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        T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

          Friday, December 29, 2017, Vol. 18, No. 258


                            Headlines


A R M E N I A

YEREVAN CITY: Fitch Alters Outlook on B+ IDR to Positive


B E L A R U S

EUROTORG LLC: Fitch Assigns 'B-' Long-Term Issuer Default Rating


G E R M A N Y

NIKI LUFTFAHRT: 790 Staff in Austria to Get December Wages


I T A L Y

MONTE DEI PASCHI: Moody's Rates EMTN Programme (P)Caa2
* ITALY: Bank of Italy Blames EU Rules for Banking Sector Woes


K A Z A K H S T A N

KCELL JSC: Fitch Rates Proposed KZT30BB Domestic Bond 'BB(EXP)'


K Y R G Y Z S T A N

KYRGYZSTAN CJSC: Fitch Assigns B- IFS Rating, Outlook Stable


L U X E M B O U R G

ARVOS MIDCO: Moody's Revises Outlook to Stable, Affirms B3 CFR
GALAPAGOS HOLDING: Moody's Lowers CFR to Caa1, Outlook Negative
INTELSAT SA: Egan-Jones Cuts Senior Unsecured Ratings to CCC-


M O L D O V A

* MOLDOVA: State-Owned Enterprises' Losses Exceed MDL3.5-Bil.


N E T H E R L A N D S

CHAPEL 2003-I: Moody's Hikes Class B Notes Rating to Ba2(sf)


P O R T U G A L

DOURO MORTGAGES NO.1: Moody's Affirms B2 Rating on Class D Notes


R U S S I A

ORIENT EXPRESS: Fitch Withdraws 'CCC' Long-Term IDR
RUSSIAN HELICOPTERS: Fitch Affirms Then Withdraws BB+ IDR
SUKHOI CIVIL: Fitch Affirms Then Withdraws BB- Long-Term IDR
T2 RTK: Fitch Corrects December 22 Rating Release
VOZROZHDENIE BANK: Moody's Cuts Long-Term Deposit Ratings to B2

* Russia's DIA Aims to Speed Up Liquidation Procedures to 18 Mos.


S P A I N

AYT HIPOTECARIO BBK II: Fitch Raises Class C Notes Rating to BB+
CATALONIA: Fitch Maintains BB IDR on Rating Watch Negative
MADRID RMBS 1: Fitch Lowers Class C Notes Rating to 'CCCsf'


U N I T E D   K I N G D O M

ELLI INVESTMENTS: Fitch Cuts IDR to C on Missed Coupon Payment
PREMIER OIL: Catcher Project Milestone to Help Repay Debt Load
TOYS R US: East Kilbride Store to Close Next Spring


X X X X X X X X

* BOOK REVIEW: The First Junk Bond


                            *********



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A R M E N I A
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YEREVAN CITY: Fitch Alters Outlook on B+ IDR to Positive
--------------------------------------------------------
Fitch Ratings has revised the Outlook on the Armenian City of
Yerevan's Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) to Positive from Stable and affirmed the IDRs at
'B+'. The Short-Term Foreign-Currency IDR has been affirmed at
'B'.

Under EU credit rating agency (CRA) regulation, the publication of
International Public Finance reviews is subject to restrictions
and must take place according to a published schedule, except
where it is necessary for CRAs to deviate from this in order to
comply with their legal obligations.

Fitch interprets this provision as allowing it to publish a rating
review in situations where there is a material change in the
creditworthiness of the issuer that Fitch believe makes it
inappropriate for us to wait until the next scheduled review date
to update the rating or Outlook/Watch status. In this case, the
deviation was caused by the revision of the Outlook on the
sovereign's IDRs.

Following the recent Outlook revision on Armenia's Long-Term IDRs,
Fitch has taken similar rating action on Yerevan as it is rated at
the same level as the sovereign and its IDR is constrained by the
sovereign ratings.

The next scheduled review date for the City of Yerevan will be
decided in December 2017 when Fitch publishes its LRG rating
review calendar for 2018.

KEY RATING DRIVERS

The revision of the Outlook on the city reflects the following key
rating drivers and their relative weights:

HIGH

Yerevan's ratings are constrained by the sovereign ratings. Fitch
believes that the city will keep posting a satisfactory budgetary
performance, supported by steady transfers from the central
government and sustain its zero debt status, while the sovereign
ratings will remain a constraint on the city's ratings.

The rating drivers of the Long-Term IDRs and Short-Term Foreign-
Currency IDR are unaffected, leading to their affirmation.

RATING SENSITIVITIES

The City of Yerevan's ratings are constrained by the sovereign
ratings, so any rating action on Armenia's sovereign IDRs would
lead to a corresponding rating action on the city's IDR.



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B E L A R U S
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EUROTORG LLC: Fitch Assigns 'B-' Long-Term Issuer Default Rating
----------------------------------------------------------------
Fitch Ratings has assigned Belarus-based Eurotorg LLC a final
Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'B-'
with a Stable Outlook following completion of debt refinancing. At
the same time, Fitch has assigned a final rating of 'B-'/RR4 to
the USD350 million loan participation notes (LPN) maturing in
2022. The LPN are issued by Bonitron Designated Activity Company,
an SPV domiciled in Ireland. The SPV is restricted in its ability
to do business other than issue the notes and provide a loan to
Eurotorg. The notes are secured by a loan to Eurotorg, which ranks
equally with its other senior unsecured obligations.

The 'B-' IDR reflects Eurotorg's enhanced liquidity position
following its LPN placement. Nevertheless, even after successful
debt refinancing, the rating is constrained at 'B-' by the
company's limited financial flexibility resulting from significant
FX risks combined with a currently high debt burden. The rating is
supported by Eurotorg's strong business profile, underpinned by
its unrivalled position in Belarusian food retail market, limited
threat of entrance of international chains and some growth
opportunities arising from low penetration of modern retail in the
country, as well as solid profitability relative to rated peers.

KEY RATING DRIVERS

Largest Food Retailer in Belarus: The rating is supported by
Eurotorg's strong market position as the largest food retailer in
Belarus with a 19% market share by sales in 1H17. This ensures
strong bargaining power with suppliers and should help Eurotorg
preserve its gross margin and win market share from traditional
retail, which accounts for 55% of retail sales in the country. The
company is large by Belarusian standards, but its absolute scale
(2016 EBITDAR of around USD170 million) is smaller than other
Fitch-rated food retailers and only commensurate with the 'B'
rating category.

Material FX Exposure: Limited financial flexibility stems from an
inherent material mismatch between the currencies of Eurotorg's
profits and debt. As a company with only domestic operations,
Eurotorg generates its profits in Belarusian roubles, while over
80% of its debt is in hard currency. In addition, the company's
operating lease agreements are in euros, although it has some
negotiation power with landlords in case of sharp local currency
depreciation. In Fitch sensitivity analysis, depreciation of the
local currency of a similar magnitude seen in 2015/16 would push
leverage up by 1x, albeit partly mitigated by rising inflation in
this scenario.

LfL Sales Growth to Accelerate: Fitch project Eurotorg's like-for-
like (LfL) sales growth to accelerate to mid-single digits due to
Fitch expectation of stabilisation of consumer sentiment as
Belarus's GDP resumes growth. The company's LfL sales grew a
modest 1% over 2015-1H17 due to weak consumer spending, sales
cannibalisation from rapid expansion in 2014-2016 and most
recently, a nationwide marketing campaign. Fitch assume that none
of these factors would have a material impact on sales over 2018-
2020.

EBITDA Margin Growth: Based on management's accounts, Eurotorg's
EBITDA margin increased to 9.6% in 1H17 (1H16: 5.5%) due to
marketing activities and, to a greater extent, better terms from
suppliers achieved at the expense of shorter payables days. Fitch
expect Eurotorg to maintain EBITDA margins within 8.5%-9.0% over
the medium term. This is based on Fitch assumption that cost
efficiencies (especially in personnel expenses) will offset growth
in operating lease expenses as the company opens new stores mostly
on leasehold premises.

FCF Partly Mitigates Refinancing Risks: Fitch expect Eurotorg to
generate positive free cash flow (FCF) at around 2%-3% of sales
over 2017-2020, due to moderate expansionary capex and projected
stable operating performance. Fitch also assumes that shareholders
would stay committed to the company's deleveraging and
accumulation of cash buffer ahead of the LPNs' repayment over
2021-2022.

High Leverage to Decrease: Over 2013-2016 Eurotorg's funds from
operations (FFO)-adjusted gross leverage was within 5.5x-6.0x,
which is commensurate with food retail peers in the 'B' rating
category. Nevertheless, Fitch views these leverage levels as high
for Eurotorg, given the company's inherent FX exposure and
challenging operating environment in Belarus. Fitch rating assumes
that Eurotorg's FFO adjusted gross leverage would fall below 4x
over the next four years due to stabilisation in FX exchange rates
and mild growth in consumer spending. However, deleveraging is
contingent on the Belarusian rouble not depreciating sharply
against the US dollar, the major currency of Eurotorg's debt.

Limited Diversification: Eurotorg operates grocery and consumer
electronics stores but the latter is immaterial relative to its
core food retail operations and thus provides little
diversification benefit. Geographic diversification is also
limited as the company operates only in Belarus. Eurotorg's
presence across different regions of the country puts the company
in a better position than competitors but does not reduce
concentration risks as Belarus is a small economy.

Weak Corporate Governance: Eurotorg's lack of adherence to best
corporate governance practices is a weakness for the company's
credit profile. Eurotorg is a private company with limited
information disclosure and key-man risk from two dominant
shareholders. In addition, its financials have multiple
restatements. A prudent financial policy targeting net debt/EBITDA
of 3.0x, and dividend suspension after 2014, provide some credit
support. Fitch therefore view corporate governance practices as
neutral to the rating.

DERIVATION SUMMARY

Eurotorg's market position and bargaining power in Belarus is
stronger than Russian peers X5 Retail Group N.V. (BB/ Stable),
Lenta LLC (BB/ Stable) and O'Key Group S.A. (B+/ Stable). This is
due to the large distance in market shares between Eurotorg and
its next competitor and significant price advantage. However, in
absolute terms based on annual EBITDAR, Eurotorg is substantially
smaller than Russian peers. In addition, it has weaker credit
metrics, more limited access to liquidity, despite Eurotorg's
latest debut issuance, and, in contrast to Russian peers, material
exposure to FX risks, which substantially reduces the company's
financial flexibility.

Eurotorg's ratings take into consideration higher-than-average
systemic risks associated with the Belarusian business and
jurisdictional environment. No Country Ceiling or parent/
subsidiary linkage aspects were in effect for these ratings.

KEY ASSUMPTIONS

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

- BYN/USD at 1.93 in 2017, 2.03 in 2018 and 2.17 in 2019
- 4% selling space CAGR over 2017-2020
- 9% revenue CAGR over 2017-2020
- EBITDA margin at 8.5%-8.8%
- Investment in working capital of around BYN180 million in 2017
- Capex around 1.5% of revenue over the next four years
- No dividends until net debt-to-EBITDA falls below 3x
- No M&A

RATING SENSITIVITIES

Future Developments That May, Individually or Collectively, Lead
to a Revision of the Outlook to Positive

- FFO adjusted leverage sustainably below 4.5x (2016: 5.5x) and
   FFO fixed charge coverage trending towards 2x (2016: 1.4x);
- Sustained positive FCF and maintenance of conservative
   financial policy;

An upward revision of the Belarus Country Ceiling (currently B-)
would be a pre-requisite for any potential upgrade.

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

- FFO adjusted leverage sustainably above 5.5x;
- FFO fixed charge coverage trending to 1.2x due to operating
   underperformance, greater-than-expected debt-funded capex or
   sharp depreciation of Belarusian rouble;
- Erosion in liquidity ratio sustainably below 1x.

KEY RECOVERY RATING ASSUMPTIONS

Average Recoveries for Noteholders: Fitch assigned a final rating
to the USD350 million LPN in line with Eurotorg's 'B-' IDR,
reflecting average recoveries in case of default under Fitch going
concern scenario. LPN are issued by an SPV which is restricted in
its ability to do business other than issue notes and provide a
loan to Eurotorg. The notes are secured by a loan to Eurotorg,
which ranks equally with the company's other senior unsecured
obligations.

Eurotorg is the major operating company within the group
accounting for 90% of the group's assets. The rights of
noteholders would be structurally subordinated to those of senior
secured lenders but Fitch expect the amount of secured debt will
be reducing over time due to positive free cash flows.

Key Recovery Rating Assumptions: The recovery analysis assumes
that Eurotorg would be considered a going-concern in bankruptcy
and that the company would be reorganised rather than liquidated.
Fitch has assumed a 10% administrative claim.

Eurotorg's going concern EBITDA is based on LTM-June 2017 EBITDA.
It reflects Fitch's view of a sustainable, post-reorganisation
EBITDA level upon, which Fitch based the valuation of the company.

The going-concern EBITDA is 35% below LTM-June 2017 EBITDA to
reflect significant FX translation risks, which are partly
mitigated by rising inflation in a currency devaluation scenario.

An enterprise value (EV)/EBITDA multiple of 4.0x is used to
calculate a post-reorganisation valuation and reflects a mid-cycle
multiple. It is in line with EV multiples Fitch use for Ukrainian
agricultural commodity processor Kernel and Ukrainian poultry
producer MHP and lower than the 5.0x EV/EBITDA multiple for
Russian retailer O'Key Group S.A. due to a higher-risk
jurisdiction.

For the debt waterfall assumptions, Fitch used secured and
unsecured debt at December 8, 2017.

The debt waterfall results in a 34% recovery estimate
corresponding to 'RR4' Recovery Rating for LPNs. This leads to
'B-' rating for the LPNs, in line with Eurotorg's IDR.

LIQUIDITY

Sufficient Liquidity Post Bond Placement: Eurotorg's liquidity
profile has strengthened substantially after the USD350 million
LPN placement and subsequent refinancing of short-term debt
maturities. As at 8 December 2017, cash of USD49.3 million and
expected positive FCF in 2018 were sufficient to cover short-term
debt of USD22.7 million. In addition, the company may refinance a
portion (USD9.3 million) of the local bond due in 3Q18 under an
existing credit agreement with the same lender.



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G E R M A N Y
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NIKI LUFTFAHRT: 790 Staff in Austria to Get December Wages
----------------------------------------------------------
Shadia Nasralla and Ilona Wissenbach at Reuters report that around
790 staff working for insolvent airline Niki in Austria will be
paid monthly wages for December, administrator Lucas Floether said
on Dec. 27, adding he was confident of striking a deal with a new
investor in the next few days.

The new owner would be expected to take on Niki's running costs,
including salaries, from the beginning of January, Reuters
discloses.

According to Reuters, three people familiar with the situation
have said among the four bidders selected for the final stages of
talks to buy all or parts of Niki is IAG, the owner of British
Airways and low-cost carrier Vueling.

British tour operator Thomas Cook and Niki's founder, former
Formula One world champion Niki Lauda, are also among the bidders,
Reuters notes.

A spokesman for Mr. Floether, as cited by Reuters, said the talks
were "going at full speed", but declined to reveal further
details.

The airline also employs around 200 people in Germany, Reuters
discloses.

"Our aim remains to preserve as many jobs as possible in Austria
and Germany.  This task is one of the central questions in the
ongoing . . . process," Reuters quotes Mr. Floether as saying in a
statement.

As reported by the Troubled Company Reporter-Europe on Dec. 15,
2017, the management of NIKI Luftfahrt GmbH on Dec. 13 filed with
the local court of Berlin-Charlottenburg a petition for the
opening of insolvency proceedings over the assets of NIKI.

                         About Air Berlin

In operation since 1978, Air Berlin PLC & Co. Luftverkehrs KG is
a global airline carrier that is headquartered in Germany and is
the second largest airline in the country.

In 2016, Air Berlin operated 139 aircraft with flights to
destinations in Germany, Europe, and outside Europe, including
the United States, and provided passenger service to 28.9 million
passengers.  Within the first seven months of 2017, the Debtor
carried approximately 13.8 million passengers.  It employs
approximately 8,481 employees.  Air Berlin is a member of the
Oneworld alliance, participating with other member airlines in
issuing tickets, code-share flights, mileage programs, and other
similar services.

Air Berlin has racked up losses of about EUR2 billion over the
past six years, and has net debt of EUR1.2 billion.

On Aug. 15, 2017, Air Berlin applied to the Local District Court
of Berlin-Charlottenburg, Insolvency Court for commencement of an
insolvency proceeding.  On the same day, the German Court opened
preliminary insolvency proceedings permitting the Debtor to
proceed as a debtor-in-possession, appointed a preliminary
custodian to oversee the Debtor during the preliminary insolvency
proceedings, and prohibited any new, and stayed any pending,
enforcement actions against the Debtor's movable assets.

To seek recognition of the German proceedings, representatives of
Air Berlin filed a Chapter 15 petition (Bankr. S.D.N.Y. Case No.
17-12282) on Aug. 18, 2017.  The Hon. Michael E. Wiles is the
case judge.  Thomas Winkelmann and Frank Kebekus, as foreign
representatives, signed the petition.  Madlyn Gleich Primoff,
Esq., at Freshfields Bruckhaus Deringer US LLP, is serving as
counsel in the U.S. case.



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MONTE DEI PASCHI: Moody's Rates EMTN Programme (P)Caa2
------------------------------------------------------
Moody's Investors Service assigned a provisional (P)Caa2
subordinated rating to the EMTN programme of Banca Monte dei
Paschi di Siena S.p.A. (Montepaschi), based on the base prospectus
dated Dec. 15, 2017, which allows issuance up to EUR50 billion.

RATINGS RATIONALE

The ratings take into account Montepaschi's caa1 standalone
baseline credit assessment (BCA) and Moody's Loss Given Failure
(LGF) analysis.

Moody's positioned the provisional subordinated rating at (P)Caa2,
one notch below the BCA, based on the rating agency's view that
loss-given-failure would be high for this debt class in case of
resolution.

Moody's withdrew Montepaschi's subordinated ratings on August 2,
2017, following the conversion of subordinated debt into equity.
Moody's is now reinstating the subordinated programme rating,
following an update to the programme (which expired in March 2016)
and the bank's plan to issue subordinated bonds during 2018.

RATING OUTLOOK

Subordinated debt ratings do not carry outlooks.

FACTORS THAT COULD LEAD TO AN UPGRADE

Moody's could upgrade the standalone BCA of Montepaschi if the
group were to meet the financial targets set out in its
restructuring plan, in particular: (i) a return on assets above
0.4%; (ii) a problem loan ratio below 15% of loans; and (iii)
increased deposit funding or demonstrated access to the senior and
subordinated debt markets, without the benefit of a government
guarantee.

An upgrade in the BCA would likely result in upgrades of all
ratings.

FACTORS THAT COULD LEAD TO A DOWNGRADE

Conversely, a downgrade in the BCA would drive a downgrade to all
ratings. This could be triggered if (i) the bank fails to return
to consistent profit generation; (ii) its Common Equity Tier 1
ratio falls below 12%; (iii) problem loans increase materially
once again; or (iv) the bank is not able to increase deposits and
remains reliant on government guaranteed funding. Moody's could
also downgrade senior debt if a shrinking volume of bonds
outstanding increases its loss-given-failure.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks
published in September 2017.


* ITALY: Bank of Italy Blames EU Rules for Banking Sector Woes
--------------------------------------------------------------
James Politi at The Financial Times reports that the governor of
the Bank of Italy has blamed a deep recession and unhelpful EU
rules for the recent troubles of the country's banking sector,
denying that poor supervision had played a role in the collapse of
several banks that required EUR13 billion worth of bailouts.

According to the FT, speaking before a parliamentary inquiry
commission on Dec. 19, Ignazio Visco -- who was recently
reappointed to a second six-year term as governor -- mounted the
most extensive defense of the central bank's actions in recent
years.

Many critics have accused the Bank of Italy of being slow and
negligent as banks such as Monte dei Paschi di Siena, two regional
banks in Veneto, and four small banks in central Italy, headed
towards collapse as a result of poor management and overwhelmed by
non-performing loans, the FT notes.

Echoing frequent criticism from Italian officials, Mr. Visco
attacked the EU regulatory regime on struggling banks for
contributing to the crisis, the FT relates.



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KCELL JSC: Fitch Rates Proposed KZT30BB Domestic Bond 'BB(EXP)'
---------------------------------------------------------------
Fitch Ratings has assigned 'BB'/'A(kaz)' ratings to JSC Kcell's
(BB/Stable) senior unsecured debt and 'BB(EXP)'/'A(kaz)(EXP)'
ratings to its proposed domestic bond issue for up to
KZT30 billion.

Kcell is the market-leading mobile-only operator in Kazakhstan.
The company does not have a proprietary backbone network and lacks
any broadband bundling options, which is a strategic weakness.
Leverage is likely to remain moderate but higher than the
company's public target of up to 0.9x net debt/EBITDA, driven by
continuing 4G and backbone investments in the medium term. Kcell
is majority controlled by Telia Company AB (A-/Stable). Fitch
expect this to change soon, in line with Telia's intention to
divest its emerging-market assets in the near future.

KEY RATING DRIVERS

Senior Unsecured Bond: The proposed bond is structured as senior
unsecured obligations of Kcell. The bond's terms and conditions
contain certain limitations on asset sales, cross-default
provisions with Kcell's other debt, and a financial covenant of
2.5x net debt/EBITDA (company definition). However, these
creditor-protective features are subject to significant carve-outs
and weak implementation remedies. The bond has a maturity of three
years and is callable at any time at the issuer's discretion.

Leading Market Positions: Kcell is the leader in Kazakhstan's
three-operator mobile market, with a subscriber market share of
39% at end-2016, within its targeted range. A rapid 4G roll-out
after receiving 4G spectrum in 2016 and significant network
investments will help protect its positions. The impact of mobile
number portability is unlikely to be significantly negative. The
company has only shed about 50,000 subscribers on a net basis,
less than 1% of the total, since its introduction in January 2016.

Intense but More Rational Competition: Competition in the Kazakh
mobile market is likely to remain intense but more rational than
in 2015-2016, after Kazakhtelecom's mobile subsidiary Altel and
Tele2 merged their mobile assets into a joint venture at end-2015
operating under the Tele2 brand. The merger was between the two
most disruptive companies in the market. The new enlarged operator
is likely to be less aggressive. Tele2 is targeting further market
share growth, but it already has about a quarter of the market by
subscribers, and financial performance has become a greater
priority.

Lack of Backbone: Fitch view Kcell's lack of a proprietary
backbone network and its over-reliance on other operators for
domestic transit traffic as a strategic weakness in the absence of
long-term contractual relationships. Short-term network leases are
exposed to substantial repricing risk, particularly on the about
15% of Kazakhstan territory where alternative network providers
are not present. Kcell's management is exploring a number of
options to address this issue, but Fitch believe higher lease
payments and additional investments into back-bone infrastructure
are likely in the short to medium term.

Cost-Cutting Benefits Delayed: Fitch do not expect the company's
EBITDA margins to improve from the high 30s in the short to medium
term, in spite of substantial cost-cutting efforts. Faced with
severe declines in revenue and EBITDA in 2015-2016, Kcell launched
strategic initiatives aimed at significant operating improvements
and cost savings in the long run. However, these are being run
largely in parallel, entail a degree of execution risk and may
require additional expenses in the short to medium term, in Fitch
view.

Moderate Leverage Overall: Fitch estimate that Kcell's leverage
may keep rising modestly due to negative free cash flow resulting
from high capex. Fitch expect FFO adjusted net leverage of 2.1x-
2.6x in the medium term (2.1x at end-2016).

Pending Shareholding Change: Fitch treats a pending shareholder
change as an event risk. Kcell is majority controlled by Telia but
this is scheduled to change as Telia announced plans to
"responsibly" dispose of its emerging-market assets, with an exit
expected by the shareholder before end-2017. A number of scenarios
are possible, but shareholding changes may not necessarily put
pressure on the ratings unless accompanied by a prolonged rise in
leverage, or if they result in a new controlling shareholder with
a significantly lower credit profile than Kcell and with
unfettered power to take cash out of the company.

DERIVATION SUMMARY

Kcell's operating and leverage profile is similar to that of its
Russian mobile peers PJSC Mobile TeleSystems (BB+/Rating Watch
Negative) and PJSC Megafon (BB+/Stable), but these benefit from a
greater presence in the fixed-line/broadband segment, largely
proprietary backbone infrastructure and a near completion of 4G
roll-out. Unlike incumbent Kazakhtelecom JSC (BB+/Stable), Kcell
lacks fixed broadband/pay-TV bundling opportunities, although it
benefits from stronger mobile-only market positions. Italian Wind
Tre SpA (B+/Positive) is rated lower due to higher leverage.

KEY ASSUMPTIONS

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

- modest and improving low single-digit service revenue declines
   in the medium term;
- EBITDA margin in the high 30s, with margin pressure from
   higher backbone leases not exceeding 1%;
- continuing negative working-capital movements driven by
   handset sales;
- capex in the mid-to-high teens in 2017-2020;
- dividends in line with the company's guidance of 70% of net
   income.

RATING SENSITIVITIES

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

- Lower dependence on external providers for domestic traffic
   transit, better broadband bundling opportunities
- Stronger free cash flow generation while maintaining market
   leadership and network quality parity with peers, and
   comfortable liquidity

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

- Leverage above 3x FFO-adjusted net leverage on a sustained
   basis without a clear path for deleveraging
- Continuing market share losses and financial underperformance
   leading to persistent and strongly negative FCF
- Persistently weak liquidity situation
- Negative changes in corporate governance after Telia's exit

LIQUIDITY

Limited Liquidity to Improve: Cash on balance sheet totalled KZT14
billion at end-3Q17, without any available committed lines. A
successful bond placement would improve Kcell's liquidity.



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K Y R G Y Z S T A N
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KYRGYZSTAN CJSC: Fitch Assigns B- IFS Rating, Outlook Stable
------------------------------------------------------------
Fitch Ratings has assigned Closed Joint-Stock Company Insurance
Company Kyrgyzstan (CJSC Kyrgyzstan) an Insurer Financial Strength
(IFS) Rating of 'B-'. The Outlook is Stable.

KEY RATING DRIVERS

The rating reflects the weak environment in which CJSC Kyrgyzstan
is operating, the company's high investment risk, its weak
business profile and high reserving risk. These rating weaknesses
are partly offset by supportive capitalisation and sustained
profitable performance.

The Kyrgyz insurance market remains relatively immature, and
contracted by 1% and 6% on a gross basis in 2015 and 2016,
respectively, shrinking to KGS1 billion (approximately USD14
million) in 2015 and to KGS946 million (USD13 million) in 2016. In
line with other CIS countries, Kyrgyzstan faced an economic
downturn, which resulted in declining GDP growth rates and
devaluations of national currencies.

Fitch views CJSC Kyrgyzstan's investment portfolio as very low
credit quality. The immature capital markets in Kyrgyzstan limit
available investment opportunities. CJSC Kyrgyzstan's investments
are therefore concentrated in deposits placed with local banks,
which Fitch believe are of very weak credit quality, reflecting
Fitch's view of the financial condition of the Republic of
Kyrgyzstan.

CJSC Kyrgyzstan is the fourth-largest insurer in Kyrgyzstan by
gross written premiums (USD1.1 million in 2016) with a market
share of around 10%, but is very small in absolute terms by
international standards and also compared with other rated peers
in the CIS region.

Fitch believes CJSC Kyrgyzstan is exposed to high risk of under-
reserving for insurance claims. The company does not perform any
assessment on the sufficiency of its loss reserves in a run-off
scenario. This weakness, together with limited in-house actuarial
expertise, increases the risks of adverse reserve development,
with resulting implications for profitability and capitalisation.

From a regulatory perspective, CJSC Kyrgyzstan is comfortably in
compliance with solvency requirements with the regulatory solvency
margin coverage being at 322% at end-2016. In January 2017, the
regulator increased the minimum solvency capital requirements. As
a result CJSC Kyrgyzstan's solvency margin coverage decreased to
111% at end-9M17.

CJSC Kyrgyzstan has generated robust profits over the last five
years (2012-2016). Historically, the net profit was supported by
both positive underwriting and investment components. The average
net income return on equity was 11% over 2013-2016.

In 2016, CJSC Kyrgyzstan reported net income of KGS19 million,
with underwriting income of KGS14 million and investment income of
KGS10 million. Conversely, the net income was affected by debt-
related interest expenses of KGS2.5 million. Results from 9M17
indicate that CJSC Kyrgyzstan will remain profitable in full-year
2017, with accrued net profit for the nine months totalling KGS6
million.

RATING SENSITIVITIES

A worsening of the operating environment, indicated in particular
by a change in Fitch's view of the financial condition of the
Republic of Kyrgyzstan, would result in a downgrade.

The ratings could also be downgraded if the insurer's regulatory
capital position weakens significantly or if the company
experiences any material adverse reserve development.

An upgrade is unlikely in the near term.



===================
L U X E M B O U R G
===================


ARVOS MIDCO: Moody's Revises Outlook to Stable, Affirms B3 CFR
--------------------------------------------------------------
Moody's Investors Service has changed the outlook on Arvos Midco
S.a r.l ('Arvos') and Arvos Bidco S.a.r.l. to stable from
positive. At the same time, Moody's affirmed the B3 Corporate
Family Rating (CFR) and the B3-PD Probability of Default Rating of
Arvos. Moody's also downgraded to B3 from B2 the ratings assigned
to the first lien senior secured term loan B and the senior
secured revolving credit facility (RCF) of Arvos Bidco S.a.r.l.

RATINGS RATIONALE

The change in outlook was driven by (i) the company's weaker than
expected operating performance during the first six months of the
current financial year resulting in an estimated Moody's adjusted
debt/EBITDA ratio of around 7.0x as of September 2017 compared to
5.9x as of March 2017 and by (ii) the weakened liquidity profile
as evidenced by a cash balance of EUR24 million as of September
2017 down from EUR40 million as of March 2017, lower expected cash
flow generation in the upcoming quarters and reduced headroom
under the springing covenant, which however should not be tested
in the upcoming quarters. The change of outlook to stable has
triggered the downgrade of the 1st lien instruments to the same
level as the CFR at B3 as described under structural
considerations.

The B3 CFR reflects (1) the group's small size compared with other
European speculative grade manufacturing companies, as illustrated
by revenues in the last twelve months to September 2017 of EUR319
million; (2) high financial leverage, with gross debt/EBITDA (as
adjusted by Moody's) of 7.0x as of end-September 2017; (3) limited
business diversification, with around 60% of group revenue
generated by the Air Preheaters division; (4) relatively high,
albeit declining, exposure to the mature coal powered electricity
markets of Europe, the United States, and Japan, which
collectively face long-term structural challenges because of
tightening environmental legislation; and (5) dependence on the
investment decisions of companies operating in the cyclical oil &
gas sector, affecting primarily the Heat Transfer Solutions
business.

These negatives are, however, partly balanced by the group's (1)
strong competitive position in certain niche areas of the global
steam auxiliary components market with a broad product portfolio
and global production capability; (2) established position in a
mature industry, which is supported by long-standing customer
relationships, as well as existing technological know-how; (3)
increasing order success in the large Asian markets which
mitigated the structural market decline in Europe and North
America; (4) a sizeable and higher-margin aftermarket business
(which accounts for around 60% of group turnover) which partially
offset the volatility of the new equipment business; (6) and a
limited but positive free cash flow generation supported by low
working capital and capex needs.

LIQUIDITY

Moody's considers Arvos' liquidity to be just adequate. Since
April 2017, the liquidity profile of Arvos has weakened mainly
because of the weak operating performance during April --
September 2017, the reduced cash flow generation expected for the
upcoming quarters and the refinancing transaction closed in May
2017 which reduced interest expense but consumed EUR23 million of
cash on balance sheet. At the end of September 2017, the company
had EUR24 million of cash on the balance and had access to a EUR40
million RCF, out of which EUR11.8 million have been drawn. There
is a net leverage covenant, which is expected to be tested in case
the RCF is drawn by more than EUR12 million, a situation that the
rating agency does not foresee in the next quarters. Since April
2017, the headroom under the covenant has reduced significantly.
Over the next twelve months, Moody's expects Arvos to generate
around EUR30 million of funds from operations as well as positive
but very limited free cash flow. The limited debt amortization
under the group's lending facilities will be manageable.

STRUCTURAL CONSIDERATIONS

In its assessment of the priority of claims in a default scenario
for Arvos, Moody's distinguishes between two layers of debt in the
capital structure. First, the senior secured EUR40 million RCF,
EUR287 million outstanding and USD194 million outstanding senior
secured first lien term loans and trade payables rank pari passu
on top of the capital structure. Then, behind these debt
instruments are pension and lease obligations.

Part of Arvos's equity is provided by way of a shareholder loan,
which the rating agency considers to be an equity like instrument
in line with its methodology for hybrid debt instruments.

The refinancing transaction closed in May 2017 took out the first
loss cushion provided by the second lien term loan through
increasing the senior secured first lien borrowings. Because of
the positive outlook on the CFR at the time of the refinancing
transaction, the rating agency decided to leave the instrument
ratings on the first lien facilities one notch above the CFR. The
change in outlook to stable has now triggered a realignment of the
first lien instrument ratings with the CFR at B3.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's expectations that in the next
12-18 months, Arvos will maintain a gross leverage in a range
between 6.0x and 6.5x Moody's adjusted gross debt/EBITDA and
positive but very limited free cash flow generation.

WHAT COULD CHANGE THE RATINGS UP/DOWN

An upgrade would require financial leverage as measured by
adjusted debt/EBITDA sustainably moving towards 5.5x with free
cash flow / debt improving sustainably to mid-single digits.

Downgrade pressure could be exerted on the rating in the event of
weaker operating performance leading to debt/EBITDA increasing
above 6.5x for an extended period of time, negative free cash flow
generation or weakening liquidity position.

The principal methodology used in these ratings was Global
Manufacturing Companies published in June 2017.


GALAPAGOS HOLDING: Moody's Lowers CFR to Caa1, Outlook Negative
---------------------------------------------------------------
Moody's Investors Service downgraded to Caa1 from B3 the corporate
family rating (CFR) and to Caa1-PD from B3-PD the probability of
default rating (PDR) of Galapagos Holding S.A. (Galapagos).
Moody's also downgraded to Caa3 from Caa2 the rating pertaining to
the senior unsecured notes of Galapagos and to B3 from B2 the
rating pertaining to the senior secured notes issued by Galapagos
S.A., a subsidiary of Galapagos. The outlook remains negative.

RATINGS RATIONALE

"Moody's decision to downgrade Galapagos by one notch takes into
account (1) the weak order backlog, which was 16.8% down year-
over-year as per end of September, which contributed to (2)
another downward revision of the company's public guidance
together with the release of Q3 results ," said Oliver Giani,
Moody's lead analyst for Galapagos. "In addition, the announcement
of a management change -- new CEO appointed, CFO will leave the
company as well, creates additional uncertainty," he added.

The Caa1 CFR reflects Galapagos' (1) high financial leverage (debt
/ EBITDA expected in 2017 to remain well above 7.0x); (2) the
increasing risk of a covenant breach over the next twelve months;
(3) a degree of customer concentration, particularly to those
customer groups operating in the oil & gas and power generation
sectors; (4) the cyclicality of the heat exchanger market which
primarily reflects the demand environment in the customers' end-
markets; and (5) the risk of additional restructuring charges
becoming necessary.

These factors are somewhat offset, however, by: (1) the
criticality of the heat exchanger product, which typically
represents a small percentage of the overall cost of a large power
plant or asset; (2) a strong position in the global heat exchanger
market with a broad product portfolio, global production
capability and geographic diversification; and (3) long-standing
customer relationships as well as technological know-how.

RATIONALE FOR THE NEGATIVE OUTLOOK

The negative outlook reflects a weak liquidity position, tight
covenant headroom, lack of visibility regarding the business
outlook into 2018 as evidenced by a low order backlog, the
expectation of a further erosion of profitability margin at
Kelvion, which accounts for more than 75% of company adjusted
EBITDA, and uncertainty resulting from management changes. In
addition Moody's highlights the company's continuing challenge --
owing to weaker demand in selected end markets, most notably oil
and gas -- to progressively improve EBITDA in order to stay
compliant with minimum EBITDA levels as set out in the revolving
credit facility agreement. The headroom under the springing
covenant continues to be low (6.7% or EUR6.2 million as of
September 2017). Moody's will closely monitor the further
development with the next milestone being the publication of the
2017 results and the release of the guidance for 2018.

Moody's views Galapagos' liquidity position as weak. While the
group's cash position amounted to EUR63 million end of September
2017, around EUR36 million of this is estimated to be trapped due
to transfer restrictions. Other cash sources for the next 12-18
months primarily comprise its EUR75 million revolving credit
facility and some EUR27 million proceeds expected from property
disposal. At the end of September 2017, drawings under the group's
RCF amounted to EUR35 million reflecting the seasonal reduction of
working capital in the Q3. Moody's forecasts RCF drawing to reduce
by the end of 2017 supported by disposal proceeds of up to EUR27
million and further seasonal working capital releases in Q4.
However, in its base scenario the rating agency expects negative
free cash flow for 2018 so that drawings under the RCF will
increase again during 2018.

WHAT COULD CHANGE THE RATING -- UP/DOWN

The ratings could be downgraded further in case of (1) a
deterioration in liquidity from current levels as indicated by the
utilisation of the revolving credit facility of EUR35 million as
per end of September 2017 and assuming usual seasonal swings, (2)
further tightening covenant headroom, (3) further erosion of
profitability margin at Kelvion, which accounts for more than 75%
of company adjusted EBITDA, or (4) if leverage were to remain
above 8x debt / EBITDA. Conversely, Moody's could consider an
upgrade if Galapagos is able to deliver organic growth and realize
efficiency measures that would facilitate a decrease in leverage
to sustainable well below 7x debt / EBITDA (as adjusted by
Moody's) in conjunction with positive FCF.

The principal methodology used in these ratings was Global
Manufacturing Companies published in June 2017.

Galapagos Holding S.A. (Galapagos) is a holding company, based in
Luxembourg, for a group of entities involved in the manufacturing
of heat exchangers for a variety of different industrial
applications. These primarily include the power generation and oil
& gas sectors but also the food & beverages, chemicals and marine
business areas. Galapagos was formed through a de-merger from its
previous parent - GEA AG (a German engineering company) in May
2014 - and was acquired by Triton Partners, a private equity
group. In 2016, Galapagos achieved revenues of EUR1.1 billion from
continuing operations.


INTELSAT SA: Egan-Jones Cuts Senior Unsecured Ratings to CCC-
-------------------------------------------------------------
Egan-Jones Ratings Company, on Sept. 25, 2017, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by Intelsat S.A. to CCC- from CCC.

Headquartered in Luxembourg, Intelsat S.A. is a satellite
services company that provides diversified communications
services to the world's leading media companies, fixed and
wireless telecommunications operators, data networking service
providers for enterprise and mobile applications, multinational
corporations and Internet service providers.


=============
M O L D O V A
=============


* MOLDOVA: State-Owned Enterprises' Losses Exceed MDL3.5-Bil.
-------------------------------------------------------------
InfoMarket, citing the publication of an independent analytical
center, reports that in 2013-2016 the total amount of losses of
companies with state capital exceeded MDL3.5 billion.

Weak results of profitability of state-owned enterprises naturally
lead to a high level of their debt, and if the situation persists,
then it is fraught with bankruptcy, InfoMarket discloses.

According to InfoMarket, experts said the level of debts of SOEs
increased in 2013-2015, but declined in 2016.  Although at the
moment the debt is kept within reasonable limits, its growth was
much more rapid in the case of the largest enterprises, which
causes some concern, InfoMarket states.

In addition, due to the lack of clear data, it is almost
impossible to assess the risk of excessive accumulation of arrears
and alleged bankruptcy of joint-stock companies in which the state
owns blocks of shares, InfoMarket notes.

Experts pay attention to the fact that the profitability of
companies with state capital can be affected by a number of
factors, among them: the appointment of managers close to certain
political forces; non-application of corporate governance
principles; weak control by the authorities and a relatively low
level of transparency in financial activities, InfoMarket relays.



=====================
N E T H E R L A N D S
=====================


CHAPEL 2003-I: Moody's Hikes Class B Notes Rating to Ba2(sf)
------------------------------------------------------------
Moody's Investors Service has upgraded the rating of Class B notes
issued by Chapel 2003-I B.V. to Ba2 (sf) from B3 (sf) and affirmed
the rating of Class A notes at Baa1 (sf) the same time. The rating
action reflects the increased levels of credit enhancement for the
affected notes, as a result of the deleveraging of the transaction
following repayment of the underlying collateral.

-- EUR890M Class A Notes, Affirmed Baa1 (sf); previously on
    May 23, 2016 Affirmed Baa1 (sf)

-- EUR39M Class B Notes, Upgraded to Ba2 (sf); previously on
    May 23, 2016 Upgraded to B3 (sf)

Chapel 2003-I B.V. closed in December 2003 and represents the
securitization of Dutch consumer loans and second lien mortgage
loans, originated by now-bankrupt Dutch DSB Bank N.V.

RATINGS RATIONALE

The rating actions are prompted by the increase in the credit
enhancement available for the affected tranches due to portfolio
amortization.

Increase in Available Credit Enhancement:

Sequential amortization during the amortization period led to the
increase in the credit enhancement available for Class B notes to
33% in November 2017 from 24% since last rating action in May
2016. Currently the credit enhancement only takes the form of
subordination as the reserve fund has been fully drawn.

Revision of Key Collateral Assumptions

As part of the rating action, Moody's reassessed its default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date. The performance of
the transaction has continued to be stable since last review.
Total delinquencies are at low level currently, with 60 days plus
arrears standing at 0.68% of current pool balance. Cumulative
losses stand at 4.67% of original pool balance plus all
replenishments. The unpaid PDL reduced continuously to 18.8mln in
November 2017. In addition, the issuer has received a pay-out
equivalent to 100% of all counterclaims from the DSB Bank N.V.
bankruptcy estate.

Moody's maintained its default probability (DP) assumption
unchanged at 6.2% of original balance and expected the DP
assumption of 7.6% of the current portfolio balance. Moody's left
unchanged the fixed recovery rate of 15% and the portfolio credit
enhancement of 40%.

The principal methodology used in these rating action was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in
September 2015.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors or circumstances that could lead to an upgrade of the
ratings include (1) a decrease in sovereign risk, (2) performance
of the underlying collateral that is better than Moody's expected,
(3) deleveraging of the capital structure and (4) improvements in
the credit quality of the transaction counterparties.

Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.



===============
P O R T U G A L
===============


DOURO MORTGAGES NO.1: Moody's Affirms B2 Rating on Class D Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating of two notes in
DOURO MORTGAGES No.1. At the same time, 2 notes' ratings have been
affirmed. The rating action reflects the upgrades of Banco BPI
S.A.'s Counterparty Risk assessment "CR assessment" acting as
servicer and swap counterparty. Moody's affirmed the ratings of
the notes that had sufficient credit enhancement to maintain
current rating on the affected notes.

-- EUR1434M Class A Notes, Affirmed A2 (sf); previously on Jan
    20, 2017 Confirmed at A2 (sf)

-- EUR24.75M Class B Notes, Upgraded to Baa3 (sf); previously on
    Jan 20, 2017 Upgraded to Ba1(sf)

-- EUR22.5M Class C Notes, Upgraded to Ba3 (sf); previously on
    Jan 20, 2017 Confirmed at B1 (sf)

-- EUR18.75M Class D Notes, Affirmed B2 (sf); previously on Jan
    20, 2017 Confirmed at B2 (sf)

RATINGS RATIONALE

The rating action is prompted by the upgrade of Banco BPI S.A.'s
Counterparty Risk assessment "CR assessment" to Baa3(cr) on
Dec. 7, 2017. Banco BPI S.A. acts as servicer and swap
counterparty in the transaction.

Counterparty Exposure

The rating actions took into consideration the notes' exposure to
relevant counterparties, such as servicer or swap providers.

Moody's matches banks' exposure in structured finance transactions
to the CR Assessment for commingling risk. Moody's uses a recovery
rate assumption of 45% for this exposure.

Moody's assessed the exposure to Banco BPI S.A. acting as swap
counterparty. Moody's analysis considered the risks of additional
losses on the notes if they were to become unhedged following a
swap counterparty default by using the CR Assessment as reference
point for swap counterparties. Moody's concluded that the ratings
of DOURO MORTGAGES No.1 note C and D are constrained whereas the
rest of the notes in this press release are not constrained by the
swap agreement entered between the issuer and Banco BPI S.A.

The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
September 2017.

The analysis undertaken by Moody's at the initial assignment of
these ratings for RMBS securities may focus on aspects that become
less relevant or typically remain unchanged during the
surveillance stage.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) deleveraging of the capital
structure, (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.

Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.


===========
R U S S I A
===========


ORIENT EXPRESS: Fitch Withdraws 'CCC' Long-Term IDR
---------------------------------------------------
Fitch Ratings has withdrawn Russia-based Orient Express Bank's
(OEB) ratings, including its 'CCC' Long-Term Issuer Default
Ratings (IDRs) on Rating Watch Evolving (RWE), for commercial
reasons. Accordingly, Fitch will no longer provide ratings or
analytical coverage for OEB.

KEY RATING DRIVERS

Fitch has withdrawn the bank's Long-Term IDRs and Viability Rating
(VR) without resolving the Rating Watch as the proposed new Bank
Rating Criteria, which drove the Watch, has not yet been
published. As outlined in the Exposure Draft of the Criteria,
Fitch plans to introduce + and - modifiers at the 'CCC'/'ccc'
level for Long-Term Issuer Default Ratings (IDRs), long-term
international debt and deposit ratings, Derivative Counterparty
Ratings (DCRs) and VRs.

There have been limited changes in OEB's credit profile since
Fitch review on Nov. 1, 2017. The ratings mainly capture Fitch's
view that the quality of the bank's capital has weakened markedly
following the merger with Uniastrumbank due to the resulting
significant exposure to investment property, non-traded equities
and high-risk corporate loans, which may be a source of negative
mark-to-market adjustments or impairment in the future. For more
details see ' Fitch Takes Rating Actions on Four Russian Consumer
Banks', dated Nov. 1, 2017, on www.fitchratings.com.

RATING SENSITIVITIES

Rating Sensitivities are not applicable as the ratings have been
withdrawn.

The rating actions are:

  Foreign- and Local-Currency Long-Term IDRs: 'CCC' on RWE;
  Withdrawn

  Short-Term Foreign-Currency IDR: affirmed and withdrawn at 'C'

  Viability Rating: 'ccc' on RWE; withdrawn

  Support Rating: affirmed and withdrawn at '5'

  Support Rating Floor: affirmed and withdrawn at 'No Floor'


RUSSIAN HELICOPTERS: Fitch Affirms Then Withdraws BB+ IDR
---------------------------------------------------------
Fitch Ratings has affirmed JSC Russian Helicopters' (RH) Long- and
Short-Term Issuer Default Ratings (IDR) at 'BB+' and 'B',
respectively. The Outlook is Stable. Fitch has simultaneously
withdrawn the ratings for commercial reasons. Fitch will no longer
provide ratings or analytical coverage of the company.

KEY RATING DRIVERS

State Support: RH benefits from existing state support in various
forms: interest rate subsidies on investment loans, research &
development funding support, lending from state banks (about 70%
of total debt at end-2016), and a long-term order book from The
Ministry of Defence. Given the strong support from the Russian
state the company's IDR is notched up once RH's standalone rating
of 'BB'.

Increasing Maintenance Revenue: Maintenance and aftermarket
service revenue as a share of RH's revenue has grown to 21% in
2016 from 11% in 2011. If sustained, this will provide the company
with recurring inflows that are typically less sensitive to
economic cycles.

Privatisation Supports Business: In February 2017 RH sold 12% of
its shares for USD300 million to a pool of investors, including
Russian Direct Investment Fund and Middle Eastern investors.
Changes in its shareholding structure have no influence on the
strategic importance of RH to the Russian government and existing
state support. The presence of the new minority shareholders
should both help improve corporate governance and RH expand its
activity in new markets. Moreover, proceeds from the privatisation
are being used to fund new investments rather than paid out
dividends.

Moderate Performance amid Weak Market: Weaker oil prices since
mid-2014 and the corresponding investment cutbacks by oil and gas
companies, which are one of the key customers in the helicopter
industry, have resulted in slower orders and rising price
competition. RH's order book decreased to 396 units in 2016 from
808 units in 2013. Nevertheless, the company benefited from rouble
devaluation and reported improved leverage since end-2015 with
stabilising funds from operations (FFO) generation. FFO adjusted
gross leverage improved to 2.1x at end-2016 from 2.6x at end-2015
and is expected to be under 2.1x by 2018.

DERIVATION SUMMARY

RH's ratings are currently based on Fitch's Parent and Subsidiary
Linkage Criteria and incorporate a one-notch uplift from the
company's standalone rating of 'BB' to reflect support from the
Russian Federation (BBB-/Positive). This is based on the strategic
importance of the company to the state underlined by the existing
different forms of state support.

Such one-notch uplift from the standalone rating is applicable to
Russian entities such as PJSC Alrosa and PJSC MOESK, whose
standalone credit profile is also 'BB', reflecting implied
parental support from their ultimate shareholder - the Russian
state.

The standalone rating profile of RH is in line with CIS-based
companies rated in the BB' category and is characterised by its
dominant global position in certain segments of the industry such
as attack and heavy-lift helicopters and by adequate credit
metrics with improved leverage and a satisfactory liquidity
position.

RH's standalone rating is comparable to foreign peers such as
Leonardo S.p.A. (BBB-/Stable), Bombardier Inc. (B/Negative),
Boeing Company (The) (A/Stable) and Airbus SE (A-/Stable). RH's
small scale of operations is offset by higher profitability and
moderate leverage metrics. RH's FFO-adjusted gross leverage at
2.1x (at end-2016) is closer to Leonardo's 3.7x, but greater
geographical diversification, a larger backlog and better
operating environment of Leonardo results in the rating being
higher than RH's.

No country-ceiling or operating environment aspects have an impact
on the rating. Parent/subsidiary linkage is applicable.

KEY ASSUMPTIONS

Fitch's Key Assumptions within its Rating Case for the Issuer

- Single-digit rise of revenue in upcoming years.
- Stable EBITDA margin averaging at 18%.
- Capex in line with previous years at about 7.5% of revenue.
- Dividend pay-out for 2017 in line with announced dividends
   payments; 25% of net profit thereafter.
- No material USD/RUB rate fluctuation is expected based on
   Fitch' Global Economic Outlook Forecast.

RATING SENSITIVITIES

Not applicable.

LIQUIDITY

Satisfactory Liquidity: RH's liquidity is satisfactory with
reported cash of RUB47.4 billion at end-1H17 against short-term
debt of RUB31.8 billion. About 83% of cash was held in RUB while
the rest was in USD and EUR. Expected slightly negative free cash
flow in 2017 should not be material and existing cash on hand
would be sufficient to cover growing working capital needs.


SUKHOI CIVIL: Fitch Affirms Then Withdraws BB- Long-Term IDR
------------------------------------------------------------
Fitch Ratings has affirmed JSC Sukhoi Civil Aircraft's (SCAC)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDR)
at 'BB-'. The Outlook is Positive. Fitch has also affirmed SCAC's
senior unsecured rating at 'BB-' and Short-Term Foreign- and
Local-Currency IDRs at 'B'. Fitch has simultaneously withdrawn the
ratings. The withdrawal of the ratings is due to commercial
reasons. Fitch will no longer provide ratings or analytical
coverage of the company.

KEY RATING DRIVERS

State Support: In line with Fitch's parent subsidiary linkage
methodology, SCAC's ratings are notched down three levels from the
ratings of its ultimate majority shareholder, the Russian
sovereign (BBB-/Positive). The three-notch differential reflects
the company's strong links to the state supported by the continued
equity injections. However, the state does not guarantee SCAC's
debt. Due to the company's importance to the government, Fitch
expects SCAC to continue to receive support from the Russian state
over and above what has already been contributed. Any actual or
perceived waning of that support is likely to lead to SCAC's
ratings being further notched down from those of the sovereign.

Limited FX Risks: SCAC's costs and revenues are not entirely
matched in terms of currencies, as the majority (around 95%) of
revenues are in USD, while only 70% of costs are in foreign
currency. Therefore, SCAC benefits from the weakening rouble and
given Fitch conservative forecasts for the rouble, the company is
likely to continue to benefit from it. However, should the rouble
strengthen, it would negatively affect the company's financial
performance. The company does not hedge its foreign currency
exposure.

Delivery Ramp-up: SCAC has regularly struggled to deliver on
management's forecasts regarding the ramp-up of the SSJ100. Due to
adverse economic conditions in the company's core market (Russia),
as well as weak penetration of the export markets, SCAC only
delivered 26 aircraft in 2016 (up from 25 in 2015). Fitch expects
deliveries between 2017 and 2020 to range between 27 and 30.
However, as the firm backlog is under 100 units, production could
be adjusted down in the short term if no new orders are won. SCAC
has made efforts to diversify away from Russian-based customers,
but the domestic market remains its core source of revenue, with
47% of the company's expected aircraft deliveries for Russian
companies.

Debt to Equity Conversion: In December 2016 SCAC converted its
shareholder's debt (over RUB100 billion) into equity. Furthermore,
Sukhoi Aviation Holdings bought out the minority shareholder,
Alenia Aeronautica (a subsidiary of Finmeccanica (BB+/Positive)),
and now controls 100% of SCAC. Fitch views this as a sign of
tangible support, which supports the ratings.

DERIVATION SUMMARY

SCAC's ratings are currently based on Fitch's Parent and
Subsidiary Linkage Criteria and are notched down by three notches
from the rating of the ultimate parent - the Russian Federation -
due to the support the company receives from the state in the form
of equity injections and loans from state banks, which demonstrate
the importance of the company to the state. The majority of other
Fitch-rated Russian and CIS-based companies whose ratings
incorporate state-support and are notched down from the sovereign
rating, such as KazMunayGas (BBB-/Stable) or Samruk Energy
(BB+/Stable), have ratings that are closer to those of the parent
as they are in sectors that are perceived as being more
strategically important to the parent, such as natural resources
or utilities.

Fitch views SCAC's standalone rating profile as very weak at
present, characterised by the company's small size, weak market
position and weak financial metrics. In some respects, its
standalone profile is similar to JSC National Company Kazakhstan
Engineering (BB+/Stable), which is also heavily reliant on the
sovereign's support and notched down by two notches from the state
rating. Nevertheless, Fitch believes that SCAC is likely to
improve its financials in the coming years as it continues to
increase its ramp-up and penetration of both domestic and foreign
markets.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
- Aircraft deliveries gradually increase to 30 by 2020
- Costs gradually decreasing to sustainable levels over 2017-
   2020
- Capex at around USD50 million over the forecast period
- No equity injections from the state

RATING SENSITIVITIES
Not applicable

LIQUIDITY
Liquidity Reliant on Russian Government: SCAC continues to be
reliant on financing from the Russian government and state-owned
banks, as Fitch expects the company to be FCF negative in 2017. As
of 1H17, around 60% of the company's debt was from state-owned
banks (Sberbank and VTB). In addition, SCAC has remaining
shareholders debt of around USD55 million (8% of the total debt)
from JSC United Aircraft Corporation (UAC) and Sukhoi Aviation
Holding. Fitch expects this level of support to continue to
underpin the company's liquidity, alongside SCAC's gradual
production and sales progress, which should lead to positive FCF
in the medium to long term. The company's cash position of USD54
million, combined with the unused credit facilities from the major
Russian banks of USD390 million should be sufficient to cover the
company's short-term needs.


T2 RTK: Fitch Corrects December 22 Rating Release
-------------------------------------------------
Fitch Ratings issued a correction of a commentary on LLC T2 RTK
Holding published Dec. 22, 2017 to include missing applicable
criteria.

The revised commentary is as follows:

Fitch Ratings has revised LLC T2 RTK Holding's (T2R) Outlook to
Stable from Negative, while affirming the telecoms company's Long-
Term Issuer Default Rating (IDR) at 'B+'. A full list of rating
actions is available at the end of this commentary.

The change in the Outlook reflects significant improvement in
T2R's financial performance following the company's entry into the
Moscow regional market and resultant substantial deleveraging.
Fitch expect T2R's funds from operations (FFO)-adjusted net
leverage to decline to below 4.5x in 2018 from slightly above this
level end-2017.

T2R is the fourth-largest facilities-based mobile-only operator in
Russia with approximately a 15% subscriber market share at end-
2016. The company benefits from close cooperation with Rostelecom
PJSC (BBB-/Stable), its large strategic shareholder. Rostelecom
provides T2R with access to its extensive country-wide backbone
infrastructure and enables T2R to provide bundled services
including fixed broadband and Pay-TV.

KEY RATING DRIVERS

Strategic Focus on Value: T2R's strategic shift in focus to become
a value-for-money operator rather than a heavy discounter will
likely lead to less market disruption and allow for faster margin
improvement, albeit at the expense of slower subscriber additions.
The company has achieved a low churn, which enhances the financial
benefits of long customer relationships and adds credibility to
its strategy of gradually growing average revenue per user (ARPU)
and attracting higher-value customers.

Foray into Moscow: T2R has made its foray into the Moscow market
and this region will become less of a cash drag in the near future
as start-up costs diminish. Although the company has not fully
achieved its initial target to take approximately 10% subscribers
in this region, market share gains are no longer a key target,
with financial performance higher on the agenda.

Data Drives Growth: T2R is likely to continue to gradually
increase its subscriber market share and grow revenue ahead of the
market. The company has significantly reduced its gap versus.
peers in terms of 3G and 4G coverage, and can expect to grab a
wider share of data-heavy subscribers. T2R has rolled out 4G
service in 49 out of its 65 total regions of operations by end-
2017. Continuing network investments should sustain improvements
in network quality.

MVNO Platform: T2R's willingness to open the company's network to
mobile virtual network operators (MVNOs) is likely to be margin-
accretive as it helps the company to better utilise its
infrastructure. Fitch believe the strategic risks are limited as
MVNO regulation is almost non-existent in Russia while T2R retains
a flexibility to re-negotiate terms every two to three years. The
company has invited a number of MVNOs to join its infrastructure,
and plans to add more MVNOs in the future.

Strategic Relationship with Rostelecom: T2R benefits from its
strategic partnership with Rostelecom, its 45% shareholder. T2R
enjoys access to Rostelecom's wide back-bone infrastructure,
leading to capex efficiency. The two companies can offer fixed-
mobile bundled service, which may give them an edge over key peers
that lack this option across most of Russia. T2R is also likely to
spend less on the implementation of the Yarovaya law that requires
all operators to store customer internet traffic as Rostelecom has
already invested in significant new storage capacity.

Rapid Deleveraging: Fitch expect T2R's leverage to decline to
within the range for 'B+' rating in 2018. Deleveraging will be
supported by stronger EBITDA generation on the back of gradually
improving financial performance in the not-so-long-ago-entered
Moscow market. Fitch estimate FFO-adjusted net leverage at 4.7x at
end-2017 (end-2016: 7x) and 4.3x at end-2018. Fitch believe T2R is
past the Moscow-related EBITDA trough and capex peak in 2016.
Recovering EBITDA generation and capex rationalisation were the
key factors behind T2R's strong deleveraging in 2017. Fitch
believe deleveraging will become a lesser priority once the
company reduces debt below its comfort level of 4x net debt/EBITDA
(company definition) in 2018.

Capex to Grow: Fitch project significantly higher capex in 2018
after it was more than halved yoy in 2017. The company is
expecting to enter two new regions in 2018 and will keep investing
in network quality to reach closer parity with its larger peers.
However, Fitch do not expect capex to exceed 20% of revenue in
2018 and forecast it will likely start to slow over the medium
term.

Cash Flow Break-Even to Slightly Positive: Fitch expect T2R's cash
flow on average to breakeven or be slightly positive over 2018-
2020. The company is likely to prioritise investments over
shareholder distributions, applying free cash flow (FCF) to capex.
Although the absolute quantum of debt is unlikely to materially
decline, Fitch expect cash flow to be helped by substantial
interest savings due to improving leverage and a lower interest
rate environment in Russia. Shareholder banks, the company's key
creditors, will likely allow loan re-pricing on market terms.

Shareholder Funding: Fitch expect shareholder banks to remain the
key funding source for T2R, which mitigates refinancing and
liquidity risks. Fitch believe T2R retains an option to diversify
into a wider creditor base after its leverage and financial
performance stabilise in 2017.

DERIVATION SUMMARY

T2R, the smallest of the four Russian facilities-based mobile
operators, lacks scale versus its larger peers and has lower
profitability, driven by its still low market share in the
lucrative Moscow market. T2R is facing stronger growth prospects
as it catches up with its peers in terms of network coverage and
quality and enters new regions. The company is significantly more
leveraged than its domestic peers, all of whom have FFO-adjusted
net leverage of less than 3x. Although T2R lacks any fixed-line
operations, this is addressed by its partnership with its
strategic shareholder Rostelecom.

KEY ASSUMPTIONS

- Mid-single digit revenue growth in 2018-2020 on the back of
   entry into new regions, gradually increasing market share and
   higher data consumption.
- EBITDA margin recovering to 27% in 2018 and further growing to
   low-thirties territory in the medium term.
- Substantial yoy interest savings in 2017 and 2018.
- Capex below 20% of revenue in 2018, slowly declining in the
   medium-term.
- No dividends until leverage drops below 4x net debt/EBITDA
   under the company definition.
- Operating lease payments at 5% of revenue, on a par with
   Russian peers and taking into account management information

KEY RECOVERY RATING ASSUMPTIONS
- The recovery analysis assumes that T2R would be considered
   a going-concern in bankruptcy and that the company would be
   reorganised rather than liquidated.
- Fitch assumes a 10% fee for administrative claims.
- the going-concern EBITDA estimate of RUB21 billion reflects
   Fitch's view of a sustainable, post-reorganisation EBITDA
   level upon which Fitch base the valuation of the company. This
   going-concern EBITDA is 30% below Fitch forecast of the
   company's 2017 EBITDA.
- An EV/EBITDA multiple of 4.5x is used to calculate a post-
   reorganisation valuation, reflecting a conservative post-
   distressed valuation.
- The recovery rating of the senior unsecured bond is capped at
   'RR4' due to country considerations.

RATING SENSITIVITIES

Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Successful operating development and FFO-adjusted net leverage
   stabilising at below 4x.

Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A protracted rise in FFO-adjusted net leverage to above 4.5x
   without a clear path for deleveraging.
- Weak cash flow generation driven by operating under-
   performance and insufficient growth from the expansion
   programme in Moscow and 3G/4G rollout in region.

LIQUIDITY

Comfortable Liquidity: At end-3Q17 T2R had undrawn credit
facilities with relationship banks that covered its debt
maturities till end-2018.

FULL LIST OF RATING ACTIONS

LLC T2 RTK Holding
- Long-Term IDR: affirmed at 'B+', Outlook revised to Stable
   from Negative

OJSC Saint-Petersburg Telecom
- Senior unsecured rating: affirmed at 'B+'/Recovery Rating
  'RR4'


VOZROZHDENIE BANK: Moody's Cuts Long-Term Deposit Ratings to B2
---------------------------------------------------------------
Moody's Investors Service has downgraded Vozrozhdenie Bank's long-
term local and foreign-currency deposit ratings to B2 from B1,
baseline credit assessment (BCA) and adjusted BCA to b2 from b1,
and Counterparty Risk Assessment (CRA) to B1(cr) from Ba3(cr). The
rating agency maintains the review for downgrade placed on the
above ratings on 1 November. At the same time, Vozrozhdenie Bank's
short-term Not Prime deposit ratings and short-term Not Prime(cr)
CRA were affirmed.

RATINGS RATIONALE

The downgrade of Vozrozhdenie Bank's ratings with maintaining the
review for downgrade follows the recent failure of its sister-bank
Promsvyazbank (LT bank deposits: B2 Developing, BCA: ca), which
was taken over by the Central bank of Russia on December 15
(http://www.moodys.com/viewresearchdoc.aspx?docid=PR_377417).The
rating action reflects Vozrozhdenie Bank's links to Promsvyazbank
and its shareholders, which pose risks of related-party exposure
and damage to the bank's reputation given the negative publicity
surrounding Promsvyaz group.

Vozrozhdenie Bank is currently 52.73% owned by Promsvyaz Capital
B.V. with the ultimate beneficiary shareholders being the Ananyev
brothers (the same beneficiaries as for Promsvyazbank). According
to the regulator's requirement, they would need to reduce their
stake in Vozrozhdenie down to 10% threshold within the next 90
days. Until ownership change, there is a risk of intensifying
deposit volatility and customers outflow, in Moody's view.

Moody's believes that the related-party exposure poses heightened
risks to Vozrozhdenie Bank following its sister-bank's failure,
which can cause additional credit losses in case of affiliated
loans write-offs. Disclosed related party exposure under IFRS
amounted to RUB20 billion (76% of shareholders equity) as of
October 1, 2017, out of which RUB6 billion (23% of equity)
referred to customer loans, RUB1.8 billion -- investments in
securities (which were consequently sold according to the bank's
management), and the remainder -- interbank exposure.

Vozrozhdenie Bank's ratings continue to be underpinned by robust
pre-provision earnings, limited reliance on market funding and
currently ample liquidity cushion. At the same time, the ratings
are constrained by links to Promsvyazbank and its shareholders,
high single-name credit concentrations and modest regulatory Tier
1 capital buffer.

Moody's will resolve the review for downgrade within the next
three months following change in ownership structure or financial
profile, including dynamics in customer deposits and related-party
exposure.

WHAT COULD MOVE THE RATINGS UP / DOWN

Moody's will confirm the current ratings following ownership
change, assuming the bank maintains robust financial profile,
including good asset quality with no increase in related-party
exposures, adequate capital adequacy and ample liquidity cushion.

Downward pressure on Vozrozhdenie Bank's ratings could arise in
case of weakening of its credit profile as a result of revealed
increased related-party exposure, capital dilution, material
deposits outflow and liquidity shortage.

LIST OF AFFECTED RATINGS

Issuer: Vozrozhdenie Bank

Downgraded and Placed on Review for Further Downgrade:

-- LT Bank Deposits, Downgraded to B2 from B1, Outlook remains
    Rating Under Review

-- Adjusted Baseline Credit Assessment, Downgraded to b2 from b1

-- Baseline Credit Assessment, Downgraded to b2 from b1

-- LT Counterparty Risk Assessment, Downgraded to B1(cr) from
    Ba3(cr)

Affirmations:

-- ST Bank Deposits, Affirmed NP

-- ST Counterparty Risk Assessment, Affirmed NP(cr)

Outlook Actions:

-- Outlook, Remains Rating Under Review

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks
published in September 2017.


* Russia's DIA Aims to Speed Up Liquidation Procedures to 18 Mos.
-----------------------------------------------------------------
According to Bloomberg News' Elena Mazneva, Vedomosti, citing DIA
head Yuri Isayev, reports that Russia's Deposit Insurance Agency
is working on reforms that would speed up bank liquidation
procedures from current average of three years to about 18 months.

The agency seeks to sell assets faster, before their value
declines, including through regular open auctions or Dutch
auctions, if needed, Bloomberg discloses.

DIA currently manages liquidation of 321 banks with overall book
value of assets of RUR3.78 trillion, estimated market value of
RUR0.44 trillion, Bloomberg notes.

Bank of Russia is working on reforms together with DIA, Bloomberg
relays, citing the regulator's press service.



=========
S P A I N
=========


AYT HIPOTECARIO BBK II: Fitch Raises Class C Notes Rating to BB+
----------------------------------------------------------------
Fitch Ratings has upgraded AyT Hipotecario BBK I, FTA's (BBK I)
and AyT Hipotecario BBK II, FTA's (BBK II) class B and C notes,
affirmed the class A notes for both transactions and removed all
notes from Rating Watch Evolving (RWE):

AyT Hipotecario BBK I:
Class A notes (ISIN ES0312364005): affirmed at 'AA+sf'; off RWE;
Outlook Stable
Class B notes (ISIN ES0312364013): upgraded to 'AA+sf' from 'AA-
sf'; off RWE; Outlook Stable
Class C notes (ISIN ES0312364021): upgraded to 'BBB+sf' from
'BB+sf'; off RWE; Outlook Stable

AyT Hipotecario BBK II:
Class A notes (ISIN ES0312251004): affirmed at 'AA+sf'; off RWE;
Outlook Stable
Class B notes (ISIN ES0312251012): upgraded to 'A+sf' from 'Asf';
off RWE; Outlook Stable
Class C notes (ISIN ES0312251020): upgraded to 'BB+sf' from
'BBsf'; off RWE; Outlook Stable

The transactions comprise residential mortgages originated and
serviced by Kutxabank, S.A. (BBB+/OutS/F2).

KEY RATING DRIVERS

Increased Credit Enhancement (CE)
The notes have amortised sequentially throughout the life of the
transactions, leading to a substantial increase in CE for the
senior notes. CE available to the class A notes for BBK I and BBK
II represents 35.5% and 25.7% of the securitised assets. Fitch
does not expect pro rata amortisation to occur at any point of the
transactions' lives due to a breach in a trigger linked to late-
stage delinquencies (loans in arrears by three months and more)
and outstanding defaults (loans in arrears by 18 months and more),
which will not be reversed in the agency's base case scenario.

The same performance trigger is in place for BBK I's reserve fund
(RF) amortisation. The RF has not amortised since closing in 2005
and now represents 7.7% of the outstanding notes, providing
significant CE across the structure. The upgrade of the class B
and C notes reflects a higher resilience of the notes to Fitch's
stresses as their CE has increased respectively by 210bp and 70bp
over the last 12 months.

In comparison, a looser trigger has been put in place for the
amortisation of BBK II's RF, which is currently amortising and
sized at 4.3% of the outstanding notes balance. As the RF is the
only source of CE for the class C notes this has remained stable
while for class B it has increased 90bp. In Fitch's base case
assumptions the RF will continue to amortise to its floor,
providing a moderate improvement to the notes' resilience as the
portfolio amortises.

Counterparty Exposure
The issuer account bank for both transactions is Banco Santander,
S.A. (A-/Stable/F2), with a dynamic rating trigger in place linked
to the maximum rating achievable by the bonds subject to the
Country Ceiling (currently AA+ for Spanish transactions).

Under Fitch's Structured Finance and Covered Bonds Counterparty
Rating Criteria, a direct support counterparty rated 'A-'/'F2' is
compatible with note ratings up to the 'AAsf' category. Therefore,
even in case of removal of the Country Ceiling due to an eventual
upgrade of the IDR of Spain the notes would still be capped at
current rating level.

Stable Asset Performance

The transactions' sound asset performance reflects the high
seasoning of the portfolios and is in line with Spanish
transactions backed by portfolios of similar vintage.

Late-stage delinquencies for both BBK I and BBK II are currently
at 0.4% of the portfolios' current balances (1.7% and 1.8%
including defaulted assets) while loans in arrears by more than
one month are respectively at 1.3% and 1.5%. Cumulative defaults
represent 1.1% of original collateral balance for BBK I and 1.8%
for BBK II.

Given the limited pipeline of delinquencies and the high seasoning
of the portfolios, Fitch expects performance to remain stable.

Geographical Concentration
Both transactions are exposed to significant regional
concentration risk, as 72.7% of BBK I portfolio (by property
count) and 68.9% of BBK II are located in the regions of Pais
Vasco and Cantabria. As per the agency's rating criteria, Fitch
has applied a higher set of rating multiples to the base
foreclosure frequency assumption to the portion of the portfolio
that exceeds 2.5x the population within these regions.

RATING SENSITIVITIES

A change in Spain's IDR and Country Ceiling may result in a
revision of the highest achievable rating.

Deterioration in asset performance may result from economic
factors. A corresponding increase in new defaults and associated
pressure on excess spread levels and the RFs, beyond those
captured in Fitch's analysis, could result in negative rating
action. Furthermore, an abrupt shift of the underlying interest
rates might jeopardise the underlying borrowers' affordability.


CATALONIA: Fitch Maintains BB IDR on Rating Watch Negative
----------------------------------------------------------
Fitch Ratings is maintaining the Autonomous Community of
Catalonia's (Catalonia) Long-Term Foreign and Local Currency
Issuer Default Ratings (IDR) of 'BB' on Rating Watch Negative
(RWN). The Short-Term Foreign Currency IDR of 'B', and the ratings
on the EMTN programme and bond issues - all rated at 'BB/B' - also
remain on RWN.

KEY RATING DRIVERS

Catalonia was placed on RWN on Oct. 5, 2017 following the
escalation of the political tensions between the central
government and Catalonia, in the aftermath of the referendum held
on October 1 - ruled illegal by the Spanish constitutional court.
Intervention by the central government in Catalonia's
administration led to regional elections being called on 21
December.

These political developments increased uncertainty with respect to
liquidity support from the central government, provided through
the Regional Liquidity Fund (FLA), for the ongoing payment of
Catalonia's debt obligations. Although social unrest has abated
since and liquidity support from the central government has been
timely, Fitch has decided to maintain the RWN ahead of the
formation of a new government after the elections and its ensuing
relationship with the central government.

The elections show pro-independence parties retaining the majority
in Parliament with 70 out of 135 seats (72 in 2015 elections), and
47.5% of the overall vote. Moreover, the centrist Citizen's Party
(anti-independence) has obtained the most votes.

In the medium term, Fitch central assumption remains that there
will be a continuation of ongoing support from the central
government, notably through the FLA, for Catalonia's debt
servicing, as has been the case since 2012.

RATING SENSITIVITIES

Fitch expects to resolve the RWN within the next four months,
subject to developments in the relationship between Catalonia and
the central government, in particular how this affects liquidity
support from the latter to the former. A weakening in this
liquidity could trigger a downgrade of several notches.

KEY ASSUMPTIONS

Fitch assumes that the region will continue to have access to
state liquidity support for debt servicing over the medium term.


MADRID RMBS 1: Fitch Lowers Class C Notes Rating to 'CCCsf'
-----------------------------------------------------------
Fitch Ratings has upgraded five, downgraded three and affirmed
nine tranches of Madrid RMBS 1, FTA (M1), Madrid RMBS II, FTA (M2)
and Madrid III RMBS, FTA (M3). The agency also removed all classes
from Rating Watch Evolving (RWE).

Madrid RMBS 1, FTA
Class A2 (ES0359091016) upgraded to 'A-sf' from 'BBB-sf'; Outlook
Stable
Class B (ES0359091024) upgraded to 'BBB-sf' from 'BB-sf'; Outlook
Stable
Class C (ES0359091032) downgraded to 'CCCsf' from 'B-sf'; Recovery
Estimate (RE) 100%
Class D (ES0359091040) affirmed at 'CCCsf'; RE 0%
Class E (ES0359091057) affirmed at 'CCsf'; RE 0%

Madrid RMBS II, FTA
Class A2 (ES0359092014) upgraded to 'A-sf' from 'BBB-sf'; Outlook
Stable
Class A3 (ES0359092022) upgraded to 'A-sf' from 'BBB-sf'; Outlook
Stable
Class B (ES0359092030) upgraded to 'BBB-sf' from 'BB-sf'; Outlook
Stable
Class C (ES0359092048) downgraded to 'CCCsf' from 'B-sf'; RE 100%
Class D (ES0359092055) affirmed at 'CCCsf'; RE 0%
Class E (ES0359092063) affirmed at 'CCsf'; RE 0%

Madrid RMBS III, FTA
Class A2 (ES0359093012) affirmed at 'BB-sf'; Outlook Stable
Class A3 (ES0359093020) affirmed at 'BB-sf'; Outlook Stable
Class B (ES0359093038) downgraded to 'Bsf' from 'B+sf'; Outlook
Stable
Class C (ES0359093046) affirmed at 'CCCsf'; RE to 0% from 60%
Class D (ES0359093053) affirmed at 'CCsf'; RE 0%
Class E (ES0359093061) affirmed at 'Csf'; RE 0%

These transactions comprise Spanish residential mortgage loans
originated and serviced by Bankia S.A. (BBB-/Stable/F3).

KEY RATING DRIVERS

Stable to Rising Credit Enhancement
Structural credit enhancement (CE) across all notes has remained
broadly stable over the last 12 months, with gradual CE increases
visible for the most senior class A tranches to 27.1%, 27.8% and
16.9% for M1, M2 and M3 respectively as of August 2017 from 25%,
25.6% and 16.6%. Fitch expects the sequential amortisation of the
notes to continue, as performance based- conditions that could
trigger the pro-rata amortisation of the notes are not expected to
be met in the near future. Fitch views the existing and projected
CE as sufficient to support the current ratings.

Stable Arrears Performance
The rating actions reflect stable asset performance, supported by
a decreasing trend of arrears over the past 12 months. As of
August 2017, three-months plus arrears (excluding defaults)
decreased to 0.13% from 0.33% (M1), to 0.22% from 0.29% (M2) and
to 0.26% from 0.3% (M3) of the current pool balances. Cumulative
gross defaults (defined as loans in arrears for more than six
months) are high but show signs of continuous flattening, ranging
between 19.3% (M1) and 22.4% (M3) of the initial portfolio balance
as of the latest reporting period.

Junior Notes Interest Deferrals
Interest payment due amounts on the junior class E notes of M2 and
class B to E notes of M3 have moved to a subordinate position
within the waterfall of payments, as the deferability conditions
linked to cumulative defaults have been met. While this deferral
mechanism provides credit protection to the senior notes that
receive principal amortisation ahead of junior interest, it adds
cash flow uncertainty to the lower-rated tranches, resulting in
downgrades.

RATING SENSITIVITIES

A worsening of the Spanish macroeconomic environment, especially
employment conditions, or an abrupt shift of interest rates could
jeopardise the underlying borrowers' affordability.
Additionally, larger recovery rates on defaulted loans and faster
recovery periods could support rating upside, all else being
equal.



===========================
U N I T E D   K I N G D O M
===========================


ELLI INVESTMENTS: Fitch Cuts IDR to C on Missed Coupon Payment
--------------------------------------------------------------
Fitch Ratings has downgraded UK care homes operator Elli
Investments Ltd's (Elli; key brand Four Seasons) Long-Term Issuer
Default Rating (IDR) to 'C' from 'CC'. At the same time, the
agency has downgraded Elli Finance (UK) Plc's super senior
facility to 'CCC'/'RR1'/100% from 'CCC+'/'RR1'/100% and its senior
secured notes to 'CCC-'/'RR2'/82% from 'CCC'/'RR2'/82%. Fitch has
also affirmed Elli's senior unsecured notes at 'C'/'RR6'/0%.

The IDR downgrade to 'C' follows the missed coupon payment on
Dec. 15, 2017 entering into a grace period and the concomitant
standstill agreement in relation to the deferral of interest
payments until 4 March 2018. The issuer intends to utilise the
standstill period to facilitate and seek agreement on a
restructuring plan in order to create a sustainable capital
structure beneficial for the business operation in the long term.
The 'C' IDR precedes an anticipated downgrade to Restricted
Default (RD) upon occurrence of the completion of a debt
restructuring or failure of the interest deferral approval.

KEY RATING DRIVERS
Debt Restructuring Follows Interest Deferral: Within the
contemplated standstill period, the issuer will proceed with a
restructuring plan and seek approval from bondholders. Based on
the debt restructuring proposals from Terra Firma and H/2 Capital
Partners on 17 October 2017 and 7 November 2017 respectively,
Fitch expects the final restructuring plan to result in material
reduction in the terms of debt, which Fitch would view as a
distressed debt exchange (DDE) event.

Following its DDE criteria, Fitch will downgrade Elli's IDR to
'RD' upon completion of the debt restructuring. Fitch will likely
assign an appropriate IDR for the issuer's post-exchange capital
structure, risk profile and prospects.

Continued Operational Challenges: Fitch believes Elli's business
model continues to face constraints on profitability and cash flow
generation. This is based on pressures on the group's cost base
associated with the increase in the national living wage and the
shortage of nurses in the UK, leading to increasing reliance on
agency workers. Although the "social care" levy introduced by the
UK treasury to increase funding for care has been adopted by the
majority of local authorities and led to a moderate increase in
fee rates during 2016, this has so far been insufficient to fully
restore profitability.

DERIVATION SUMMARY

Fitch has observed significant pressures on ratings in the UK
leveraged care homes sector, which have been affected by a
reduction in local authorities' fee rates in real terms. The
pressures on profitability have been exacerbated by increasing
costs, predominantly as a result of the increase in the national
living wage from April 2016 as well as increased use of agency
workers due to the shortage of nurses.

This has led to profitability across the sector being impaired as
cost inflation could not be passed on to the payers for care,
which now increasingly threatens the underlying business model of
operators and makes leveraged capital structures increasingly
unsustainable.

Operators' resilience to these external pressures has varied
according to their exposure to public vs private payers and their
position on the acuity care spectrum. Care companies at the higher
end of the dependency spectrum such as Voyage Bidco Limited
(ratings withdrawn), with a larger share of disability care, have
been comparatively resistant to the funding cuts of local
authorities, but are facing strategic pressures as the care model
evolves towards assisted living schemes. Care homes operators more
at risk have been those catering for residents with less complex
needs such as Elli and Care UK (unrated).

The business models of these three key players are also
differentiated, with Care UK operating an asset-light structure,
leasing most of its care facilities, whereas Voyage and Elli own
the majority of their assets. This leads to a differentiation in
Fitch's recovery approach, as Fitch apply a liquidation scenario
to Voyage and Elli, while Care UK's recoveries are based on a
going-concern scenario.

KEY ASSUMPTIONS

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

- Revenue decline of 5.0% in 2017 due to a reduction in the
   number of effective beds following asset disposals; growth of
   up to 1.5% assumed thereafter to 2020.
- EBITDA of GBP52 million in 2017, in line with that for the 12
   months to end-September 2017; EBITDA margin assumed at 8.0%
   over the rating horizon to 2020.
- Capex reduced to below 5.0% of sales in 2017 and slightly
   increased to 5.0% from 2018.
- Disposals of uneconomic care homes for GBP47 million. The
   September 2017 YTD results disclosed GBP27.7 million of
   disposals.
- Exceptional cash flow for an amount of GBP15 million expected
   in 2017.
- Deferral of interest payment in December 2017 to March 2018.

Recovery Assumptions:

- In its recovery analysis, Fitch assumes that a liquidation of
   Elli's assets would provide higher recoveries for lenders than
   a going-concern restructuring scenario. This is primarily due
   to Elli's freehold and long-leasehold properties.
- Fitch applied a 35% discount to Fitch estimated current market
   value of Elli's property assets of GBP485 million (post
   disposals).

RATING SENSITIVITIES

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

- A restructuring of the group's capital structure, leading to
   improving liquidity and maturity profiles, and debt service
   coverage ratios post DDE.

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

- Execution of the DDE.
- Failure to receive approval for the interest deferral from
   holders of at least 90% of the outstanding notes, leading to
   bankruptcy or administration proceedings.

LIQUIDITY

Strained Liquidity, Aided by Debt Refinancing and Interest
Deferral: At end-September 2017, the group's cash balance was
GBP24.8 million. In October 2017, the GBP40 million term loan was
refinanced on similar terms with a new maturity date of March
2019. The extended maturity, along with proposed interest
deferral, if approved, will help improve the liquidity profile in
the near term. In Fitch assessment, Fitch continue to assume GBP5
million of restricted cash required to run the operations and
absorb periodic working capital swings.

FULL LIST OF RATING ACTIONS

Elli Investments Ltd
-- Long-Term IDR: downgraded to 'C'
-- Senior unsecured notes: affirmed at 'C'/'RR6'/0%

Elli Finance (UK) Plc
-- Super senior term loan: downgraded to 'CCC'/'RR1'/100%
-- Senior secured notes: downgraded to 'CCC-'/'RR2'/82%


PREMIER OIL: Catcher Project Milestone to Help Repay Debt Load
--------------------------------------------------------------
Nathalie Thomas at The Financial Times reports that Premier Oil
has produced first oil from its flagship development in the North
Sea, a milestone that will help the UK explorer and producer start
repaying its significant debt load.

The company said on Dec. 27 first oil from the US$1.6 billion
Catcher project was achieved on the afternoon of Dec. 23, the FT
relates.

Catcher was delivered nearly 30% below the company's original
budget but Premier racked up hefty debts as it had to pour money
into the project -- its net debt stood at US$2.8 billion at the
end of September, the FT notes.

Premier refinanced this year, allowing it to reset some of its
lending covenants and extend the date when some of its debts would
mature to 2021, the FT recounts.  The group has also been selling
peripheral assets to bolster its balance sheet, the FT states.

However, the refinancing came with strict conditions, including
handing its lenders final say over whether Premier could press
ahead with significant new projects in future, the FT relays.

According to the FT, Tony Durrant, chief executive of Premier,
said on Dec. 27 that "increased cash flows will play an important
role in Premier's plans for debt reduction".

Premier Oil is a London-based oil and gas explorer.


TOYS R US: East Kilbride Store to Close Next Spring
---------------------------------------------------
Nicola Findlay at Daily Record reports that shop workers at an
East Kilbride Toys R Us store were dealt a massive blow.

Toys R Us previously announced plans to close 26 of its larger
warehouse-style stores across the UK amid tough trading
conditions, Daily Record recounts.

The East Kilbride outlet is one of four closing in Scotland next
spring after the American retailer confirmed creditors had
accepted its Company Voluntary Arrangement (CVA), Daily Record
discloses.

According to Daily Record, dozens of jobs will go at the store
near Kingsgate Retail Park -- although Toys R Us refused to
confirm exactly how many when asked by the News.

However, up to 800 jobs are expected to go across the UK as part
of the restructuring process which the toy retailer hope will
stave-off administration, Daily Record states.

"All of our stores across the UK will remain open for business as
normal until spring 2018, Daily Record quotes Steve Knights,
managing director of Toys R Us UK, as saying.

"Customers can continue to shop online and there will be no
changes to our returns policies or gift cards across this period.
As part of the CVA proposal, a number of stores have been
identified for closure.  Consultations with employees will
commence in the New Year."

                         About Toys "R" Us

Toys "R" Us, Inc., is an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area.  Merchandise is sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions.

Merchandise is also sold at e-commerce sites including
Toysrus.com and Babiesrus.com.

On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.

Toys "R" Us is now a privately owned entity but still files with
the Securities and Exchange Commission as required by its debt
agreements.

The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders'
deficit of $1.319 billion as of April 29, 2017.

Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017.  In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice.  The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, are not part of the Chapter 11 filing and CCAA
proceedings.

Grant Thornton is the monitor appointed in the CCAA case.

Judge Keith L. Phillips presides over the Chapter 11 cases.

In the Chapter 11 cases, Kirkland & Ellis LLP and Kirkland &
Ellis International LLP serve as the Debtors' legal counsel.
Kutak Rock LLP serves as co-counsel.  Toys "R" Us employed
Alvarez & Marsal North America, LLC as its restructuring advisor;
and Lazard Freres & Co. LLC as its investment banker.  It hired
Prime Clerk LLC as claims and noticing agent.  A&G Realty
Partners, LLC, serves as its real estate advisor.

On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors.  The Committee
retained Kramer Levin Naftalis & Frankel LLP as its legal
counsel; Wolcott Rivers, P.C. as local counsel; FTI Consulting,
Inc. as financial advisor; and Moelis & Company LLC as investment
banker.



===============
X X X X X X X X
===============


* BOOK REVIEW: The First Junk Bond
----------------------------------
Author: Harlan D. Platt
Publisher: Beard Books
Softcover: 236 pages
List Price: $34.95
Review by Gail Owens Hoelscher

Order your personal copy today and one for a colleague at
http://www.beardbooks.com/beardbooks/the_first_junk_bond.html
Only one in ten failed businesses is equal to the task of
reorganizing itself and satisfying its prior debts in some
fashion. This engrossing book follows the extraordinary journey
of Texas International, Inc (known by its New York Stock
Exchange stock symbol, TEI), through its corporate growth and
decline, debt exchange offers, and corporate renaissance as
Phoenix Resource Companies, Inc. As Harlan Platt puts it, TEI
"flourished for a brief luminous moment but then crashed to
earth and was consumed." TEI's story features attention-grabbing
characters, petroleum exploration innovations, financial
innovations, and lots of risk taking.

The First Junk Bond was originally published in 1994 and
received solidly favorable reviews. The then-managing director
of High Yield Securities Research and Economics for Merrill
Lynch said that the book "is a richly detailed case study. Platt
integrates corporate history, industry fundamentals, financial
analysis and bankruptcy law on a scale that has rarely, if ever,
been attempted." A retired U.S. Bankruptcy Court judge noted,
"(i)t should appeal as supplementary reading to students in both
business schools and law schools. Even those who practice.in the
areas of business law, accounting and investments can obtain a
greater understanding and perspective of their professional
expertise."

"TEI's saga is noteworthy because of the company's resilience
and ingenuity in coping with the changing environment of the
1980s, its execution of innovative corporate strategies that
were widely imitated and its extraordinary trading history,"
says the author. TEI issued the first junk bond. In 1986 it
achieved the largest percentage gain on the NYSE, and in 1987
suffered the largest percentage loss. It issued one of the first
bonds secured by a physical commodity and then later issued one
of the first PIK (payment in kind) bonds. It was one of the
first vulture investors, to be targeted by vulture investors
later on. Its president was involved in an insider trading
scandal. It innovated strip financing. It engaged in several
workouts to sell off operations and raise cash to reduce debt.
It completed three exchange offers that converted debt in to
equity.

In 1977, TEI, primarily an oil production outfit, had had a
reprieve from bankruptcy through Michael Milken's first ever
junk bond. The fresh capital had allowed TEI to acquire a
controlling interest of Phoenix Resources Company, a part of
King Resources Company. TEI purchased creditors' claims against
King that were subsequently converted into stock under the terms
of King's reorganization plan. Only two years later, cash
deficiencies forced Phoenix to sell off its nonenergy
businesses. Vulture investors tried to buy up outstanding TEI
stock. TEI sold off its own nonenergy businesses, and focused on
oil and gas exploration. An enormous oil discovery in Egypt made
the future look grand. The value of TEI stock soared. Somehow,
however, less than two years later, TEI was in bankruptcy. What
a ride!

All told, the book has 63 tables and 32 figures on all aspects
of TEI's rise, fall, and renaissance. Businesspeople will find
especially absorbing the details of how the company's bankruptcy
filing affected various stakeholders, the bankruptcy negotiation
process, and the alternative post-bankruptcy financial
structures that were considered. Those interested in the oil and
gas industry will find the book a primer on the subject, with an
appendix devoted to exploration and drilling, and another on oil
and gas accounting.

Harlan Platt is professor of Finance at Northeastern University.
He is president of 911RISK, Inc., which specializes in
developing analytical models to predict corporate distress.



                            *********

Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
however, be complete or accurate.  The Monday Bond Pricing table
is compiled on the Friday prior to publication.  Prices reported
are not intended to reflect actual trades.  Prices for actual
trades are probably different.  Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind.  It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets.  At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled.  Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets.  A company may establish reserves on its balance sheet for
liabilities that may never materialize.  The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.

Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals.  All titles are
available at your local bookstore or through Amazon.com.  Go to
http://www.bankrupt.com/booksto order any title today.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.

Copyright 2017.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

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of the same firm for the term of the initial subscription or
balance thereof are US$25 each.  For subscription information,
contact Peter Chapman at 215-945-7000.


                 * * * End of Transmission * * *