/raid1/www/Hosts/bankrupt/TCREUR_Public/171123.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
Thursday, November 23, 2017, Vol. 18, No. 233
Headlines
A U S T R I A
CONSTANTIA FLEXIBLES: S&P Hikes CCR to BB Then Withdraws Rating
D E N M A R K
EVERGOOD 4: Moody's Assigns (P)B2 CFR, Outlook Stable
EVERGOOD 4: S&P Assigns Prelim 'B' LT CCR, Outlook Stable
F R A N C E
3AB OPTIQUE: Moody's Rates EUR425MM Secured Notes Due 2023 'B3'
CGG HOLDING: Files Status Report on Group's Reorganization
G E R M A N Y
ADLER REAL ESTATE: S&P Rates New Medium-Term Unsec. Notes 'BB+'
SC GERMANY 2017-1: S&P Gives Prelim BB(sf) Rating on D-Dfrd Notes
G R E E C E
GREECE: Unveils Draft Budget for Next Year, Dec. 22 Vote Set
I R E L A N D
FASTWAY LEASING: Court Appoints Jim Luby as Interim Receiver
HARBOURMASTER PRO-RATA 2: Fitch Corrects Nov. 1 Ratings Release
HARBOURMASTER PRO-RATA 3: Fitch Corrects Nov. 6 Rating Release
MANLEY CONSTRUCTION: Nenagh Work Halted After Examinership
K Y R G Y Z S T A N
KYRGYZ REPUBLIC: Moody's Affirms B2 Issuer Ratings, Outlook Stable
N E T H E R L A N D S
CONSTELLIUM NV: S&P Raises Senior Unsecured Bonds Rating to 'B-'
DUTCH MBS XVIII: Fitch Affirms 'Bsf' Rating on Class E Notes
P O L A N D
ZABRZE CITY: Fitch Affirms BB+ Long-Term IDR, Outlook Stable
R U S S I A
ARCELORMITTAL: S&P Alters Outlook to Positive & Affirms 'BB+' CCR
CB REGIONFINANCEBANK: Put on Provisional Administration
KRASNOYARSK REGION: Fitch Affirms BB+ IDR, Outlook Stable
VOLZHSKIY CITY: Fitch Affirms B+ IDR, Outlook Positive
S P A I N
CAIXABANK PYMES 9: Moody's Rates EUR222MM Series B Notes (P)Caa3
T U R K E Y
BURSA: Fitch Affirms 'BB' Issuer Default Ratings, Outlook Stable
IZMIR: Fitch Affirms 'BB+' Long-Term FC IDR, Outlook Stable
U N I T E D K I N G D O M
BRIGHTHOUSE GROUP: Bondholders Mull Debt-for-Equity Swap
SPS PRINT: Undergoes Pre-Pack Administration After CVA Fails
TAURUS 2017-2: Fitch Assigns BB(EXP) Rating to Cl. E Notes
*********
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A U S T R I A
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CONSTANTIA FLEXIBLES: S&P Hikes CCR to BB Then Withdraws Rating
---------------------------------------------------------------
S&P Global Ratings said that it raised to 'BB' from 'B+' its long-
term corporate credit rating on Austria-based packaging producer
Constantia Flexibles Holding GmbH and removed the rating from
CreditWatch with positive implications where it was placed on July
25, 2017.
S&P subsequently withdrew the rating at the company's request. The
outlook at the time of the withdrawal was stable.
S&P also withdrew the ratings on Constantia's senior secured notes
because they have been repaid.
The rating actions follow Constantia's completion of the sale of
its labels division to Multi-Color Corporation, a U.S.-based
provider of labels for consumer goods, and the subsequent debt
repayment with the proceeds from the sale. Constantia received
about EUR830 million in cash from the sale (from the total EUR1.15
billion transaction), most of which was used to repay debt, in
line with S&P's expectations. It also received about 3.4 million
Multi-Color shares and became its largest shareholder, with a
share of about 16.6% of the stock. Constantia will also be
represented in Multi-Color's board of directors.
S&P said, "As a result of the transaction, Constantia reduced its
total reported debt by about EUR830 million (from about EUR1.3
billion at year-end 2016) and we calculate S&P Global Ratings-
adjusted debt to EBITDA stabilizing at below 3.5x for the year
following the close of the transaction (from 2018 on). We expect
the funds from operations-to-debt ratio will improve to above 20%,
also supported by the company's sound cash generating ability. We
also take into account management's commitment to operate at this
level of leverage going forward, so we believe that this
improvement is sustainable. The industry remains competitive and
fragmented and consolidation is likely. We anticipate that the
company will continue to supplement its organic growth with bolt-
on acquisitions, as it has done previously. However, we expect
Constantia to retain a good grasp on integrating the newly
acquired businesses, as it did before, and its profitability
remain at least stable."
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D E N M A R K
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EVERGOOD 4: Moody's Assigns (P)B2 CFR, Outlook Stable
-----------------------------------------------------
Moody's Investors Service has assigned a provisional (P)B2
corporate family rating to Evergood 4 ApS (Nets or the company).
Concurrently, Moody's has assigned a (P)B1 instrument rating to
the EUR1,860 million first lien term loan B1E due 2025, NOK2,795
million first lien term loan B1N due 2025, and EUR200 million
revolving credit facility (RCF) due 2024, all raised by Evergood 4
ApS. The outlook on the ratings is stable.
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 conclusive review of
the final documentation, Moody's will endeavour to assign a
definitive rating to the loans. A definitive rating may differ
from a provisional rating.
The new first lien term loan B1E and B1N (together the first lien
term loans) amounting to DKK16,070 million (equivalent based on
EUR/DKK FX rate of 7.44) alongside DKK4,390 million (equivalent)
of second lien term loans due 2026 (unrated) and DKK20,573 million
of equity will be used to fund the acquisition of Nets A/S (CFR
Ba2, under review for downgrade) by Evergood 5 AS and repay the
target's outstanding debt. Evergood 5 AS is a newly formed company
controlled by funds managed and advised by Hellman & Friedman LLC
(Hellman & Friedman) which owns 70% of the acquisition vehicle
together with a group of minority investors, including Sampo PLC,
funds managed and advised by StepStone Group LP, and a fund
managed by Fisher Lynch Capital LLC. The remaining equity is held
by GIC Private Limited, funds managed and/or advised by Advent
International Corporation, and funds managed and/or advised by
Bain Capital Private Equity (Europe) LLP. Evergood 4 ApS, the
parent of Evergood 5 AS, will be the top entity of the new banking
group and will produce audited consolidated accounts going
forward. In addition to the above mentioned new facilities, the
existing clearing facility will remain in place to provide the
company with liquidity in respect of clearing operations.
The take-private transaction (Nets A/S will be de-listed from
Nasdaq Copenhagen) is expected to close in Q1 2018 subject to
customary merger clearance and regulatory approvals and offer
acceptance from more than 90% of the share capital and voting
right of Nets A/S.
RATINGS RATIONALE
"Evergood 4 ApS' (P)B2 CFR is weakly positioned within the rating
category and mainly reflects the company's very high Moody's
adjusted leverage at the closing of the acquisition of the company
by Hellman & Friedman", says Sebastien Cieniewski, Moody's lead
analyst for Nets. Pro forma for the transaction, Nets' adjusted
gross leverage (as adjusted by Moody's mainly for capitalized
development costs, operating leases, pension liabilities, and
initial public offering (IPO) and transaction costs) will increase
to 8.7x as of the last twelve months period to September 30, 2017
from 4.3x as of the same date. This significant increase in
Moody's adjusted leverage justifies the 3-notch differential
between the provisional CFR of Evergood 4 ApS and the Ba2 CFR
(under review for downgrade) assigned to Nets A/S before the
acquisition of the company by Hellman & Friedman.
Other key constraints on the rating include (1) the company's
revenue concentration in the Nordic region, (2) its limited scale
of operations in the context of increasing competition in merchant
acquiring and issuer processing from larger international players,
(3) the pressure on prices from its issuing bank customers, and
(4) the expectation that Nets will perform bolt-on acquisitions
which might slow down the company's de-leveraging trajectory.
However, these weaknesses are partly mitigated by (1) the
resilience of Nets' operations supported by the large volume of
transactions processed by the company which are mostly recurring
in nature, (2) the high barriers to entry related to the company's
presence across the entire payment value chain, the mission
critical nature of its services, and the high switching costs for
its bank and government customers involving a risk of disruption
during the migration phase to a new supplier, (3) the good growth
prospects at around mid-single digit rates over the medium-term
driven by the ongoing structural shift from cash to digital-based
payments, and (4) the strong free cash flow (FCF) generation
projected by Moody's at around 5% of total adjusted debt, which
alongside EBITDA growth, should lead to a rapid de-leveraging of
the business at between half a turn to one turn per annum over the
medium-term.
The first lien term loans and the RCF (together the first lien
facilities) will benefit from guarantees from material
subsidiaries representing at least 80% of group EBITDA, subject to
restrictions. The first lien facilities will also benefit from
security limited to a pledge over shares, bank accounts, and
intercompany receivables. The second lien term loans will benefit
from the same guarantee and security package as the first lien
facilities but on a second lien basis. A springing financial
maintenance covenant will be attached to the RCF, set at a 9.2x on
a senior secured net leverage basis or 40% headroom relative to
the respective leverage at the closing of the transaction, only
tested on a quarterly basis when the RCF is drawn by more than
35%. The (P)B1 ratings assigned to the first lien facilities, one
notch above the CFR, reflects the cushion provided by the second
lien term loans ranking below.
The stable outlook on the ratings reflects Moody's expectation
that the company will continue experiencing organic growth rate at
mid-single digit rates and generating FCF at around 5% as a
percentage of adjusted gross debt enabling the company to de-
leverage towards 7x (on a Moody's adjusted basis) within 12-18
months from the closing of the transaction.
Factors that Could Lead to an Upgrade
Due to the weak positioning of Nets' rating within the B2 rating
category, Moody's considers that an upgrade is unlikely in the
short-term. Positive pressure on the rating could develop over
time if (1) Nets maintains a strong momentum in terms of revenue
growth at or above high-single digit rates while increasing its
EBITDA margin, (2) Moody's adjusted gross leverage decreases
towards 6x on a sustained basis, (3) the company generates FCF-
debt at well above 5% on a sustained basis with a significant
portion of the excess cash flow to be used for debt prepayment,
and (4) Nets maintains a conservative financial policy and a good
liquidity position.
Factors that Could Lead to a Downgrade
Negative pressure could arise if (1) Nets is subject to
unfavorable regulatory changes or negative market developments
leading to stable or declining revenues, (2) the company maintains
a Moody's adjusted gross leverage at above 7.5x on a sustained
basis resulting for example from large debt-funded acquisitions,
or (3) its liquidity position weakens.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Headquartered in Copenhagen, Denmark, Nets is the largest pan-
Nordic payments processor focusing on Norway, Denmark, Finland,
and Sweden, and second largest in Europe. Nets generated revenues
of DKK7,688 million and EBITDA before special items (company
reported) of DKK2,767 million in fiscal year (FY) 2016. Nets is
present at various points in the digital value payment chain by
providing the merchant payment solutions, by acquiring the
transactions, and by clearing and processing the transactions for
issuers.
EVERGOOD 4: S&P Assigns Prelim 'B' LT CCR, Outlook Stable
---------------------------------------------------------
S&P Global Ratings said that it assigned its preliminary 'B' long-
term corporate credit rating to Evergood 4 ApS, the new parent
company of leading Nordic payment service provider Nets A/S. The
outlook is stable.
S&P also assigned its preliminary 'B' rating to the proposed
first-lien term loan and revolving credit facility (RCF). The
recovery rating is '3', indicating its expectation of meaningful
(rounded estimate: 50%) recovery prospects for creditors in the
event of a payment default.
These ratings are preliminary and based on draft documentation.
Final ratings will depend on S&P's receipt and satisfactory review
of the final documentation within a reasonable period upon the
successful closing of the leveraged buyout (LBO) transaction,
currently expected in early 2018.
The rating action follows the planned LBO of Nets by Hellman &
Friedman for about EUR5.4 billion equivalent. The transaction will
be funded from a combination of EUR2,160 million equivalent of
proposed first-lien term loans, EUR590 million equivalent of
proposed second-lien term loans, and EUR2,765 million equivalent
of equity capital. These proceeds will be applied to the Danish
krone (DKK) 33.0 billion equity value (EUR4,440 million
equivalent) and the repayment of about EUR992 million equivalent
of net debt. The remainder will largely be used to pay financing
fees.
S&P said, "The preliminary rating reflects our forecast that Nets
will post very high adjusted gross leverage of more than 8x at
year-end 2018, as well as a significant increase in the interest
burden, leading to interest coverage of about 2.5x. The rating
also reflects the company's financial sponsor ownership, which we
think will result in a continued aggressive balance sheet
position. These constraints are partly balanced by Nets' leading
position as a Nordic payment service provider with a strong
presence across the payment value chain, especially in Denmark and
Norway; its improving EBITDA margin; and solid medium-term growth
prospects.
"We expect Nets' adjusted EBITDA margins to improve to about 22%-
23% over 2017 and 2018 from about 20% of gross revenues in 2016.
We expect the improvement to be driven by the achievement of
recent cost savings programs, operating leverage due to a scalable
technology platform, and a more favorable business mix with high
growth in higher margin-based digital services within the merchant
services segment. We expect further costs related to restructuring
of about DKK200 million in 2018, which we include in our adjusted
EBITDA calculation. EBITDA growth will, however, be offset by high
cash interest payments of about DKK1 billion in 2018, and, as a
result, we expect only modest free operating cash flow (FOCF) to
debt of about 3.5% in 2018.
"Our assessment of Nets' business risk reflects the group's
leading position in the Nordic electronic payments sector. Nets
holds a strong market share as an acquirer and issuer processor in
Nordic countries. For instance, over 90% of households in Denmark
use its direct debit solutions, while 95% of Danes and 80% of
Norwegians use its national e-identity solutions. Nets' market
share is so significant and its products so integrated into the
Nordic banking systems that we consider its position within the
region's payment system as critical."
Nets also has long-standing experience in the Nordic payment
market and good revenue predictability. It offers a very broad
range of products covering the entire payment value chain:
account-based payments, digital identity solutions, card payments
including issuer and acquirer processing, and financial acquiring.
Nets is the owner of the Danish national payment card scheme,
Dankort, and the processor of the Norwegian national card scheme,
BankAxept, and operates the national clearing systems in both
countries. It has a diversified customer base -- with 32% of 2016
net revenues coming from the 10 largest customers -- and long-term
customer relationships.
Furthermore, in clearing and direct debit, S&P thinks it would be
difficult for a competitor to challenge Nets' dominant position.
S&P also expects the Nordic electronic payment market to continue
expanding -- given the stable macroeconomic environment -- as well
as Nordic banks' willingness to outsource, and a high level of
consumer sophistication, including early adoption of
digitalization and new solutions.
These strengths are somewhat offset by Nets' modest scale and
limited geographic diversification, with 80% of revenues generated
in Denmark and Norway. As competition from international
competitors could intensify, S&P considers scale to be a key
competitive advantage.
Regulatory uncertainties include the introduction of the EU Second
Payment Service Directive (PSD2), which requires bank account
information to be made available to third-party payment providers
(TPPs) by early 2018. This could raise competition for card
payment service providers from new account-based payment
providers, while also increasing compliance costs. In addition to
its existing significant presence in account-based payments, Nets
intends to proactively mitigate the potential revenue impact by
helping bank customers comply with PSD2 and providing TPPs with
access infrastructure.
S&P said, "Our rating on Nets reflects its limited scale and very
high leverage compared with higher rated companies and with peers
that have similar business and financial risk profiles.
Specifically, compared with peers such as First Data Corp., we
think Nets has smaller scale, weaker EBITDA margins, less
geographic diversification, higher adjusted leverage, and weaker
FOCF generation."
In its base case for Nets, S&P assumes:
-- Gross revenue growth to normalize to mid-single digits over
2018-2019 after the boost in 2016 from Nordea Merchant
Acquiring and a slowdown in 2017 from merchant contract price
adjustments related to the new interchange fee regulation in
Norway. Growth should be supported by organic growth
initiatives (such as value-added services or mobile payments)
and an average annual growth of 4% in noncash transaction
volumes in the Nordic region.
-- Improving adjusted EBITDA margins from about 20% of gross
revenues in 2016 to about 22%-23% over 2017 and 2018. Capital
expenditure (capex) at about 6% of gross revenues in 2017 and
2018. This is equivalent to about 8% of net revenues, of
which about 5% are capitalized development costs that are
expensed in line with our standard EBITDA adjustments. We
expect capex to mainly relate to investments for Nets' data
center in Norway (expected to be completed in 2017), network
segregation, and PSD2 compliance.
-- Bolt-on acquisitions and earn-out payments from past
acquisitions of about DKK350 million-DKK400 million combined
in 2017 and 2018.
Based on these assumptions, S&P arrives at the following credit
measures:
-- Adjusted debt to EBITDA of around 8.3x in 2018, reducing to
about 7.5x in 2019.
-- Adjusted FOCF to debt of about 3%-4% in 2018, increasing to
5%-6% in 2019.
-- EBITDA interest coverage of about 2.5x in 2017 and about 3.0x
in 2019.
S&P said, "The stable outlook reflects our expectation that Nets
will continue to increase its revenues, maintain adjusted EBITDA
margin above 20% and adequate liquidity, and generate significant
positive FOCF in 2018, excluding changes in working capital from
clearing activities.
"We could raise the rating if revenues and margins improve quicker
than we forecast, resulting in EBITDA interest coverage
sustainably above 3.0x, FOCF to debt sustainably above 5%, and
leverage declining to about 7x.
"We could lower the rating if revenues or EBITDA declined
substantially, for instance because of competitive pressure. We
could also lower the ratings if FOCF approached breakeven
(excluding working capital changes related to clearing activities)
or if we changed our view of liquidity to less than adequate."
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F R A N C E
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3AB OPTIQUE: Moody's Rates EUR425MM Secured Notes Due 2023 'B3'
---------------------------------------------------------------
Moody's Investors Service has assigned a definitive B3 rating to
the EUR425 million worth of senior secured notes due 2023
(consisting of fixed and floating rate tranches) issued by 3AB
Optique Developpement, a holding company owner of French optical
retailer Afflelou. The definitive rating replaces the provisional
rating assigned on October 4, 2017.
Concurrently, Moody's has also assigned a B3 corporate family
rating (CFR) and B3-PD probability of default rating (PDR) to 3AB
Optique Developpement (Afflelou or the company), the top entity of
the new restricted group. The outlook on all ratings is stable.
Moody's has also withdrawn Lion / Seneca France 2 SAS' B3 CFR, B3-
PD and stable outlook.
The rating action reflects the successful bond refinancing
announced on October 4, 2017.
RATINGS RATIONALE
ASSIGNMENT OF B3 CFR AND B3-PD PDR
In line with Moody's comment in its press release dated October 4,
2017, the rating agency has decided to move the CFR and PDR
previously assigned to Lion / Seneca France 2 SAS to 3AB Optique
Developpement, which is the top-entity of the new restricted
group.
The rating assignment primarily reflects Afflelou's successful
bond refinancing which closed on October 17, 2017. The company
raised EUR425 million worth of senior secured notes due 2023 at
the level of 3AB Optique Developpement.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectations that Afflelou
will continue to improve its operating performance in the next 12
to 18 months, helped by improving consumer sentiment in France and
positive sales momentum, as seen in recent quarters. The company's
marketing initiatives and increased presence in preferred care
networks should also help improve Afflelou's revenue and earnings
growth, and free cash flow generation.
WHAT COULD CHANGE THE RATING UP/DOWN
Positive pressure could arise if (1) Afflelou were to demonstrate
a sustainable improvement in its earnings trend; (2) its ratio of
(gross) debt/EBITDA (as adjusted by Moody's) were to fall
materially below 6.0x on a sustainable basis; and (3) its ratio of
Retained Cash Flow/net debt (as adjusted by Moody's) were to
approach 15%.
On the other hand, downward pressure could arise if (1) Afflelou's
free cash flow were to turn negative; or (2) its ratio of (gross)
debt/EBITDA (as adjusted by Moody's) were to approach 7.0x. Also
any weakening of the liquidity profile would exert downward
pressure on the rating.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Retail
Industry published in October 2015.
Headquartered in Paris, France, Afflelou is, under its Alain
Afflelou banner, the fourth largest optical retailer in the French
market by total sales volume and number one in Spain by number of
stores. The company also has smaller operations in 14 other
countries. The company mainly operates a franchise model mainly
under the commercial names "Alain Afflelou", "Optical Discount",
"Optimil" and "Alain Afflelou Acousticien" and at the end of July
2017, the company had 1,474 stores, of which 1,290 were
franchisees and 184 were directly-owned. In the twelve months to
July 31, 2017, the company's revenues amounted to approximately
EUR372 million (against EUR759 million of total sales for the
whole store network).
CGG HOLDING: Files Status Report on Group's Reorganization
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BankruptcyData.com reported that CGG Holding filed with the U.S.
Bankruptcy Court a status report with respect to the
reorganization of the Debtors and their non-Debtor affiliates
(collectively, "CGG Group") in France and the United States
through the Safeguard Plan and the Plan, respectively. According
to the Debtors, "As the Court may recall, implementation of the
Financial Restructuring requires, among other things, approval by
the requisite majority of the Debtors' lenders and bondholders,
approval of the resolutions necessary to implement the Safeguard
Plan by the requisite majority of CGG S.A.'s ('CGG') shareholders
at the general meeting of shareholders (the 'General Meeting') and
sanctioning by the French Court of the Safeguard Plan. In
accordance with the rules applying to the Safeguard under French
law, a meeting of the committee of credit institutions and
assimilated entities (the 'Lenders' Committee') and a bondholders'
general meeting (the 'BGM') were held on July 28, 2017. At such
meetings, the Lenders' Committee unanimously approved the
Safeguard Plan, and a 93.5% majority of the holders of claims
arising under CGG's senior notes and convertible bonds who cast a
vote at the BGM also approved the Safeguard Plan. Accordingly, the
requisite threshold of creditors have voted to approve the
Safeguard Plan. In early August, an informal group of convertible
bondholders objected to their treatment under the Safeguard Plan.
The French Court will examine the Safeguard Plan and the
convertible bondholder group's challenge thereto at a hearing
later this month. Given the delays, with respect to the
shareholder vote, the French Court has postponed the hearing to
approve the Safeguard Plan to November 20, 2017 (from November 6,
2017). Assuming that the French Court enters an order sanctioning
the Safeguard Plan, CGG will seek an order in the Chapter 15 Case
to enforce the French sanction order at the hearing before this
Court. Although the Debtors had hoped that the Effective Date of
the Plan would occur in mid-January 2018, in light of the
aforementioned delays, it is likely that the Plan will not be
consummated until February 2018."
About CGG Holding
Paris, France-based CGG Holding (U.S.) Inc. -- http://www.cgg.com
-- provides geological, geophysical and reservoir capabilities to
its broad base of customers primarily from the global oil and gas
industry. Founded in 1931 as "Compagnie Generale de Geophysique",
CGG focuses on seismic surveys and other techniques to help energy
companies locate oil and natural-gas reserves. The company also
makes geophysical equipment under the Sercel brand name.
The Group has more than 50 locations worldwide, more than 30
separate data processing centers, and a workforce of more than
5,700, of whom more than 600 are solely devoted to research and
development. CGG is listed on the Euronext Paris SA (ISIN:
0013181864) and the New York Stock Exchange (in the form of
American Depositary Shares, NYSE: CGG).
After a deal was reached key constituencies on a restructuring
that will eliminate $1.95 billion in debt, on June 14, 2017 (i)
CGG SA, the group parent company, opened a "sauvegarde"
proceeding, the French equivalent of a Chapter 11 bankruptcy
filing, (ii) 14 subsidiaries of CGG S.A. filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code (Bankr.
S.D.N.Y. Lead Case No. 17-11637) in New York, and (iii) CGG S.A
filed a petition under Chapter 15 of the U.S. Bankruptcy Code
(Bankr. S.D.N.Y. Case No. Case No. 17-11636) in New York, seeking
recognition in the U.S. of the Sauvegarde as a foreign main
proceeding.
Chapter 11 debtors CGG Canada Services Ltd. and Sercel Canada Ltd.
also commenced proceedings under the Companies' Creditors
Arrangement Act in the Court of Queen's Bench of Alberta, Judicial
District of Calgary in Calgary, Alberta, Canada, to seek
recognition of the Chapter 11 cases in Canada.
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G E R M A N Y
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ADLER REAL ESTATE: S&P Rates New Medium-Term Unsec. Notes 'BB+'
---------------------------------------------------------------
S&P Global Ratings said that it has assigned its 'BB+' long-term
issue rating to two tranches of new medium-term senior unsecured
notes issued by German real estate company Adler Real Estate AG
(BB/Stable/--). The recovery rating on the debt is '2', reflecting
S&P's expectation of around 80% recovery (70%-90%).
S&P said, "We arrive at our 'BB+' issue rating on the notes by
adding one notch to our 'BB' long-term issuer credit rating on
Adler, applying our recovery analysis for issue ratings."
RECOVERY ANALYSIS
KEY ANALYTICAL FACTORS
The '2' recovery rating reflects Adler's valuable asset base
consisting of residential investment properties in Germany.
However, our recovery prospects are constrained by the unsecured
nature of the debt instrument and its contractual subordination to
the current amount of secured debt. S&P expects that the company
will use the proceeds from the bond issuance to refinance mainly
existing secured debt.
S&P said, "In our hypothetical default scenario, we envisage a
severe macroeconomic downturn in Germany, resulting in market
depression and exacerbated competitive pressures.
"We value the group as a going concern. Our stressed valuation
comprises the stressed value of the company's property portfolio.
Recovery prospects for the senior unsecured notes are sensitive to
change in the amount of senior secured debt or any other priority
debt outstanding at default."
SIMULATED DEFAULT ASSUMPTIONS
-- Year of default: 2022
-- Jurisdiction: Germany
SIMPLIFIED WATERFALL
-- Gross enterprise value at emergence: EUR1,938 million
-- Net enterprise value at emergence after administrative
costs: EUR1,841 million
-- Estimated priority debt (secured debt): EUR708 million
-- Net enterprise value available to senior unsecured
bondholders: EUR1,133 million
-- Senior unsecured debt claims: EUR1,431 million
-- Recovery expectation: 70%-90% (rounded estimate: 80%)
*All debt amounts include six months' prepetition interest.
SC GERMANY 2017-1: S&P Gives Prelim BB(sf) Rating on D-Dfrd Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to SC
Germany Consumer 2017-1 UG (haftungsbeschraenkt)'s class A, B-
Dfrd, C-Dfrd, and D-Dfrd notes. At closing, SC Germany Consumer
2017-1 will also issue unrated class E-Dfrd notes.
The securitized portfolio comprises receivables from consumer
loans, which Santander Consumer Bank AG granted to its German
retail client base. This is Santander Consumer Bank's ninth true
sale consumer loan transaction.
During the transaction's revolving period, the issuer can purchase
additional loan receivables. The revolving period is scheduled to
last for 12 months, followed by sequential note amortization. A
combination of subordination and excess spread provides credit
enhancement for the rated classes of notes. A principal deficiency
trigger is in place. Once hit, it will subordinate the class B-
Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes' interest payments to the
class A notes' principal payments and accelerate the repayment of
the class A notes.
Santander Consumer Bank is an indirect subsidiary of Spanish Banco
Santander S.A. It is the largest noncaptive provider of auto loans
in Germany and is also a well-known originator in the European
securitization market.
S&P said, "Our preliminary ratings on the rated classes of notes
reflect our assessment of the underlying asset pool's credit and
cash flow characteristics, as well as our analysis of the
transaction's exposure to counterparty and operational risks. Our
analysis indicates that the available credit enhancement for the
class A, B-Dfrd, C-Dfrd, and D-Dfrd notes would be sufficient to
absorb credit and cash flow losses in 'AA', 'A', 'BBB', and 'BB'
rating scenarios, respectively."
There will be no back-up servicer in place at closing. The
combination of a borrower notification process, a liquidity
reserve, a commingling reserve, and the general availability of
substitute servicers will mitigate servicer disruption risk.
RATING RATIONALE
Economic Outlook
S&P said, "In our base-case scenario, we forecast that Germany
will record GDP growth of 2.0% in 2017, 1.7% in 2018, and 1.5% in
2019. At the same time, we expect unemployment rates to stabilize
at historically low levels, at 3.7% in 2017, 3.4% in 2018, and
3.3% in 2019 (see "The Political Fog Shifts To The U.K., Prospects
Are Improving In The Rest Of EMEA," published on Oct. 2, 2017). In
our view, changes in GDP growth and the unemployment rate are key
determinants of portfolio performance. We set our credit
assumptions to reflect our economic outlook. Our near- to medium-
term view is that the German economy will remain resilient and
record positive growth."
Credit Risk
S&P said, "We have analyzed credit risk under our European
consumer finance criteria using historical loss data from the
originator's loan book since January 2007 until June 2017 (see
"European Consumer Finance Criteria," published on March 10,
2000). We expect to see 6.5% of defaults in the securitized pool,
which reflects our economic outlook for Germany, as well as our
view on the originator's good servicing procedures. This is in
line with its predecessor, SC Germany Consumer 2016-1."
Payment Structure
S&P said, "Our preliminary ratings reflect our assessment of the
transaction's payment structure, cash flow mechanics, and the
results of our cash flow analysis to assess whether the notes
would be repaid under stress test scenarios. Taking into account
subordination and the available excess spread in the transaction,
we consider the available credit enhancement for the rated notes
to be commensurate with the preliminary ratings that we have
assigned. Additionally, the class B-Dfrd to D-Dfrd notes are
deferrable-interest notes and we have treated them as such in our
analysis. Under the transaction documents, the issuer can defer
interest payments on these notes. Consequently, any deferral of
interest on the class B-Dfrd to D-Dfrd notes would not constitute
an event of default. While our preliminary 'AA (sf)' rating on the
class A notes addresses the timely payment of interest and the
ultimate payment of principal, our preliminary ratings on the
class B-Dfrd to D-Dfrd notes address the ultimate payment of
principal and the ultimate payment of interest. Furthermore, we
note that there is no compensation mechanism that would accrue
interest on deferred interest in this transaction. We have
nevertheless assumed accrual of interest on deferred interest in
our analysis."
Counterparty Risk
The transaction's documented replacement language is in line with
S&P's current counterparty criteria for all of the relevant
counterparties. The transaction is exposed to HSBC Bank PLC as
transaction account provider, to Santander Consumer Bank as
commingling and setoff reserve provider, and DZ Bank AG Deutsche
Zentral-Genossenschaftsbank as interest rate swap counterparty.
The swap documentation allows for a maximum achievable preliminary
rating of 'BB (sf)' for the class D-Dfrd notes.
Operational risk
Santander Consumer Bank is an indirect subsidiary of Banco
Santander. It is one of the largest German consumer banks, and
Germany's largest noncaptive car finance bank. It is also a well-
known originator in the European securitization market. S&P said,
"We believe that the company's origination, underwriting,
servicing, and risk management policies and procedures are in line
with market standards and adequate to support the preliminary
ratings assigned. Our operational risk criteria focuses on key
transaction parties (KTPs) and the potential effect of a
disruption in the KTPs' services on the issuer's cash flows, as
well as the ease with which a KTP could be replaced if needed (see
"Global Framework For Assessing Operational Risk In Structured
Finance Transactions," published on Oct. 9, 2014). In this
transaction, the servicer is the only KTP we have assessed under
this framework. Our operational risk criteria do not constrain our
preliminary ratings in this transaction based on our view of the
servicer's capabilities."
Legal Risk
The transaction may be exposed to deposit setoff and commingling
risks, in our opinion. If it becomes ineligible as a counterparty,
Santander Consumer Bank will fund the setoff and commingling
reserves, which will mitigate these risks. A reserve will
partially mitigate commingling risk and S&P has sized the
unmitigated exposure as an additional credit loss. We have
analyzed legal risk, including the special-purpose entity's
bankruptcy remoteness, under its legal criteria (see "Structured
Finance: Asset Isolation And Special-Purpose Entity Methodology,"
published on March 29, 2017).
Ratings Stability
S&P said, "In line with our scenario analysis approach, we have
run two scenarios to test the stability of the assigned
preliminary ratings (see "Scenario Analysis: Gross Default Rates
And Excess Spread Hold The Answer To Future European Auto ABS
Performance," published on May 12, 2009). The results show that
under the scenario modeling moderate stress conditions (scenario
1), the rating on the notes would not suffer more than the maximum
projected deterioration that we would associate with each rating
level in the one-year horizon, as contemplated in our credit
stability criteria (see "Methodology: Credit Stability Criteria,"
published on May 3, 2010)."
Sovereign Risk
Considering the current unsolicited 'AAA' long-term foreign
currency sovereign rating on Germany, S&P's structured finance
ratings above the sovereign (RAS) criteria do constrain its
preliminary ratings in this transaction.
RATINGS LIST
Preliminary Ratings Assigned
SC Germany Consumer 2017-1 UG (haftungsbeschraenkt)
EUR850 Million Asset-Backed Fixed- And Floating-Rate Notes
Class Prelim. Prelim.
rating amount
(mil. EUR)
A AA (sf) 712.3
B-Dfrd A (sf) 53.2
C-Dfrd BBB (sf) 33.6
D-Dfrd BB (sf) 13.1
E-Dfrd NR 37.8
NR--Not rated.
===========
G R E E C E
===========
GREECE: Unveils Draft Budget for Next Year, Dec. 22 Vote Set
------------------------------------------------------------
Niki Kitsantonis at The New York Times reports that the Greek
government on Nov. 21 unveiled an ambitious draft budget for next
year, the latest sign the country is making progress in its
economic recovery after years of painful austerity and
international bailouts.
According to The New York Times, the government projected that the
economy will grow 2.5% next year, after a 1.6% anticipated
increase this year, a further sign of Greece's confidence as it
looks to wean itself off the financial assistance it has relied on
for the last eight years. Athens has also tapped international
debt markets in recent months, indicating it is able to command
the confidence of overseas investors, The New York Times notes.
The 2018 budget also forecast a primary surplus -- cash in the
Treasury after expenses and before debt payments -- of 2.4% this
year, higher than the country's creditors anticipate, The New York
Times discloses.
The budget "will mark the country's exit from a long period of
macroeconomic adjustment," Greece's Finance Ministry, as cited by
The New York Times, said in a statement accompanying the proposed
budget.
The details of the budget will be scrutinized when representatives
of the country's international creditors return to Athens this
month, before it goes to a vote in Parliament on Dec. 22, The New
York Times states.
There are doubts, however, over how realistic the government's
forecasts are, according to The New York Times.
=============
I R E L A N D
=============
FASTWAY LEASING: Court Appoints Jim Luby as Interim Receiver
------------------------------------------------------------
The Irish Times reports that a receiver has been appointed over
shares in three Irish-registered aviation firms linked to a man
described in the High Court as a "fugitive" Russian businessman.
The temporary orders concern shares held in trust for the benefit
of Rashid Mursekayev, said to have fled Russia with his current
whereabouts unknown, the report relates.
Mr. Mursekayev, who has extensive interests in the aviation
industry, is the subject of a criminal investigation for alleged
fraud arising out of financial difficulties of Vim Avia Airlines,
which he co-owns, the report adds.
The Irish Times relates that lawyers representing US registered
firm Volgadnepr-Unique Air Cargo obtained temporary orders against
Mr. Mursekayev aka Mursekaev and against three firms - Fastway
Leasing DAC, Avion Leasing Ltd DAC and City Leasing.
The orders provide for the appointment of Jim Luby of McStay Luby
as receiver over shares in the firms and restrain the shares being
dealt with or disposed of, pending further order, The Irish Times
cites.
The proceedings are also against Orpheus Shareholder Ltd, legal
owner of the shares in Fastway and City.
Seeking the orders, Andrew Fitzpatrick SC, instructed by Whitney
Moore solicitors, for Volgadnepr, said his client obtained a EUR4
million judgment in the German courts against a German-registered
firm, ACG Air Cargo, which became insolvent in 2013, the report
states. The loan, which was not repaid, was guaranteed by Mr.
Mursekayev, counsel said.
The judgment was granted in 2016 and his side had been unable to
serve Mr. Mursekayev at his Moscow home. The orders were being
sought in the Irish courts against the three companies to enforce
the judgment, he said, according to the report.
The three companies have registered addresses in Dublin and
Limerick and the matter is urgent as the plaintiff fears there is
a danger any assets could be moved outside the jurisdiction by Mr.
Mursekayev, who is under investigation by the Russian authorities
for alleged fraud, counsel said.
The orders were granted, on an ex-parte basis (one side only
represented), by Mr. Justice Paul Gilligan.
HARBOURMASTER PRO-RATA 2: Fitch Corrects Nov. 1 Ratings Release
---------------------------------------------------------------
Fitch Ratings issued a correction on the release on Harbourmaster
Pro-Rata 2 CLO published on November 1, 2017, which incorrectly
stated the rating sensitivities and sources of information.
The revised release is as follows:
Fitch Ratings has affirmed Harbourmaster Pro-Rata 2 CLO as
follows:
Class A3: affirmed at 'Asf'; Outlook Stable
Class A4 E: affirmed at 'BBB+sf'; Outlook Stable
Class A4 F: affirmed at 'BBB+sf'; Outlook Stable
Class B1 E: affirmed at 'BB+sf'; Outlook Stable
Class B1 F: affirmed at 'BB+sf'; Outlook Stable
Class B2: affirmed at 'Bsf'; Outlook Negative
KEY RATING DRIVERS
The affirmation reflects the increase in credit enhancement (CE)
across the capital structure due to the transaction's deleveraging
since November 2016. This has offset portfolio concentration (the
number of obligors has decreased to 13 from 38 in November 2016)
The class A2 notes have paid down by EUR111 million since November
2016 and have been paid in full. The class A3 notes have paid down
by EUR35.7 million since November 2016 and CE has increased
significantly as a result of continued asset amortisation.
Fitch has affirmed the class A3, A4 and B1 notes despite the
increased CE due to an increase in obligor concentration. The top
five obligors now represent 68.7% of the portfolio. As per its
criteria, Fitch will not upgrade a note due to excessive obligor
concentration, if Fitch expect the notes to remain outstanding
when there are fewer than 10 performing obligors rated in the 'B'
category.
The affirmation of the class B2 notes reflects that although it is
exposed to portfolio concentration risk, this can be offset by
portfolio prepayment.
The portfolio credit quality has remained stable overall. All
portfolio profile tests, portfolio quality tests and coverage
tests are passing. The transaction is scheduled to mature in
October 2022 and the portfolio's weighted average life (WAL) has
decreased to 3.03 years from 3.33 years one year ago.
Fitch's Global Rating Criteria for CLOs and Corporate CDOs does
not describe default patterns for portfolios with a WAL lower than
3.5 years. As such, the agency adjusted its default patterns to
account for the transaction's short tenor. In the front-loaded
scenario, Fitch assumed 50% of the defaults occurred in year one
and 25% in years two and three. In the mid-default timing, Fitch
assumed 50% of the default occurred in year two and 25% in years
one and three. In the back-default timing, Fitch assumed 50% of
the default occurred in year three and 25% in years one and two.
RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a
downgrade of 1 category for Class B2 notes.
A 25% reduction in expected recovery rates would lead to a
downgrade of 1 category to Class B2 notes.
HARBOURMASTER PRO-RATA 3: Fitch Corrects Nov. 6 Rating Release
--------------------------------------------------------------
Fitch Ratings issued a correction on a release on Harbourmaster
Pro-Rata 3 CLO published on November 6, 2017, to which incorrectly
stated the rating sensitivities.
The revised release is as follow:
Fitch Ratings has upgraded three tranches of Harbourmaster Pro-
Rata 3 CLO and affirmed the others, as follows:
Class A2: upgraded to at 'AAAsf' from 'AA+sf'; Outlook Stable
Class A3: affirmed at 'A+sf'; Outlook Stable
Class A4: upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable
Class B1: affirmed at 'BB+sf'; Outlook Stable
Class B2: affirmed at 'Bsf'; Outlook Stable
Class S4: upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable
KEY RATING DRIVERS
The rating action reflects the increase in credit enhancement (CE)
across the capital structure due to the transaction's deleveraging
since November 2016. This has offset portfolio concentration (the
number of obligors has decreased to 32 from 67 in November 2016)
and unhedged FX exposure (3.4% unhedged USD exposure and 7.5%
unhedged GBP exposure)
The class A1-VF notes have paid down by EUR156.8 million since
November 2016 and have been paid in full.
The class A2 notes have paid down by EUR64.8 million since
November 2016 and the upgrade reflects the significant increase in
CE (increased to 82.9% from 45.6% at last review) as a result of
continued asset amortisation and repayment in full of class A1-VF
notes.
Fitch has affirmed the class A3 notes despite the increase in CE.
As the portfolio deleverages, the transaction is becoming more
exposed to obligor concentration. The top ten obligors currently
represent 59%, compared with 33% a year ago. As per its criteria,
Fitch decided not to upgrade this note due to excessive obligor
concentration.
Fitch has upgraded the class A4 and S4 notes and affirmed the
class B1 notes considering the increased CE (CE of class A4 notes
has increased to 35.4% from 18.4% at last review; CE of class B1
notes has increased to 23.3% from 11.6% at last review). Class S4
is combination note and the recommended rating approach is to link
the rating of the note to the rating of the component that covers
the rated balance, which is class A4.
The affirmation of the class B2 notes reflects that, although it
is exposed to portfolio concentration risk, this can be offset by
portfolio prepayment.
The portfolio credit quality has remained stable overall, except
WARR has decreased to 65% versus 70.7% at last review. All
portfolio profile tests, portfolio quality tests and coverage
tests are passing. The transaction is scheduled to mature in
September 2023 and the portfolio's weighted average life (WAL) has
decreased to 3.44 years from 4.3 years one year ago.
RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a
downgrade of 1 category of class B2 notes.
A 25% reduction in expected recovery rates would lead to a
downgrade of 1 category of class B2 notes.
MANLEY CONSTRUCTION: Nenagh Work Halted After Examinership
----------------------------------------------------------
Tipperary Star reports that construction work on the new EUR4.6
million unit at Nenagh Hospital has come to a sudden halt.
The work was halted last week shortly after the building company
Manley Contruction Ltd of Duleek, County Meath, went into
examinership, Tipperary Star relates.
The Health and Safety executive (HSE), in a statement to the
Tipperary Star, said: "On Friday, November 17, the HSE served a
notice of termination on the contractor's obligation to complete
the works at Nenagh Hospital in accordance with Clause 12 of the
contract. As a result, the contractor was required to leave the
site and alternative arrangements are currently being put in place
to complete the project in a timely manner.
"This was considered to be the most appropriate course of action
in the current circumstances where we desire to complete this
project as quickly as possible."
A spokesperson for Manley Construction told the Tipperary Star:
"Manley Construction Ltd experienced difficulties a number of
projects secured at the latter end of the recession in late
2014/early 2015. As a result of these difficulties and to provide
Manley Construction the opportunity to recover into the future,
Manley Construction entered into an Examinership process and
sought approval from the courts on Tuesday, November 14, 2017, in
order to secure the company and employees.
The spokesperson said the company did not anticipate going back
onsite, and have had talks with the HSE and explained their
situation and difficulties regarding the examinership and were
working with the HSE for a swift handover, Tipperary Star relays.
The company was onsite for approximately two years and had five
workers employed who have been relocated to other Manley
Construction projects, Tipperary Star notes.
On Nov. 14, the High Court appointed an interim examiner to Manley
Construction, according to the report.
According to Tipperary Star, Ms Justice Marie Baker said she was
satisfied to appoint Michael McAteer -- michael.mcateer@ie.gt.com
-- of Grant Thornton Ireland, after being informed that the
company was insolvent and unable to pay its debts as they fell
due.
However, the court was informed an independent expert had stated
in a report that the company had a reasonable prospect of survival
as a going concern if certain steps were taken, including the
appointment of an examiner, Tipperary Star discloses.
===================
K Y R G Y Z S T A N
===================
KYRGYZ REPUBLIC: Moody's Affirms B2 Issuer Ratings, Outlook Stable
------------------------------------------------------------------
Moody's Investors Service has affirmed the Kyrgyz Republic's local
and foreign currency issuer ratings at B2 and maintained the
outlook at stable.
The factors supporting the rating affirmation are Moody's
expectations that:
1. Fiscal metrics will continue to constrain the rating. In
particular, the government's debt levels will remain relatively
high for a small economy, although the fiscal deficit and debt
levels are likely to ease in coming years. A large and stable
revenue base and the largely concessional nature of government
debt will continue to keep servicing costs low.
2. The economy's shock absorption capacity will remain low due to
its small size, a lack of operational scale in a number of
sectors, and low incomes. These constraints outweigh Moody's
expectations for ongoing solid growth rates.
3. The Republic's institutional strength will continue to develop,
albeit from weak levels, including through ongoing reform in
partnership with the International Monetary Fund (IMF).
The stable outlook balances upside risks related to solid economic
growth, ongoing reforms, a large revenue base and low costs of
concessional funding and downside risks from potentially more
adverse developments in fiscal metrics in particular if fiscal
consolidation is significantly delayed.
The local-currency bond and deposit ceilings and the foreign
currency bond ceiling are unchanged at Ba3. The foreign currency
bank deposits ceiling is unchanged at B3.
RATINGS RATIONALE
RATIONALE FOR AFFIRMATION OF RATING AT B2
HIGH DEBT BURDEN CONSTRAINS THE RATING, ALTHOUGH LARGE REVENUE
BASE AND LOW FINANCING COSTS STABILISE FISCAL METRICS
Moody's assessment of the Kyrgyz Republic's low fiscal strength
reflects a relatively large debt burden for a small, low-income
economy, at 58.9% of GDP at the end of 2016.
A large depreciation of the som against the US dollar in 2015 was
largely responsible for the rise in the debt-to-GDP ratio from
46.2% in 2013 given that nearly all the government's debt is
denominated in foreign currency. Since then an appreciation of the
som in the first half of 2016 and subsequent stability, have
partially unwound the currency effect.
Moody's estimate that the fiscal deficit peaked at 4.6% of GDP in
2016 reflecting large infrastructure spending. The pace of fiscal
consolidation has been slower this year than earlier expected,
particularly following an increase in government spending ahead of
the presidential elections. However, and in concert with the IMF,
the authorities plan to streamline a range of current tax
exemptions and take other measures to broaden the tax base, as
well as improving the efficiency of public administration. Recent
changes to tariff policy for the energy sector should also
contribute to reducing energy subsidies and lift cost recovery.
Given the authorities' past record of progress on reform in
collaboration with the IMF, and signs of an improvement in
domestic political stability, Moody's expect that fiscal
consolidation will continue.
Mitigating elevated debt, the Kyrgyz Republic's large and stable
revenue base, with government revenues amounting to 35% of GDP in
2016, shores up debt affordability. The debt structure also
contributes to low debt servicing costs. The government's foreign
currency debt is on highly concessional terms, which offsets the
impact of currency fluctuations on government finances. Reflecting
the concessional nature of much of the government's debt, interest
payments remain very low, at 3.3% of revenues, and significantly
lower than the median of B rated sovereigns (9.2%).
LOW SHOCK ABSORPTION CAPACITY, GIVEN SMALL OPERATIONAL SCALE, LOW
COMPETITIVENESS AND VERY LOW INCOMES
The economy's low shock absorption capacity is also a constraint
to the sovereign rating.
Moody's assessment of the Kyrgyz Republic's economic strength
reflects the economy's small size, its volatile growth compared
with B-rated peers and very low incomes (GDP per capita of $3,520
in 2016 at purchasing power parity). In particular, with 2017 GDP
of only $7 billion, the Kyrgyz Republic is one of the smaller
economies among rated sovereigns. Small operational scale
constrains scope for productivity improvements. These features
outweigh the economy's strong growth potential.
Partly driving the limited capacity to absorb negative shocks, the
economy significantly relies on gold mining and remittances, two
sources of incomes that can be relatively volatile at times.
Remittances to the Kyrgyz Republic amounted to 30.4% of GDP in
2016, the second-highest globally. Russia (Ba1 stable) is the
origin of 98% of remittance inflows registered in money transfer
systems. About 500,000 documented Kyrgyz workers and another half
million undocumented Kyrgyz nationals are reportedly employed in
the Russian Federation.
The Kyrgyz Republic scores poorly in international competitiveness
rankings, with corruption, political and policy instability,
government bureaucracy, and small scale lowering its scores. It is
ranked 102nd out of 137 countries in the World Economic Forum's
Competitiveness survey, lagging behind its regional peers.
On the positive side, donor support remains conducive to growth.
The Kyrgyz Republic benefits from significant financial and
technical assistance provided on both multilateral and bilateral
bases.
In turn, donor support contributes to high investment levels. At
around 33% of GDP in 2017, investment is high and exceeds the
median for B-rated countries of 22% of GDP. The government has
engaged in large investments in infrastructure and the energy
sector by borrowing externally, with about half of the projects
financed by Export-Import Bank of China (The) (A1 stable).
Moreover, ample, low-cost and as yet largely untapped natural
resources should boost the Kyrgyz Republic's growth potential.
Hydropower accounts for nearly 90% of electricity generation; yet
less than 10% of hydropower potential is currently utilized,
according to the Asian Development Bank (Aaa stable). There are
challenges to the sector's development related to regulated
tariffs, which have been raised but remain below production costs.
In November 2015, Tajikistan (B3 stable), the Kyrgyz Republic,
Afghanistan (unrated) and Pakistan (B3 stable) signed a final
agreement to connect their grids through the CASA-1000 project,
which will provide new export markets for Kyrgyz electricity
during summer months, although completion is not likely until at
least 2020. One constraint is the availability of financing, which
has caused delays in several investments in new hydropower plants.
From a longer term perspective Kyrgyz Republic's growth prospects
are positive and will balance ongoing scale and competitiveness
constraints. According to United Nations (UN) projections, the
Kyrgyz Republic benefits from a much more favorable demographic
outlook than most CIS credits. Even with substantial emigration
flows, the UN projects working age resident population to increase
at an average rate of over 1% over 2018-2032. The old age
dependency ratio is also likely to decline over the same period,
in stark contrast to the Caucasus region or European CIS.
DEVELOPING, ALBEIT RELATIVELY WEAK, INSTITUTIONAL STRENGTH
The Kyrgyz Republic's institutional strength continues to develop
from low levels.
Ongoing collaboration with the IMF, including the renewed Extended
Credit Facility, has had positive effects on data collection and
dissemination, an enhanced monetary policy framework, stronger
domestic banking sector supervision and a reasonably transparent
budgetary framework. Reflecting the strong commitment of the
authorities to past reform programs Moody's expect continued
improvement as the IMF program matures and the implemented
measures gradually take effect. In particular, among notable
institutional reforms, the 2016 passage by Parliament of the
Budget Code has improved the predictability of fiscal policy. The
benefits of these changes should continue to unfold.
The authorities have also agreed to change the decision-making and
monitoring process for public investment projects, including by
formalizing the gate-keeper roles of the Ministries of Economy and
Finance and providing an initial assessment and prioritization of
projects based on their economic value and accounting for
financial constraints prior to inclusion in the next national
development strategy. This should lead to improvements in the
effective allocation of fiscal resources.
However, significant constraints to the institutional framework
remain. Measures of the Kyrgyz Republic's Worldwide Governance
Indicators are generally low and show a mixed picture on recent
trends with a weakening of Government Effectiveness in recent
years. More positively, reforms implemented since the 2010
Revolution have led to improvements in indicators of Rule of Law,
Voice and Accountability and Political Stability. Monetary policy
effectiveness also remains constrained by weaknesses in the
transmission mechanism reflected in a lack of alignment of policy
rates with market rates and some lack of clarity in the forward
looking components of the central bank's communication policy.
Institutional strengthening will be in part related to the
political climate. In this respect, the Kyrgyz Republic stands out
among its regional peers as the only sovereign in Central Asia
with a recent track record of democratic political transition and
increasingly entrenched democratic institutions.
Not unexpectedly in a period of democratic transition of power,
the process has seen periods of instability and despite reforms
aimed at ensuring political stability and continuity in policy
making, the governance framework has proved fragile. This is
reflected in Moody's scoring of domestic political risk as
Moderate, denoting a moderate probability that domestic political
instability rises and derails reform progress. However, recent
signs such as the ongoing smooth transition of power following the
recent presidential election suggest an improvement in domestic
political stability and a positive backdrop for further reform.
RATIONALE FOR STABLE OUTLOOK
The stable outlook balances upside risks related to solid economic
growth, ongoing reforms, a large revenue base and low costs of
concessional funding; and downside risks from potentially more
adverse developments in fiscal metrics in particular if fiscal
consolidation and structural improvements, including those to
boost energy and transport infrastructure, are significantly
delayed.
WHAT COULD CHANGE THE RATING UP
Upward credit pressure could develop as a result of (1) fiscal
consolidation efforts that lead to a significant reduction in the
government's debt burden; (2) growth-enhancing structural reforms,
especially if combined with continued evidence of domestic
political stability.
WHAT COULD CHANGE THE RATING DOWN
A downgrade could result from: (1) a marked increase in financing
needs due to wider for longer fiscal deficits combined with a
substantial deterioration in financing conditions; (2) withdrawal
of or a significant reduction in donor support, which would add to
the government's borrowing costs; or (3) economically
destabilizing domestic and/or regional political tensions.
GDP per capita (PPP basis, US$): 3,520 (2016 Actual) (also known
as Per Capita Income)
Real GDP growth (% change): 3.8% (2016 Actual) (also known as GDP
Growth)
Inflation Rate (CPI, % change Dec/Dec): -0.5% (2016 Actual)
Gen. Gov. Financial Balance/GDP: -4.6% (2016 Actual) (also known
as Fiscal Balance)
Current Account Balance/GDP: -7.0% (2016 Actual) (also known as
External Balance)
External debt/GDP: 121.8% (2016 Actual)
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On November 16, 2017, a rating committee was called to discuss the
rating of the Kyrgyz Republic, Government of. The main points
raised during the discussion were: The issuer's economic
fundamentals, including its economic strength, have not materially
changed. The issuer's institutional strength/framework have not
materially changed. The issuer's fiscal or financial strength,
including its debt profile has not materially changed. The
issuer's susceptibility to event risks has not materially changed.
=====================
N E T H E R L A N D S
=====================
CONSTELLIUM NV: S&P Raises Senior Unsecured Bonds Rating to 'B-'
----------------------------------------------------------------
S&P Global Ratings raised its long-term issue rating on The
Netherlands-incorporated aluminum producer Constellium N.V.'s (B-
/Stable/--) senior unsecured 4.625% notes due 2021, 5.75% notes
due 2024, and 6.625% notes due 2025 to 'B-' from 'CCC+'. S&P also
removed the rating from CreditWatch, where it had placed it with
positive implications on Nov. 1, 2017.
At the same time, S&P revised its recovery rating on the bonds to
'4' from '5', following the company's refinancing of approximately
EUR824 million in bonds and an equity offering of about EUR271
million.
S&P also withdrew its issue ratings on the bonds that were
redeemed with the refinancing proceeds, as follows:
-- The 'B+' issue and '1' recovery ratings on the 7.875% senior
secured notes due 2021; and
-- The 'CCC+' issue and '5' recovery ratings on the 7.00% senior
unsecured notes due 2023 and on the 8.00% senior unsecured
notes due 2023.
S&P affirmed its 'B-' issue rating on the newly issued 5.875%
senior unsecured notes due 2026 and the 4.250% senior unsecured
notes due 2026. The recovery rating on these notes is '4' (30%
recovery, rounded estimate).
Constellium has now finalized the bond refinancing and equity
offering, in line with S&P's expectations stated in "Constellium
Outlook To Stable On Improved Profitability; 'B-' Rating Affirmed;
Proposed Bonds Rated 'B-'," dated Nov. 1, 2017.
The upgrade reflects that all the notes in the current capital
structure rank pari passu and benefit from the repayment of the
secured tranche, improving their recovery prospects to 30%
(rounded estimate) from 10% (rounded estimate).
Priority liabilities that will rank ahead of the bonds are the
asset-backed loan, French inventory facility, factoring program,
and unfunded pension obligations amounting to approximately EUR992
million. The bonds are supported by a comprehensive guarantor
package.
Ratings List
Upgraded; Recovery Rating Revised; CreditWatch Action
To From
Constellium N.V.
Senior Unsecured* B- CCC+/Watch Pos
Recovery Rating 4(30%) 5(10%)
Ratings Withdrawn
To From
Constellium N.V.
Senior Secured NR B+
Recovery Rating NR 1(95%)
Senior Unsecured NR CCC+
Recovery Rating NR 5(10%)
Ratings Affirmed
Constellium N.V.
Corporate Credit Rating B-/Stable/--
Constellium N.V.
Senior Unsecured B-
Recovery Rating 4(30%)
*Guaranteed by Wise Metals Group LLC.
NR--Not rated.
DUTCH MBS XVIII: Fitch Affirms 'Bsf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has affirmed Dutch MBS XVIII and removed it from
Rating Watch Evolving (RWE), as follows:
Class A2 (XS0871317938): affirmed at 'AAAsf';off RWE; Outlook
Stable
Class B (XS0871318829): affirmed at 'AA+sf'; off RWE; Outlook
Stable
Class C (XS0871319124): affirmed at 'A+sf'; off RWE; Outlook
Stable
Class D (XS0871319397): affirmed at 'BBBsf'; off RWE; Outlook
Stable
Class E (XS0871319470): affirmed at 'Bsf'; off RWE; Outlook
Stable
The transaction is backed by prime Dutch mortgage loans originated
by NIBC Bank (BBB-/Positive/F3) and serviced by Stater B.V.
(RPS1-) or Quion (RPS2+).
Fitch placed all European RMBS ratings on RWE on October 5, 2017
following the publication of its "Exposure Draft: European RMBS
Rating Criteria" on September 15, 2017 to indicate the possibility
of rating change as a result of the application of the proposed
updated criteria.
The transaction has been reviewed within the scope of the new
criteria and the notes have been removed from RWE.
KEY RATING DRIVERS
Stable Asset Performance
Late stage arrears (loans in arrears by more than three months)
have been stable over the last 12 months at 0.5% of the current
portfolio balance while total arrears have increased by roughly
40bp and stand at 2.5% (June 2017). This can be partially
attributed to portfolio amortisation but both figures are above
what Fitch has observed in the broader Dutch market, where
delinquency levels have been improving. This has prevented the
most junior notes from achieving higher ratings at present.
Cumulative foreclosures have increased by 6bp since Fitch last
review and represent 0.9% of the original portfolio balance while
gross loss is stable at 0.2%, reflecting a sound level of
recoveries.
Given the limited pipeline of non-performing mortgages in the
pool, Fitch expects cumulative foreclosures and losses to remain
stable.
Build-up of Credit Enhancement (CE)
Due to strictly sequential amortisation and a non-amortising
reserve fund CE has increased substantially for the two most
senior notes. CE available to the class A and B notes has built-up
to 9.1% and 6.6% (August 2017) from 8.1% and 5.9% (August 2016),
respectively.
Portfolio amortisation has allowed for a moderate improvement of
the junior notes' resilience to Fitch's stresses. CE available to
the class C, D and E notes has increased by roughly 50, 25 and
10bp over the same period to 4.4%, 2.2% and 0.8%, respectively.
Lender Adjustment
As part of its analysis Fitch performs an operational review of
the originator to assess its origination, underwriting and
servicing capabilities. If significant weaknesses are evidenced in
origination, underwriting and servicing procedures an adjustment
to the base default probabilities of the whole portfolio may be
warranted.
Fitch noted significant reliance on external parties for loans
origination and verification of the completeness and accuracy of
origination documents. Moreover NIBC was unable to provide
cumulative default data by vintage for the analysis. As a result
Fitch applied a lender adjustment of 1.1x.
Fitch has applied the same foreclosure frequency adjustment for
the current review, consistent with Fitch criteria.
Limited Effect of Loan Substitutions
DMBS XVIII's documentation allows the issuer to substitute up to
15% of the initial portfolio in case of loans repurchases due to
breach in asset conditions. The credit quality of the pool is
protected by stringent conditions that new mortgages have to
comply with. Fitch notes that the cumulative purchases to date
account for only 3.9% of the initial pool balance.
In Fitch's view, the introduction of new loans has had no material
effect on the pool's credit quality.
RATING SENSITIVITIES
The transaction has a material concentration of interest-only
loans maturing within a three-year period during its lifetime. As
per its criteria, Fitch carried out a sensitivity analysis
assuming a stressed default probability for these loans. No rating
action was deemed necessary as a result of the interest-only loan
concentration. Nevertheless, Fitch will keep monitoring this risk
as the transaction continues to amortise.
A material increase in the frequency of defaults and loss
severities experienced on defaulted receivables could produce
losses larger than Fitch's base case expectations, which in turn
may result in negative rating action on the notes.
===========
P O L A N D
===========
ZABRZE CITY: Fitch Affirms BB+ Long-Term IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed the Polish City of Zabrze's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BB+'
and National Long-Term rating at 'BBB+(pol)'. The Outlooks are
Stable.
The affirmation reflects Fitch's view that Zabrze's operating
performance will remain modest but in line with a 'BB+' rating.
The ratings also incorporate the city's moderate direct debt and
its substantial indirect risk. The Stable Outlook reflects Fitch's
view that despite expected modest operating results in the medium
term, direct debt ratios will remain in line with a 'BB+' rating,
even if approaching the trigger for a lower rating.
KEY RATING DRIVERS
S&P projects that Zabrze's operating margin will hover around a
modest 4%-5% in 2017-2019. The annual debt service (instalment
plus interests) estimated at around PLN50 million annually (2016:
PLN49.7 million) will be 1.5x the operating balance, which Fitch
estimate at PLN30 million on average. From 2019, the city's
operating performance could be supported by additional revenue
from property tax following the completion of two large private
investments in the city.
Fitch expects the full-year operating results in 2017 to stabilise
rather than improve in comparison with 2016 due to rising opex
pressure, especially on education resulting from state reform, and
the increase of service prices due to increased salaries following
the general market trend. In 2016 Zabrze reported a modest
operating performance with operating margin at 4.1% (or 4.5%
excluding the inflating effect of 500+ Programme) and the
operating balance covering 60% of debt service.
Fitch expects that 2017 and 2018 may be challenging for the city
as opex growth could outpace revenue growth, given the city's
lower revenue flexibility than other Fitch-rated Polish cities.
From 2019, operating results could start to improve due to
expected increase of revenue from property tax.
Fitch expects net overall risk to current revenue of around 90% in
2019 (2016: 106%), as the city's direct debt will remain stable in
relative terms (below 55% of current revenue or PLN445 million
nominally in 2019) and its indirect risk (debt of PSE and
guarantees) will gradually decrease (after peaking at PLN342
million in 2016) in line with the city's medium-term goal. Fitch
expect that the city's debt-to-current balance ratio (debt
payback) will be around 20 years in 2017-2018 (2016: 21 years).
Until 2019, the city's capital spending on its shareholdings will
be high, at about PLN50 million annually, reducing Zabrze's capex
financing flexibility for other purposes. Fitch estimates the
city's total capital expenditure will average around PLN120
million annually or 12% of total expenditure, which is relatively
low compared with other Fitch-rated Polish cities. Fitch expect
capex to be at least half funded by capital revenue (mainly by EU
grants) and from new debt. As in previous years, Zabrze will apply
for EU grants from the 2014-2020 budget to co-finance its
investments.
Fitch also expects that the city's somewhat weak liquidity
situation will continue in the medium term. Zabrze relies on a
committed external liquidity line of PLN50 million as its cash
balances do not cover all liquidity needs during the year.
Zabrze is a medium-sized city by Polish standards (176,000
inhabitants), located in the Slaskie region and part of the Upper
Silesian Agglomeration (two million inhabitants). GDP per capita
in 2015 (last available data) for the Gliwicki sub-region, where
Zabrze is located was 120% of the national average but this
probably overestimates Zabrze's performance. The city's
unemployment rate of 6.9% at end-September 2017 was in line with
the national rate. As is typical for the Slaskie region, Zabrze's
local economy is dominated by industry and construction, which
represented 45.8% of the sub-region's GVA in 2015, well above the
average 35% in Poland.
RATING SENSITIVITIES
The ratings could be downgraded if net overall risk grows above
130% of current revenue accompanied by weak operating performance,
leading to a debt payback ratio exceeding 20 years.
A sustained improvement in Zabrze's operating performance leading
to a debt payback ratio of below 10 years, coupled with net
overall risk stabilisation below 100% of current revenue would
lead to an upgrade.
===========
R U S S I A
===========
ARCELORMITTAL: S&P Alters Outlook to Positive & Affirms 'BB+' CCR
-----------------------------------------------------------------
S&P Global Ratings revised its outlook on global integrated steel
producer ArcelorMittal to positive from stable. S&P affirmed its
long- and short-term corporate credit ratings at 'BB+/B'.
S&P also affirmed its issue ratings on ArcelorMittal's unsecured
debt at 'BB+'. The recovery rating is unchanged at '3', indicating
a 50%-70% recovery range.
The outlook revision reflects an accelerated improvement in
ArcelorMittal's credit profile. This results primarily from
persistently supportive steel market conditions and robust average
iron ore prices (the latter up 29% year-to-date at $71 per tonne
for benchmark grade). S&P now sees supportive steel market
conditions for ArcelorMittal continuing into 2018. With reported
EBITDA up 36% year-on-year and covering capital investment three
times over, debt metrics are on an improving trend. S&P projects
this will continue despite material working capital requirements
($3.5 billion year-to-date) and additional capital investment in
2018 and 2019. Consistent with management's explicit commitment to
investment-grade ratings, the majority of our estimate of $2
billion of free cash flow could be applied to debt reduction in
2018.
Nonetheless, at Sept. 30, 2017, after material net debt reduction
in recent years, adjusted funds from operations (FFO) to debt was
approaching but still below our minimum 'BBB-' upgrade threshold
of 25% on a last 12 months and five-year average basis. This
underlines the importance of reducing fixed costs and
strengthening the balance sheet further so that, as and when
market conditions turn, potential future investment-grade ratings
should still be supported by lower absolute net debt and cash
costs.
China is a key sector driver and high margins there are likely to
remain supportive for the global industry, EU and U.S. import
tariffs notwithstanding. A better supply and demand balance and
capacity utilization in China had resulted from reported Chinese
steel capacity reductions of above 100 million tonnes (Mt) on an
annual basis, with another 120 Mt illegal induction furnaces
closed, and continuing supportive pollution control measures over
the winter (another 33 Mt). Domestic demand -- especially property
investment and infrastructure spending -- has also supported
recent high Chinese steel margins and utilization, with lower
exports. If Chinese demand for cars, construction, or machinery
softens beyond 2018, this could reverse prevailing positive
trends.
S&P said, "We now project ArcelorMittal's EBITDA to be about $8.0
billion-$8.5 billion for full years 2017 and 2018, up from $6.3
billion on an underlying basis in 2016. This increase in revenues
and earnings reflects both the stronger average group steel
margins and growing shipments as well as the benefits of
ArcelorMittal's 2020 efficiency projects. We continue to assess
steel markets as highly volatile notwithstanding the continuing
relatively strong performance."
ArcelorMittal is exposed to the cyclical and capital-intensive
nature of the steel sector, balanced by the company's large scale
and the diversity of its operations. This is supported by
ArcelorMittal's partial vertical integration into iron ore and, to
a lesser extent, coal.
-- 1%-2% increases in steel shipments in 2017, with average
annual pricing in 2018 at least in line with 2017.
-- Iron ore prices per ton of $65 for the remainder of 2017, $55
in 2018, and $50 from 2019, with modest volume increases.
-- EBITDA of $8.0 billion-$8.5 billion in 2017 and 2018,
potentially moderating from 2019.
-- Capital expenditure of up to $3.5 billion per year from 2018
including Ilva expenditures; and
-- Minimal dividend payments in 2017 and 2018. S&P sees dividends
received broadly covering distributions to minorities.
Based on these assumptions, S&P arrives at the following credit
metrics:
-- FFO to debt between 25% and 30% in 2017 and 2018;
-- An adjusted debt-to-EBITDA ratio of below 3.0x in 2017 and
2018; and
-- Sustained positive cash flow generation after working capital
movements and investment. Specifically, discretionary cash
flow above $1 billion in 2017 and above $2 billion in 2018.
S&P said, "The positive outlook reflects our view that
ArcelorMittal is rapidly building rating headroom and increasing
its resilience to future industry downturns. It is achieving this
through robust operating performance and commitments to further
debt reduction, despite increased investments in Italy and Mexico.
"We forecast FFO to debt of above 25% in 2017 and comfortably
above this level in 2018, in our base case. We believe continued
strong industry conditions will support reported annual EBITDA of
$8.0 billion-$8.5 billion, well up on 2016. We project positive
cash generation of about $1.0 billion in 2017 after capital
investment of $2.9 billion and working capital outflows of about
$2.0 billion for the year.
"An upgrade would likely reflect our forecast ratio of FFO to debt
consistently and comfortably above 25%, potentially averaging
closer to 30% on a multi-year basis. Combined with positive free
operating cash generation and improving EBITDA per tonne, this
could give ArcelorMittal sufficient headroom to defend a higher
rating even amid weaker industry conditions.
"Alternatively, over time, the continuing realization of the 2020
cash requirement reduction plan could result in an upgrade if we
perceive sustainably stronger performance compared with peers, and
improved cash generation visibility with less sensitivity to
market conditions in China and elsewhere.
"We could revise the outlook back to stable if the anticipated
improvement in credit metrics doesn't occur, due to a reversal in
supportive market conditions over the coming year or for other
reasons.
"Although not anticipated in the near term, we could lower the
rating on ArcelorMittal if we believed adjusted FFO to debt would
remain well below the 20% that we see as commensurate with the
'BB+' rating, and cash flow after investment and dividends could
be negative."
SENSITIVITIES
S&P said, "Given the volatility of the steel production and iron
ore mining industries, we estimate the impact of variances from
our base-case assumptions. For example, we can assume our 25% FFO
to debt threshold is met and test the maximum EBITDA decline in a
given year that would be consistent with this. This shows the
extent to which lower net debt builds greater resilience to future
cycles. Also, it underlines the importance of reducing cash costs
-- the focus of ArcelorMittal's Action 2020 plan -- to build
operational headroom and flexibility.
"Based on our estimates, with net debt of about $10 billion,
EBITDA of about $8 billion would result in FFO to debt of 25% in
2017. In 2018, in a scenario of lower net debt of just over $8
billion, EBITDA could fall further to $7.2 billion or so, before
FFO to debt reached the 25% threshold (allowing for a concomitant
working capital release). By 2019, one-year EBITDA of $6.5 billion
could still meet the minimum FFO to debt threshold of 25% with
debt of $7 billion, without cutting capital investment. For
context, we note that reported EBITDA was actually $6.3 billion in
2016 and even lower at $5.2 billion in the trough of 2015."
Taking 30% FFO to debt, this metric could be achieved in 2018 with
EBITDA of $8.3 billion and debt of $7.7 billion. In 2019, the
corresponding figures would be $7.9 billion and $7.3 billion. In
the latter case, EBITDA of $7.9 billion is lower than the forecast
level for the current year, 2017.
CB REGIONFINANCEBANK: Put on Provisional Administration
-------------------------------------------------------
The Bank of Russia, by Order No. OD-3243, dated November 17, 2017,
revoked the banking license of Moscow-based credit institution
Commercial Bank Regional Finances LTD or CB Regionfinancebank LTD
from November 17, 2017, according to the press service of the
Central Bank of Russia.
According to the financial statements, as of November 1, 2017, the
credit institution ranked 480th by assets in the Russian banking
system. CB Regionfinancebank LTD is not a member of the deposit
insurance system.
The business of CB Regionfinancebank LTD was aimed at conducting
'shadow' currency exchange operations which were not reflected in
the accounting and statements submitted to the Bank of Russia.
Moreover, the credit institution conducted this activity despite
the regulator-imposed ban. It was revealed that the bank
repeatedly violated the statutory requirements on countering the
legalisation (laundering) of criminally obtained incomes and the
financing of terrorism in respect of the completeness and
reliability of information submitted to the authorised body,
including operations subject to mandatory control.
The Bank of Russia repeatedly applied supervisory measures to CB
Regionfinancebank LTD, including the ban and restrictions on
certain operations.
The management and owners of the bank did not take effective
measures to normalise its activities. Under the circumstances, the
Bank of Russia took the decision to withdraw CB Regionfinancebank
LTD from the banking services market.
The Bank of Russia took this decision due the credit institution's
failure to comply with federal banking laws and Bank of Russia
regulations, repeated violations within one year of the
requirements stipulated by Articles 6 and 7 (except for Clause 3
of Article 7) of the Federal Law "On Countering the Legalisation
(Laundering) of Criminally Obtained Incomes and the Financing of
Terrorism", and the requirements of Bank of Russia regulations
issued in pursuance thereof, and taking into account repeated
applications within one year of measures envisaged by the Federal
Law "On the Central Bank of the Russian Federation (Bank of
Russia)".
The Bank of Russia, by its Order No. OD-3244, dated November 17,
2017, appointed a provisional administration to CB
Regionfinancebank LTD 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.
KRASNOYARSK REGION: Fitch Affirms BB+ IDR, Outlook Stable
---------------------------------------------------------
Fitch Ratings has affirmed the Russian Krasnoyarsk Region's Long-
Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at
'BB+' with a Stable Outlook and Short-Term Foreign-Currency IDR at
'B'. The region's senior debt long-term rating has been affirmed
at 'BB+'.
KEY RATING DRIVERS
The affirmation and Stable Outlook reflect Fitch's unchanged
baseline scenario regarding the expected consolidation of the
region's operating performance, a narrowing budget deficit and
gradual stabilisation of debt metrics over the medium term.
The ratings take into account the improved budgetary performance
in 2016, moderate direct risk and the robust industrialised
profile of the local economy, which is benefiting from the
national economic recovery. The ratings also take into account the
concentrated tax base, which results in revenue volatility, and
the evolving institutional framework for Russian subnationals.
Fitch expects consolidation of the region's operating balance at
8%-9% of operating revenue over the medium term (2016: 6.7%). This
will be supported by continuous control over operating expenditure
and further expansion of the region's strong tax base on the back
of macroeconomic restoration and better performance of the natural
resources sector. Taxes have historically composed around 85% of
region's operating revenue (2016: 89%) supporting Krasnoyarsk's
strong fiscal capacity.
During 9M2017, the region collected 70% of the revenue budgeted
for the full year and incurred 64% of full-year expenditure,
resulting in a RUB2.3 billion interim surplus, or 2% of total
revenue. However, Fitch expects that seasonal acceleration of
expenditure in 4Q, both operating and capital, will ultimately
lead to a moderate full-year deficit at around 5% of total revenue
(2016: 7%).
Fitch projects the deficit will remain at the same level in 2018
due to capital spending peaking and will then narrow to a low 2%-
3% in 2019. In 2019, Krasnoyarsk will host Universiade -- the
international students sport competition. In preparation for this
event, the large-scale investment programme should be completed
before 2019. Around 45% of the regional investment needs for 2017
are co-financed by the federal government while the proportion of
federal support earmarked for Universiade-2019 is higher due to
the national importance of the project.
The agency projects the region's direct risk will remain moderate
by international standards, at below 65% of current revenue in
2017-2019. During 10M17, the region's direct risk remained almost
unchanged from the start of the year and was RUB95.2 billion as of
1 November. However, the maturity profile of the debt improved
during 2017 with weighted average life of debt being increased to
3.1 years as of 1 November from 2.5 years as of 1 January 2017.
This was thanks to the issuance of a new RUB10 billion domestic
bond due in 2024 and RUB8.84 billion of low-cost budget loans from
the federal government due in 2021-2022.
Nevertheless, like most of its national peers, the region remains
exposed to refinancing pressure as in 2017-2019 it has to
refinance around half of the total debt stock. The region has a
good access to the domestic capital market, and Fitch does not
foresee any difficulties in terms of refinancing. However, the
federal government's decision to cut budget loans to the regions
could increase the cost of borrowing over the medium term.
The region has a strong industrialised economy weighted towards
non-ferrous metallurgy and mining. Krasnoyarsk's wealth metrics
are above the national median with GRP per capita at 172% of the
national median. Negatively, the region's tax revenue is
concentrated with top 10 taxpayers contributing around 50% of
total tax proceeds in 2015-2016. The list of largest taxpayers
includes PJSC MMC Norilsk Nickel (BBB-/Stable/F3), PJSC Polyus
(BB-/Positive/B) and Rosneft. Tax concentration makes the region's
revenue base volatile and dependent on business cycles and
commodity price fluctuations.
The region's credit profile remains constrained by the weak
institutional framework for Russian local and regional governments
(LRGs), which has a shorter record of stable development than many
of its international peers. Weak institutions lead to lower
predictability of Russian LRGs' budgetary policies, which are
subject to the federal government's continuous reallocation of
revenue and expenditure responsibilities within government tiers.
RATING SENSITIVITIES
An operating balance above 10% of operating revenue on a
sustainable basis accompanied by sound debt metrics, with a direct
risk-to-current balance (2016: 19.5 years) below the weighted
average life of debt could lead to an upgrade.
Resumed deterioration of budgetary performance leading to
operating balance insufficient to cover interest expenditure
accompanied by growth of direct risk above 65% of current revenue
could lead to a downgrade.
VOLZHSKIY CITY: Fitch Affirms B+ IDR, Outlook Positive
------------------------------------------------------
Fitch Ratings has affirmed the Russian City of Volzhskiy's Long-
Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at
'B+' with Positive Outlooks and Short-Term Foreign-Currency IDR at
'B'. The region's outstanding senior unsecured domestic debt has
been affirmed at B+.
KEY RATING DRIVERS
The Positive Outlook reflects Fitch's expectation that the city
will consolidate its improved budgetary performance with a
positive current balance and moderate debt in the medium term. The
ratings also factor in the small size of Volzhskiy's budget and
ongoing refinancing needs. The city is also highly dependent on
the decisions of the regional and federal authorities, which leads
to low fiscal flexibility and low shock resilience.
Fitch expects Volzhskiy's operating balance to stabilise at 5%-7%
(2016: 8.7%) of operating revenue, which will be sufficient to
cover interest expenditure, so the current balance remains
positive in 2017-2019. During 9M17 Volzhskiy collected 74.7% of
its revenue budgeted for the full year and incurred only 67.7% of
its full-year budgeted expenditure, which resulted in an interim
budget surplus of RUB93.8 million.
Fitch projects that seasonal acceleration of expenditure in 4Q17
will erode the positive interim result and the city will report a
close to balance annual budget. The city already recorded surplus
before debt variation in 2015-2016 and Fitch expects Volzhskiy
will maintain its prudent policy of a close to balance budget in
the medium term.
Following the interim fiscal surplus, the region's direct risk has
reduced since the beginning of the year and was RUB1.07 billion at
November 1, 2017 (2016: RUB1.25 billion). Fitch forecasts direct
risk will increase by year-end driven due to growing expenditure
and reach RUB1.25 billion or a moderate 30% of current revenue
(2016: 27.9%). Fitch expect the city's direct risk to remain below
30% in 2018-2019.
The city is exposed to ongoing refinancing pressure despite its
moderate overall debt burden, given its weak cash position and
short-term repayment profile. At 1 November the city's debt was
represented by bank loans (RUB786 million or 74% of total direct
risk) and RUB180 million outstanding domestic bonds due within
2017-2018. The remaining debt was represented by RUB101.7 million
treasury facilities due in November 2017. Given the small absolute
debt level Fitch expects that the city will have sufficient access
to domestic financial market and will refinance the maturing debt.
With 325,970 inhabitants, Volzhskiy is the second-largest city in
the Volgograd region after the regional capital, the City of
Volgograd. The city's economy is dominated by processing
industries and together with the City of Volgograd, forms a strong
regional industrial agglomeration. The city's administration
expects that industrial production will demonstrate moderate
growth at 1%-2% in the medium term, which is in line with Fitch's
expectation for Russia's economy gradual recovery.
The city demonstrates prudent debt management, aimed at limiting
the fiscal deficit and maintaining moderate debt. At the same time
its budgetary policy is dependent on the decisions of the regional
and federal authorities, which leads to potential performance
volatility and low expenditure flexibility. Volzhskiy is receiving
an ongoing flow of earmarked current transfers from the regional
budget, which averaged 49% of operating revenue in 2014-2016.
The city's credit profile remains constrained by the weak
institutional framework for Russian local and regional governments
(LRGs), which has a shorter record of stable development than many
of its international peers. Weak institutions lead to lower
predictability of Russian LRGs' budgetary policies, which are
subject to the federal government's continuous reallocation of
revenue and expenditure responsibilities within government tiers.
RATING SENSITIVITIES
Consolidation of improved budgetary performance with a sustainable
positive current balance, and maintenance of moderate direct risk,
could lead to an upgrade.
=========
S P A I N
=========
CAIXABANK PYMES 9: Moody's Rates EUR222MM Series B Notes (P)Caa3
-----------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to the debts to be issued by CAIXABANK PYMES 9, FONDO DE
TITULIZACION:
-- EUR1,628M Series A Notes due March 2053, Assigned (P)A1 (sf)
-- EUR222M Series B Notes due March 2053, Assigned (P)Caa3 (sf)
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavour
to assign definitive ratings. A definitive rating (if any) may
differ from a provisional rating.
The transaction is a static cash securitisation of secured and
unsecured loans and draw-downs under secured and unsecured credit
lines granted by CaixaBank, S.A. ("CaixaBank", Long Term Deposit
Rating: Baa2 Not on Watch /Short Term Deposit Rating: P-2 Not on
Watch) to small and medium-sized enterprises (SMEs) and self-
employed individuals located in Spain.
RATINGS RATIONALE
The ratings of the notes are primarily based on the analysis of
the credit quality of the underlying portfolio, the structural
integrity of the transaction, the roles of external counterparties
and the protection provided by credit enhancement.
In Moody's view, the strong credit positive features of this deal
include, among others: (i) performance of CaixaBank originated
transactions has been better than the average observed in the
Spanish market; (ii) granular and diversified pool across industry
sectors; and (iii) refinanced and restructured assets have been
excluded from the pool. However, the transaction also presents
challenging features, such as: (i) exposure to the construction
and building sector at around 17.2% of the pool volume, which
includes a 7.2% exposure to real estate developers, in terms of
Moody's industry classification; (ii) strong linkage to CaixaBank
as it holds several roles in the transaction (originator, servicer
and accounts bank); and (iii) no interest rate hedge mechanism in
place.
- Key collateral assumptions:
Mean default rate: Moody's assumed a mean default rate of 9.4%
over a weighted average life of 3.7 years (equivalent to a Ba3
proxy rating as per Moody's Idealized Default Rates). This
assumption is based on: (1) the available historical vintage data,
(2) the performance of the previous transactions originated by
CaixaBank and (3) the characteristics of the loan-by-loan
portfolio information. Moody's took also into account the current
economic environment and its potential impact on the portfolio's
future performance, as well as industry outlooks or past observed
cyclicality of sector-specific delinquency and default rates.
Default rate volatility: Moody's assumed a coefficient of
variation (i.e. the ratio of standard deviation over the mean
default rate explained above) of 45.3%, as a result of the
analysis of the portfolio concentrations in terms of single
obligors and industry sectors.
Recovery rate: Moody's assumed a stochastic recovery rate with a
38% mean, primarily based on the characteristics of the
collateral-specific loan-by-loan portfolio information,
complemented by the available historical vintage data.
Portfolio credit enhancement: the aforementioned assumptions
correspond to a portfolio credit enhancement of 18.7%, that takes
into account the current local currency country risk ceiling (LCC)
for Spain of Aa2.
As of October, the audited provisional asset pool of underlying
assets was composed of a portfolio of 36,785 contracts amounting
to EUR 1,937.4 million. The top industry sector in the pool, in
terms of Moody's industry classification, is Beverage, Food &
Tobacco (25%). The top borrower group represents 1.7% of the
portfolio and the effective number of obligors is 1,147.The assets
were originated mainly between 2016 and 2017 and have a weighted
average seasoning of 0.9 years and a weighted average remaining
term of 7.6 years. The interest rate is floating for 58.7% of the
pool while the remaining part of the pool bears a fixed interest
rate. The weighted average spread on the floating portion is 2%,
while the weighted average interest on the fixed portion is 3%.
Geographically, the pool is concentrated mostly in the regions of
Catalonia (26%) and Valencia (13.7%). At closing, assets in
arrears up to 30 days will not exceed 5% of the pool balance,
while assets in arrears between 30 and 90 days will be limited to
up to 1% of the pool balance and assets in arrears for more than
90 days will be excluded from the final pool.
Around 14.9% of the portfolio is secured by mortgages over
different types of properties.
- Key transaction structure features:
Reserve fund: The transaction benefits from a EUR 84 million
reserve fund, equivalent to 4.55% of the balance of the Series A
and Series B notes at closing. The reserve fund provides both
credit and liquidity protection to the notes.
- Counterparty risk analysis:
CaixaBank will act as servicer of the loans for the Issuer, while
CaixaBank Titulizacion S.G.F.T., S.A. (not rated) will be the
management company (Gestora) of the transaction.
All of the payments under the assets in the securitised pool are
paid into the collection account at CaixaBank. There is a daily
sweep of the funds held in the collection account into the Issuer
account. The Issuer account is held at CaixaBank with a transfer
requirement if the rating of the account bank falls below Ba2.
Moody's has taken into account the commingling risk in its
analysis.
- Stress scenarios:
Moody's also tested other sets of assumptions under its Parameter
Sensitivities analysis. For instance, if the assumed default rate
of 9.4% used in determining the initial rating was changed to
12.2% and the recovery rate of 38% was changed to 28%, the model-
indicated rating for Series A and Series B of A1 (sf) and Caa3
(sf) would be Baa2 (sf) and Caa3 (sf) respectively. For more
details, please refer to the full Parameter Sensitivity analysis
included in the New Issue Report of this transaction.
- Principal Methodology:
The principal methodology used in these ratings was "Moody's
Global Approach to Rating SME Balance Sheet Securitizations"
published in August 2017.
- Factors that would lead to an upgrade or downgrade of the
ratings:
The notes' ratings are sensitive to the performance of the
underlying portfolio, which in turn depends on economic and credit
conditions that may change. The evolution of the associated
counterparties risk, the level of credit enhancement and Spain's
country risk could also impact the notes' ratings.
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 with respect to the notes by the legal final
maturity. Moody's ratings address only the credit risk associated
with the transaction. Other non-credit risks have not been
addressed but may have a significant effect on yield to investors.
===========
T U R K E Y
===========
BURSA: Fitch Affirms 'BB' Issuer Default Ratings, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Metropolitan Municipality of Bursa's
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR)
at 'BB' and National Long-Term rating at 'AA-(tur)'. The Outlooks
are Stable.
The affirmation reflects Bursa's continued robust operating
performance supporting its debt service capacity, in line with
Fitch unchanged base case scenario and expected increase in debt
stemming from large capex realisation. The ratings further take
into account the city's large unhedged FX liabilities of the city
and therefore the FX risk it is exposed to. This is mitigated by
the amortising nature and lengthy maturity of its debt and its
predictable non-seasonal monthly cash flows.
The Stable Outlook reflects Fitch's expectations of continued
robust fiscal performance with an operating balance covering over
30% of operating revenue in 2017-2019 and debt payback capacity
gradually decreasing to five years in 2019.
KEY RATING DRIVERS
Fiscal Performance (Neutral/Stable): Fitch projects Bursa will
continue to post robust operating margins of above30% in 2017-2019
(2016: 33.8%) due to its strong local economic base, reflecting a
broad tax base and opex growth, which even though elevated is
still broadly in alignment with operating revenue growth,
generating a healthy operating balance.
The 3Q17 interim budgetary results showed Bursa had achieved 74%
of the budgeted tax revenue income, including shared tax revenues,
transfers received and own tax revenue, reflecting continued
robust local economic growth. Total income at end 3Q17 was 59%.
Total expenditure was 67%, in line with Fitch expectation, leading
to an expected deficit before financing to total revenues at 18%
by year-end 2017.
Debt & Liquidity (Weakness/Stable): Bursa has the highest
indebtedness of its Fitch-rated national peers, with a debt to
current revenue ratio of 145% at end FY16 due to a track record of
significantly higher capex than budgeted. Fitch expect debt to
increase to TRY2.6 billion at end 2019 from TRY1.9 billion at end-
2016, due to elevated capital spending prior to local elections in
2019 and expected depreciation of the Turkish lira against the
euro. Fitch expect debt to gradually decrease after the elections.
A healthy operating balance will support debt to current balance
gradually decreasing to five years from the expected peak of six
years in 2017-2018.
Among its national peers, Bursa has the lowest share of unhedged
external debt (2016: 42.3%), but expected currency volatility
could increase fiscal pressure on the debt servicing costs of the
city's unhedged liabilities. The latter could make up 40% of its
total debt in 2017-2019. However, the lengthy weighted average
maturity of Bursa's total debt, at 10.9 years, and predictable and
regular monthly cash flows with Treasury repayment guarantees
mitigate immediate refinancing and repayment risks.
Bursa's contingent liabilities are largely limited to the debt of
its waste water and water distribution management affiliate
(BUSKI), which is not a company and established according to a
separate law, similar to affiliates in other metropolitan
municipalities. At end-2016 BUSKI posted a deficit before
financing of TRY369.4 million or 49% of total revenue, as the
affiliate increased its capex significantly due to the enlargement
of the city's boundaries after Law 6360 in 2014. Capex-induced
total debt reached TRY777.5 million at end-2016 (end-2015:
TRY338.8 million). However, the healthy operating balance helped
the debt/current balance ratio remain strong at 2.1 years. Fitch
expect the affiliate to increase its borrowing further in 2017-
2018
Economy (Neutral/Stable): Bursa is one of the most important
industrial hubs in Turkey with wealth levels are higher than the
national average. Bursa accounts on average for about 4% of
Turkey's GDP. Its GDP per capita was USD16,812 in 2016, well above
the Turkish average of USD10,273. Bursa's industrial sector
contributes 40% of its local GDP on average, well above the
national average of 26% in 2004-2014. The share of employment in
the industrial sector was the highest among Turkish regions at
end-2016. Bursa is also Turkey's fourth-largest city by population
with a population of 2,901,396 at end 2016 or 3.6% of the national
population.
Management (Neutral/Negative): Management has a track record of
significant increases in capex that are not aligned with current
balance development. This has increased the city's debt funding,
with indebtedness oscillating between 109%-145% of current revenue
for the last eight years, limiting the city's financial
flexibility.
In the large and important metropolitan municipalities such as
Ankara, Istanbul, Bursa and Balikesir, the elected mayors have
resigned prior to the expiry of their terms in 2019. Mr. Recep
Altepe resigned and was replaced by Mr. Alinur Aktas, who was
elected by the local municipal council. According to
Municipalities Law 5393 / Article 45, a new mayor can be elected
through and from the local council members within 10 days. The
voting occurs by a secret ballot. 75 of the 84 local municipal
members 75 voted for the current mayor. However, there has been no
change to the financial administration team.
Fitch will monitor this development closely and expects no major
changes to the financial administration team in the near term.
This team has a good track record of budgetary performance in
terms of healthy operating balances.
Institutional Framework (Weakness/Stable): Bursa's credit profile
is constrained by a weak Turkish institutional framework,
reflecting a short track record of stable relationship between the
central government and the local governments with regard to
allocation of revenue and responsibilities, weak financial
equalisation system and the evolving nature of its debt management
in comparison with international peers.
RATING SENSITIVITIES
Negative rating action would be triggered by Bursa's inability to
adjust capex in relation to its current balance and to apply cost
control, deteriorating the sustainability of the budgetary
performance and a debt to current revenue ratio above 170%.
Sustainable reduction of overall risk closer to 100% from its
current 145% and continued sound fiscal performance with a current
margin sufficient to cover at least 60% capex together with
operating expenditure in line with its budget could trigger
positive rating action.
FULL LIST OF RATING ACTIONS
Long-Term Foreign-Currency IDR affirmed at 'BB'; Outlook Stable
Long-Term Local-Currency IDR affirmed at 'BB'; Outlook Stable
National Long-Term rating affirmed at/to 'AA-(tur)'
IZMIR: Fitch Affirms 'BB+' Long-Term FC IDR, Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed the Metropolitan Municipality of
Izmir's Long-Term Foreign-Currency Issuer Default Rating (IDR) at
'BB+' and Long-Term Local-Currency IDR at 'BBB-'. The Outlooks are
Stable. The National Rating has been affirmed at 'AAA(tur)' with
Stable Outlook.
The affirmation reflects Izmir's continued strong operating
performance, in line with Fitch unchanged base case scenario, and
expected increase in debt stemming from large capex realisation.
The ratings further take into account the city's large unhedged FX
liabilities and therefore the FX risk it is exposed to. This is
mitigated by the amortising nature and lengthy maturity of its
debt and its predictable non-seasonal monthly cash flows.
The Stable Outlook reflects Fitch's expectations of a continued
sound fiscal performance with operating margins well above 50% in
2017-2019 and its debt payback capacity to remain strong at below
two years.
KEY RATING DRIVERS
Fiscal Performance (Strength/Stable): Fitch projects Izmir will
post strong operating margins in the high 50s in 2017-2019 (2016:
52.4%) supporting the ratings. The August 2017 interim budgetary
results showed Izmir had already achieved 59% of the budgeted tax
revenue income, including shared tax revenues, transfers received
and own tax revenue, reflecting the continued robust local
economic growth. Total income realisation at end-August 2017 was
at 55.2%. Total expenditure realisation was 68.4%.
Of this, 12.9% relates to write-offs of Izmir's companies' losses,
which accounted for two-thirds of planned write-offs for 2017. The
city budgeted to write off TRY1 billion cash in 2017-2019, or on
average 8% of its operating revenue during the forecast period.
According to Ministry of Interior regulation from 2012, the
company losses should be reduced by equity on the city's balance
sheet, but shown as an expense on its budget (a non-cash item).
However, at the same time the city needed to increase its equity
in the companies by capital injections of TRY1 billion (cash
item), to keep the required equity stake. This leads to double
counting under the capital expenditure item in its budget.
Consequently, Fitch expects Izmir to post a deficit before debt
variation averaging 18% of its total revenue in 2017-2019, down
from 26% in 2016. 49.5% will be due to write-offs.
Debt & Liquidity (Neutral/Stable): Debt is expected to increase
moderately to TRY2.8 billion at end-2019 from TRY1.7 billion at
end 2016, mainly due to capital spending needs and expected
depreciation of the Turkish lira against the euro. Fitch expect
the city to realise on average 85% of its budgeted capex. This
would lead debt to current revenue to be close to 60% in 2017-
2019.
The city faces foreign currency risk, as its foreign currency debt
is unhedged. Approximately 10% of the 56.6% increase in direct
debt in 2016 was due to depreciation of the Turkish lira, as 80%
of its debt was euro-denominated at end-2016. The lengthy maturity
(weighted average maturity at 9.8 years), amortising nature of its
total debt and healthy liquidity levels mitigate refinancing and
liquidity risks.
Economy (Neutral/Stable): With a population of 4.22 million in
2016, Izmir is Turkey's third-largest municipality in terms of
population. Its wealth indicators are above the national average
and its local GDP of TRY127.4 billion in 2014 (according to the
latest available statistics) accounts for 6.2% of the national
GDP. Izmir is the nation's third-largest GDP contributor. The city
is an important transport and industrial hub and accounts for 6%
of the country's exports. Its dynamic socio-economic profile and
high standard of living exposes it to a high number of less
qualified job seekers as well as migrant flows, resulting in the
unemployment rate (2016: 14%) being persistently above the
national average (11.1%).
Management (Neutral/Positive): Izmir has a track record of
disciplined expenditure, with spending in 2016 fully on budget.
Nevertheless, significant increases in capex ahead of the local
elections will drive debt funding higher, albeit comfortably
covered by the healthy operating balance. The city has a solid
track record of a strong investment profile, with capex to total
expenditure consistently above 50% and current balance coverage of
capex of at least 65% for the last five years.
Institutional Framework (Weakness/Stable): Izmir's credit profile
is constrained by a weak Turkish institutional framework,
reflecting a short track record of stable relationship between the
central government and the local governments with regard to
allocation of revenue and responsibilities, weak financial
equalisation system and the evolving nature of its debt management
in comparison with international peers.
RATING SENSITIVITIES
Izmir's ratings are capped by the sovereign and an upgrade of the
sovereign ratings could result in similar action on Izmir's
ratings. A reduction of foreign currency exposure to below 35% of
its outstanding debt, improving financial strength with budgetary
surplus before financing and continuation of prudent management
policies could lead to positive rating action, provided the
sovereign's ratings are upgraded.
As Izmir's IDRs are capped by the sovereign, any negative rating
action on Turkey would be mirrored on Izmir's IDRs. A sharp
increase in Izmir's direct debt to current balance above two
years, driven by capex and local currency devaluation could also
lead to a downgrade
FULL LIST OF RATING ACTIONS
Long-Term Foreign-Currency IDR affirmed at 'BB+'; Outlook Stable
Long-Term Local-Currency IDR affirmed at 'BBB-'; Outlook Stable
National Long-Term rating affirmed at 'AAA (tur)'
===========================
U N I T E D K I N G D O M
===========================
BRIGHTHOUSE GROUP: Bondholders Mull Debt-for-Equity Swap
--------------------------------------------------------
Alys Key at City A.M. reports that Brighthouse Group could come
under the control of a group of bondholders as its restructuring
process continues.
Private equity owners Vision Capital will be left with a stake of
3% if proposals can be agreed upon, City A.M. relays, citing Sky
News.
However, the chain's advisers have also been running parallel
discussions over a possible takeover deal, City A.M. notes. City
A.M. understands that these talks are still ongoing.
Meanwhile, the group's bondholders, led by Alteri Investors, have
been circling the company for months with plans for a debt for
equity swap which would wrest control from Brighthouse's private
equity owners, City A.M. discloses. Any proposal put forward
would need the agreement of all bondholders, City A.M. states.
BrightHouse Group plc operates as a rent-to-own retailer in the
United Kingdom.
SPS PRINT: Undergoes Pre-Pack Administration After CVA Fails
------------------------------------------------------------
Rhys Handley at PrintWeek reports that Dorset-based POS specialist
SPS Print Group has gone through a pre-pack administration and re-
emerged as Specialist Print Services, following a failed company
voluntary arrangement (CVA).
SPS Print Group appointed James Snowdon -- james.snowdon@cbw.co.uk
-- and John Dickinson -- john.dickinson@cbw.co.uk -- of London-
based Carter Backer Winter on Nov. 10 as administrators, PrintWeek
relates. The company was acquired on the same day by Specialist
Print Services, which was formed on Sept. 29, and shares two of
the same directors as SPS, brothers James and Toby Martin,
PrintWeek discloses.
SPS entered into a CVA last year, having been impacted by falling
turnover since 2012, PrintWeek recounts. However, the catalyst
for the CVA was SPS discovering in late 2015 that "human error" in
the processing of the company's accounts had obscured evidence of
losses of around GBP1.8 million as a result of double counting of
turnover as it was converted from work in progress, PrintWeek
notes.
Following advice from Grant Thornton, the Wimborne, Dorset-based
business entered a CVA in March 2016, PrintWeek relays.
According to PrintWeek, while delivering monthly CVA payments of
GBP35,000, the administrators said that SPS continued to struggle
with cashflow and had failed to win new contracts. A total of
GBP480,000 had been paid to creditors prior to SPS exiting the CVA
and approximately GBP2.8 million was still owed to CVA creditors,
PrintWeek states.
Over the 20 months of the CVA, 25 staff left the company through a
mixture of resignations and redundancies, PrintWeek discloses. A
total of 125 staff remained at the business, which had sales of
GBP12 million over the past 12 months and runs large-format litho,
screen and digital kit, according to PrintWeek.
The pre-pack sale and the transfer of SPS' assets to Specialist
Print Services was approved by the Pre Pack Pool on Nov. 2,
PrintWeek says.
TAURUS 2017-2: Fitch Assigns BB(EXP) Rating to Cl. E Notes
----------------------------------------------------------
Fitch Ratings has assigned Taurus 2017-2 UK DAC's notes expected
ratings as follows:
GBP164.5 million class A: 'AAA(EXP)sf'; Outlook Stable
GBP0.1 million class X: NR
GBP53.2 million class B: 'AA-(EXP)sf'; Outlook Stable
GBP33.7 million class C: 'A(EXP)sf'; Outlook Stable
GBP51.8 million class D: 'BBB(EXP)sf'; Outlook Stable
GBP44.7 million class E: 'BB(EXP)sf'; Outlook Stable
The transaction is the securitisation of 95% of a single GBP367.25
million commercial real estate loan advanced to entities related
to Blackstone Real Estate Partners by Bank of America Merrill
Lynch International Limited. The loan is backed by a portfolio of
127 multi-let light industrial/logistics assets located throughout
the UK.
The final ratings are contingent upon the receipt of final
documents conforming to the information already received.
KEY RATING DRIVERS
Granular Portfolio: The portfolio benefits from a diverse array of
tenants (with more than one 1,000 unique tenants) and no
significant geographic concentration. Therefore exposure to
idiosyncratic factors affecting a particular industry, tenant or
region is limited. This is reflected favourably in Fitch's
property scoring.
Secondary Property Quality: Secondary property is scored down by
Fitch, but there is little that Fitch consider at risk of
obsolescence. The vast majority are more than 30-years old, but
they are generally fit for purpose. Properties located in or near
populated areas may enjoy higher barriers to entry for new supply
of similar stock, which will tend to be relatively expensive to
deploy. This is evidenced by an estimated rebuild cost almost
double market value.
Pro-Rata Principal Pay: Prior to loan default, principal
(including property release amounts) is repaid to all noteholders
pro rata. If the borrower sells stronger assets more quickly, this
would leave notes exposed to a poorer quality, more concentrated
subset of properties. This risk is mitigated by initial portfolio
granularity and homogeneity, while its impact is cushioned by a
10% release premium. Allocated loan amounts also vary slightly by
certain proxies for property quality, like occupancy.
Last Mile Distribution Demand: The need for logistics operations
that are near to consumers to facilitate same-day delivery is
growing rapidly. This is driving up demand for so called "last
mile" logistics properties. Well located light industrial
buildings in this portfolio can be used as the final step in a
supply chain network.
KEY PROPERTY ASSUMPTIONS (all by market value)
'BBsf' WA cap rate: 7.5%
'BBsf' WA structural vacancy: 13%
'BBsf' WA rental value decline: 4.5%
'BBBsf' WA cap rate: 8%
'BBBsf' WA structural vacancy: 14.4%
'BBBsf' WA rental value decline: 6.5%
'Asf' WA cap rate: 8.6%
'Asf' WA structural vacancy: 15.8%
'Asf' WA rental value decline: 9.3%
'AAsf' WA cap rate: 9.3%
'AAsf' WA structural vacancy: 17.2%
'AAsf' WA rental value decline: 13.3%
'AAAsf' WA cap rate: 10%
'AAAsf' WA structural vacancy: 22.7%
'AAAsf' WA rental value decline: 18.5%
RATING SENSITIVITIES
The change in model output that would apply if the capitalisation
rate assumption for each property is increased by a relative
amount is as follows:
Current rating- class A/B/C/D/E: 'AAA(EXP)sf'/'AA-
(EXP)sf'/'A(EXP)sf'/'BBB(EXP)sf'/'BB(EXP)sf'
Increase capitalisation rates by 10% class A/B/C/D/E:
'AA+(EXP)sf'/'A+(EXP)sf'/'A-(EXP)sf'/'BB+(EXP)sf'/'B(EXP)sf'
Increase capitalisation rates by 20% class A/B/C/D/E:
'AA+(EXP)sf'/'A(EXP)sf'/'BBB(EXP)sf'/'BB(EXP)sf'/'CCC(EXP)sf'
The change in model output that would apply if the rental value
decline (RVD) and vacancy assumption for each property is
increased by a relative amount is as follows:
Increase RVD and vacancy by 10% class A/B/C/D/E: 'AA+(EXP)sf'/'AA-
(EXP)sf'/'A(EXP)sf'/'BBB(EXP)sf'/'BB(EXP)sf'
Increase RVD and vacancy by 20% class A/B/C/D/E/F:
'AA+(EXP)sf'/'A+(EXP)sf'/'A-(EXP)sf'/'BBB-(EXP)sf'/'BB-(EXP)sf'
The change in model output that would apply if the capitalisation
rate, RVD and vacancy assumptions for each property is increased
by a relative amount is as follows:
Increase in all factors by 10% class A/B/C/D/E:
'AA+(EXP)sf'/'A(EXP)sf'/'BBB+(EXP)sf'/'BB+(EXP)sf'/'B(EXP)sf'
Increase in all factors by 20% class A/B/C/D/E/F: 'AA-
(EXP)sf'/'BBB+(EXP)sf'/'BBB-(EXP)sf'/'BB-(EXP)sf'/'CCC(EXP)sf'
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
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Editors.
Copyright 2017. All rights reserved. ISSN 1529-2754.
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