/raid1/www/Hosts/bankrupt/TCREUR_Public/170721.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, July 21, 2017, Vol. 18, No. 144
Headlines
C R O A T I A
HELIOS FAROS: Accepts Valamar Riviera's Recapitalization Plan
HRVATSKABANKA ZA: S&P Affirms 'BB/B' ICR, Outlook Stable
F R A N C E
GM&S: PSA Reaches Agreement with French Gov't on Rescue Plan
THOM EUROPE: S&P Affirms 'B' CCR on Refinancing Announcement
G E R M A N Y
MIFA: Acquisition Talks with Potential Buyer in Final Stage
I R E L A N D
ALPSTAR CLO 2: Moody's Affirms Ba3(sf) Rating on Cl. E Notes
I T A L Y
INTESA SANPAOLO: Fitch Affirms BB+ Perpetual Sub. Debt Rating
L U X E M B O U R G
AXIUS EUROPEAN: Moody's Hikes Rating on Cl. E Notes to Ba2(sf)
N E T H E R L A N D S
CIMPRESS NV: Moody's Rates New ~$1BB Sr. Sec. Credit Facility Ba1
IPD 3: Moody's Assigns B2 Corporate Family Rating
JUBILEE CLO 2014-XIV: Moody's Affirms B2 Rating on Cl. F Notes
N O R W A Y
NORSKE SKOG: S&P Lowers CCR to 'SD' on Standstill Agreement
R U S S I A
MEZHTOPENERGOBANK PAO: Put On Provisional Administration
MOBILE TELESYSTEMS: S&P Affirms 'BB+' CCR, Outlook Developing
POWER MACHINES: Moody's Lowers CFR to B2, Outlook Negative
S L O V A K R E P U B L I C
RAPID LIFE: Faces Bankruptcy, No Recovery for Clients
S P A I N
CAIXABANK CONSUMO 3: Moody's Rates Series B Notes (P)B3 (sf)
VALENCIA HIPOTECARIO 2: Fitch Affirms CCC Rating on Cl. D Notes
U N I T E D K I N G D O M
CYAN BLUE: Moody's Lowers CFR to B2, Outlook Stable
HSS FINANCING: S&P Lowers CCR to 'B+' on Weaker Profitability
KUWAIT ENERGY: Fitch Cuts LT Issuer Default Rating to 'CCC'
STORM FUNDING: August 8 Proofs of Debt Submission Deadline Set
X X X X X X X X
* BOOK REVIEW: Transnational Mergers and Acquisitions
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C R O A T I A
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HELIOS FAROS: Accepts Valamar Riviera's Recapitalization Plan
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SeeNews reports that Croatian hotel operator Valamar Riviera said
on July 20 Hvar-based hotel company Helios Faros has accepted its
recapitalization bid made in partnership with PBZ Croatia Pension
Insurance Fund.
Valamar said in a statement that Helios Faros will now draft a
plan, which should lead the company out of bankruptcy and provide
for the continuation of business, SeeNews relates.
Valamar and PBZ have earlier proposed to invest HRK650 million
(US$100.8 million/EUR87.7 million) in Helios Faros over the next
six years, SeeNews discloses.
Helios Faros, located in Stari Grad on Hvar Island, went bankrupt
in 2016, SeeNews recounts.
HRVATSKABANKA ZA: S&P Affirms 'BB/B' ICR, Outlook Stable
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On July 18, 2017, S&P Global Ratings affirmed its 'BB/B' long-
and short-term issuer credit ratings on Croatian, 100% state-
owned development bank, Hrvatskabanka za obnovu i razvitak
(HBOR). The outlook is stable.
RATIONALE
S&P said, "We equalize our ratings on HBOR with our ratings on
Croatia. In our view, the sovereign is almost certain to provide
timely and sufficient extraordinary support to HBOR in the event
of financial distress, and we do not consider this will be
subject to transition risk. We base our assessment of the
likelihood of support on our view of the bank's:"
-- Critical public policy role in implementing the government's
economic, social, and political policy, namely the
sustainable development of the Croatian economy and the
promotion of exports. The bank's role has widened since its
formation and has evolved alongside the government's
strategic goals for the country's social and economic
development. Since 2015, HBOR has officially been in charge
of coordinating the implementation of the investment plan for
Europe in cooperation with the European Investment Bank and
the European Investment Fund; and
-- Integral link with Croatia, demonstrated by the state's 100%
ownership, regular oversight, and injections of capital. HBOR
benefits from a public policy mandate and strong government
support. Croatia guarantees all of HBOR's obligations
unconditionally, irrevocably, and on first demand, without
issuing a separate guarantee instrument as stipulated by the
HBOR Act. The government is closely involved in defining
HBOR's strategy. The president of the supervisory board is
the Minister of Finance, while the Minister of the Economy,
Entrepreneurship and Trade serves as the deputy president of
the board. In addition, the supervisory board includes the
ministers of regional development and EU funds, agriculture,
and tourism as well as other members of parliament and the
chairman of the Croatian Chamber of Economy. Lastly, the
government is continuing its capital injections, with the
stated goal of HBOR reaching total capital of Croatian kuna
(HRK) 7 billion (roughly EUR930 million) over the next
several years.
Established in June 1992, HBOR was tasked with financing the
reconstruction and development of the Croatian economy. HBOR
lends to both the public and private sectors, either directly or
through commercial banks. These banks lend HBOR's funds on to the
ultimate borrowers, who benefit from HBOR's lower funding cost
while still providing subsidized loans to Croatian corporations.
HBOR's creditworthiness is linked to that of the sovereign. S&P
said, "We do not assess a stand-alone credit profile for HBOR
because we view the likelihood of extraordinary government
support for the bank as almost certain. However, we estimate that
the bank's underlying credit quality, absent extraordinary
support, is in the 'bb' category. This combines our view of the
bank's strong capitalization and the sustainability of its
business model as a government-owned development bank and export
credit agency and, as such, we do not consider government support
to be subject to transition risk.
Positively, HBOR has a relatively stable track record of revenue
generation and profitability, which supports internal capital
generation. In 2016, profits at the group level surged by over
50% year on year, mostly as a result of lower impairment losses
and provisions but also higher net interest income. HBOR
continues to use any profits to bolster its reserves. However,
this trend may reverse somewhat in 2017 because HBOR has some
loan exposure to the struggling Croatian retail company Agrokor
and will therefore need to increase provisioning for this
exposure. At the same time, however, these loans are secured, as
opposed to the majority of Agrokor's loans from commercial banks.
HBOR's capital adequacy ratio stood at over 60% in December 2016,
well above the minimum capital requirement for Croatian banks.
This is set against a tougher operating environment -- in which
the bank is exposed to the economic cycle and is susceptible to
higher-than-average credit losses -- due to a fast-growing and
changing loan book portfolio. The bank also exhibits significant,
although reduced, single-name concentrations. As the recovery of
the Croatian economy gathered pace and commercial banks' risk
appetite returned, HBOR's share of direct lending dropped to 46%
in 2016 from its peak of 57% of newly approved loans in 2015.
Moreover, while the number of newly approved loans increased
further over 2016, the amount committed decreased slightly
compared with 2015, indicating continued focus on small and
midsize enterprises (SMEs). The bank continues to rely on
concentrated wholesale funding, especially from multilateral
institutions. At the same time, it benefits from a sizable liquid
asset portfolio that has grown to 12% of assetsover the past few
years and an unconditional, irrevocable, and at-first-demand
guarantee from the Republic of Croatia, which is embedded in law.
Of HBOR's total loans in 2016, 49% were disbursed via other
banks, compared with 39% in 2015 and more than 88% in 2009. To
this end, HBOR cooperates with 24 of the 25 Croatian banks. In
addition, another 5% of loans were disbursed through leasing
companies, slightly up from 4% in 2015 when this type of activity
started. Despite this trend, the bank still intends to increase
its direct exposure to clients through risk-sharing models with
banks, and meet increasing demand for direct loans from clients.
More generally, the bank is aiming to continue focusing on SMEs
and export-oriented companies while expanding its venture capital
and private equity portfolio and boosting EU fund absorption.
Furthermore, HBOR's loan exposures have been changing over the
past five years from short-term working capital loans toward
longer-term, new investment projects. In 2016, 75% of approved
funds were for capital investments and 25% for working capital
needs. HBOR has placed particular emphasis on new loans that
target companies emerging from prebankruptcy settlement
proceedings, as well as start-up businesses and SMEs, to support
growth in the economy. S&P therefore notes that HBOR's higher
risk appetite may continue to pose some risk to asset quality in
the future.
Furthermore, HBOR's role in facilitating EU funds absorption has
been crucial, especially for SMEs. In fact, HBOR has
significantly intensified its role in funding SMEs, which account
for almost half of the approved loans since 1992 although only
16% in terms of volume. In light of the government's economic
agenda, S&P believes that HBOR will continue to play a vital
role, as demonstrated by the state's continued capital injections
and growth in new lending. In 2016, the Croatian government
injected HRK33 million into HBOR, increasing the total amount of
capital contributed by the stateto slightly over HRK6.5 billion,
or 65% of HBOR's total equity at year-end 2016. The Croatian
government is planning a further HRK467 million capital injection
over the next few years at roughly the same pace as last year.
OUTLOOK
The stable outlook on HBOR reflects that on Croatia. S&P said,
"We believe that HBOR's integral link with and critical role for
the Croatian government's economic development plans and policies
will remain unchanged. Any downward revision in our assessment of
the bank's relationship with the government could lead us to
consider lowering the ratings on HBOR. In addition, any upgrade
or downgrade of Croatia will result in a similar action on HBOR."
RATINGS LIST
Rating
To From
Hrvatska banka za obnovu i razvitak
Issuer Credit Rating
Foreign and Local Currency BB/Stable/B BB/Stable/B
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F R A N C E
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GM&S: PSA Reaches Agreement with French Gov't on Rescue Plan
------------------------------------------------------------
Laurence Frost and Caroline Pailliez at Reuters report that PSA
Group said on July 19 it had reached agreement with the French
government over the carmaker's contribution to a rescue plan for
struggling supplier GM&S, defusing their public stand-off ahead
of a key bankruptcy hearing.
The government also confirmed it had dropped its demands that the
maker of Peugeot, Citroen and DS cars contribute a EUR5 million
(US$5.8 million) "modernization" grant to the metal parts
supplier on top of a EUR50 million purchasing pledge, Reuters
relates.
The threat to GM&S and its 277 jobs is in the political spotlight
as a first industrial policy test for new President Emmanuel
Macron's government, Reuters notes.
A court hearing that had been due on July 19 to rule on the
takeover bid by larger supplier GMD, with backing from PSA,
Renault and the government, was postponed to July 24, Reuters
relays. GMD plans to restructure the site and keep "at least
120" jobs, Reuters states.
PSA had resisted the grant demand and on July 18 circulated a
letter in which GMD boss Alain Martineau assured the carmaker's
Chief Executive Carlos Tavares that his existing offer was enough
to safeguard GM&S operations, Reuters recounts.
According to Reuters, a spokesman for the carmaker said on
July 19 the stand-off was resolved after PSA agreed to extend its
purchasing commitment to five years averaging EUR10 million
annually from three years at EUR12 million.
THOM EUROPE: S&P Affirms 'B' CCR on Refinancing Announcement
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S&P Global Ratings said that it affirmed its 'B' long-term
corporate credit rating on European jewelry retailer THOM Europe
S.A.S. The outlook is stable.
S&P said, "At the same time, we assigned our 'B' issue rating to
THOM Europe's proposed EUR670 million senior secured term loan B
due 2024 and EUR90 million RCF due 2023. The recovery rating on
these instruments is '4' reflecting our expectation of average
recovery (30%-50% range; rounded estimate: 45%) in the event of
default.
"The new issue ratings are subject to the successful issue of the
instruments and our review of the final documentation. If S&P
Global Ratings does not receive the final documentation within a
reasonable time frame, or if the final documentation departs from
the materials we have already reviewed, we reserve the right to
withdraw or revise our ratings.
"We have also affirmed our 'BB-' issue rating on Thom Europe's
super senior RCF due 2019. Our recovery rating remains '1' on
this instrument, reflecting our expectation of very high recovery
prospects (rounded estimate: 95%). Likewise, we affirmed our 'B'
issue rating on the group's EUR536.8 million senior secured
notes. Our recovery rating remains '4' on this instrument,
reflecting our expectation of average recovery prospects (30%-
50%; rounded estimate: 45%) in the event of default. We expect to
withdraw these issue ratings once the proposed transaction has
been completed.
"Our affirmation follows THOM Europe's announcement that it plans
to refinance its capital structure and use part of the proceeds
to repay EUR105 million of the shareholder-owned convertible
bonds (about 40% of the total amount outstanding as of Dec. 31,
2016). Although we expect that the transaction will push up
leverage, we forecast THOM Europe's credit metrics will remain
within our expectations for the current rating.
Over the past six years, THOM Europe has nearly doubled its store
base to about 1,000 stores as of March 2017, through
acquisitions, such as the recently completed acquisition of
Stroili Oro, the Italian leading player. While this growth
strategy has broadened the company's footprint in Europe,
diversified its store brands, and reinforced its leading market
positions, S&P thinks the entrance into new markets, along with
the integration of recently acquired businesses, presents
execution risks, given differences in local cultures and customer
preferences as well as target companies' operating models.
S&P said, "That said, we believe the company will pursue a
prudent execution strategy and leverage its broader size and
scale to obtain purchase benefits and overhead-cost reduction
that we think should help improve profit and cash flows. We also
believe that THOM Europe will implement its inventory systems
management at Stroili Oro, which should translate into better
overall working capital performance.
"Among the constraints to the rating, we also take into account
the fragmented nature of the jewelry retailing sector and its
sensitivity to declines in disposable income, given that jewelry
is non-essential and easily substitutable. Moreover, the high
seasonality of the sector, with the majority of earnings
generated in the fourth quarter of the calendar year, can result
in cash flow volatility. The penetration of online distribution
in the jewelry sector continues to lag other retail segments.
Although competitive pressure from online selling continues to
increase, THOM Europe's online presence remains limited."
THOM Europe's capital structure will remain highly leveraged post
refinancing. S&P said, "In our base case forecast, the combined
group's adjusted debt-to-EBITDA ratio will increase to about
5.3x-5.7x in fiscal 2017 (ending Sept. 30, 2017) on an S&P Global
Ratings-adjusted basis. On a reported basis, which excludes the
impact of operating-lease adjustments to debt and EBITDA, and
includes about EUR174 million of the convertible bonds, we expect
gross debt to EBITDA to be about 7x. We also expect a ratio of
reported EBITDA before rent costs (EBITDAR) to cash interest plus
rent of between 1.5x and 1.7x in fiscal 2017, improving to about
1.7x to 1.9x in fiscal 2018. Our rating also incorporates our
view that, given the company's financial sponsor ownership and
track record of acquisitions and refinancing transactions,
significant deleveraging is unlikely in the long term.
"Our calculation of THOM Europe's debt assumes the successful
refinancing of the current capital structure by the EUR670
million senior secured term loan B. It excludes the remaining
EUR174 million convertible bonds that we currently view as equity
under our methodology. Despite the partial redemption, we
continue to exclude this instrument from our debt calculation
because we consider the group's financial policy commensurate
with such treatment. In particular we consider supportive of the
equity treatment the fact that THOM Europe's leverage has been
maintained consistently at 6x or below despite the various
acquisitions and refinancings undertaken since 2014. We could
revise our treatment of the convertible bonds if the group failed
to maintain this policy, and if adjusted leverage were to rise
above 6x for a prolonged period.
"Our adjusted debt calculation also captures operating-lease
commitments, the net present value of which we now estimate at
about EUR356 million. This compares with the EUR203 million
operating-lease adjustment we had anticipated for fiscal 2017 in
our previous base case. The increase results from our extension
of the lease schedule for comparability with other retailers. We
believe that our initial lease-adjusted ratios tended to
significantly understate the group's leverage in comparison with
the average rental period of retail stores across continental
Europe and operating-lease commitments of rated comparable peers.
As a result, our assumption on operating-lease commitments is now
in line with that of peers."
In S&P's base case, it assumes:
-- Soft macroeconomic conditions; GDP growth of 1.6% and 1.2% in
calendar 2017 in France and Italy, respectively, and 1.8% and
0.8% in calendar 2018.
-- Continued revenue growth to be achieved mainly via THOM
Europe's store expansion strategy, supported by the addition
of the Stroili Oro store network, with about 370 points of
sale.
-- Capital expenditure (capex) of about EUR40 million-EUR50
million per year; and
-- An adjusted EBITDA margin for the combined group of about
25%-26% in fiscal 2017, given our expectations of additional
costs to be incurred in the short term. We anticipate that
margins will improve toward 27%-28% in fiscal 2018, once the
integration of Stroilli Oro has advanced. No acquisitions or
shareholder distributions.
Based on these assumptions, and following the expected completion
of the transaction, S&P arrives at the following credit measures
for financial 2017 and 2018:
-- Funds from operations (FFO) to debt of about 10%-14% in 2017
and 2018;
-- Adjusted debt to EBITDA of 5.3x-5.7x in 2017, improving to
between 5.0 x and 5.3x in 2018;
-- Adjusted EBITDA-to-interest ratio of over 3x;
-- Unadjusted EBITDAR cash interest plus rent coverage of about
1.5x-1.7x for FY2017; and
-- Positive free operating cash flow (FOCF) of about EUR5
million in fiscal 2017, rising to about EUR25 million in
fiscal 2018.
S&P said, "The stable outlook reflects our view that THOM Europe
can support a modest increase in leverage given its strengthening
market position gained through the acquisition and smooth
integration of Stroili, which translates into higher EBITDA and
positive and growing FOCF. It also reflects our view that the
group's cash interest and rent coverage metrics will improve
because the proposed refinancing will lower interest expense and
enhance the group's financial flexibility starting from fiscal
2018. We forecast that in the next 12 months, the group will
achieve a debt-to-EBITDA ratio of about 5.3x-5.7x on an S&P
Global Ratings-adjusted basis, and EBITDAR cash interest plus
rent coverage of between 1.5x and 1.8x. Our metrics are based on
an equity treatment of the convertible bonds, which could change
if we were to witness a more aggressive financial policy, marked
by higher adjusted leverage for a prolonged period.
"We could lower the ratings if the integration of Stroili Oro
faltered or if weaker economic or market conditions resulted in
materially weaker operating performance on a consolidated basis,
including lower margins and cash flows. Downward rating pressure
could also arise from financial policy becoming more aggressive,
with debt to EBITDA failing to decrease over the coming months.
In addition, if EBITDAR cash interest plus rent cover fell lower
than the 1.6x posted in fiscal 2016. Likewise, we could take a
negative rating action if the company was unable to sustain
positive FOCF, or if its liquidity position deteriorated.
"Given the group's current releveraging, we view an upgrade as
unlikely in the short term. However, we could consider raising
the rating if THOM Europe and its shareholders committed to a
materially more conservative financial policy such that adjusted
debt to EBITDA remained below 5.0x and EBITDAR coverage
approached 2.2x on a sustainable basis. An upgrade would hinge on
strong like-for-like growth, the S&P Global Ratings-adjusted
EBITDA margin being maintained at the historical level of about
27%, and meaningfully positive and growing FOCF."
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G E R M A N Y
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MIFA: Acquisition Talks with Potential Buyer in Final Stage
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Bike Europe reports that the future for MIFA looked very
uncertain after the announcement in early June that the Puello
family would not acquire the troubled bicycle manufacturer MIFA.
However, a new potential buyer has been named in the German media
for a few weeks now, Bike Europe notes.
According to Bike Europe, the buyer is said to be the German
businessman Stefan Zubcic.
Negotiations with Mr. Zubcic are, according to insolvency
administrator Lucas Floether, in an advanced phase, Bike Europe
relates.
The newly built factory hall just outside Sangerhausen which was
opened last December, just before MIFA applied for insolvency,
seems to have been an important hurdle during the take-over
discussions, Bike Europe says. This facility is owned by the
former MIFA owner Von Nathusius, according to Bike Europe.
Once the take-over contract is signed, the new investor wants to
return MIFA to the old factory buildings in the center of
Sangerhausen, Bike Europe states. A part of this property
belongs to the district of Mansfeld-Suedharz after a failed
rescue attempt of the former MIFA AG, Bike Europe discloses. The
district of Mansfeld-Suedharz has already indicated not to object
to a move of the facility, Bike Europe relays.
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I R E L A N D
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ALPSTAR CLO 2: Moody's Affirms Ba3(sf) Rating on Cl. E Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the rating on the
following notes issued by Alpstar CLO 2 Plc:
-- EUR37.5M Class C Deferrable Senior Secured Floating Rate
Notes due 2024, Upgraded to Aa1 (sf); previously on Nov 20, 2015
Upgraded to Aa3 (sf)
Moody's also affirmed the ratings of the following notes.:
-- EUR78M (Current outstanding balance of EUR54.7M) Class A2
Senior Secured Floating Rate Notes due 2024, Affirmed Aaa
(sf); previously on Nov 20, 2015 Affirmed Aaa (sf)
-- EUR48.5M Class B Deferrable Senior Secured Floating Rate
Notes due 2024, Affirmed Aaa (sf); previously on Nov 20, 2015
Upgraded to Aaa (sf)
-- EUR42M Class D Deferrable Senior Secured Floating Rate Notes
due 2024, Affirmed Baa3 (sf); previously on Nov 20, 2015
Upgraded to Baa3 (sf)
-- EUR24M Class (Current outstanding balance of EUR17.0M) E
Deferrable Senior Secured Floating Rate Notes due 2024,
Affirmed Ba3 (sf); previously on Nov 20, 2015 Affirmed Ba3
(sf)
Alpstar CLO 2 Plc, issued in April 2007, is a collateralised loan
obligation ("CLO") backed by a portfolio of mostly high yield
European loans denominated in Euro and USD. It is predominantly
composed of senior secured loans. The portfolio is managed by
Chenavari Investment Managers Holdings. The transaction's
reinvestment period ended in May 2014.
RATINGS RATIONALE
The rating action on the Class C notes is primarily a result of
the significant deleveraging of the senior notes following
amortisation of the underlying portfolio over the last twelve
months. Classes AR-E, AR-S and AR-U Variable Funding Notes and
Class A1 notes (senior notes) paid down by a total of EUR36.7
million equivalent on the November 2016 payment date. On the May
2017 payment date the EUR41.2 million and USD24.8 million
aggregate outstanding balances of Classes AR-E, A1 and AR-U
redeemed in full and Class A2 paid down by approximate EUR23.2
million. As a result of this deleveraging overcollateralization
ratios (the "OC ratios") have increased across the capital
structure. According to the June 2017 trustee report, the Classes
A2, B, C, D and E OC ratios are 406.10%, 215.25%, 157.88%,
121.59% and 111.24% respectively compared to levels of June 2016
of 196.94%, 154.70%, 132.70%, 114.46% and 108.43%.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analysed the underlying collateral pool as having
performing par and principal proceeds of EUR189.23 million and
USD24.30 million, defaulted par of EUR19.82 million, a weighted
average default probability of 21.06% (consistent with a WARF of
2983 and a weighted average life of 4.19 years), a weighted
average recovery rate upon default of 47.77% for a Aaa liability
target rating, a diversity score of 16.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance and a collateral manager's latitude to trade
collateral are also relevant factors. Moody's incorporates these
default and recovery characteristics of the collateral pool into
its cash flow model analysis, subjecting them to stresses as a
function of the target rating of each CLO liability it is
analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in October 2016.
Factors that would lead to an upgrade or downgrade of the
ratings:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it lowered the weighted average recovery rate by 5
percentage points; the model generated outputs that were
unchanged for Class A2 and Class B, and within a notch of the
base case results for Classes C, D and E.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
note, in light of uncertainty about credit conditions in the
general economy. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behaviour and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties because of embedded ambiguities.
Additional uncertainty about performance is due to the following:
* Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortisation would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
* Foreign currency exposure: All remaining liabilities of the
deal are denominated in EUR but there are USD24.3 million of non-
EUR denominated assets remaining which are not hedged. Volatility
in foreign exchange rates will have a direct impact on interest
and principal proceeds available to the transaction, which can
affect the expected loss of rated tranches.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
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I T A L Y
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INTESA SANPAOLO: Fitch Affirms BB+ Perpetual Sub. Debt Rating
-------------------------------------------------------------
Fitch Ratings has affirmed Intesa Sanpaolo Vita's (ISV) Insurer
Financial Strength (IFS) rating at 'BBB' (good) and Long-Term
Issuer Default Rating (IDR) at 'BBB'. The Outlooks are Stable.
Fitch has also affirmed ISV's dated subordinated notes and
perpetual subordinated debt at 'BBB-' and 'BB+', respectively.
KEY RATING DRIVERS
ISV's IFS rating reflects its strong business profile in Italy,
where it is the largest life insurance group by premiums, with
EUR24 billion of gross premiums underwritten in 2016, and its
good capitalisation. However, ISV is significantly exposed to
Italian sovereign debt and this heavily influences its ratings.
To match domestic liabilities, ISV held EUR51 billion of Italian
sovereign bonds or around 10x consolidated shareholders' funds,
including Fideuram Vita (FV), at end- 2016.
ISV's large exposure to Italian sovereign debt constrains its IFS
rating to Italy's sovereign IDR (BBB/Stable). If Italy was
upgraded, it is unlikely that ISV's IDR would be higher than the
IDR of its ultimate parent, Intesa Sanpaolo (ISP; BBB/Stable).
ISV's Prism FBM score was 'Adequate' based on year-end 2015
results, and Fitch expects it remained at least at this level in
2016. Its consolidated Solvency II ratio, calculated using the
standard formula, was 190% at end-March 2017. However, given the
large exposure to Italian sovereign debt, ISV could face a
significant increase in regulatory capital charges if European
authorities remove the zero risk-weighting for European
sovereigns. Prism FBM already includes a capital charge for
sovereign assets.
ISV's Fitch-calculated financial leverage ratio (FLR) decreased
to 23% in 2016 (2015: 24%). Fitch expects the FLR to remain
commensurate with the company's rating in 2017. Fitch's total
financing and commitments (TFC) ratio is low given the
traditional nature of ISV's business.
ISV's ultimate parent, ISP, is the second-largest Italian bank by
total assets. ISV is highly integrated in ISP. The bank manages
capital and risks at group level, including for ISV. As part of
ISP's wealth management operations, ISV distributes its insurance
products through ISP branches. Fitch views ISV as an important
contributor to ISP's financial performance. ISV is rated on a
standalone basis and its ratings do not benefit from ISP's
ownership.
Life gross written premiums, including FV, fell by 13% yoy at
end-2016 to EUR24 billion, after ISV suspended sales of life
traditional savings products in favour of unit-linked and hybrid
products. This volatile trend is also linked to the volatile
nature of the bancassurance business in Italy. Net income
increased to EUR691 million in 2016 (2015: EUR659 million). ISV's
2012-2016 average return on equity was strong at 11%. Fitch
expects ISV's net profitability will continue to support the
ratings in 2017.
Fitch considers ISV's exposure to interest rate risk as low. This
reflects strong asset and liability matching and relatively low
minimum guarantees. The reduction in minimum guarantees offered
on new business (0% for the newest products), is reducing the
proportion of in-force life reserves that carry financial
guarantees. New guarantees apply only at maturity, rather than
accruing year by year, allowing ISV greater flexibility in
dealing with low investment returns in any particular year.
RATING SENSITIVITIES
ISV's ratings would likely be downgraded if Italy or ISP are
downgraded. Conversely, ISV's ratings would likely be upgraded if
Italy and ISP are upgraded.
===================
L U X E M B O U R G
===================
AXIUS EUROPEAN: Moody's Hikes Rating on Cl. E Notes to Ba2(sf)
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Axius European CLO S.A.:
-- EUR16,500,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2023, Upgraded to Aaa (sf); previously on May 18,
2016 Upgraded to Aa3 (sf)
-- EUR16,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2023, Upgraded to A3 (sf); previously on May 18,
2016 Upgraded to Baa3 (sf)
-- EUR15,000,000 (Current outstanding balance of EUR10.82M)
Class E Senior Secured Deferrable Floating Rate Notes due
2023, Upgraded to Ba2 (sf); previously on May 18, 2016
Affirmed B1 (sf)
Moody's has also affirmed the ratings on the following notes:
-- EUR250,000,000 (Current outstanding balance of EUR21.30M)
Class A Senior Secured Floating Rate Notes due 2023, Affirmed
Aaa (sf); previously on May 18, 2016 Affirmed Aaa (sf)
-- EUR10,000,000 Class B1 Senior Secured Deferrable Floating
Rate Notes due 2023, Affirmed Aaa (sf); previously on May 18,
2016 Upgraded to Aaa (sf)
-- EUR9,000,000 Class B2 Senior Secured Deferrable Fixed Rate
Notes due 2023, Affirmed Aaa (sf); previously on May 18, 2016
Upgraded to Aaa (sf)
Axius European CLO S.A., issued in October 2007, is a
collateralised loan obligation ("CLO") backed by a portfolio of
mostly high-yield European loans. It is predominantly composed of
senior secured loans. The portfolio is managed by Investcorp
Credit Management EU Limited. The transaction's reinvestment
period ended in November 2013.
RATINGS RATIONALE
The upgrades of the notes are primarily the result of
deleveraging since the last rating action. On the November 2016
payment date the Class A Notes amortised to a pool factor of
19.5%, and in May 2017 the Class A Notes were further reduced to
a pool factor of 8.5%. Currently EUR21.30M of the original
EUR250.00M Class A Notes balance remains outstanding. As of the
May 31, 2017 trustee report, the Class A, Class B, Class C, Class
D and Class E overcollateralisation ratios are reported at
443.74%, 234.52%, 166.39%, 129.82% and 113.03% respectively
compared with 200.42%, 158.81%, 134.55%, 117.19% and 107.79% in
November 2016.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analysed the underlying collateral pool as having a
performing par and principal proceeds balance of EUR95.12M,
defaulted par of EUR0.00M, a weighted average default probability
of 17.59% over a 3.87 years weighted average life (consistent
with a WARF of 2715), a weighted average recovery rate upon
default of 44.65% for a Aaa liability target rating, a diversity
score of 17 and a weighted average spread of 3.63%.
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on
future defaults is based primarily on the seniority of the assets
in the collateral pool. Moody's generally applies recovery rates
for CLO securities as published in "Moody's Approach to Rating SF
CDOs". In some cases, alternative recovery assumptions may be
considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in October 2016.
Factors that would lead to an upgrade or downgrade of the
ratings:
In addition to the base-case analysis, Moody's conducted
sensitivity analyses on the key parameters for the rated notes,
for which it assumed lower weighted average recovery rate for the
portfolio. Moody's ran a model in which it reduced the weighted
average recovery rate by 5%; the model generated outputs were
unchanged for Classes A, B1 and B2, and within one notch of the
base-case results for Classes C, D and E.
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
notes, in light of uncertainty about credit conditions in the
general economy. CLO notes' performance may also be impacted
either positively or negatively by 1) the manager's investment
strategy and behaviour and 2) divergence in the legal
interpretation of CDO documentation by different transactional
parties because of embedded ambiguities.
Additional uncertainty about performance is due to the following:
* Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager
or be delayed by an increase in loan amend-and-extend
restructurings. Fast amortisation would usually benefit the
ratings of the notes beginning with the notes having the highest
prepayment priority.
* Around 10.59% of the collateral pool consists of debt
obligations whose credit quality Moody's has assessed by using
credit estimates. As part of its base case, Moody's has stressed
large concentrations of single obligors bearing a credit estimate
as described in "Updated Approach to the Usage of Credit
Estimates in Rated Transactions" published in October 2009 and
available at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_120461.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
=====================
N E T H E R L A N D S
=====================
CIMPRESS NV: Moody's Rates New ~$1BB Sr. Sec. Credit Facility Ba1
-----------------------------------------------------------------
Moody's Investors Service rated Cimpress N.V.'s new ~$1 billion
senior secured bank credit facility Ba1, downgraded the company's
senior unsecured notes to B1 from Ba3, and affirmed its Ba2
corporate family rating. As a part of the same rating action,
Moody's affirmed Cimpress' Ba2-PD probability of default rating
and SGL-1 speculative grade liquidity rating (indicating very
good liquidity), and maintained the company's stable ratings
outlook.
The rating action was prompted by Cimpress' July 14 announcement
that it had closed on a new $1.045 billion senior secured bank
credit facility which replaces, upsizes and extends (to July 13,
2022) the company's $850 million senior secured bank credit
facility. The increase in senior secured facilities causes the
senior unsecured notes to be downgraded to B1 from Ba3. The Ba1
ratings for the prior senior secured bank credit facility will be
withdrawn in due course.
The ratings are contingent upon Moody's review of final
documentation and no material change in previously advised terms
or financial condition.
The following summarizes Cimpress' ratings and actions:
Issuer: Cimpress N.V.
Senior Secured Credit Facility: Assigned Ba1 (LGD3)
Senior Unsecured Notes: Downgraded to B1 (LGD5) from Ba3 (LGD5)
Corporate Family Rating: Affirmed at Ba2
Probability of Default Rating: Affirmed at Ba2-PD
Speculative Grade Liquidity Rating: Affirmed at SGL-1
Existing Senior Secured Credit Facility: Unchanged at Ba1 (LGD3),
To Be Withdrawn
Outlook: Maintained at Stable
RATINGS RATIONALE
Cimpress' Ba2 corporate family rating is based primarily on the
company's strong organic growth profile stemming from superior
on-line technology for small print jobs, which facilitates good
free cash flow (~$100 million/year) allowing leverage to be
maintained around 3x. The rating is constrained by the execution
and re-levering risks of ongoing acquisitions, the broader
downward trajectory of the printing industry, margin pressures
from shipping costs/prices of small orders within the Vistaprint
business, the opacity of reported results, share buy-back
activity, and the declining demand for physical advertising-
related products.
Following the ~$210 million acquisition of National Pen in
December, 2016, annualized adjusted LTM debt/EBITDA rose to 4.1x
(March17), but Moody's expects that to drop to around 3.5x by the
end of 2017 and 3x by the end of 2018 through a combination of
debt reduction from free cash flow and EBITDA growth.
Cimpress' liquidity is very good (SGL-1), with Moody's assessment
starting with the expectation that the company will generate
about $100 million of free cash flow. Cimpress maintains a $745
million revolving credit facility that, at nearly 35% of sales,
is much larger than is required to fund operations and has been
sized to support Cimpress' growth strategy which involves
acquisitions. Nonetheless, with a cash balance of $43 million and
with pro forma availability of about $430 million (both at
31Mar17), and with the revolving credit facility commited through
June 2022, its liquidity benefits are substantial.
Rating Outlook
The outlook is stable because the company's superior technology
will continue to enable superior revenue growth and free cash
flow, with leverage expected to decline to around 3x in 2018.
What Could Change the Rating - Up
* Expectations of debt/EBITDA of approaching 2x on a sustained
basis (4.1x annualized at 31Mar17),
* Together with solid operating fundamentals, a positive business
environment, improved revenue diversification and,
* Free cash flow to debt above 10% (6.3% at 31Mar17)
What Could Change the Rating - Down
* Expectations of debt/EBITDA sustained above 3x (4.1x annualized
at March 31, 2017), or
* Free cash flow to debt to be sustained at or below 5% (6.3% at
March 31, 2017), or
* Should margins contract or organic revenue growth stagnate, or
should share buy-backs or acquisition activity (for example)
signal more aggressive financial policies
The principal methodology used in these ratings was Media
Industry published in June 2017.
Corporate Profile
Headquartered in the Netherlands and with executive offices in
Paris, France and Waltham, Massachusetts, Cimpress N.V.
(Cimpress, formerly Vistaprint) is a provider of customized
marketing products and services to small businesses and consumers
worldwide, with printed and other physical products accounting
for more than 95% of the company's $2.1 billion of total
revenues.
IPD 3: Moody's Assigns B2 Corporate Family Rating
-------------------------------------------------
Moody's Investors Service has assigned a B2 corporate family
rating (CFR) and a B2-PD probability of default rating (PDR) to
IPD 3 B.V. (IPD, Infopro or the company). At the same time
Moody's assigned a B2 instrument rating to the new EUR500 million
senior secured notes due 2022 to be issued by IPD 3 B.V. The
outlook is stable.
The notes' proceeds will be used to repay the outstanding amounts
under the company's current term loan B (EUR440 million) and
existing revolving credit facility (EUR31 million) with EUR22
million from the proceeds remaining as cash on balance sheet. The
company will also enter into a new EUR70 million super senior
revolving credit facility (SSRCF) due 2022.
RATINGS RATIONALE
IPD's B2 CFR reflects (i) the company's leading position as a
niche operator in the French B2B information market with a
diversified portfolio of products; (ii) the high percentage of
recurring revenue coming from subscription related businesses and
the high retention rate of its leading products; (iii) the
company's positive free cash flow generation supported by low
capex requirements and long-dated maturity profile.
The B2 CFR also reflects (i) the relatively high Moody's-adjusted
leverage of the company (expected above 5.5x at year end 2017);
(ii) the exposure to certain cyclical industries such as the
construction and automotive sectors which together represent
around 47% of IPD's revenues; and (iii) the execution risk in the
company's strategy of M&A-led growth to increase its scale
further.
IPD is a French business-to-business information company focusing
on industry specific information platforms ("Knowledge &
Networking" division or "K&N"), B2B software and lead solutions
("Software, Data & Leads" division or "SD&L") and global trade
shows ("GTS").
In 2016 the company generated around 50% of its revenue from
subscription based activities for its magazines, software, data
and leads activities. Although most of these subscription
packages are based on a 12-month contract and hence only offer
short-term revenue predictability, earnings visibility is
strengthened further by the strong customer retention rates the
company has enjoyed historically (around 80% for each activity).
The company bears a degree of concentration risk around the
inherently volatile construction and automotive sectors which
together represent around 47% of IPD's revenues. IPD's exposure
to these industries is however partly mitigated by its strong
revenue diversification with no single customer -- in any of
IPD's business lines -- accounting for more than 2% of revenues
in 2016. In addition, the bulk of IPD's exposure to the
automotive industry is focused on the replacement parts market
which tends to be more resilient in times of economic downturn.
Moody's expects IPD's adjusted leverage to exceed 5.5x at the end
of 2017 which is at the high end of Moody's guidance for the
current rating category. While Moody's expects IPD to generate
positive free cash flow, the company's growth strategy
incorporates an active acquisition strategy. Owner, TowerBrook,
has earmarked further funds to assist the company in financing
future acquisitions and Moody's notes that financial support has
been consistently provided by the shareholders in the past.
Despite management's experience in successfully integrating
acquisitions, IPD's ambition for growth through further M&A poses
high execution risk. It also reduces the likelihood of any
meaningful long-term deleveraging prospect in the coming years.
IPD's liquidity is adequate, supported by the company's low capex
requirements and its long-dated maturity profile. Liquidity is
furthermore supported by an expectation of positive free cash
flow generation and the new EUR70 million revolving credit
facility (RCF) which matures in 2022. The company is likely to
draw on its available liquidity sources in the future to part-
fund planned M&A transactions.
The B2 rating on the EUR500 million senior secured notes, in line
with the company's CFR, reflects their second priority ranking in
the company's capital structure, behind only a moderate amount of
first ranking claims related to the SSRCF. The notes benefit from
a security package over shares only and are guaranteed by a group
of subsidiaries representing no less than 75% of the consolidated
group's Adjusted EBITDA (as defined in the indenture). The B2-PD
PDR, at the same level as the CFR reflects a 50% recovery rate
assumption, as is customary for bond and bank-debt capital
structures.
The stable outlook reflects the company's high proportion of
recurring revenues as well as Moody's expectations that IPD3 will
continue to generate positive free cash flow and maintain a good
liquidity profile.
What Could Change the Rating Up
Positive pressure on the ratings could develop should IPD3's
adjusted leverage sustainably decrease to below 4.75x. An upgrade
would also require the company to successfully achieve organic
mid-single digit revenue growth.
What Could Change the Rating Down
Negative ratings pressure could develop should IPD3's leverage
increase towards 6.0x as a result of softening in demand for the
company's products. Downward pressure would also ensue should the
company's liquidity profile deteriorate as a result of weakening
performance or aggressive M&A strategy.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
JUBILEE CLO 2014-XIV: Moody's Affirms B2 Rating on Cl. F Notes
--------------------------------------------------------------
Moody's Investors Service has assigned the following ratings to
the following notes (the "Refinancing Notes") issued by Jubilee
CLO 2014-XIV B.V.:
-- EUR319,500,000 Class A-1-R Senior Secured Floating Rate Notes
due 2028, Assigned Aaa (sf)
-- EUR5,000,000 Class A-2-R Senior Secured Fixed Rate Notes due
2028, Assigned Aaa (sf)
-- EUR51,200,000 Class B-1-R Senior Secured Floating Rate Notes
due 2028, Assigned Aa2 (sf)
-- EUR12,800,000 Class B-2-R Senior Secured Fixed Rate Notes due
2028, Assigned Aa2 (sf)
-- EUR34,400,000 Class C-R Deferrable Mezzanine Floating Rate
Notes due 2028, Assigned A2 (sf)
-- EUR28,400,000 Class D-R Deferrable Mezzanine Floating Rate
Notes due 2028, Assigned Baa2 (sf)
Additionally, Moody's has affirmed the ratings on the existing
following notes issued by the Issuer on the original issuance
date (the "Original Closing Date"):
-- EUR38,500,000 Class E Deferrable Junior Floating Rate Notes
due 2028, Affirmed Ba2 (sf); previously on Oct 22, 2014
Definitive Rating Assigned Ba2 (sf)
-- EUR18,900,000 Class F Deferrable Junior Floating Rate Notes
due 2028, Affirmed B2 (sf); previously on Oct 22, 2014
Definitive Rating Assigned B2 (sf)
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a
portfolio of senior secured, broadly syndicated corporate loans.
Alcentra Limited (the "Manager") manages the CLO. It directs the
selection, acquisition, and disposition of collateral on behalf
of the Issuer.
RATINGS RATIONALE
Moody's ratings on the Refinancing Notes address the expected
loss posed to noteholders. The ratings reflect the risks due to
defaults on the underlying portfolio of assets, the transaction's
legal structure, and the characteristics of the underlying
assets.
The Issuer has issued the Refinancing Notes on July 17, 2017 (the
"Refinancing Date") in connection with the refinancing of certain
classes of notes (the "Refinanced Original Notes") previously
issued on the Original Closing Date. On the Refinancing Date, the
Issuer used the proceeds from the issuance of the Refinancing
Notes to redeem in full the Refinanced Original Notes.
As part of this refinancing, the Issuer extended the weighted
average life by one year and amended the base matrix.
Moody's rating actions on the Class E Notes and Class F Notes are
primarily a result of the amendments to the transaction documents
and the issuance of the Refinancing Notes.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in October 2016.
The cash flow model evaluates all default scenarios that are then
weighted considering the probabilities of the binomial
distribution assumed for the portfolio default rate. In each
default scenario, the corresponding loss for each class of notes
is calculated given the incoming cash flows from the assets and
the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum
product of (i) the probability of occurrence of each default
scenario and (ii) the loss derived from the cash flow model in
each default scenario for each tranche. As such, Moody's
encompasses the assessment of stressed scenarios.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: EUR549,000,000
Defaulted par: EUR2,000,000
Diversity Score: 30
Weighted Average Rating Factor (WARF): 3072
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 3.80%
Weighted Average Recovery Rate (WARR): 44.0%
Weighted Average Life (WAL): 6.27 years
As part of its analysis, Moody's has addressed the potential
exposure to obligors domiciled in countries with local currency
government bond rating of A1 or below. Following the effective
date, and given the portfolio constraints and the current
sovereign ratings in Europe, such exposure may not exceed 10% of
the total portfolio, where exposures to countries rated below A3
cannot exceed 5% (with none allowed below Baa3). Given this
portfolio composition, the model was run with different target
par amounts depending on the target rating of each class of notes
as further described in the methodology. The portfolio haircuts
are a function of the exposure size to peripheral countries and
the target ratings of the rated notes and amount to 0.75% for
Class A notes, 0.50% for the Class B notes, 0.375% for the Class
C notes and 0% for Classes D, E and F.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in October 2016.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The rated notes' performance is subject to uncertainty. The
notes' performance is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
notes' performance.
Stress Scenarios:
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a
component in determining the provisional rating assigned to the
rated Notes. This sensitivity analysis includes increased default
probability relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds
to higher expected losses), assuming that all other factors are
held equal:
Percentage Change in WARF -- increase of 15% (from 3072 to 3533)
Rating Impact in Rating Notches:
Class A-1-R Senior Secured Floating Rate Notes: 0
Class A-2-R Senior Secured Fixed Rate Notes:0
Class B-1-R Senior Secured Floating Rate Notes : -2
Class B-2-R Senior Secured Fixed Rate Notes : -2
Class C-R Deferrable Mezzanine Floating Rate Notes: -2
Class D-R Deferrable Mezzanine Floating Rate Notes: -2
Class E Deferrable Junior Floating Rate Notes: -1
Class F Deferrable Junior Floating Rate Notes:-1
Percentage Change in WARF -- increase of 30% (from 3072 to 3994)
Rating Impact in Rating Notches:
Class A-1-R Senior Secured Floating Rate Notes: 0
Class A-2-R Senior Secured Fixed Rate Notes:0
Class B-1-R Senior Secured Floating Rate Notes : -3
Class B-2-R Senior Secured Fixed Rate Notes : -3
Class C-R Deferrable Mezzanine Floating Rate Notes: -3
Class D-R Deferrable Mezzanine Floating Rate Notes: -2
Class E Deferrable Junior Floating Rate Notes: -1
Class F Deferrable Junior Floating Rate Notes:-3
Further details regarding Moody's analysis of this transaction
may be found in the related new issue report, published after the
Original Closing Date in October 2014 and available on Moodys.com
===========
N O R W A Y
===========
NORSKE SKOG: S&P Lowers CCR to 'SD' on Standstill Agreement
-----------------------------------------------------------
S&P Global Ratings said that it lowered its long- and short-term
corporate credit ratings on Norwegian paper producer Norske
Skogindustrier ASA (Norske Skog) to 'SD' (selective default) from
'CC/C'.
S&P said, "At the same time, we lowered the issue ratings on the
senior secured notes maturing in 2019 to 'D' from 'CC'. We
affirmed our 'C' issue ratings on the senior unsecured notes. The
recovery rating on these notes remains unchanged at '6' and
continues to reflect our expectation of negligible (0%-10%)
recovery in the event of a conventional default. We kept the
unsecured issue ratings on CreditWatch with negative
implications, where we placed them on June 6, 2017."
The downgrade follows Norske Skog's announcement that it has
entered into a standstill agreement with the holders of its
senior secured notes, in order to suspend coupon payments beyond
the 30-day contractual grace period under the existing senior
secured notes indenture, which expired on July 14. The standstill
agreement is expected to extend to Sept. 24, allowing Norske Skog
to further extend discussions on its proposed exchange offer.
"The 'D' ratings on the senior secured debt reflect the
nonpayment of the contractual coupon under the standstill
agreement, which we consider tantamount to a default. We aim to
resolve the CreditWatch on the remaining unsecured debt following
the completion of the debt exchange."
Norske Skog has extended the consent period of the debt-exchange
offer it initiated on June 2, 2017, to July 31, 2017, with the
standstill introduced to ensure participation of the senior
secured noteholders given the requirement for 90% of them to
accept the proposed restructuring. The exchange offer covers the
substantial portion of the group's capital structure, and
includes an amendment to the terms of the group's senior secured
notes and a debt-to-equity swap for the group's senior unsecured
and previous exchange notes. In total, about 93% of the group's
capital structure is affected by the proposed transaction, which
would follow a previous debt-exchange offer completed in 2016.
S&P said, "We expect the corporate credit ratings to remain on
'SD' for as long as the standstill period is upheld. We expect
this to be until the consent or rejection of the group's debt
exchange offer on July 31, if not extended further.
"If the offer is completed as planned, we would maintain the
long- and short-term ratings on Norske Skog at 'SD/D' as a result
of the distressed exchange offer, and additionally lower the
issue ratings on the affected senior unsecured notes to 'D'.
"If Norske Skog does not complete the offer or fails to receive
the minimum consents required, we will reassess the company's
creditworthiness primarily based on our view of the likelihood of
a further distressed exchange offer."
===========
R U S S I A
===========
MEZHTOPENERGOBANK PAO: Put On Provisional Administration
--------------------------------------------------------
The Bank of Russia, by its Order No. OD-2033, with effect from
July 20, 2017, revoked the banking license of Moscow-based credit
institution Mezhtopenergobank PAO, according to the press service
of the Central Bank of Russia.
According to the financial statements, as of July 1, 2017, the
credit institution ranked 108th by assets in the Russian banking
system.
Mezhtopenergobank PAO placed funds in low-quality assets,
including in construction and investment sectors, and
inadequately assessed the risks assumed. The bank provided loans
to companies not engaged in real economic activity. Moreover,
the credit institution failed to comply with the requirements of
laws and Bank of Russia regulations on countering the
legalization (laundering) of criminally obtained incomes and the
financing of terrorism with regard to identifying operations
subject to mandatory control, as well as submitting the required
information to the authorized body.
The Bank of Russia repeatedly applied supervisory measures
against Mezhtopenergobank PAO, including two-times restrictions
on taking household funds on deposit.
The management and owners of the bank failed to take effective
measures to normalize its activities. In addition, their behavior
was unscrupulous: they withdrew assets to the detriment of
creditors' interests.
Due to the poor quality of assets, which had failed to generate
sufficient cash flow, Mezhtopenergobank PAO was incapable of
honoring its obligations to creditors on time. Under these
circumstances, the Bank of Russia performed its duty on the
revocation of the banking license from Mezhtopenergobank PAO in
accordance with Article 20 of the Federal Law 'On Banks and
Banking Activities'.
The Bank of Russia took this decision because the credit
institution failed to comply with the federal banking laws and
Bank of Russia regulations, repeatedly violated within a year the
requirements of Article 6 and 7 (excluding Clause 3 of Article 7)
of the Federal Law "On Countering the Legalisation (Laundering)
of Criminally Obtained Incomes and the Financing of Terrorism"
and Bank of Russia regulations issued in pursuance thereof, and
was incapable of satisfying creditors' pecuniary claims, as well
as with due regard to the measures stipulated by the Federal Law
"On the Central Bank of the Russian Federation (Bank of Russia)"
repeatedly applied against the bank within a year.
The Bank of Russia, by its Order No. OD-2034, dated July 20,
2017, appointed a provisional administration to Mezhtopenergobank
PAO for the period until the appointment of a receiver pursuant
to the Federal Law "On Insolvency (Bankruptcy)" or a liquidator
under Article 23.1 of the Federal Law "On Banks and Banking
Activities". In accordance with federal laws, the powers of the
credit institution's executive bodies have been suspended.
Mezhtopenergobank PAO is a member of the deposit insurance
system. The revocation of the banking license is an insured event
as stipulated by Federal Law No. 177-FZ "On the Insurance of
Household Deposits with Russian Banks" in respect of the bank's
retail deposit obligations, as defined by law. The said Federal
Law provides for the payment of indemnities to the bank's
depositors, including individual entrepreneurs, in the amount of
100% of the balance of funds but no more than a total of RUR1.4
million per one depositor.
MOBILE TELESYSTEMS: S&P Affirms 'BB+' CCR, Outlook Developing
-------------------------------------------------------------
S&P Global Ratings said that it has revised its outlook on
Russian mobile operator Mobile TeleSystems PJSC (MTS) to
developing from positive and affirmed its 'BB+' long-term
corporate credit rating on the company.
S&P said, "At the same time, we affirmed our 'BB+' rating on MTS'
senior unsecured debt.
"The revision of our outlook on MTS follows our placement of
Sistema, the 50% parent of MTS, on CreditWatch with negative
implications due to uncertainties stemming from the potential
indirect impact on MTS from the outcome of Rosneft's Russian
ruble (RUB) 170.6 billion (equivalent to $3 billion) claim to
Sistema (see "Russian Holding Company Sistema 'BB' Rating Placed
On Watch Negative On Pending Court Decision," published July 18,
2017, on RatingsDirect). We see potential pressures on our rating
on MTS if the claim results in a multi-notch downgrade of
Sistema, or if MTS' shareholder distributions are above our base-
case scenario. At the same time, in the absence of a material
negative impact of the claim on Sistema, or if MTS' links with
Sistema weaken, we could upgrade MTS by one notch to 'BBB-',
which is the same level as our stand-alone credit profile (SACP)
on the company. In order for us to upgrade MTS, we would first
need to raise our foreign currency rating on Russia and upwardly
revise our Transfer and Convertibility (T&C) assessment on the
country because MTS is not an exporter and does not have
significant access to foreign currency-denominated revenue.
"The developing outlook on MTS reflects our view that we could
upgrade or downgrade MTS depending on the outcome of Sistema's
litigation with Rosneft and its indirect impact on MTS.
"We could lower the rating on MTS if we downgrade Sistema by more
than one notch, which could result from any material pressure on
Sistema's liquidity or financial risk profile. Rating downside
could also stem from MTS' shareholder distributions exceeding our
base-case assumptions and resulting in pressure on MTS' credit
metrics.
"We could raise the ratings on MTS if we upgrade the sovereign
and raise our T&C assessment for Russia, provided our assessment
of MTS' SACP remains at least 'bbb-', and the pressure on Sistema
eases, or MTS' links with Sistema weaken. In the current
governance setup, we believe that our rating on MTS can be no
more than two notches higher than our ratings on Sistema. To
consider an upgrade of MTS, we would look for the adjusted debt-
to-EBITDA ratio remaining consistently below 2x and discretionary
cash flow generation at close to breakeven levels. An upgrade
would also hinge on MTS having a supportive financial policy."
POWER MACHINES: Moody's Lowers CFR to B2, Outlook Negative
----------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating and the probability of default rating of Power Machines
PJSC (PM) -- a Russian manufacturer of electric power generation
equipment -- to B2 from B1 and B2-PD from B1-PD, respectively.
The outlook on the ratings is negative.
The rating action concludes Moody's review process that was
initiated on April 4, 2017.
The downgrade reflects Moody's expectation that PM's already weak
financial profile -- as reflected by leverage in the high single
digits and a sizable negative free cash flow -- will likely
deteriorate further in 2017, with limited prospects of a material
recovery. Moreover, Moody's is concerned that such deterioration
will create pressure on the company's liquidity.
RATINGS RATIONALE
PM's B2 corporate family rating reflects Moody's view that the
company's margins will likely deteriorate, and operating cash
flow will remain significantly negative in 2017, resulting in a
further increase in its already elevated leverage, as seen by its
adjusted debt/EBITDA of 9x at end-2016.
Moody's view considers the lack of new contracts signed in 2016,
potential losses from some large contracts and delays in the
implementation of some signed contracts. PM's order book is now
dominated by large scale and complex contracts, with a
significant construction component. As a result, the average
duration of the contracts has increased to 7-10 years from 2-3
years, while advance payments from customers currently do not
exceed 10%-15% of total contract value compared to 30%-50% in the
past.
Moody's notes that PM has to contend with reduced demand in
Russia's weak domestic market for electric power generation
equipment, price pressure in highly competitive export markets,
as well as high industry, customer and contract concentration.
Given the weakness in PM's credit metrics and the lack of
positive shifts in demand for its products and services, the
company's financial metrics will likely not improve materially
before 2019.
PM's financial profile could recover in the longer term, as the
company progresses with the implementation of its largest
contracts, including export contracts. PM's portfolio of
contracts has been solid totaling $5.9 billion at end-2016, which
together with its sizable share in Russia's market, supports PM's
B2 rating. At the same time, given the market and project
management challenges, PM has yet to prove its ability to
consistently deliver in line with the cash inflow schedule under
its portfolio of contracts.
Given its weak cash flow generation, PM's liquidity remains
dependent on its access to external funding. Nevertheless,
Moody's regards PM's liquidity position over the next 12 months
as adequate, due to shareholder support for the company. In
particular, PM benefits from access to long-term and low-cost
loan facilities provided by its shareholders.
Moody's also notes the company's established relationships with
Russia's state banks and their supportiveness of the company.
PM's cash reserves of around $280 million in mid-2017 and
availabilities under committed backup facilities should cover its
liquidity needs through mid-2018. However, over the longer term,
its liquidity profile will depend on its internal cash
generation, the continued availability of shareholder funding,
and the company's ability to remain compliant with bank covenants
and maintain access to the banks.
The negative ratings outlook reflects the risk of a further
sustainable deterioration of the company's already weak financial
profile over the next 12-18 months, which could challenge its
liquidity and the prospects of recovery to levels more
commensurate with the B2 ratings level.
Given the negative outlook, Moody's does not foresee any upward
pressure on the ratings over the near to intermediate term.
The ratings could be downgraded if: 1) Moody's sees no sign of
PM's progress in terms of the intake of new contracts and/or PM's
cash inflow deviates materially from the current schedule under
its portfolio of contracts, 2) the prospects of a recovery in
PM's financial profile become remote, or 3) the company's
liquidity weakens.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global
Manufacturing Companies published in June 2017.
Headquartered in St. Petersburg, Power Machines PJSC (PM) is a
manufacturer of a wide range of electric power generating
equipment (turbines, generators, boilers and other equipment). It
also provides integrated solutions for electric power plants of
all types and sizes. 100% of PM's share capital is indirectly
controlled by Mr. Aleksey A. Mordashov.
In 2016, PM generated revenue and adjusted EBIT of $1.2 billion
and $69.3 million, respectively.
=============================
S L O V A K R E P U B L I C
=============================
RAPID LIFE: Faces Bankruptcy, No Recovery for Clients
-----------------------------------------------------
The Slovak Spectator reports that the Kosice-based insurance
company Rapid Life has gone bankrupt.
In mid-July, the National Bank of Slovakia announced that they
imposed a receivership, or government-appointed administrator, on
the insurance company, The Slovak Spectator relates.
According to The Slovak Spectator, Vladimir Dvoracek from NBS
stated as quoted by the Sme daily, "The insurer is insolvent and
does not have enough finances to pay its clients and cover its
operation."
The administrator, Irena Sopkova, confirmed that she will file
the official motion for the company to be sent into the
bankruptcy procedure, The Slovak Spectator relays.
"It is 99% sure that clients will receive nothing from Rapid
Life," Ms. Sopkova said, explaining that the insurer has
accumulated millions of euros in debts.
Rapid Life has some EUR65,000 in its accounts, but all the money
has been blocked for distrainment, The Slovak Spectator
discloses.
The NBS recommends that clients no longer pay insurance to Rapid
Life, The Slovak Spectator states. The administrator will file a
criminal complaint against the former management of the company,
according to The Slovak Spectator.
=========
S P A I N
=========
CAIXABANK CONSUMO 3: Moody's Rates Series B Notes (P)B3 (sf)
------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to notes to be issued by CAIXABANK CONSUMO 3, FONDO DE
TITULIZACION:
-- EUR[2,278.5 million] Series A Floating Rate Asset Backed
Notes due March 2053, Assigned (P)A2 (sf)
-- EUR[171.5 million] Series B Floating Rate Asset Backed Notes
due March 2053, Assigned (P)B3 (sf)
RATINGS RATIONALE
The transaction is a static cash securitisation of unsecured
consumer loans as well as consumer loans backed by mortgages and
consumer drawdowns of related mortgage lines of credit extended
to obligors in Spain by CaixaBank, S.A. (CaixaBank) (Baa1(cr)/P-
2(cr), Baa2 LT Bank Deposits).
The provisional portfolio of underlying assets consists of
unsecured and secured debt obligations originated in Spain for a
total balance of c. EUR[2.93]bn, from which a final pool will be
selected, based on certain eligibility criteria, funded by the
issued notes equal to an amount of EUR[2.45]bn.
As at June 22, 2017, the provisional pool cut contains [323,586]
contracts with a weighted average seasoning of [3.02] years. The
portfolio consists of unsecured consumer loans and consumer loans
backed by mortgages or consumer drawdowns of related mortgage
lines of credit. Approximately [72.53]% of the pools is composed
of unsecured consumer loans, used for several purposes, such as
property improvement, car acquisition or repair and other
undefined or general purposes. Drawdowns of mortgage lines of
credit constitute [24.61]% of the pool, and mortgage loans make
up [2.86]%. [32.56]% of the pool are pre-approved loans where the
borrower was granted an unsecured consumer loan up to a maximum
amount without the need to go through an ad-hoc approval process
flow, as this amount was approved in advance.
According to Moody's, the transaction benefits from credit
strengths such as the granularity of the portfolio, the high
excess spread and the financial strength and securitisation
experience of the originator. However, Moody's notes that the
transaction features some credit weaknesses such as the
amortisation of the reserve fund lacking performance triggers and
a floor in terms of initial notes balance, and the high degree of
linkage to CaixaBank. In addition, the transaction is exposed to
interest rate risk due to the absence of a swap, given that the
notes pay floating and the assets pay a mixture of fixed rates
and floating rates referencing a variety of indices. Commingling
risk is partly mitigated by the transfer of collections to the
issuer account on a daily basis.
Moody's analysis focused, amongst other factors, on (i) an
evaluation of the underlying portfolio of loans and the
eligibility criteria; (ii) historical performance information of
the total book and past ABS and RMBS transactions; (iii) the
credit enhancement provided by subordination and the reserve
fund; (iv) the static nature of the portfolio; (v) the liquidity
support available in the transaction by way of principal to pay
interest and the reserve fund; and (vi) the overall legal and
structural integrity of the transaction.
MAIN MODEL ASSUMPTIONS
Moody's determined a portfolio lifetime expected mean default
rate of 7.0%, expected recoveries of 30% and Aa2 portfolio credit
enhancement ("PCE") of 17.5% related to the combined pool of
unsecured and secured receivables. The expected defaults and
recoveries capture Moody's expectations of performance
considering the current economic outlook, while the PCE captures
the loss Moody's expects the portfolio to suffer in the event of
a severe recession scenario. Expected defaults and PCE are
parameters used by Moody's to calibrate its lognormal portfolio
loss distribution curve and to associate a probability with each
potential future loss scenario in its ABSROM cash flow model to
rate consumer ABS transactions.
METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in
September 2015.
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 by the legal final maturity of the Class A
notes only. Moody's ratings address only the credit risks
associated with the transaction. Other non-credit risks have not
been addressed but may have a significant effect on yield to
investors.
Please note that on March 22, 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 Rating on CAIXABANK CONSUMO
3, FONDO DE TITULIZACION is not expected to 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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE
RATINGS:
Factors that may cause an upgrade of the ratings include a
significantly better than expected performance of the pool
together with an increase in credit enhancement of the notes.
Factors that may cause a downgrade of the ratings include a
decline in the overall performance of the pool and a significant
deterioration of the credit profile of the originator CaixaBank,
S.A.
LOSS AND CASH FLOW ANALYSIS:
Moody's used its cash flow model ABSROM as part of its
quantitative analysis of the transaction. ABSROM enables users to
model various features of a standard European ABS transaction -
including the specifics of the loss distribution of the assets,
their portfolio amortisation profile, yield as well as the
specific priority of payments, swaps and reserve funds on the
liability side of the ABS structure. The model is used to
represent the cash flows and determine the loss for each tranche.
The cash flow model evaluates all loss scenarios that are then
weighted considering the probabilities of the lognormal
distribution assumed for the portfolio loss rate. In each loss
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 loss scenario; and (ii)
the loss derived from the cash flow model in each loss scenario
for each tranche.
STRESS SCENARIOS:
In rating consumer loan ABS, the mean default rate and the
recovery rate are two key inputs that determine the transaction
cash flows in the cash flow model. Parameter sensitivities for
this transaction have been calculated in the following manner:
Moody's tested 9 scenarios derived from the combination of mean
default: 7.0% (base case), 8.0% (base case +1%), 9.0% (base case
+ 2.0%) and recovery rate: 30.0% (base case), 20% (base case -
10%), 10% (base case - 20.0%). The 7.0%/30% scenario would
represent the base case assumptions used in the initial rating
process. At the time the rating was assigned, the model output
indicated that Class A would have achieved Baa1 even if the mean
default was as high as 9% with a recovery as low as 10% (all
other factors unchanged). Class B would have achieved Caa3 in the
same scenario.
VALENCIA HIPOTECARIO 2: Fitch Affirms CCC Rating on Cl. D Notes
----------------------------------------------------------------
Fitch Ratings has upgraded three tranches of three Valencia
Hipotecario RMBS transactions and affirmed eight tranches:
Valencia Hipotecario 1, Fondo de Titulizacion de Activos:
Class A (ISIN ES0382744003): affirmed at 'AA+sf'; Outlook Stable
Class B (ISIN ES0382744011): upgraded to 'AA+sf' from 'AA-sf';
Outlook Stable
Class C (ISIN ES0382744029): affirmed at 'Asf'; Outlook Stable
Valencia Hipotecario 2, Fondo de Titulizacion de Hipotecaria:
Class A (ISIN ES0382745000): affirmed at 'AA+sf'; Outlook Stable
Class B (ISIN ES0382745018): upgraded to 'A+sf' from 'A-sf';
Outlook Stable
Class C (ISIN ES0382745026): upgraded to 'BBBsf' from 'BB+sf';
Outlook Stable
Class D (ISIN ES0382745034): affirmed at 'CCCsf'; revised
Recovery Estimate 90% from 50%
Valencia Hipotecario 3, Fondo de Titulizacion de Activos:
Class A2 (ISIN ES0382746016): affirmed at 'AA-sf'; Outlook Stable
Class B (ISIN ES0382746024): affirmed at 'BBBsf'; Outlook Stable
Class C (ISIN ES0382746032): affirmed at 'BB+sf'; Outlook Stable
Class D (ISIN ES0382746040): affirmed at 'CCCsf'; revised
Recovery Estimate 90% from 70%
The transactions comprise residential mortgage loans serviced by
CaixaBank, S.A. (BBB/Positive/F2) in Spain.
KEY RATING DRIVERS
Credit Enhancement (CE) Trends
All three transactions include amortisation mechanisms that allow
the notes to be paid down pro-rata rather than sequentially as
long as performance and tranche thickness (tranche size relative
to total outstanding) triggers are fulfilled. Fitch views the
available and projected CE across the series sufficient to
withstand the associated rating stresses, which is reflected in
the affirmations and upgrades.
Valencia Hipotecario 1's CE trends are expected to increase as
the transaction will soon revert to sequential amortisation, as
its portfolio balance is near the 10% limit as defined by
transaction documents and pro-rata amortisation will no longer be
permitted. CE for the senior notes of Valencia Hipotecario 2 and
3 is expected to remain broadly stable, as both transactions are
most likely to revert to or maintain pro-rata amortisation of the
notes as long as performance triggers are satisfied.
Stable Asset Performance
The securitised mortgage portfolios have built some substantial
seasoning between 12 and 15 years. As such, the weighted average
current loan-to-value (LTV) ratios have dropped to between 26%
and 40%, compared with the weighted average original LTV of
around 70%, and support Fitch's view that credit performance will
remain stable in the near term.
The transactions have three-month plus arrears (excluding
defaults) ranging between 0.3% (Valencia Hipotecario 1) and 1.1%
(Valencia Hipotecario 2) of the portfolio outstanding balance,
and cumulative gross defaults (defined as loans in arrears for
more than 18 months) ranging between 0.5% and 3.6% of the initial
portfolio balance for Valencia Hipotecario 1 and 3, respectively.
Geographic Concentration Risk
Fitch has applied a 15% increase to the base foreclosure
frequency assumption for loans located in regions that represent
each more than 35% of the portfolio balance, such as Valencia,
which makes up 60% to 70% of the portfolios.
Restructured Loan Exposure
Fitch has received additional data that shows loan maturity
extensions have taken place in the range between 8.3% (Valencia
Hipotecario 1) and 1.6% (Valencia Hipotecario 2) of the
outstanding collateral balance. In the absence of sufficient
payment history data for such loans, Fitch has added their
balance to the three months plus arrears bucket, which is linked
to a higher default probability assumption.
RATING SENSITIVITIES
The ratings of the senior notes of Valencia Hipotecario 1 and 2
are sensitive to changes in Spain's Country Ceiling of 'AA+sf'
and also to changes to the highest achievable 'AA+sf' rating for
Spanish structured finance notes.
The rating of Valencia Hipotecario 1 class C is sensitive to
changes in the respective SPV account bank's rating (Barclays
Bank, A/Stable/F1), as the transaction cash reserves are kept at
this bank account representing the only source of CE for this
tranche.
A worsening of the Spanish macroeconomic environment, especially
employment conditions or an abrupt shift of interest rates could
jeopardise the underlying borrowers' affordability. This could
have negative rating implications, especially for junior tranches
that are less protected by structural CE.
===========================
U N I T E D K I N G D O M
===========================
CYAN BLUE: Moody's Lowers CFR to B2, Outlook Stable
---------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating (CFR) of the UK online gaming operator Cyan Blue Holdco 2
Limited (Sky Bet) to B2 from B1 as well as its probability of
default rating (PDR) to B2-PD from B1-PD. Concurrently, Moody's
has assigned a (P)B2 rating to the proposed GBP810 million
equivalent senior secured term loan B due 2024, and will
subsequently withdraw the B1 rating of the existing GBP340
million TLB due 2022, issued by Cyan Blue Holdco 3 Limited, a
subsidiary of Sky Bet. Moody's has also assigned a (P)B2 rating
to the proposed extended GBP35 million senior secured revolving
credit facility (RCF) due 2023, to be borrowed by Cyan Blue
Holdco 3 Limited and Cyan Bidco Limited, an indirect subsidiary
of Sky Bet, and will subsequently withdraw the B1 rating of the
existing GBP35 million RCF due 2021. The outlook on all ratings
is stable.
The proceeds from the GBP810 million new TLB together with
surplus cash (cash in excess of GBP40 million) will be used to
repay the existing GBP340 million TLB, to make a distribution to
the shareholders (via repayment of the shareholder loans and cash
dividends), and to pay the transaction fees. Based on March 2017
pro forma cash position, the distribution is expected to be
around GBP481 million. At close, Moody's expects Sky Bet to have
GBP40 million of cash in the balance sheet, pro forma for the
repayment of GBP83 million vendor loan to Sky plc (Sky, Baa2
developing), and GBP35 million of undrawn RCF.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary
credit opinion regarding the transaction only. Upon a conclusive
review of the final documentation, including any possible changes
during the syndication process, Moody's will endeavor to assign a
definitive rating to the facilities. A definitive rating may
differ from a provisional rating.
RATINGS RATIONALE
The action largely reflects the material increase in Moody's
adjusted leverage to approximately 5.8x from 2.5x, pro forma with
this transaction, and based on last twelve months to March 2017
EBITDA, as well as the ability within the shareholder-friendly
senior facilities documentation to increase total net leverage to
6.25x through the use of incremental facilities.
However, Moody's expects Sky Bet to continue to grow at
attractive pace over the next 12 to 18 months, resulting in a
rapid deleveraging to around 4.6x by the end of fiscal year 2019,
and to continue to generate strong cash flow. Such growth is
supported by favourable industry fundamentals, the benefits from
the commercial relationship with Sky plc, providing brand
strength and direct channels for sourcing new customers, and
continued investments in technology and marketing.
These positives provide strong mitigants to (1) ongoing
regulatory pressures and tax increases such as the 10% horse
racing levy from April 2017 and the new regime for free play on
online gaming from August 2017; (2) the highly competitive nature
of the on-line gaming industry, with limited differentiation in
offer between players, no clear market leader, high customer
churn and a reliance on marketing and free bet offers to win new
customers and the fact that Sky Bet is now competing with fewer
but larger gaming companies following a consolidation wave over
the last three years; (3) its exposure to sports results
volatility; and (4) the limited geographic and business diversity
outside the UK, as the recent investments in the Italian and
German markets are likely to positively contribute to the EBITDA
in a few year time.
LIQUIDITY
Moody's considers Sky Bet's liquidity position to be good for its
near-term requirements with GBP40 million of unrestricted cash at
close, full availability under its GBP35 million RCF, low capital
expenditure and negative working capital. Excluding the effect of
the current transaction, free cash flow to debt is expected to
exceed 10% per annum going forward, resulting in a significant
cash build-up which is however permitted to be used for dividend
distributions subject to restricted payment tests within the
documentation. The facilities have to comply with a net leverage
ratio of 8.25x, which will be tested only when the RCF is drawn
by more than GBP20 million.
STRUCTURAL CONSIDERATIONS
Using Moody's Loss Given Default for Speculative-Grade Companies
methodology, the probability of default rating B2-PD is in line
with the B2 CFR. This is based on a 50% recovery rate, as is
typical for transactions with capital structures including first
lien bank loans with covenant-lite documentation. The debt
facilities, are all (P)B2 rated, as they rank pari passu; are
secured over all material assets of Sky Bet and its subsidiaries,
except for the SPV which holds the Sky brand license agreement
(Cyan Blue IPco Limited), and subject to an 85% guarantor
coverage test.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's view that Sky Bet will
continue to grow its revenue and EBITDA and de-lever towards 4.5x
over the next 12 to 18 months. The stable outlook also assumes
that the group will maintains its existing relationship with Sky
and that it will not engage in material debt-funded acquisitions
or further shareholder distributions.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Positive pressure on the ratings could arise over time if (1)
Moody's adjusted debt/EBITDA falls towards 4.0x on a sustainable
basis; (2) free cash flow to debt trends towards above 10%, and
(3) the company maintains good liquidity.
Negative ratings pressure could develop if (1) the company fails
to de-lever below 5.5x by fiscal year end June 30, 2018; (2) free
cash flow to debt turns negative (excluding the impact of the
July 2017 refinancing); (3) liquidity concerns arise; or (4)
aggressive financial policies lead to a re-leveraging.
LIST OF AFFECTED RATINGS
Downgrades:
Issuer: Cyan Blue Holdco 2 Limited
-- LT Corporate Family Rating, Downgraded to B2 from B1
-- Probability of Default Rating, Downgraded to B2-PD from B1-PD
Assignments:
Issuer: Cyan Blue Holdco 3 Limited
-- Backed Senior Secured Bank Credit Facility, Assigned (P)B2
Outlook Actions:
Issuer: Cyan Blue Holdco 2 Limited
-- Outlook, Remains Stable
Issuer: Cyan Blue Holdco 3 Limited
-- Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Gaming
Industry published in June 2014.
Sky Bet, based in Leeds (UK), is a leading operator of on-line
betting and gaming in the UK. For the last twelve month to March
31, 2017, the company generated net revenues of GBP488 million
and reported an EBITDA of GBP140 million.
The company is owned by funds managed by CVC Capital Partners and
Sky plc.
HSS FINANCING: S&P Lowers CCR to 'B+' on Weaker Profitability
-------------------------------------------------------------
S&P Global Ratings lowered its long-term corporate credit ratings
on HSS Hire Group PLC and its 100% owned subsidiary HSS Financing
PLC to 'B+'. The outlook is stable.
S&P said, "At the same time, we lowered our issue rating on the
group's outstanding GBP136 million senior secured fixed-rate
notes due 2019 to 'BB-' from 'BB'. Our recovery rating on these
notes is unchanged at '2', indicating our expectation for a
substantial (70%) recovery in the event of a payment default."
As a leading equipment rental provider in the U.K. business-to-
business market, HSS Hire operates in a well-penetrated and
highly competitive environment. Market players continue to price
aggressively and differentiate themselves on speed and quality of
service.
Against this difficult backdrop, the company has incurred sizable
one-off costs associated with its gradual shift from one
operating model to another. HSS restructured its logistics
network and effectively ran two distribution networks at the same
time during the transition (from one to another). This resulted
in lower-than-expected profitability, weaker credit metrics, and
higher-than-expected pressure on cash flows and liquidity versus
S&P's base case.
HSS Hire continues to proactively adapt its distribution
model/footprint and capture volumes. S&P said, "We anticipate
that recent efforts to restructure and optimize its distribution
network should help support EBITBA margin improvement, but we
expect tough market conditions and aggressive competition to
weigh on profitability, with credit metrics at a level more
comfortably commensurate with a 'B+' rating going forward. In
addition, given HSS' strong geographic focus on the U.K., it
could face market headwinds arising from Brexit."
S&P's base-case operating scenario for FY2017 assumes:
-- U.K. real GDP growth of about 1.4% in 2017 and 1.3% in 2018.
-- Revenues of about GBP340 million.
-- S&P Global Ratings-adjusted EBITDA margin of 23%-24%.
-- Adjusted funds from operations (FFO) of about GBP60 million.
-- After a period of high growth and ambitious capital
expenditure (capex) to grow its fleet and invest in its
repair center, management has, as S&P expected, pared back
capex to protect cash flows and liquidity. S&P said,
"Overall, we anticipate that the company could invest up to
GBP38 million in FY2017. We note that HSS Hire can quickly
reduce discretionary investment capex to preserve liquidity
demand starts to drop off, a factor that is key to our base
case and to our assessment of liquidity as adequate."
-- No major acquisitions or divestitures.
This results in the following credit measures in 2017:
-- Debt to EBITDA of just over 4x; and
-- FFO to debt of about 18%-19%.
S&P said, "The stable outlook reflects our expectation that HSS
Hire's revenues will continue to grow and that its EBITDA margins
will gradually improve following the restructuring of its
logistics network. Specifically, we expect debt to EBITDA of just
more than 4x and funds from operations to debt of 18%-19% for
FY2017.
"We could lower the ratings if there were no evidence that,
following the restructuring of its logistics network, the group's
results had materially improved in the third quarter of FY2017.
We could also lower the ratings if HSS were to experience further
margin pressure or diminished cash flows, leading to weaker
credit metrics.
"More specifically, we could lower the ratings if we expected HSS
Hire's EBITDA margins to reverse their gradual expected
improvement, if debt-to-EBITDA were to trend toward 5x, or FFO to
debt were to trend toward 12% in 2017. In addition, if we were to
assess HSS Hire's liquidity as less than adequate, we could also
lower the ratings.
"We could raise the ratings if HSS Hire's credit metrics were to
recover to a level more comfortably commensurate with a 'BB-'
rating, specifically debt to EBITDA of under 4x and FFO to debt
of more than 20%, supported by at least adequate liquidity."
KUWAIT ENERGY: Fitch Cuts LT Issuer Default Rating to 'CCC'
-----------------------------------------------------------
Fitch Ratings has downgraded Kuwait Energy plc's Long-Term Issuer
Default Rating (IDR) to 'CCC' from 'B-' and the senior unsecured
rating on its USD250 million 9.5% notes, due in 2019 to 'CCC'
from 'B-'. The Recovery Rating is 'RR4'. Fitch has removed these
ratings from Rating Watch Negative.
Fitch believes the probability of default has increased due to
market conditions not allowing completion of the IPO in H117, and
without there being available alternative sources of long-term
funding, which are needed to repay upcoming convertible bond
payments, finance capex and improve liquidity. With no
immediately available undrawn credit facilities, liquidity over
the next 12 months is expected to stay below USD50 million. The
intention to launch an IPO is still being considered, as well as
other financing arrangements, with more clarity expected later on
in the year. Volatile oil markets and geopolitical concerns over
MENA may impact investor sentiment. As soon as longer-term
financing is obtained, Fitch will re-evaluate Kuwait Energy's
liquidity and rating. Failure to obtain long-term financing may
lead to further negative action.
KEY RATING DRIVERS
Low Cash Balances, Liquidity: At end-June 2017, Kuwait Energy's
cash balance had improved to USD64 million, up from around USD27
million at end-March 2017 due to receipts and upfront payments
from EGPC, Block 9 and the Siba farm-out, and divestment proceeds
from the 2016 sale of the 25% stake in Abu Sennan. Fitch expects
cash to fall to under USD25 million at year-end due to continued
high capex payments, principally on greenfield development capex
in Iraq, the time lag on cash receipts from Block 9, and cash
outflows from the convertible bond should it not convert to
equity.
Approaching Debt Maturities: This latest cash position
incorporates net USD47 million received from Vitol pursuant to
the USD100 million December 2016 forward sale agreement, under
which the company receives prepayments for future oil deliveries.
Fitch expects the cash cushion to fall to USD13 million by May
2018 and before the July 2018 coupon on the bond, meaning there
is increasing risk of default as debt maturities come closer,
especially if unexpected events occur, including adverse changes
to oil prices, further project delays and working-capital swings.
Small MENA Oil Producer: Kuwait Energy is a small Middle East and
North Africa (MENA-focused) oil and gas exploration and
production (E&P, or upstream) company with an average working
interest (WI) production of 26.9 thousand barrels of oil
equivalent per day (mboepd) over Q117. This is the highest WI
average since Q115, as block 9 Iraq continues to ramp up
production which helps combat falling production from Egypt.
Falling Egyptian Production: In 2016 Kuwait Energy's oil
production came from Egypt (B/Stable, 74%), Iraq (B-/Stable, 16%)
and Oman (BBB/Negative, 10%). Q117 production was 60% from Egypt,
30% from Iraq and 10% from Oman. The company's four Egyptian
assets had WI production of 18.2mboepd in 2016, down 13% yoy due
to natural factors. This has continued to fall into 2017 with
Egypt having WI production of 16.3mboepd over Q117. Kuwait Energy
is ramping up production in Iraq, where its WI production
increased six-fold in 2016 to 4.3mboepd and was 8mboepd during
Q117. Its operations in Yemen have been on hold since March 2015
when the civil war broke out there.
At end-2016 Kuwait Energy's proved and probable (2P) reserves
were 810 million barrels of oil equivalent (mmboe), over 96% of
which are located in Iraq, same as end-2015. Its 2P reserves in
Egypt of 27mmboe imply a reserve life of only about five years,
based on Q12017 production volumes. Kuwait Energy's total
hydrocarbon production and reserves are in line with those of
Fitch-rated 'B' oil companies.
Risks around Block 9 Ramp-up: Kuwait Energy has been accelerating
the development of its Greenfield Block 9 in Iraq during its
early production programme, in which it has a 60% WI. Currently,
three wells - Faihaa-1, 2 and 3 - are producing around 8mbopd on
a WI basis over Q12017, up from 6.5mbopd in 4Q16, when only two
wells were producing. Two additional wells remain planned for
2017 and one in 2018, which could increase WI to a maximum of
18mbopd (Kuwait Energy's share). The ramp-up has been slightly
slower than expected, with risks remaining over the Iraqi
government's liquidity and to a lesser extent over the support
for ramped-up production from the area.
Block 9 Improves Diversification: Block 9 is currently operating
under the exploration portion of the contract, with a 20-year
service-type take-or-pay contract with Iraqi state-owned Basra
Oil Company yet to be agreed from 2019, with service fees of
USD6.2 per barrel of oil equivalent (boe). Fitch believes that
Block 9, when fully operational, should help Kuwait Energy
diversify oil production away from Egypt, albeit subject to
production and payment risks.
Siba Delays Pressure Liquidity: Siba, a greenfield gas project in
Iraq, has been delayed beyond the 2H16 full-scale production
launch expected last year. Siba is a 20-year take-or-pay
agreement with Basra Oil Company, with a plateau production of
100 million cubic feet of gas per day (mmcf/d) and USD7.5/boe
service fees. The project has been delayed further from 2H17 to
completion in 2018, with Kuwait Energy pushing for first gas to
commence by January 2018.
In 1H17 Kuwait Energy finalised the farm-out of the 20% stake in
Siba to EGPC. Kuwait Energy received USD35 million from EGPC on
the deal closing in June 2017. The farm-out benefits the company
by reducing its cash capex payments to Siba, while the company
will still be able to receive its proportionate share of revenues
after the project becomes operational. However, the longer the
project is delayed, the more liquidity is squeezed for the
company.
DERIVATION SUMMARY
Kuwait Energy has similar production scale to other 'B' rated
EMEA upstream companies such as Kosmos Energy (B/Stable,
production of 19.2mboepd in 2016) and Seven Energy (RD,
14.2mboepd), although Kuwait Energy's output is slightly larger
and more diversified geographically. The company is currently
developing production assets in Iraq, which has stretched its
liquidity due to project delays. It is also currently heavily
reliant on the state-owned Egyptian General Petroleum Corporation
(EGPC) for most of its oil liftings and cash inflows and these
have historically being recovered in a timely manner. No country-
ceiling, parent/subsidiary or operating environment aspects
impacts the rating.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case include:
- Brent oil price deck at USD52.5/bbl in 2017, USD55/bbl in
2018,
USD60/bbl in 2019;
- production volumes in line with the company's guidance with a
haircut of 10% applied from 2017 onwards on lower expected
Block 9 ramp-up and delays on Siba launch;
- service fees for Iraqi production of USD7.5/boe for Siba and
USD6.2/boe for Block 9;
- no dividends;
- 2017 to 2018 capex of around USD185 million mainly to complete
Siba and to ramp-up Block 9 production;
- capex then jumps up considerably on Block 9 stage 2 ramp-up of
production from 2019;
- no refinancing included.
Fitch's key assumptions for bespoke recovery analysis include:
- The recovery analysis assumes that Kuwait Energy plc would be
considered a going-concern in bankruptcy and that the company
would be reorganized rather than liquidated. Fitch has North
Westerly CLO IV 2013 assumed a 10% administrative claim.
- Kuwait Energy plc's going-concern EBITDA is based on expected
2017 EBITDA and reflects Fitch's view of a sustainable, post-
reorganization EBITDA level upon which Fitch base the valuation
of the company. The going- concern EBITDA is about 30% below
expected 2017 EBITDA to reflect the risks associated with oil
price volatility, potential project delays and other factors. On
the other hand, it captures the progress that Kuwait Energy plc
has made with Block 9 drilling and production program and the
track record of cost recovery in Iraq and Egypt. The going-
concern EBITDA is approximately equal to the average EBITDA from
2015-2016, which covered a period of depressed oil prices and
project delays.
- An EV multiple of 4.5x is used to calculate a post-
reorganization valuation and reflects a mid-cycle multiple for
oil & gas and metals & mining companies in the EMEA region. The
estimate considered that Kuwait Energy plc does not have any
unique characteristic that would allow for a higher multiple,
such as significant market share, or undervalued assets.
- The drawn portion of the USD100 million Vitol facility is
treated super senior to USD100 million convertible notes and
USD250 million unsecured notes in the waterfall.
- The waterfall results in a 76% recovery corresponding to RR2
recovery for the USD250 million unsecured notes. The recovery
ratings are capped at RR4 as most of Kuwait Energy plc's physical
assets are located in Egypt and Iraq.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
- Success in obtaining long-term financing, conversion of
convertible bonds to equity or successful launch of and stable
production from Iraqi greenfields leading to a significant
liquidity buffer in the form of available cash or committed
facilities at each quarter-end.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
- Default becoming probable, including a payment default or a
debt restructuring in a form Fitch would consider a distressed
debt exchange.
LIQUIDITY
Stretched Liquidity: The company has been unable to secure any
longer-term funding which has pressurised liquidity, ie cash
balances continuing to stay below USD50 million, and with no
available unused credit facilities to draw on.
At end-June 2017, Kuwait Energy's cash balance had improved to
USD64 million, up from around USD274 million at end-March 2017.
However, cash is forecast to fall to under USD25 million by the
end of December 2017 and then fall further to USD13 million by
the end of May 2018 and before the July 2018 coupon on the bond,
meaning there is increasing risk of default as debt maturities
come closer, especially if unexpected events occur or if no
additional financing is available.
FULL LIST OF RATING ACTIONS
Kuwait Energy plc
- Foreign-Currency Long-Term Issuer Default Rating downgraded to
'CCC' from 'B-'; RWN off
- Senior unsecured long-term rating downgraded to 'CCC'/RR4 from
from 'B-'/RR4
STORM FUNDING: August 8 Proofs of Debt Submission Deadline Set
--------------------------------------------------------------
The Joint Administrators of Storm Funding Limited intend to make
a distribution (by way of paying an interim dividend) to the
preferential creditors (if any) and to the unsecured, non-
preferential creditors of Storm.
Proofs of debt may be lodged at any point up to (and including)
August 8, 2017. Creditors however are requested to lodge their
proofs of debt at the earliest possible opportunity.
Creditors may be required to provide further details or produce
documents or other evidence to their claims as the Joint
Administrators deem necessary.
The Joint Administrators will not be obliged to deal with proofs
lodged after the last date for proving but they may do so if they
think fit.
The Joint Administrators intend to make the announced
distribution within the period of two months from the last date
of proving claims.
For further information, contact details, and proof of debt
forms, please visit https://is.gd/wrXzq9
Creditors must complete and return a proof of debt form together
with relevant supporting documents, to PricewaterhouseCoopers
LLP, 7 More London Riverside, London SE1 2RT marked for the
attention of Alison Lieberman. Alternatively, creditors can
email a completed proof of debt form to storm.claims@uk.pwc.com
===============
X X X X X X X X
===============
* BOOK REVIEW: Transnational Mergers and Acquisitions
-----------------------------------------------------
Author: Sarkis J. Khoury
Publisher: Beard Books
Softcover: 292 pages
List Price: $34.95
Review by Gail Owens Hoelscher
Order your personal copy today at http://is.gd/hl7cni
Transnational Mergers and Acquisitions in the United States will
appeal to a wide range of readers. Dr. Khoury's analysis is
valuable for managers involved in transnational acquisitions,
whether they are acquiring companies or being acquired
themselves.
At the same time, he provides a comprehensive and large-scale
look at the industrial sector of the U.S. economy that proves
very useful for policy makers even today. With its nearly 100
tables of data and numerous examples, Khoury provides a wealth of
information for business historians and researchers as well.
Until the late 1960s, we Americans were confident (some might say
smug) in our belief that U.S. direct investment abroad would
continue to grow as it had in the 1950s and 1960s, and that we
would dominate the other large world economies in foreign
investment for some time to come. And then came the 1970s, U.S.
investment abroad stood at $78 billion, in contrast to only $13
billion in foreign investment in the U.S. In 1978, however, only
eight years later, foreign investment in the U.S. had skyrocketed
to nearly #41 billion, about half of it in acquisition of U.S.
firms. Foreign acquisitions of U.S. companies grew from 20 in
1970 to 188 in 1978. The tables had turned an Americans were
worried. Acquisitions in the banking and insurance sectors were
increasing sharply, which in particular alarmed many analysts.
Thus, when it was first published in 1980, this book met a
growing need for analytical and empirical data on this rapidly
increasing flow of foreign investment money into the U.S., much
of it in acquisitions. Khoury answers many of the questions
arising from the situation as it stood in 1980, many of which are
applicable today: What are the motives for transnational
acquisitions? How do foreign firms plans, evaluate, and negotiate
mergers in the U.S.? What are the effects of these acquisitions
on competition, money and capital markets; relative technological
position; balance of payments and economic policy in the U.S.?
To begin to answer these questions, Khoury researched foreign
investment in the U.S. from 1790 to 1979. His historical review
includes foreign firms' industry preferences, choice of location
in the U.S., and methods for penetrating the U.S. market. He
notes the importance of foreign investment to growth in the U.S.,
particularly until the early 20th century, and that prior to the
1970s, foreign investment had grown steadily throughout U.S.
history, with lapses during and after the world wars.
Khoury found that rates of return to foreign companies were not
excessive. He determined that the effect on the U.S. economy was
generally positive and concluded that restricting the inflow of
direct and indirect foreign investment would hinder U.S. economic
growth both in the short term and long term. Further, he found no
compelling reason to restrict the activities of multinational
corporations in the U.S. from a policy perspective. Khoury's
research broke new ground and provided input for economic policy
at just the right time.
Sarkis J. Khoury holds a Ph.D. in International Finance from
Wharton. He teaches finance and international finance at the
University of California, Riverside, and serves as the Executive
Director of International Programs at the Anderson Graduate
School of Business.
*********
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'
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Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
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Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and
Peter A. Chapman, Editors.
Copyright 2017. All rights reserved. ISSN 1529-2754.
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