profitable.
Alternatively, Fitch could affirm the bank's Long-Term IDR at 'B-
' or upgrade it if the capital raised is sufficient for the bank
to continue to operate and meet its regulatory capital
requirements including buffers in the medium-term.
Fitch expects to resolve the RWE once the capital is raised and a
clear plan on how capital will be used is provided.
SUPPORT RATING AND SUPPORT RATING FLOOR
A positive change in the UK sovereign's propensity to support
senior bondholders that would be necessary for an upgrade of the
SR and an upward revision of the SRF is, in Fitch's view, highly
unlikely.
The rating actions are:
Long-Term IDR: 'B-' maintained on RWE
Short-Term IDR: 'B'; Rating Watch revised from Evolving to
Negative
Viability Rating: downgraded to 'c' from 'cc'
Support Rating: affirmed at '5', removed from RWP
Support Rating Floor: affirmed at 'No Floor'
Senior unsecured notes' Long-Term rating: 'B-'/'RR4', maintained
on RWE
Senior unsecured notes' Short-Term rating: 'B', Rating Watch
revised from Evolving to Negative
RESIDENTIAL MORTGAGE 30: Moody's Rates Class X1 Notes (P)Ca
------------------------------------------------------------
Moody's Investors Service has assigned provisional credit ratings
to the following notes to be issued by Residential Mortgage
Securities 30 plc:
-- GBP [*] Class A Notes due March 2050, Assigned (P)Aaa (sf)
-- GBP [*] Class B Notes due March 2050, Assigned (P)Aa3 (sf)
-- GBP [*] Class C Notes due March 2050, Assigned (P)A2 (sf)
-- GBP [*] Class D Notes due March 2050, Assigned (P)Baa2 (sf)
-- GBP [*] Class E Notes due March 2050, Assigned (P)Ba2 (sf)
-- GBP [*] Class F1 Notes due March 2050, Assigned (P)Caa3 (sf)
-- GBP [*] Class X1 Notes due March 2050, Assigned (P)Ca (sf)
The GBP [*] Class F2 Notes due March 2050, the GBP [*] Class F3
Notes due March 2050, the GBP [*] Class X2 Notes due March 2050,
the GBP [*] Class Z Notes due March 2050 and Certificates have
not been rated by Moody's.
The portfolio backing this transaction consists of UK non-
conforming residential loans originated by Money Partners Loans
Limited and Kensington Mortgage Company Limited, which were part
of the Kensington group. The portfolio comprises of loans that
have been previously securitised in transactions rated by Moody's
including Residential Mortgage Securities 21 plc ("RMS 21"),
Residential Mortgage Securities 22 plc ("RMS 22") and Money
Partners Securities 4 Plc ("MPS 4"): [29.8]% of the portfolio are
loans previously securitized in RMS 21 transaction, [37.8]% of
the portfolio are loans previously securitized in RMS 22
transaction and [32.4]% of the portfolio are loans previously
securitized in MPS 4 deal. The portfolio will initially be
serviced by Homeloan Management Limited ("HML") at closing, with
servicing of the portfolio expected to move to Acenden Limited
shortly after closing.
At closing Kensington Mortgage Company Limited will sell the
portfolio to [Kayl PL S.Ö.r.l.] (the "Seller", not rated). In
turn the Seller will sell the portfolio to RMS 30.
RATINGS RATIONALE
The ratings of the notes take into account, among other factors:
(1) the historical performance of the collateral; (2) the credit
quality of the underlying mortgage loan pool, (3) the level of
arrears in the pool, (4) the seasoning of the loan pool, and (5)
the initial credit enhancement provided to the senior notes by
the junior notes and the reserve fund.
-- Expected Loss and MILAN CE Analysis
Moody's determined the MILAN credit enhancement (MILAN CE) and
the portfolio's expected loss (EL) based on the pool's credit
quality. The expected portfolio loss (EL) of [10]% and the MILAN
CE of [30]% serve as input parameters for Moody's cash flow and
tranching model, which is based on a probabilistic lognormal
distribution. The MILAN CE reflects the loss Moody's expects the
portfolio to suffer in the event of a severe recession scenario.
The key drivers for the MILAN CE of [30]%, which is higher than
the UK non-conforming sector average (25%) and is based on
Moody's assessment of the loan-by-loan information, are: (i) the
high WA current unindexed LTV of [73.4]%, (ii) the presence of
[72.5]% loans where the borrowers self-certified their income,
(iii) borrowers with adverse credit history with [18.2]% of the
pool containing borrowers with CCJ's, (iv) the weighted average
seasoning of the pool of [11.25] years, (vi) the level of arrears
of around [43.5]% (including all technical arrears) at the end of
April 2017, of which [15.7]% are 90+ days in arrears, and (v)
presence of [3.7]% of second lien loans and [38.3]% of
restructured loans in the portfolio, although these are largely
legacy restructurings as only [0.5]% of the portfolio contains
loans which have been restructured after 2012.
The key drivers for the portfolio's expected loss of [10]%, which
is higher than the UK non-conforming sector average (4.8%) and is
based on Moody's assessment of the lifetime loss expectation,
are: (1) the observed performance of mortgages, which have been
previously securitised in transactions rated by Moody's, (2) the
performance of other previous Kensington originations; (3)
benchmarking with comparable transactions in the UK non-
conforming market; (4) the levels of delinquencies in the pool
together with roll rate analysis; and (5) the current economic
conditions in the UK and the potential impact of future interest
rate rises and inflation on the performance of the mortgage
loans.
-- Operational Risk Analysis
Kensington Mortgage Company Limited ("KMC", not rated) will be
acting as servicer. KMC will sub-delegate certain primary
servicing obligations to HML. HML's sub-delegation
responsibilities are expected to move to Acenden later this year.
In order to mitigate the operational risk, Capita Trust Corporate
Limited (not rated) will act as back-up servicer facilitator, and
Wells Fargo Bank International Unlimited Company (not rated),
which is a wholly-owned subsidiary of Wells Fargo & Company
(A2/P-1), will be acting as a back-up cash manager from close. To
ensure payment continuity over the transaction's lifetime the
transaction documents incorporate estimation language whereby the
cash manager can use the three most recent servicer reports to
determine the cash allocation in case no servicer report is
available.
-- Transaction structure
At close, a General Reserve Fund will be established, which will
be equal to [2]% of the initial portfolio size (around GBP[*]
million). Post-closing, the reserve fund required amount will be
[3]% of the initial portfolio size (around GBP[*] million) until
the Class A through F2 have been redeemed in full and thereafter
the reserve fund required amount will fall to GBP 0. Following
redemption in full of the F2 Notes, any remaining balance in the
General Reserve Fund will form part of Available Revenue Funds.
In addition the transaction will benefit from a Liquidity Reserve
Fund, which will not be funded at closing, but only if the
General Reserve Fund falls to below [1.5]% of the Class A to F3
outstanding balance. In that case, the Liquidity Reserve Fund
Required Amount will increase to [2]% of the Class A aggregate
outstanding balance for the life of the transaction, which will
be funded through the principal waterfall. Drawings on the
Liquidity Reserve Fund to pay interest will create a PDL. The
topping up of the Liquidity Reserve up to the Required Amount
will not create a PDL. In addition, Moody's notes that unpaid
interest on the class B, C, D, E, F1, F2, X1 and X2 is
deferrable. Non-payment of interest on the class A notes
constitutes an event of default.
Principal to pay interest mechanism is always available to pay
interest on the Class A notes. After the Class A notes are paid
in full, principal can be used to pay interest on the most senior
note outstanding. The reserve fund is a source of liquidity to
all rated notes (although it may only be used for the F1 and F2
notes after the Class E notes are paid in full). In addition the
Class A notes benefit from a Liquidity Reserve Fund.
-- Interest Rate Risk Analysis
There are two main forms of SVR linked-loans, KVR and MVR. Under
the servicing agreement, the servicer must set SVR at least equal
to LIBOR plus a fixed margin of [2.5]% and [1.5]% for the KVR and
MVR respectively. There are no swaps in the transaction to hedge
these rates to LIBOR. Moody's has modelled the spread taking into
account the minimum margin covenants. However, due to uncertainty
on enforceability of this covenant, Moody's has performed
stressed analysis for the interest rate reset scenario.
-- Stress Scenarios
Moody's Parameter Sensitivities: At the time the ratings were
assigned, the model output indicates that the Class A Notes would
still have achieved Aaa(sf), even if the portfolio expected loss
was increased to [12.5]% from [10]% and the MILAN CE was remained
unchanged at [30]%, assuming that all other factors remained the
same. Class B notes would have achieved Aa3 (sf), even if the
expected loss was increased to [12.5]% from [10]% and the MILAN
CE was remained unchanged at [30]% and all other factors remained
the same. Class C would have achieved A3 (sf) if the expected
loss was as high as [10]% assuming MILAN CE increased to [36]%
and all other factors remained the same. Class D would have
achieved Baa3 (sf) if the expected loss was as high as [10]%
assuming MILAN CE increased to [36]% and all other factors
remained the same. Class E would have achieved Ba3 (sf) if the
expected loss was as high as [10]% assuming MILAN CE increased to
[36]% and all other factors remained the same. Class F1 would
have achieved Caa3 (sf) if the expected loss was as high as [10]%
assuming MILAN CE increased to [48]% and all other factors
remained the same.
Moody's Parameter Sensitivities provide a quantitative/model-
indicated calculation of the number of rating notches that a
Moody's structured finance security may vary if certain input
parameters used in the initial rating process differed. The
analysis assumes that the deal has not aged and is not intended
to measure how the rating of the security might migrate over
time, but rather how the initial rating of the security might
have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are
calculated by stressing key variable inputs in Moody's primary
rating model.
Factors that would lead to an upgrade or downgrade of the
ratings:
Factors that would lead to a downgrade of the ratings include
economic conditions being worse than forecast resulting in worse-
than-expected performance of the underlying collateral,
deterioration in the credit quality of the counterparties and
unforeseen legal or regulatory changes.
Factors that would lead to an upgrade of the ratings include
economic conditions being better than forecast resulting in
better-than-expected performance of the underlying collateral.
The ratings address the expected loss posed to investors by the
legal final maturity of the notes. In Moody's opinion the
structure allows for timely payment of interest and ultimate
payment of principal at par on or before the rated final legal
maturity date for all rated notes. Moody's ratings only address
the credit risk associated with the transaction. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
September 2016.
Please note that on March 21, 2017, Moody's released a Request
for Comment, in which it has requested market feedback on
potential revisions to its Approach to Assessing Counterparty
Risks in Structured Finance. If the revised Methodology is
implemented as proposed, the Credit Ratings on Residential
Mortgage Securities 30 plc will not be affected. Please refer to
Moody's Request for Comment, titled "Moody's Proposes Revisions
to Its Approach to Assessing Counterparty Risks in Structured
Finance" for further details regarding the implications of the
proposed Methodology revisions on certain Credit Ratings.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Moody's issues provisional ratings in advance of the final sale
of securities, but these ratings only represent Moody's
preliminary credit opinion. Upon a conclusive review of the
transaction and associated documentation, Moody's will endeavour
to assign definitive ratings to the Notes. A definitive rating
may differ from a provisional rating. Moody's will disseminate
the assignment of any definitive ratings through its Client
Service Desk. Moody's will monitor this transaction on an ongoing
basis. For updated monitoring information, please contact
monitor.rmbs@moodys.com.
SOHO HOUSE: Moody's Withdraws Caa2 CFR, Negative Outlook
--------------------------------------------------------
Moody's Investors Service has withdrawn Soho House & Co Limited's
Caa2 corporate family rating (CFR), the Caa2-PD probability of
default rating (PDR) and its negative outlook.
RATINGS RATIONALE
Moody's has withdrawn the ratings for its own business reasons.
Moody's has previously withdrawn the ratings on the company's
GBP152.5 million senior secured notes due October 2018 following
the redemption of these notes. Please refer to the Moody's
Investors Service's Policy for Withdrawal of Credit Ratings,
available on its website, www.moodys.com.
Soho House & Co Limited is a fully integrated hospitality company
that operates exclusive, private members' clubs (or Houses) as
well as public restaurants, workspaces, hotels and spas.
Membership targets professionals in the creative industries and
access to Houses is reserved exclusively for members and their
guests. Soho House is owned by the consortium of The Yucaipa
Companies, Richard Caring, a British entrepreneur who owns
several retail and fashion oriented businesses, and Soho House
founder and CEO Nick Jones. In 2016, Soho House realised total
revenues of GBP293.4 million and adjusted EBITDA of GBP31.7
million, as reported by the company.
TRAVELPORT WORLDWIDE: S&P Affirms 'B+' LT Corporate Credit Rating
-----------------------------------------------------------------
S&P Global Ratings affirmed its 'B+' long-term corporate credit
rating on U.K.-based travel services provider Travelport
Worldwide Ltd. The outlook remains stable.
S&P said, "At the same time, we affirmed our 'B+' issue rating on
the company's first-lien term loan. The recovery rating is
unchanged at '3', reflecting our expectation that recovery in the
event of a payment default will be about 65%.
"At the same time, we said that we should have applied our
criteria "Key Credit Factors For The Business And Consumer
Services Industry," published Nov. 19, 2013 (the Business
Services KCF) in rating Travelport; instead, we used "Key Credit
Factors For The Transportation Cyclical Industry," published Feb.
12, 2014. In correcting this error, we have revised our industry
and competitive position assessment. However, the revision of
industry risk to intermediate from high is counterbalanced by the
weaker competitive position and higher volatility of
profitability among business services peers; as a result, the use
of the Business Services KCF has had no impact on the ratings."
The affirmation follows Travelport's positive operational
performance, which continued its momentum from full year 2016
results in the first quarter of 2017, as reflected in a ratio of
S&P Global Ratings-adjusted funds from operations (FFO) to debt
of about 13% in the 12 months to March 31, 2017. This is
consistent with S&P's base case and the rating guideline.
Travelport also
confirmed its full-year guidance.
Travelport continued to report stable growth in its Travel
Commerce Platform (+7% year-on-year), which comprises most of its
business in most of its geographies. Furthermore, the company
reported a 9% increase in its adjusted EBITDA (excluding S&P
Global Ratings adjustments) and stable margin. This was primarily
fueled by market share gains in Asia-Pacific--the world's largest
and fastest-growing travel region, which alone posted year-on-
year growth in revenues of 18% in the first quarter of 2017--and
Latin America. These markets are likely to continue to propel
Travelport's growth in the future as the portfolio of airlines
that have signed to the airline merchandizing solutions provided
by Travelport increases and eNett, Travelport's payment solution
provider, settles higher payment volumes.
The 2016 S&P Global Ratings-adjusted EBITDA margin fell slightly
compared with 2015 because of restructuring costs and somewhat
higher technology costs. The company is striving to improve its
platform performance, which will enable it to cater for its
customers' more technologically sophisticated service
requirements. S&P said, "We anticipate that Travelport will
stabilize its S&P Global Ratings-adjusted EBITDA margins at about
19%-20%, which is average for the business services industry, as
the restructuring costs phase out and top-line growth compensates
for the higher cost base.
"We also expect the underlying air travel market to remain
resilient despite slowing economic growth in some regions and
disruption from numerous geopolitical, security, and labor-
related events in Europe and the Middle East. We anticipate that
global air traffic growth will likely moderate to about 5.0% in
2017, compared with 6.3% in 2016 (source: The International Air
Transport Association, a global airline industry trade group),
supported by an increasing volume of traffic in the higher-growth
developing countries.
"Although the previously widespread concern among investors that
a slowing Chinese economy would undermine the aviation sector has
eased, air traffic in the region is slowing somewhat and could
represent a downside risk to our forecast.
"We expect that Travelport will be able to sustain its credit
metrics at the recent improved level and that its adjusted FFO to
debt will remain around 13% in 2017. We consider underlying
market growth prospects and profitability measures to be stable.
This, combined with Travelport's continued disciplined capital
spending and moderate dividend policy, should enable it to
maintain its credit ratios. That said, we are mindful of higher
capital expenditure (capex) guidance for the near future as the
company continues to make strategic investments into its
technology."
Travelport's financial risk profile will also benefit from lower
interest costs after its debt repricing--it reduced the margin on
its term loan B to 325 basis points (bps) from the original 500
bps. S&P said, "We note that Travelport can make repayments on
its first-lien debt from available cash before it matures in 2021
(as it did in 2016 when it voluntarily repaid $50 million of the
term loan), and that management has again confirmed its
commitment to debt reduction.
"Our business risk profile assessment continues to incorporate
our view that the travel industry carries high risk: it is
seasonal, cyclical, and price competitive. This is reflected in
Travelport's fair competitive position. We balance this against
Travelport's exposure to limited country risk through its
globally diversified operations and its largely transaction-based
business model." Travelport is a leading player in the global
distribution system (GDS) market.
In 2016, its GDS business had a global share of about 23% of the
GDS air segments. Travelport's Travel Commerce Platform revenue
was balanced across the main world travel regions of the U.S.
(27% in 2016), Europe (32%), Asia-Pacific (23%), the Middle East
and Africa (13%), and Latin America and Canada (5%). Travelport's
business risk profile also reflects its good and relatively
stable profitability in the wider context of the business
services industry peer group.
In S&P's base case, it assumes:
-- S&P's forecast 2017 GDP world growth of about 2.8%--driven by
2.4% in the U.S., 1.4% in the EU, 4.4% in Asia-Pacific, and
2.2% in Middle East and Africa, compared with 2.4%, 1.6%,
1.6%, 4.4%, and 2.6% in 2016, respectively.
-- Steady growth in the air segment revenue of about 2%-3% in
2017, based on an increase in passenger volumes fueled by
world GDP growth.
-- Revenue growth in the beyond air segment--which includes the
fast-growing eNett payment system, hospitality business, and
the mobile service platform--of 12%-14% (down from 16%-18% in
2016).
-- Stable S&P Global Ratings-adjusted EBITDA margin at 19%-20%.
-- Positive discretionary cash flow allowing Travelport to
reduce leverage or invest in growth.
Based on these assumptions, we arrive at the following credit
measures:
-- Adjusted FFO to debt of 13%-15% in 2017-2018, an improvement
from about 11% in 2016; and
-- Adjusted EBITDA interest cover of about 4.0x in 2017-2018, a
rebound from about 3.0x in 2016.
S&P said, "The stable outlook reflects our expectation that
Travelport will maintain rating-commensurate ratios, supported by
passenger growth, growth opportunities in its payment and mobile
platforms business, and stable margins. We also expect that
Travelport's reasonable total capex of about 6%-7% of revenues
and cautious approach to external growth--alongside a
conservative dividend policy--will allow the company to maintain
adjusted FFO to debt of about 13% in the next 12 months.
"We could consider lowering the ratings if the global travel
market weakened to an extent that prevented Travelport from
achieving at least 1.5% sales growth, while the EBITDA margin
simultaneously dropped to below 15%, leading adjusted FFO to debt
to drop below 10%. We could also downgrade Travelport if the
company's financial and acquisition policy became less stringent,
although we regard such a scenario as unlikely.
"We could upgrade Travelport if we believed it could reach and
sustain adjusted FFO to debt of around 16%. This could happen if
Travelport performed better than we expect, particularly if it
managed to increase its revenues by more than 6% in 2017 and its
adjusted EBITDA margin to above 20%."
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
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Peter A. Chapman, Editors.
Copyright 2017. All rights reserved. ISSN 1529-2754.
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