/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/180216.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, February 16, 2018, Vol. 19, No. 034 Headlines G E R M A N Y DECO 7: Fitch Lowers Ratings on 3 Tranches to 'Dsf' SENVION HOLDING: S&P Alters Outlook to Neg. on Weak Profitability I R E L A N D EG GROUP: Fitch Assigns Final B IDR & Puts Rating on Watch Neg. ST. PAUL'S III-R: Moody's Assigns B2 Rating to Class F-R Notes N E T H E R L A N D S * NETHERLANDS: Corporate Bankruptcies Up in January 2018 R U S S I A URALCAPITAL: Put On Provisional Administration, License Revoked S P A I N MURCIA I: Fitch Hikes Class C Notes Rating From BB+sf SA NOSTRA I: Fitch Hikes Rating on Class D notes to BB- TDA 26 SERIES 2: Fitch Affirms CCCsf Rating on Class C Notes S W E D E N NETS A/S: S&P Cuts CCR to 'B' on Leveraged Buyout, Outlook Stable U K R A I N E DTEK ENERGY: Fitch Affirms RD Long-Term IDR Amid Restructuring U N I T E D K I N G D O M ACTIVE WEALTH: Enters Voluntary Liquidation CARILLION PLC: Collapse Prompts Galliford Try to Raise New Equity NORD GOLD: Fitch Hikes Long-Term IDR to BB, Outlook Stable PIONEER UK MIDCO 1: S&P Affirms 'B' CCR Following Acquisition * UK: Number of Firms in Administration Rises to 1,206 in 2017 X X X X X X X X * BOOK REVIEW: Oil Business in Latin America: The Early Years ********* ============= G E R M A N Y ============= DECO 7: Fitch Lowers Ratings on 3 Tranches to 'Dsf' --------------------------------------------------- Fitch Ratings has downgraded DECO 7 Pan Europe 2 plc's class E-G notes, affirmed the class H notes and withdrawn all ratings: EUR23.9 million class E (XS0244896394) downgraded to 'Dsf' from 'Csf'; Recovery Estimate (RE) revised to 5% from 20%, withdrawn EUR19.4 million class F (XS0246471881) downgraded to 'Dsf' from 'Csf'; RE 0%, withdrawn EUR16.4 million class G (XS0246474042) downgraded to 'Dsf' from 'Csf'; RE 0%, withdrawn EUR35.6 million class H (XS0246475445) affirmed at 'Dsf'; RE 0%, withdrawn The transaction closed in March 2006 and was originally the securitisation of 10 commercial real estate loans backed by collateral located in Germany. In January 2018, only one loan remained - the defaulted Karstadt Kompakt loan. KEY RATING DRIVERS The notes remained outstanding at their legal final maturity in January 2018. All properties have been sold and no collateral is securing the Karstadt Kompakt loan. A borrower level reserve account of EUR2.5 million remains; however, these retained funds have been held back to pay residual transaction-related costs, legal costs (including advice on disposals) and other potential costs to the security trustee. On the assumption that half is used for such costs, Fitch have revised the RE to 5% for the class E notes. Fitch have withdrawn the ratings on all notes following the issuer's default. RATING SENSITIVITIES Not applicable. SENVION HOLDING: S&P Alters Outlook to Neg. on Weak Profitability ----------------------------------------------------------------- S&P Global Ratings revised to negative from stable its outlook on Germany-based wind turbine manufacturer Senvion Holding GmbH. S&P affirmed the 'B+' long-term issuer credit rating. S&P said, "We also affirmed our 'B+' issue rating on Senvion's EUR400 million senior secured notes. The recovery rating is '3', indicating our expectation of meaningful recovery prospects (50%- 70%; rounded estimate: 55%) in the event of a payment default. We also affirmed our 'BB' issue ratings on the group's EUR125 million revolving credit facility (RCF). The recovery rating is '1', indicating our expectation of very high recovery prospects (90%-100%, rounded estimate: 95%). "The outlook revision reflects our expectation of weaker profitability for Senvion following increased pricing pressure in the wind turbine manufacturing industry than previously expected. This could lead to debt to EBITDA of more than 4.5x or cash funds from operations (FFO) interest coverage of below 3x, which would no longer align with the 'B+' rating. The intense pricing pressure--created by overcapacity and government policy changing to an auction-based system--will pressure Senvion's profitability at least in 2017 and 2018. S&P said, "We understand that management has taken mitigating measures by improving its cost structure. However, we expect the effects will be limited initially because it will take time for cost measures, like supply-chain changes, to bear fruit. We expect EBITDA margins in 2017 and 2018 to remain below the 5.4% of 2016 and we foresee some recovery in profitability from 2019, increasing to 5.5%-6.0% on volume effects driven by sales expansion outside Europe -- where we can already see the geographic shift in the latest order intakes -- as well as benefits from implemented cost measures." S&P said, "Overall, we view the wind-power manufacturing industry as under consolidation pressure, reflecting existing overcapacity and the immense cost pressure arising from the change to auction- based systems in Europe. We also note that auction-based remuneration systems have become an industry standard globally. In Germany, where Senvion has installed 20%-30% of its onshore wind turbines in the past two years, awarded prices roughly halved to about EUR38 per megawatt hour compared with the granted feed-in tariffs before 2017. Under the new scheme, smaller bidders won most of the auctions and have until 2022 to develop their projects. We therefore believe that, in addition to the high cost pressure, demand will be delayed in Germany over the short-to-medium term." For offshore wind turbines, which account for about 20% revenues, we see a similar trend, however, with a longer transition period given the longer lead times of the projects under development. In the fragmented wind turbine manufacturing industry, Senvion's market share is small and it has a limited geographic footprint; about two-thirds of the group's sales are generated in Europe, where the company is the fifth-largest player, with a heavy dependence on Germany. With about 15% of the group's total sales, the aftermarket business makes only a limited contribution to earnings stability, leading to heavy reliance on new projects. However, the volume of service revenue is increasing in line with the installed asset base. The group is also exposed to project execution risks that could translate into volatile cash flows, as recently experienced in 2016 when the company booked a EUR55 million provision for one of its offshore projects. The high dependency on projects also led to high volatility in intra-year working capital. This was also visible in first nine months of 2017, when the company did not generate any meaningful cash flow. Based on the contract structure, we expect improved EBITDA and relative strong cash flow generation in the last quarter of 2017. The failure to develop new wind turbines to meet client needs in a timely manner might lead to market share deterioration. Senvion remains exposed to policy-driven demand cyclicality, as observed in Germany with the policy adjustment for renewable energy (EEG 2017) effective in 2017, which limits additions to onshore wind parks and increases cost pressure by shifting toward an auction- based system that intensifies competitive pressure. Nevertheless, Senvion maintains a solid footprint in its core markets, supported by a diversified customer and supplier base, with established relationships. The company has some visibility around future revenues and earnings given its strong order backlog. It also introduced several new turbine models during the past two years, broadening its product portfolio. We note that the group has started to adjust its strategy toward a more global profile to capture growth potential outside Europe, as well as implementing additional restructuring measures after completing its "move forward" opex cost reduction program, to strengthen its cost position and align its production profile with its strategy. Under S&P's base case, it assumes: -- Overall revenue growth in wind turbine business, which is more dependent on global policies than on GDP trends. -- Single digit revenue decline in 2017, led by intense competition and softness in its core markets. -- About stable revenue in 2018 and solid growth in 2019 supported by strong growth outside Europe. -- Profitability to decline in 2017 and in 2018 on the back of lower revenues and high pricing pressure compared to 2016. -- From 2019, S&P expects gradually improving EBITDA on the back of better cost position and volume effects. -- Moderate increase in capex in line with the group's track record and its expansion plans. -- No dividends for 2017 and 2018. Based on these assumptions, S&P arrives at the following credit measures: -- Adjusted debt to EBITDA of around 4.5x in 2017 and 2018, improving toward 3.5x in 2019. -- Funds from operations (FFO) cash interest coverage ratio around 3x, improving toward 3.5x in 2019. -- Adjusted EBITDA margin below 5.4% in 2017 and 2018, improving to 5.5%-6.0% in 2019. -- Senvion's financial risk profile remains constrained by the group's ownership by financial sponsor Centerbridge, which S&P views as unlikely to change over the medium term. The negative outlook on Senvion reflects the weakening of its credit metrics and profitability, following ongoing structural changes in the wind turbine manufacturing industry whereby auction-based remuneration systems are becoming the industry standard. S&P said, "We could lower the ratings during 2018 if the positive effects of cost and supply-chain optimization measures, as well as a solid order intake, leading to improved cash flow generation in 2019, do not become visible this year. We expect the headroom for Senvion's credit metrics will become tighter for the 'B+' rating, with adjusted debt to EBITDA of around 4.5x and FFO cash interest coverage ratio of around 3x in 2017 and 2018." S&P said, "We could lower the rating if the European wind turbine market contracts further than we expect, and impacts revenues more than we expect or if auction prices continue to fall leading to lower EBITDA generation than we assume. Specifically, we would consider a downgrade if Senvion's credit metrics weakened further than we expected with no signs of near-term recovery, namely a debt to EBITDA ratio of above 4.5x times or FFO cash interest coverage of below 3x. The rating could also come under pressure if the group's free operating cash flow turned substantially negative because of lower cash conversion or project related losses increase cash flow volatility. "We could revise the outlook back to stable if we believed the group's DEBT to EBITDA was going to remain below 4.5x and FFO cash interest coverage was to stay above 3x over the next 12-18 months. This could arise if Senvion's operating and financial performances were better than expected, for example due to growth and higher profitability resilience. However, we view such a development as unlikely over the next 12-18 months. An improvement of the business risk is unlikely given the group's low profitability and the ongoing consolidation in an industry where Senvion is a relatively small player." ============= I R E L A N D ============= EG GROUP: Fitch Assigns Final B IDR & Puts Rating on Watch Neg. --------------------------------------------------------------- Fitch Ratings has assigned EG Group Limited a final Long-Term Issuer Default Rating of 'B' and final senior secured debt rating of 'B' with a Recovery Rating of 'RR4' and placed them on Rating Watch Negative (RWN). The final ratings follow the receipt of the final documentation related to the group's refinancing and the funding of the Esso acquisitions. The RWN reflects the possibility of a one-notch downgrade for the ratings, following the recent announcement that EG is to acquire 762 petrol fuel station (PFS)/convenience stores sites in the US from The Kroger Co. (BBB/Negative). Fitch expects this ambitious and transformative acquisition, for a total amount of USD2.15 billion, to be entirely debt-funded. The acquisition is subject to regulatory approval. Following the acquisition, Fitch believes funds from operations (FFO) lease-adjusted gross leverage could increase slightly above 7.5x and FFO fixed charge cover could decrease below 2.0x, which are two of Fitch negative rating sensitivities under the 'B' rating. As the integration of the German and Italian PFS operations from Esso announced in 2017 has yet to complete, Fitch believes the US acquisition increases execution risk as the scale of the transaction could compromise deleveraging prospects if synergies do not materialise as planned. However, Fitch believes that the US acquisition is strategically sensible and could provide EG with a stronger negotiating position with oil majors as it will improve the group's overall scale and diversification outside Europe. The RWN will be resolved upon completion of the US acquisition and following the receipt and analysis of additional information regarding the financial contribution of the acquired sites from The Kroger Co., the associated synergies plan and details on the financing structure. In the event that the US acquisition does not complete, Fitch would expect the IDR to be affirmed at 'B' with a Stable Outlook, all other factors being unchanged. KEY RATING DRIVERS Leading PFS Operator: The IDR reflects EG's position in western Europe as a leading PFS and convenience retail/food to go (FTG) operator following the acquisition of Esso petrol stations in Germany and Italy. The acquisition of The Kroger Co.'s sites in the US should add around 5.4 billion litres of fuel sales per year (pro-forma over 15 billion litres for the whole group in 2018) and Fitch expect EG will benefit from a better negotiating position on fuel contracts with oil majors. The acquisition will also diversify EG outside its core European market and strengthen its partnerships with US FTG brands (Starbucks and Subway). Kroger's 762 sites will place EG in the top 10 convenience stores operators in the US. Pro-forma for the US and Esso acquisitions, EG will own over 4,400 sites (up from 1,463 currently) across Europe and the US and manage a portfolio of 213 high-quality highway sites in Europe. US Acquisition Reduces Rating Headroom: Fitch estimates that the entirely debt-funded US acquisition could increase FFO gross leverage slightly above 7.5x and reduce FFO fixed charge cover below 2.0x, thereby extinguishing headroom under the current rating. The proposed transaction reduces the group's flexibility to absorb higher-than-expected costs - such as a sharp rise in fuel costs to customers - or achieve lower-than-expected synergies from the Esso and Kroger acquisitions while maintaining a credit profile consistent with a 'B' rating. Significant Owner-Operated Assets: EG is a cash-flow generative business, as EG owns all its sites in the UK (360 sites) and a significant number in Europe. Fitch expects a significant portion of the acquired US sites will be owned on a freehold basis. As dealer contracts expire in Europe, EG intends to convert some of the largest sites to a company-owned/company-operated (COCO) model, allowing the group greater control over convenience retail and FTG development. EG also operates 118 valuable motorway sites in continental Europe, which will increase by 80 once the two Esso acquisitions are complete. Meaningful Execution Risk from Acquisitions: EG has been transformed from a small entrepreneurial group into a major global fuel and retail operator in less than three years. The group is acquisitive as the PFS sector consolidates. Fitch views the US acquisition as ambitious and strategically sensible but it increases execution risks at a time when the group is already focused on completing two major acquisitions from Esso PFS in Germany and Italy. The enlarged scale and market reach will in all likelihood require changes to management's organisation and control functions across the wider group. However, Fitch sees EG's business model as sustainable and management has a history of growing the business, identifying significant synergies and cost-savings opportunities from the integration of its targets. Growing Convenience, FTG Segments: EG's strategy is to develop the convenience retail and FTG offer on its sites to capture above-average growth in the sector as "time-short" consumers increasingly want to shop more frequently and more easily/closer to home or office. It also enables the group to offset stagnation in fuel volumes and gross profits from fuel sales. Currently, EG has in excess of 500 retail outlets and will install a further 102 stores in continental Europe in the next nine months. Fitch sees this diversification as critical, given stable-to-negative fuel volumes, broadly fixed fuel margins and growing alternative fuel usage. Fitch expect EG to follow a similar convenience/FTG- driven strategy in the US. Capex Fuels Diversification and Margins: Before the US acquisition, Fitch projected EG's free cash flow (FCF) will be constrained by capex reaching on average EUR120 million per year. Capex will fund the opening of new sites, the conversion of the most promising stations from CODO (company-owned and dealer- operated) to COCO and support the roll-out of EG's convenience retail / FTG strategy as well as increase the group's weighted average operating margins. Fitch expects the US acquisition will lead to a substantial increase in capex but with an accretive impact on the group's profit margins. DERIVATION SUMMARY EG's IDR of 'B'/RWN reflects the leading market position of the group as an independent petrol station operator in Europe, positive FCF and on-going diversification towards more profitable non-fuel retailing and FTG segments. However, assuming the planned US acquisition is funded entirely by debt, Fitch expect pro forma FFO adjusted gross leverage to increase slightly above 7.5x and FFO fixed charge cover to fall below 2.0x, which is more in line with a 'B-' rating. The resolution of the RWN depends on Fitch's receipt and assessment of the full details of the US acquisition, expected synergies and the financing structure. A majority of EG's business is comparable to other players that Fitch covers in its food/non-food retail rating and credit opinions portfolios although the COCO operating model should provide more flexibility and profitability for EG. With 213 highway sites, EG can also be compared with Moto Ventures Limited (B/Stable). Moto has a slightly lower leverage than EG and benefits from an infrastructure-like business profile. It also operates in a regulated market with high barriers to entry that Fitch believe is more defensive than that of EG. EG, in turn, is more geographically diversified with exposure to the US market and a strong market share in seven western European countries against only one for Moto. KEY ASSUMPTIONS Fitch's Key Assumptions within Its Rating Case for the Issuer: European business assumptions: - Slight decline in fuel volumes, with stable gross margins; - Convenience retail sales to grow 2%-3% per year, including new sites roll-out with stable gross margins of 32%-36%, depending on the country; - Like-for-like FTG sales to increase 1% on top of new sites roll-out with stable gross margins above 60%; - Stable overall EBITDA margin around 4% of sales based on current fuel prices; - Capex around EUR120 million per year to fund new site openings, COCO conversions and convenience retail and FTG roll-out; Kroger carve-out assumptions: - USD4 billion revenue growing at 2% per year; - USD2.15 billion additional debt; For the whole group: - Neutral working capital; - No further transformative acquisitions; and - No dividends. KEY RECOVERY ASSUMPTIONS As part of its bespoke recovery analysis, Fitch has applied a discount of 25% to the 2018 Fitch-estimated EBITDA (adjusted for the Esso and the US acquisitions) to derive a post-restructuring EBITDA. Fitch estimate that with a 25% discount, the group should be cash flow-neutral, while paying its cash interest, distressed corporate tax and capex. In a distressed scenario, Fitch believes that a 5.5x multiple reflects a conservative view of the weighted average value of EG's portfolio. Fitch believe that the UK, US, German and French petrol filling stations would attract a higher multiple, while the Italian stations under a CODO model would be valued lower, as suggested by the Esso Italian carve-out EBITDA multiple in the region of 5x. By comparison, Moto's 7.5x distressed multiple reflects the regulated nature of the market, the high quality of their highway sites and their infrastructure-like cash flow generation profile. As per its criteria, Fitch assumes EG's revolving credit facility (RCF) and letter of credit (LC) facility to be fully drawn and takes 10% off the enterprise value to account for administrative claims. The senior secured debt rating of 'B'/RR4/49% has been placed on RWN pending full details on the capital structure, pro- forma for the US acquisition. RATING SENSITIVITIES The RWN reflects the possibility of a one-notch downgrade for the IDR. The RWN will be resolved following the completion of the US acquisition and the receipt and analysis of additional information regarding the financial contribution of the acquired sites from The Kroger Co., associated synergies and details on the financing structure as well as EG's ability to maintain financial metrics consistent with a 'B' IDR or not. Developments that may, individually or collectively, lead to negative rating action: - FFO gross lease-adjusted leverage sustainably above 7.5x; - FFO fixed charge cover below 2x on a sustained basis; and - Significant decline in fuel volumes and convenience retail sales and/or margins leading to the EBITDA margin falling below 3% based on current fuel prices. In the event that the US acquisition does not complete, Fitch would expect the ratings to be affirmed at 'B' with a Stable Outlook, all other factors being unchanged. Developments that may, individually or collectively, lead to positive rating action: - Evidence of success in the roll-out strategy of convenience retail and FTG sites in Germany and Italy, leading to EBITDA margin rising sustainably above 5%; - FFO fixed charge cover above 2.5x on a sustained basis; - Sustainable EBITDA growth leading to FCF generation above 3% of sales; and - FFO gross lease-adjusted leverage below 5.5x through the cycle, due to additional profits from new convenience retail/FTG outlet and/or rising fuel operating profits. LIQUIDITY Satisfactory Liquidity: Expected cash at closing of the US transaction is undisclosed. Assuming previous cash balances, EG should have satisfactory liquidity due to positive FCF and availability under its RCF and LC facilities. ST. PAUL'S III-R: Moody's Assigns B2 Rating to Class F-R Notes -------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to seven classes of notes issued by St. Paul's CLO III-R Designated Activity Company (the "Issuer" or "SP III-R"): -- EUR330,100,000 Class A-R Senior Secured Floating Rate Notes due 2032, Definitive Rating Assigned Aaa (sf) -- EUR48,800,000 Class B-1-R Senior Secured Floating Rate Notes due 2032, Definitive Rating Assigned Aa2 (sf) -- EUR18,400,000 Class B-2-R Senior Secured Fixed Rate Notes due 2032, Definitive Rating Assigned Aa2 (sf) -- EUR30,800,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned A2 (sf) -- EUR27,500,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned Baa2 (sf) -- EUR40,800,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned Ba2 (sf) -- EUR16,200,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the rated notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2032. The definitive ratings reflect the risks due to defaults on the underlying portfolio of loans given the characteristics and eligibility criteria of the constituent assets, the relevant portfolio tests and covenants as well as the transaction's capital and legal structure. Furthermore, Moody's is of the opinion that the Collateral Manager, Intermediate Capital Managers Limited ("ICM"), has sufficient experience and operational capacity and is capable of managing this CLO. SP III-R is a managed cash flow CLO. The issued notes are collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second lien loans, high yield bonds and mezzanine loans. ICM will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions. The portfolio is expected to be approximately 80% ramped up as of the closing date. SP III-R will purchase all existing assets from ICM's existing cash flow CLO namely, St Paul's III Designated Activity Company (SP III). It is expected that the assets are sold to SP III-R via forward purchase agreements whereby the assets are expected to settle on the closing date. Any remaining assets which are not settled on the closing date will be sold to SP III-R via participation agreements. Over time, these assets are expected to be elevated to assignments such that full legal transfer of title will be achieved. Moody's has reviewed the relevant documentation prior to the closing of the transaction to ensure any risk associated with assets being sold via participation agreements are mitigated. Such risk could include, amongst others, the counterparty risk of the seller, the risk that the seller does not comply with its covenants under the agreements, the existence or creation of additional liens on the participated assets and the operational risks of relying on the seller passing on the cash flows of the assets to SP III-R. In addition to the seven classes of notes rated by Moody's, the Issuer issued EUR50,000,000 of subordinated notes. Moody's will not assign rating to this class of notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. ICM's investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modeled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2017. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. Moody's used the following base-case modeling assumptions: Par Amount: EUR550,000,000 Diversity Score: 36 Weighted Average Rating Factor (WARF): 2875 Weighted Average Spread (WAS): 3.60% Weighted Average Coupon (WAC): 4.50% Weighted Average Recovery Rate (WARR): 43.75% Weighted Average Life (WAL): 8.5 years Stress Scenarios: Together with the set of modelling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the definitive ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal. Percentage Change in WARF: WARF + 15% (to 3306 from 2875) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: 0 Class B-1-R Senior Secured Floating Rate Notes: -2 Class B-2-R Senior Secured Fixed Rate Notes: -2 Class C-R Senior Secured Deferrable Floating Rate Notes: -2 Class D-R Senior Secured Deferrable Floating Rate Notes: -1 Class E-R Senior Secured Deferrable Floating Rate Notes: 0 Class F-R Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF: WARF +30% (to 3738 from 2875) Ratings Impact in Rating Notches: Class A-R Senior Secured Floating Rate Notes: -1 Class B-1-R Senior Secured Floating Rate Notes: -3 Class B-2-R Senior Secured Fixed Rate Notes: -3 Class C-R Senior Secured Deferrable Floating Rate Notes: -3 Class D-R Senior Secured Deferrable Floating Rate Notes: -2 Class E-R Senior Secured Deferrable Floating Rate Notes: -1 Class F-R Senior Secured Deferrable Floating Rate Notes: -1 ===================== N E T H E R L A N D S ===================== * NETHERLANDS: Corporate Bankruptcies Up in January 2018 -------------------------------------------------------- Statistics Netherlands (CBS) reports that the number of corporate bankruptcies in Netherlands has increased again. There were 5 more bankruptcies in January 2018 than in December 2017, Statistics Netherlands discloses. In December, the number of bankruptcies rose by 17, Statistics Netherlands notes. According to Statistics Netherlands, if the number of court session days is not taken into account, 309 businesses and institutions (excluding one-man businesses) were declared bankrupt in January 2018. With a total of 72, the trade sector suffered most, Statistics Netherlands states. In January, the number of bankruptcies was relatively highest in the sector hotels and restaurants, Statistics Netherlands relays. =========== R U S S I A =========== URALCAPITAL: Put On Provisional Administration, License Revoked --------------------------------------------------------------- The Bank of Russia, by Order No. OD-372, dated February 15 2018, effective February 15, 2018, revoked the banking license of the Ufa-based credit institution Limited Liability Company Commercial Bank Ural Capital, or UralCapitalBank (Registration No. 2519), further referred to as the credit institution. According to its financial statements, as of February 1, 2018, the credit institution ranked 225th by assets in the Russian banking system. Problems in the credit institution's operations owe its origin to the use of a risky business model focused on extending loans to companies related to the credit institution's management, which resulted in multiple low-quality assets building up on its balance sheet. The due diligence check of credit risk established a substantial loss of capital and entailed the need for action to prevent the credit institution's insolvency (bankruptcy); there arose a real threat to its creditors' and depositors' interests. The Bank of Russia repeatedly applied supervisory measures against the credit institution, including three impositions of restrictions on household deposit taking. The credit institution's management and owners failed to take effective measures to normalize its activities. Under the circumstances the Bank of Russia took the decision to withdraw UralCapitalBank from the banking services market. The Bank of Russia takes this extreme measure -- revocation of the banking license -- because of the credit institution's failure to comply with federal banking laws and Bank of Russia regulations, due to repeated application within a year of measures envisaged by the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)", considering a real threat to the creditors' and depositors' interests. The Bank of Russia, by its Order No. OD-373, dated February 15, 2018, appointed a provisional administration to UralCapitalBank for the period until the appointment of a receiver pursuant to the Federal Law "On Insolvency (Bankruptcy)" or a liquidator under Article 23.1 of the Federal Law "On Banks and Banking Activities". In accordance with federal laws, the powers of the credit institution's executive bodies have been suspended. UralCapitalBank is a member of the deposit insurance system. The revocation of the banking license is an insured event as stipulated by Federal Law No. 177-FZ "On the Insurance of Household Deposits with Russian Banks" in respect of the bank's retail deposit obligations, as defined by law. The said Federal Law provides for the payment of indemnities to the bank's depositors, including individual entrepreneurs, in the amount of 100% of the balance of funds but no more than a total of RUR1.4 million per depositor. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. ========= S P A I N ========= MURCIA I: Fitch Hikes Class C Notes Rating From BB+sf ----------------------------------------------------- Fitch Ratings has upgraded one tranche of AyT Caja Murcia Hipotecario I, FTA (Murcia I), one tranche of AyT Caja Murcia Hipotecario II, FTA (Murcia II), affirmed the others and removed all tranches from Rating Watch Evolving (RWE) as follows: Murcia I Class A notes (ISIN ES0312282009): affirmed at 'AA-sf'; off RWE, Outlook Stable Class B notes (ISIN ES0312282017): affirmed at 'Asf'; off RWE, Outlook Stable Class C notes (ISIN ES0312282025): upgraded to 'BBB-sf' from 'BB+sf''; off RWE, Outlook Stable Murcia II Class A notes (ISIN ES0312272000): affirmed at 'A+sf'; off RWE, Outlook Stable Class B notes (ISIN ES0312272018): affirmed at 'BBB+sf''; off RWE, Outlook Stable Class C notes (ISIN ES0312272026): upgraded to 'BBB-sf' from 'BB+sf''; off RWE, Outlook Stable The RWE has been removed following the review of the transaction under Fitch's updated European RMBS Rating Criteria. The notes were first placed on RWE on 5 October 2017 after the publication of the Fitch's Exposure Draft: European RMBS Rating Criteria. The transactions comprise prime Spanish residential mortgages serviced by Bankia (BBB-/Stable/F3), originally issued in 2005 and 2006. KEY RATING DRIVERS Stable Asset Performance The transactions have had sound asset performance compared with the average Fitch-rated Spanish RMBS. Three-month plus arrears (excluding defaults) as a percentage of the current pool balance are at 0.2% for Murcia I and Murcia II, below Fitch's index of three-month-plus arrears (excluding defaults) of 0.6%. Cumulative defaults relative to the original portfolio balances are at 0.4% for Murcia I and 0.3% for Murcia II. Adequate Credit Enhancement Fitch expects credit enhancement (CE) provided by the subordination of junior notes to remain stable over the short to medium term for both transactions as they will continue paying pro rata. However, CE provided by the reserve funds is expected to increase as the reserve funds are at their target level and will no longer amortise. Fitch considers the existing and projected CE as sufficient to support the ratings, as reflected in the rating actions. The agency has also considered a potential loss of the reserve fund in the rating scenarios higher than the ratings of the account bank. In these scenarios, no notes would be downgraded by more than 10 notches, so there is currently no excessive counterparty exposure. Junior Notes Capped No commingling reserve is in place for either of transaction. The agency considers the CE available for the class A and B notes adequately covers this risk. However, as the class C notes could be exposed in case of default of Bankia, their rating is capped and linked to Bankia's rating. RATING SENSITIVITIES Deterioration in asset performance may result from economic factors, in particular the increasing effect of unemployment. A corresponding increase in new defaults and associated pressure on excess spread levels and reserve fund could result in negative rating action. Murcia I and Murcia II's class C tranches are sensitive to changes in Bankia's rating due to commingling risk. SA NOSTRA I: Fitch Hikes Rating on Class D notes to BB- ------------------------------------------------------- Fitch Ratings has upgraded three tranches of AyT Colaterales Global Hipotecario Sa Nostra I (SA Nostra) and affirmed one, as follows. Class A notes (ISIN ES0312273123): affirmed at 'Asf'; removed from Rating Watch Evolving (RWE); Outlook Stable Class B notes (ISIN ES0312273131): upgraded to 'A-sf' from 'BBBsf'; removed from RWE; Outlook Stable Class C notes (ISIN ES0312273149): upgraded to 'BBBsf' from 'BBsf'; removed from RWE; Outlook Stable Class D notes (ISIN ES0312273156): upgraded to 'BB-sf' from 'Bsf'; removed from RWE; Outlook Stable The transaction comprises Spanish residential mortgage loans serviced by Bankia (BBB-/Positive/F3). All ratings have been removed from RWE, where they were placed on October 5, 2017. KEY RATING DRIVERS High Concentration in Balearic Islands The class A notes' rating is capped at 'Asf' due to the significant geographical concentration in the Balearic region (around 99% of the portfolio balance), which exposes the transaction to performance volatility. In Fitch view, the strong dependence of the Balearic economy on tourism poses a risk that cannot be addressed through structural features, limiting the notes rating to 'Asf'. Excessive Counterparty Exposure The class B notes' rating is capped to the SPV account bank provider (Banco Santander, A-) considering the excessive counterparty risk, as the cash reserves equivalent to 6.5% of the portfolio balance are held in such account representing a material component of class B credit enhancement (CE). According to the agency's criteria, the hypothetical sudden loss of these reserves would cause a downgrade of the class B notes' rating by more than 10 notches. As such, the class B notes' maximum achievable rating is linked to the SPV bank account provider. Stable Asset Performance SA Nostra continues to show stable asset performance. As of end- November 2017, three-month plus arrears (excluding defaults) as a percentage of the pool balance stood at 0.2%. Cumulative defaults, defined as mortgages in arrears by more than 18 months, represent 3.6% of the original portfolio balance. Stable CE Fitch expect structural CE to remain stable as the notes' amortisation profile has recently switched to pro-rata from sequential. Fitch view existing and projected CE as sufficient to withstand higher stresses, as reflected in the rating actions. Commingling Exposure The transaction is exposed to commingling losses in the event of a sudden default of the collection account bank (Bankia), as cash collections from the underlying borrowers are almost 100% concentrated on one day of every month. Fitch has accommodated this stress in its credit analysis and found the CE ratios to be sufficient to withstand this risk. 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. This could have negative rating implications, especially for the junior tranches that are less protected by structural CE. As the class B notes' rating is capped at the SPV bank account provider rating, any change to the account bank rating would trigger a corresponding change to the class B notes' rating. TDA 26 SERIES 2: Fitch Affirms CCCsf Rating on Class C Notes ------------------------------------------------------------ Fitch Ratings has upgraded three tranches and affirmed four tranches of TDA 26 Mixto Series 1 and Series 2, two Spanish RMBS transactions that comprise residential mortgages serviced by Banco Sabadell and Banca March. All ratings have been removed from Rating Watch Evolving (RWE), where they were placed on Oct. 5, 2017. KEY RATING DRIVERS Stable Credit Enhancement (CE) Structural CE ratios of the securitisation notes have remained stable, which is expected to continue, as the transactions are paying pro-rata. Fitch believe existing and projected CE ratios are sufficient to withstand higher stresses, as reflected in the upgrades of mezzanine notes in both series. High Prepayments and Asset Performance Fitch is not giving full credit to past performance trends of TdA 26 Mixto Series 1 and has overridden the performance adjustment factor to 1.0x in accordance with the agency's criteria, in light of the loan buy backs that have been conducted by the originators during the past few months as evidenced by the substantial prepayment rate volatility. TDA 26 Mixto Series 2 continues to show sound asset performance. Two months plus arrears (excluding defaults) as a percentage of the current pool balance are standing at 0.2%, and cumulative defaults, defined as mortgages in arrears by more than 12 months, at 1.4% of the initial portfolio balance. Fitch expects performance to remain stable especially given the significant seasoning of the securitised portfolio of approximately 13 years. Payment Interruption Risk Caps Ratings Both transactions are exposed to payment interruption risk in the event of a servicer disruption as the available structural mitigants (ie. cash reserve funds) remain insufficient to fully cover stressed senior fees, net swap payments and stressed senior note interests. As a result, Fitch has capped the rating on the notes at 'A+sf' unless payment interruption risk is sufficiently mitigated. Moreover, the transactions are exposed to a commingling loss due to the concentration of cash collections from the borrowers in one day of every month. Fitch has captured this additional stress in its analysis. VARIATIONS FROM CRITERIA Rating Cap Due to Payment Interruption Risk According to Fitch's Structure Finance and Covered Bonds Counterparty Rating Criteria, the maximum achievable rating for transactions exposed to payment interruption risk is five notches above the rating of the collection account bank, so long as the bank is a regulated institution in a developed market. Even though the collection account banks in both transactions are not rated by Fitch, the maximum achievable rating for these transactions of 'A+sf' is substantiated by the established retail franchise of Banco Sabadell and Banca March, the public credit ratings of both entities from recognised international rating agencies, and the robust banking sector supervision in Spain. RATING SENSITIVITIES Senior securitisation notes on both transactions could be upgraded to the 'AAAsf' category if the transactions' liquidity protection against a servicer disruption event strengthens, all else being equal. Fitch will continue to assess the reserve fund balance relative to the securitisation notes, and its ability to mitigate credit and liquidity stresses. A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability. This could have negative rating implications, especially for the junior tranches that are less protected by structural CE. The rating actions are: TDA 26 Mixto Series 1: Class A2 (ISIN ES0377953015) affirmed at 'A+sf'; removed from RWE; Outlook Stable Class B (ISIN ES0377953023) upgraded to 'A+sf' from 'BBB+sf'; removed from RWE; Outlook Stable Class C (ISIN ES0377953031) upgraded to 'BBB+sf' from 'BB+sf'; removed from RWE; Outlook Stable Class D (ISIN ES0377953049) affirmed at 'CCCsf'; removed from RWE; Recovery Estimate (RE) revised to 90% from 85% TDA 26 Mixto Series 2: Class A (ISIN ES0377953056) affirmed at 'A+sf'; removed from RWE; Outlook Stable Class B (ISIN ES0377953064) upgraded to 'BBB+sf' from 'BBsf'; removed from RWE; Outlook Stable Class C (ISIN ES0377953072) affirmed at 'CCCsf'; RE revised to 90% from 50% =========== S W E D E N =========== NETS A/S: S&P Cuts CCR to 'B' on Leveraged Buyout, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings said that it lowered its long-term issuer credit ratings on Nordic payment services provider NETS A/S, and its subsidiary Nassa Topco, to 'B' from 'BB+', and removed the ratings from CreditWatch with negative implications where S&P had placed them on Sept. 28, 2017. The outlook is stable. S&P said, "At the same time, we lowered to 'B+' from 'BB+' and removed from CreditWatch negative our issue rating on Nassa Topco's outstanding EUR400 million unsecured notes. We also revised up the recovery rating on the notes to '2', reflecting our expectation of substantial recovery prospects (rounded estimate: 85%) in the event of default. We cap the recovery rating on the unsecured notes at '2', despite indicative recovery prospects nominally exceeding 90%. "We also affirmed our preliminary 'B' long-term issuer credit rating on Evergood 4 Aps, the new majority shareholder of Nets A/S, and our preliminary 'B' rating on the proposed first-lien term loan and revolving credit facility (RCF). Final ratings will depend on our satisfactory review of the final group capital structure. "The downgrade of Nets reflects our assessment of the company as a core subsidiary of Evergood 4 Aps, following the closing of the leveraged buyout, given that it essentially represents all the group's operations. We therefore see Nets' credit quality as effectively capped by the group credit profile, which we assess at 'b', mainly driven by the group's highly leveraged capital structure." Evergood 5 AS has completed the acquisition of Nets' shares, and is in the process of refinancing Nets' term loans, while the unsecured notes remain in the group's capital structure for the time being. S&P said, "However, we understand that, given the change of control put option for the bondholders, Evergood is likely to make an offer on the bonds over the coming weeks, which will likely reduce the outstanding amount of these notes within the group's capital structure. We expect to assign final ratings to Evergood 4 Aps once we have reviewed the final capital structure." S&P's stable outlook on Nets Mirrors that on Evergood 4 ApS. ============= U K R A I N E ============= DTEK ENERGY: Fitch Affirms RD Long-Term IDR Amid Restructuring -------------------------------------------------------------- Fitch Ratings has affirmed Ukraine-based DTEK Energy B.V.'s (DTEK) Long-Term Foreign-Currency Issuer Default Ratings (IDR) at 'RD' (Restricted Default). The agency has also affirmed DTEK's dollar Eurobond senior unsecured rating of 'C'. The Recovery Rating is 'RR4'. The affirmation of the ratings reflects the fact that DTEK's debt restructuring has not been finalised yet. Upon its completion, DTEK's foreign- and local-currency IDRs and the senior unsecured rating for the Eurobond are likely to be upgraded to 'B-' to reflect the company's post-restructuring capital structure and business risk. KEY RATING DRIVERS Post-Restructuring IDR: Fitch expect to upgrade DTEK's IDR to 'B-' from 'RD' upon completion of the restructuring of around 20% of its total debt, as of end-1H17. Fitch assess the company's post-restructuring financial risk profile and its high business risk with exposure to the weak Ukrainian operating environment, assets located near the area of military conflict, and uncertainties over the required spin-off of distribution assets, as commensurate with a 'B-' rating. Comfortable Maturities: In 2017 DTEK made USD180 million of prepayments of its bank loans. The post-restructuring bank debt profile has a comfortable maturity schedule, with small annual amortisation payments of USD20 million in 2020, USD60 million in 2021, USD80 million in 2022 and a large payment in June 2023. The outstanding Eurobond issued in December 2016 (USD1,344 million including PIK at end-2017) is split into two equally sized tranches due December 2023 and December 2024. Fitch expect DTEK to require minimal external funding in 2018-2020 to cover debt maturities. Adequate Liquidity: Fitch expects DTEK's available cash of UAH5.5 billion (USD197 million) at end-2017 to comfortably cover debt maturities in 2018-2019 of UAH3.8 billion (USD134 million). Fitch forecast neutral to slightly positive free cash flow (FCF) on average over 2017-2021. Coal Assets Loss Constrains Deleveraging: In March 2017 DTEK lost assets located in the conflict zones of the Donetsk and Lugansk regions in eastern Ukraine. Operationally, the seized assets accounted for 26% of coal mining and 8% of electricity generation and transmission (in 2016). However, the financial effect was limited to 8% of revenue and 2% of EBITDA as some assets were loss-making. Nevertheless, Fitch expect increased fuel purchase costs from external suppliers and lower revenue from external coal sales to constrain DTEK's earnings growth and deleveraging capacity, though this will be offset by electricity tariff growth. In addition, DTEK has three thermal power plants (TPPs) and three transmission companies located in proximity to non-controlled territories, and they account for around 25% of DTEK's electricity generation and transmission volumes in 2017. These assets have not been damaged by military action, but any renewed fighting in the Donbass region resulting in their seizure would strongly weaken DTEK's business profile and impair its cash generating capacity. Foreign-Currency Exposure: Almost all of DTEK's debt was denominated in foreign currencies, ie US dollars, euros and roubles as of end-2017, which contrasts with less than 10% of revenue in US dollars. However, the management plans raising hryvna-nominated debt to replace foreign-currency debt within the next four to five years. DTEK also benefits from a new wholesale electricity price-setting methodology introduced in April 2016, which links the electricity price to FX and to the price of imported coal for thermal generators in Ukraine. This will provide hedging for a part of DTEK's foreign-currency denominated debt and fuel cost increase. Distribution Assets Spin-Off: DTEK plans to spin-off its distribution assets by end-2018 to comply with the EU's Third Energy Package. DTEK's distribution assets operate on a cost-plus basis and are only marginally profitable. The distribution assets' have no debt, and their effect on cash flow is slightly negative. Although uncertainties remain, Fitch forecasts a limited effect from their spin-off on the company's financial ratios. However, DTEK's business profile will lack full integration due to spin-off of its distribution segment. DERIVATION SUMMARY DTEK Energy B.V. is the largest private vertically integrated power generating and distribution company in Ukraine. DTEK's peers include Russian based players such as PJSC The Second Generating Company of Wholesale Power Markets (OGK-2, BB+/Stable) and Enel Russia PJSC (BB+/Stable) which have a significant share of coal in their fuel mix, and CIS-based players Kazakh-based Joint Stock Company Central-Asian Electric-Power Corporation (CAEPCo, B+/Stable) and Kazakhstan Utility Systems (KUS, BB- /Stable). DTEK faces a more challenging operating environment impacting also its business profile compared with peers, including uncertainty in the regulatory framework, policy instability and further possible macroeconomic shocks in Ukraine. DTEK also has a weaker financial profile than most of its peers due to higher leverage and higher debt exposure to FX, although the latter is partly mitigated by tariff linkage to the hryvnia exchange rate. DTEK's ratings do not incorporate any parental support from the ultimate majority shareholder System Capital Management (SCM). KEY ASSUMPTIONS Fitch's Key Assumptions Within Fitch Rating Case for the Issuer - Domestic GDP growth of 3.2% in 2018 and 3.2%-3.7% in 2019- 2021, and inflation of 13.7% in 2018 and average 8% in 2019-2021 - Annual average exchange rate of USD/UAH 29 in 2018, 31 in 2019, 33 in 2020 and 34.5 in 2021. - Spin-off of distribution assets outside DTEK Energy B.V. perimeter - Capex at average UAH12.2 billion over the 2018-2021, which is above management expectations - No dividend payments - DTEK retains control over assets located near the area of military conflict in eastern Ukraine KEY RECOVERY RATING ASSUMPTIONS: - The recovery analysis assumes that DTEK would be a going concern in bankruptcy and that the company would be reorganised rather than liquidated - Fitch have assumed a 10% administrative claim Going-Concern Approach - The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch base the valuation of the company. - The going-concern EBITDA is 35% below 2016 EBITDA to reflect the potential pressure on tariffs following the macroeconomic shock and risk of seizure of assets located in close proximity to the area of military conflict. - An enterprise value (EV) multiple of 3.5x is used to calculate a post-reorganisation valuation for DTEK. - The EV multiple applied reflects a 25% discount to average EV/EBITDA multiple for electric utility companies in Russia, Ukraine's peer market, of 4.7x, due to the weaker operating environment in Ukraine. - Deferred consideration for acquisition of coal mines and a credit line from a local bank are assumed to have prior ranking to bank loans subject to restructuring and Eurobonds. Bank loans and Eurobonds are ranked pari passu. Capital leases are not considered in the recovery waterfall. - The waterfall results in a 44% recovery corresponding to a Recovery Rating 'RR4' for the senior unsecured debt. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Once restructuring is completed, the 'RD' rating will be upgraded, likely to 'B-', to reflect the appropriate IDR for the issuer's post-restructuring capital structure, risk profile and prospects. Developments That May, Individually or Collectively, Lead to Negative Rating Action - DTEK entering into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure. FULL LIST OF RATING ACTIONS DTEK Energy B.V. Long-Term Foreign- and Local-Currency IDRs affirmed at 'RD' Short-Term Foreign- and Local-Currency IDRs affirmed at 'RD' National Long-Term Rating affirmed at 'RD(ukr)' Foreign-currency senior unsecured rating affirmed at 'C'; Recovery Rating 'RR4'. DTEK Finance plc Foreign-currency senior unsecured rating for USD1,275 billion bonds affirmed at 'C'; Recovery Rating 'RR4'. =========================== U N I T E D K I N G D O M =========================== ACTIVE WEALTH: Enters Voluntary Liquidation ------------------------------------------- Professional Adviser reports that Active Wealth UK, a firm criticized for the advice it gave to British Steelworkers on transferring their pensions, has entered voluntarily liquidation. A notice posted on The Gazette on Feb. 12 said the company would be "wound up voluntarily" and that the firm is required to give proof of its debts by March 30, Professional Adviser relates. Tina Bullock was appointed liquidator of the company, Professional Adviser discloses. Active Wealth voluntarily suspended its pension advice permissions after a visit from the Financial Conduct Authority, Professional Adviser recounts. The directors of the two firms, Darren Reynolds at Active Wealth and Clive Howells at Celtic Wealth, were invited to a Work and Pensions Committee hearing in parliament on Dec. 13, but both failed to show up, Professional Adviser relays. It later emerged that Active Wealth had been on the regulator's radar since August 2016, Professional Adviser notes. CARILLION PLC: Collapse Prompts Galliford Try to Raise New Equity ----------------------------------------------------------------- Nicholas Megaw at The Financial Times reports that Galliford Try will turn to markets to raise GBP150 million in new equity and cut its dividend to support its balance sheet in the wake of Carillion's collapse. According to the FT, the FTSE 250 group was working with Carillion and Balfour Beatty on a joint venture in Aberdeenshire, and it said the loss of its partner had compounded the impact of overrun costs on the project, which have "increased the group's total cash commitments on the project by in excess of GBP150 million". Galliford, as cited by the FT, said it "has sufficient financial resources to meet its obligations", but said that doing so would require diverting funds away from its more successful ventures and limit future progress. As a result, it plans to raise new capital "in the coming weeks to strengthen further the group's balance sheet and ensure that the group's businesses can continue to pursue their respective growth opportunities", the FT discloses. The equity raise has been fully underwritten by HSBC and Peel Hunt, the FT states. In addition to the capital raise, Galliford said it would bring forward previously-announced plans to increase its dividend cover to 2x "pre-exceptional" earnings, the FT says. That meant a cut in its interim dividend from 32p to 28p per share, the FT notes. The housebuilding and construction group had already predicted a financial hit of up to GBP40 million as a direct result of Carillion's failure, the first part of which was recognized in a GBP25 million exceptional charge in its first-half results, the FT relays. Headquartered in Wolverhampton, United Kingdom, Carillion plc -- http://www.carillionplc.com/-- is an integrated support services company. The Company operates through four business segments: Support services, Public Private Partnership projects, Middle East construction services and Construction services (excluding the Middle East). NORD GOLD: Fitch Hikes Long-Term IDR to BB, Outlook Stable ---------------------------------------------------------- Fitch Ratings has upgraded UK-based gold mining company Nord Gold S.E.'s Long-Term Issuer Default Rating (IDR) to 'BB' from 'BB-'. The Outlook on the company's Long-Term IDR is Stable. The upgrade reflects Nordgold's strong operational and financial results exceeding Fitch's expectations, together with good progress in the commissioning and ramp-up of development projects eg, the Bouly mine in Burkina Faso launched in September 2016 and the commissioning of the Gross project in Russia expected in 1H18. The Stable Outlook reflects Fitch's view that the business profile of Nordgold will not improve significantly further in 2018-2020 while its strong credit metrics are commensurate with the current rating category for a single-commodity miner operating exclusively in emerging markets with a weak operating environment. KEY RATING DRIVERS Operating Results Exceed Expectations: Nordgold's operating and financial results in 2017 should exceed Fitch's earlier expectations. Absolute revenue and EBITDA amounts are forecast to be respectively 18% and 37% higher than previously expected. This is due to better-than-expected gold prices in 2017, ie, 1,257 USD per ounce (oz) versus 1,100 USD/oz forecast earlier. Nordgold's net debt is projected to be around USD700 million, or USD170 million lower than expected earlier due to higher available cash balances. Fitch expect Nordgold's funds from operations (FFO) gross leverage to have increased slightly to around 2.2x at end-2017, vs. 2.9x previously expected, as the company continues to invest in the completion of its Gross development project. With the Gross project scheduled to commence production in 1H18, Fitch expect free cash flow (FCF) to return to positive, which should result in FFO gross leverage declining to 2x at end-2018 and remaining below 2x thereafter, in line with Fitch previous guidance for a positive rating action. Production Costs under Control: In 9M17 Nordgold's total all-in sustaining costs (AISC) were USD908/oz, similar to USD904/oz in 9M16. Its 3Q17 results show that total cash costs (TCC) increased 12% yoy to USD747/oz, mainly due to lower gold grades at some assets. Fitch expect that Nordgold will continue to maintain a competitive overall cost position due to the commissioning of relatively low-cost production at the Gross project, an all- season open-pit heap leach development project. This would help the company to control the overall cost per ounce. Nordgold expects plateau production at the Gross project to exceed 200 koz of gold per year and account for about 20% of its total. Moderating Capex, Positive FCF: Nordgold's capital intensity (capex/revenue) was high in 2017 and is expected to exceed 30% by the end of this year with capex of up to USD370 million (including capitalised stripping expenditure), mainly due to capital investments in the ongoing Gross development. Starting from 2018 capex intensity should fall towards 22%, in Fitch estimate, which should allow Nordgold to generate positive FCF in 2018 and beyond. Diverse Country Risk Exposure: The company has operations in Burkina Faso (44% of total output in 9M17), Russia (BBB- /Positive, 25%), Guinea (21%) and Kazakhstan (BBB/Stable, 9%). Less developed economies such as these can be less favourable for mining companies as a result of a number of factors, eg poor roads and other infrastructure, uncertainty in the application and/or enforceability of taxation, mining and other laws, and less stable governmental finances. In this regard Fitch view Nordgold's operational diversification as a partial mitigating factor against the risk from disruption in one of the countries in which the company operates. Delisting from the LSE: In March 2017, Nordgold's GDRs were de- listed from the LSE and cancelled following the company's board proposal to tender the GDRs. This decision reflected the board's view that the then share price undervalued the company. Nordgold repurchased 84% of the GDRs at a cost of USD101 million whereas around 16% of the company's minority shareholders retained their shares. Presently, the company is controlled by Alexey A. Mordashov. DERIVATION SUMMARY Nordgold's business profile is commensurate with the 'BB' rating category given the company's single-commodity operations, production scale and proved reserve life of 13 years. Fitch rates several North American gold mining companies in the 'BBB' category: Goldcorp Inc. (BBB/Stable), Kinross Gold Corp (Kinross, BBB-/Stable), and Yamana Gold Inc. (Yamana, BBB-/Stable). Compared with Goldcorp and Kinross, Nordgold is significantly smaller in gold production and revenue, although their AISC are similar. Goldcorp and Kinross have a higher proportion of mines located in more stable countries but also have a number of mines in Mexico/South America (Goldcorp) and Russia/West Africa (Kinross). Yamana is similar to Nordgold in scale and also has a majority of assets located in emerging economies (South America). Nordgold's ratings also take into take into consideration higher- than-average systemic risks associated with the Russian business and jurisdictional environment. No Country Ceiling or parent/subsidiary aspects impact the rating. KEY ASSUMPTIONS Fitch's Key Assumptions within Fitch Rating Case for the Issuer: - Fitch gold price deck of USD1,200/oz in 2018-2020; - Production at the Gross project to commence in 1H18 in line with the company's guidance; - Total refined gold production to have reached 960 koz in 2017, to total 1,100 koz in 2018 and above 1,270 koz in 2019-2020; - Stable AISC in 2017-2018; - Capex of around USD370 million in 2017, declining to USD300 million by 2018 and stabilising at around USD350 million in 2019-2020; - Dividends of around USD110 million in 2017, 30% of net income in 2018, and 50% of net income in 2019-2020 RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Further improvement in the company's operational profile beyond the successful commissioning and ramp-up of the Gross project and other projects currently in the pipeline. - Conservative financial profile, eg, FFO adjusted gross leverage below 1.5x on a sustained basis. - Positive FCF on a sustained basis. Developments That May, Individually or Collectively, Lead to Negative Rating Action - EBITDA margin below 30% on a sustained basis. - Failure to deleverage in line with Fitch's expectations, resulting in FFO adjusted gross leverage above 2x on a sustained basis. LIQUIDITY Adequate liquidity: As at end-September 2017 Nordgold's unrestricted cash and cash deposit balance was USD335 million versus USD448 million of short-term debt and USD13 million of accrued interest payable. The short-term debt is the company's Eurobond maturing in May 2018, which Nordgold plans to refinance. Fitch believe that Nordgold will continue to have access to the bank/capital market, which supports Fitch assessment of liquidity as "adequate". Under the current refinancing plan during 2016-2017 Nordgold raised USD550 million in new loans, including a USD325 million Sberbank loan with a seven-year maturity (five-year grace period), a USD75 million UniCredit loan with a three-year maturity and a USD150 million ING three-year loan. These new funds and accumulated cash balances are sufficient to finance the company's maturing debt, working-capital needs and capital expenditures in 4Q17 - 2018. Nordgold does not maintain any undrawn facilities other than an uncommitted overdraft facility for USD25 million. FULL LIST OF RATING ACTIONS Nord Gold S.E. - Long-Term Foreign Currency Issuer Default Rating (IDR): upgraded to 'BB' from 'BB-'; Outlook Stable; - Short-Term Foreign Currency IDR: affirmed at 'B'; - Long-Term Local Currency IDR: upgraded to 'BB' from 'BB-'; Outlook Stable; - Foreign Currency senior unsecured rating: upgraded to 'BB' from 'BB-'. PIONEER UK MIDCO 1: S&P Affirms 'B' CCR Following Acquisition -------------------------------------------------------------- Philadelphia-based pharmaceutical packaging outsourcer Pioneer UK Midco 1 Ltd., which operates as PCI Pharma Services, recently announced its intention to acquire Australia-based clinical contract packager Pharmaceutical Packaging Professionals and will finance this with a $65 million add-on to its first-lien term loan. S&P Global Ratings affirmed its 'B' corporate credit rating on Philadelphia-based Pioneer UK Midco 1 Ltd., which operates as PCI Pharma Services. The outlook is stable. S&P said, "At the same time, we affirmed our 'B' issue-level rating and '3' recovery rating on PCI Pharma's first-lien secured debt, issued by operating subsidiary Packaging Coordinators Midco Inc., consisting of a $65 million revolving credit facility, a $460 million term loan, and a proposed $65 million term loan add- on. The '3' recovery rating indicates our expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in the event of payment default. "We also affirmed our 'CCC+' issue-level rating and '6' recovery rating on PCI Pharma's $205 million second-lien term loan. The '6' recovery rating indicates our expectation for negligible (0%- 10%; rounded estimate: 0%) recovery in the event of payment default. "Our ratings reflect PCI Pharma's improvement in performance since working through several operational issues in the first half of fiscal 2017, which provided the company with the capacity to make modest-sized acquisitions funded with $65 million in incremental term loan debt. PCI Pharma intends to use the proceeds to acquire Australian-based clinical packaging company Pharmaceutical Packaging Professionals, for general corporate purposes, and to repay the outstanding revolver, which was drawn partially to acquire packager Millmount Healthcare. We believe the operational issues, including quality deviations and additional time-consuming quality inspections, are subsiding because PCI Pharma has transferred product packaging to Rockford, Ill. and Philadelphia from the Woodstock facility, and the company is working through its packaging backlog. "The stable outlook reflects our expectation that strong outsourcing demand will allow PCI Pharma to generate mid-single- digit revenue growth and grow margins above 2017 levels and closer to historical levels. It also reflects our expectation that leverage will remain well above 5x, but that the company will generate positive discretionary cash flow in the $10 million to $15 million range." * UK: Number of Firms in Administration Rises to 1,206 in 2017 -------------------------------------------------------------- Analysis by KPMG of notices in the London Gazette shows that the number of companies entering administration increased from 1,156 in 2016 to 1,206 in 2017 -- an increase of 4.3%. However, the final quarter of 2017 showed the fewest number of administrations (279) of any quarter during the year, and also fewer than the same period in 2016 (293). Blair Nimmo, global head of restructuring at KPMG, commented: "2017 saw an uptick in the number of corporate insolvencies, including landmark cases such as Monarch Airlines, Jaeger and Jacques Vert. "There's no doubt we're seeing a subtle shift towards more difficult times for businesses across the board. The weak exchange rate, rising inflation and the negative effects of uncertainty on consumer and corporate confidence could certainly combine to prompt the number of insolvencies to climb more sharply in 2018. "Retailers in particular continue to have a tough time, with a number of companies issuing post-Christmas profit warnings or announcing store closures. Elsewhere, businesses related to food, either in manufacturing or casual dining, continue to bear the brunt of raw material price inflation, falling margins and tightening consumer spending. "Additionally, the increases to the Minimum and Living Wage, auto-enrolment pensions and apprenticeship levies have also impacted employment costs, at the same time that business rate hikes are eating into the reserves of many companies in this space." Mr. Nimmo continued: "This means that in addition to our usual insolvency work, we're currently assisting a number of our clients develop strategies that will improve profitability and prepare their businesses for continued economic and political uncertainty. Whilst interest rates remain low, and sources of finance plentiful, the credit appetite of some lenders is beginning to tighten as they recognise the pressure points in the economy. This means that those businesses which have been struggling and relying on refinancing to see them through the last few months now have potentially fewer options on the table. "It's also clear that issues such as Brexit and volatility in the capital markets will continue to muddy the waters, potentially stifling investment in some quarters and intensifying the competition for talent in a number of sectors. "We should therefore expect businesses to remain cautious over the coming months as they engage in strategy setting and contingency planning." =============== X X X X X X X X =============== * BOOK REVIEW: Oil Business in Latin America: The Early Years ------------------------------------------------------------- Author: John D. Wirth Ed. Publisher: Beard Books Softcover: 282 pages List price: $34.95 Review by Gail Owens Hoelscher Buy a copy for yourself and one for a colleague on-line at http://is.gd/DvFouR This book grew out of a 1981 meeting of the American Historical Society. It highlights the origin and evolution of the stateowned petroleum companies in Argentina, Mexico, Brazil, and Venezuela. Argentina was the first country ever to nationalize its petroleum industry, and soon it was the norm worldwide, with the notable exception of the United States. John Wirth calls this phenomenon "perhaps in our century the oldest and most celebrated of confrontations between powerful private entities and the state." The book consists of five case studies and a conclusion, as follows: * Jersey Standard and the Politics of Latin American Oil Production, 1911-30 (Jonathan C. Brown) * YPF: The Formative Years of Latin America's Pioneer State Oil Company, 1922-39 (Carl E. Solberg) * Setting the Brazilian Agenda, 1936-39 (John Wirth) * Pemex: The Trajectory of National Oil Policy (Esperanza Duran) * The Politics of Energy in Venezuela (Edwin Lieuwen) * The State Companies: A Public Policy Perspective (Alfred H. Saulniers) The authors assess the conditions at the time they were writing, and relate them back to the critical formative years for each of the companies under review. They also examine the four interconnecting roles of a state-run oil industry and distinguish them from those of a private company. First, is the entrepreneurial role of control, management, and exploitation of a nation's oil resources. Second, is production for the private industrial sector at attractive prices. Third, is the integration of plans for military, financial, and development programs into the overall industrial policy planning process. Finally, in some countries is the promotion of social development by subsidizing energy for consumers and by promoting the government's ideas of social and labor policy and labor relations. The author's approach is "conceptual and policy oriented rather than narrative," but they provide a fascinating look at the politics and development of the region. Mr. Brown provides a concise history of the early years of the Standard Oil group and the effects of its 1911 dissolution on its Latin American operations, as well as power struggles with competitors and governments that eventually nationalized most of its activities. Mr. Solberg covers the many years of internal conflict over oil policy in Argentina and YPF's lack of monopoly control over all sectors of the oil industry. Mr. Wirth describes the politics and individuals behind the privatization of Brazil's oil industry leading to the creation of Petrobras in 1953. Mr. Duran notes the wrangling between provinces and central government in the evolution of Pemex, and in other Latin American countries. Mr. Lieuwin discusses the mixed blessing that oil has proven for Venezuela., creating a lopsided economy dependent on the ups and downs of international markets. Mr. Saunders concludes that many of the then-current problems of the state oil companies were rooted in their early and checkered histories." Indeed, he says, "the problems of the past have endured not because the public petroleum companies behaved like the public enterprises they are; they have endured because governments, as public owners, have abdicated their responsibilities to the companies." Jonh D. Wirth is Gildred Professor of Latin American Studies at Standford University. ********* 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 2018. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *