/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/180606.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, June 6, 2018, Vol. 19, No. 111 Headlines A Z E R B A I J A N INTERNATIONAL BANK: Fitch Affirms 'B-' IDR, Outlook Stable EXPRESSBANK OPEN: Fitch Affirms 'B' LT IDR, Outlook Stable C R O A T I A AGROKOR DD: Combined Stake of Russian Banks to Remain Below 50% G E R M A N Y MINIMAX VIKING: Moody's Cuts CFR to B1, Outlook Stable TECHEM ENERGY: S&P Places 'BB-' ICR on CreditWatch Negative G E R M A N Y STEINHOFF INTERNATIONAL: Insurance Cover for Loans Withdrawn I R E L A N D IRISH NATIONWIDE: Probe Into Credit Committee Failings Ongoing K A Z A K H S T A N STANDARD INSURANCE: A.M. Best Affirms Then Withdraws 'b+' ICR N E T H E R L A N D S VIVAT NV: Fitch Rates Perpetual Restricted Tier 1 Notes 'BB-' S P A I N BBVA RMBS 11 FTA: DBRS Raises Rating on Series C Notes to BB(low) CAIXABANK CONSUMO: DBRS Finalizes BB(high) Rating on Cl. B Notes IM GRUPO 3: DBRS Keeps C(sf) Rating on Series B Notes UR-Pos. FTA RMBS SANTANDER 1: DBRS Confirms C Rating on Series C Notes T U R K E Y * TURKEY: Banks Face Surge in Debt Restructuring Demands U N I T E D K I N G D O M FRESHPACK LTD: Difficult Trading Period Prompts Administration ZEPHYR MICDO 2: Moody's Assigns (P)B3 CFR, Outlook Stable ********* =================== A Z E R B A I J A N =================== INTERNATIONAL BANK: Fitch Affirms 'B-' IDR, Outlook Stable ---------------------------------------------------------- Fitch Ratings has affirmed Open Joint-Stock Company International Bank of Azerbaijan's (IBA) Long-Term Issuer-Default Rating at 'B-' with a Stable Outlook. The agency has also resolved the Rating Watch Evolving (RWE) on IBA's Viability Rating (VR) and upgraded the VR to 'b-' from 'ccc'. KEY RATING DRIVERS - IDRs, VR and DEBT RATING The upgrade of IBA's VR reflects improved profitability and reduced pressure on capitalisation stemming from a large short foreign currency position. The VR is also supported by IBA's currently low-risk asset structure and comfortable liquidity position after a restructuring in 2017. At the same time, the VR also reflects the bank's still considerable exposure to FX risk, the bank's reduced franchise (although the bank remains the largest by total assets and deposits in Azerbaijan) and limited history of operations following the restructuring, and uncertainty about the bank's future ownership (due to privatisation plans), business model and strategy. IBA's VR was placed on RWE in December 2017 following the publication of the Exposure Draft of Fitch's revised Bank Rating Criteria, which introduced + and - modifiers at the 'CCC'/'ccc' level for international ratings. The resolution of the RWE follows the finalisation and publication of the Criteria in March 2018 and reflects the agency's revised assessment of the bank's credit profile following developments since December 2017. The upgrade of the VR means the rating is now aligned with IBA's Long-Term IDR and senior debt rating at 'B-'. In November 2017, Fitch upgraded the bank's Long-Term IDR to 'B-', one notch above the 'ccc' VR, based on the view that the probability of the bank defaulting on its senior third-party obligations (which are reference liabilities for bank IDRs) was somewhat lower than it failing (i.e. becoming non-viable, and requiring external support to address a material capital shortfall). However, at the now higher VR level, Fitch believes it is no longer appropriate to maintain a notch difference between the bank's IDR and VR. IBA reported regulatory Tier 1 and Total Capital ratios at end- 1Q18 of 19.2% and 20.5% respectively, broadly in line with Fitch's expectations after the bank completed its restructuring in September 2017. Fitch estimates the Fitch Core Capital ratio was an even higher 25% at end-2017 due to a AZN0.3 billion fair value gain on an USD1 billion low interest bond issued under restructuring. Equity in regulatory accounts improved to a positive AZN0.9 billion at end-2017 from a negative AZN0.7 billion at end-2016 mainly due to (i) a AZN0.6 billion equity injection from the state, (ii) a AZN0.4 billion recovery of provisions on bad assets bought out by the state, (iii) a AZN0.2 billion haircut gain on the restructuring, and (iv) AZN0.4 billion of net income for 2017 (including a AZN0.1 billion currency revaluation gain). Fitch still views the bank's capital position as vulnerable due to a large unhedged short foreign currency position at end-1Q18 of USD1.7 billion or 4x regulatory capital or 3x FCC. However, risks from this position have reduced since 4Q17 due to (i) a moderate reduction in the absolute size of the position from USD1.9 billion post-restructuring due to FX purchases by the bank; (ii) reduction in the position size relative to capital, from an estimated 9x of total regulatory capital post- restructuring, due to internal capital generation and gains on transfers of bad assets to the government; (iii) expected continued FX purchases and internal capital generation, which should further reduce the size of the position both in absolute terms and relative to capital; and (iv) higher oil prices reducing the risk of a sharp devaluation of the manat. Fitch estimates that even in case of a 20% manat depreciation the FCC ratio would be a reasonable 8%. The regulatory capital ratio would fall to the minimum required 10% if the manat depreciates by 12%, but would be about 9pp higher if adjusted for the fair value gains on the bond, and Fitch would expect the bank to benefit from regulatory forbearance in case of a moderate breach of the minimum requirement. Management intends to close the bank's foreign currency position during the next few months via a hedging arrangement with Ministry of Finance and/or conversion of its manat deposits with the Central Bank of Azerbaijan into US dollars. However, in Fitch's view there is uncertainty about whether these transactions will take place and over the terms of any hedges. Asset quality is reasonable after completion of the bad assets clean-up in 2017. As per regulatory accounts, net loans and advances accounted for only 17% of total assets at end-1Q18 and were almost equally split between corporate and retail borrowers. Other assets are represented mainly by low-risk deposits placed with the CBA (AZN3.1 billion, 37% of total assets), short-term placements with other banks (AZN1.4 billion, 17%) and promissory notes guaranteed by the state (AZN1.1 billion, 13%). In Fitch's view, IBA has become structurally profitable again after the restructuring, supported by low cost of funding, reduced operating expenses and low-risk asset exposures, which should result in limited impairment charges. In 1Q18, the bank's return on average equity, adjusted for non-recurring provision recoveries, was approximately 30%. Profitability could come under pressure in case of FX losses, reduced access to cheap funding or an increase in higher-risk asset exposures. After the restructuring, IBA is funded mainly with customer deposits, of which more than half were interest-free current accounts, resulting in low overall cost of funding of around 2%. The bank's outstanding debt is a USD1 billion Eurobond issued as part of the restructuring and is held mostly by the State Oil Fund of Azerbaijan. The issue is rated long-term 'B-', in line with the bank's Long-Term IDR, reflecting Fitch's view of average recovery prospects, in case of default. IBA's liquidity position is comfortable with liquid assets (mainly, cash and cash equivalents and placements with CBA and foreign banks) more than fully covering customer accounts. SUPPORT RATING AND SUPPORT RATING FLOOR The affirmation of the Support Rating of' 5' and Support Rating Floor of 'No Floor' reflects Fitch's view that support from the shareholder, the Azerbaijan sovereign (BB+/Stable), cannot be relied upon in the long term following the bank's recent default. However, in Fitch's view some form of forbearance or support may be made available to the bank in the near term to avoid a repeat default on third-party senior obligations, should its capital be depleted by losses resulting from its FX position. RATING SENSITIVITIES IBA's VR and Long-term IDR could be upgraded if the bank is able to hedge its open foreign currency position and if the hedge is viewed by Fitch as effective and reliable. Conversely, if the bank fails to close its foreign currency position and incurs large losses as a result of manat depreciation against the US dollar, then the VR may be downgraded, potentially to 'f' to reflect a material capital shortfall. Positive rating action on the bank's Support Rating and Support Rating Floor is unlikely in the near term given the bank's recent default. The rating actions are as follows: Contact: Open Joint Stock Company International Bank of Azerbaijan Long-Term IDR: affirmed at 'B-', Outlook Stable Short-Term IDR: affirmed at 'B' Viability Rating: upgraded to 'b-' from 'ccc', off RWE Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor' Senior unsecured debt: affirmed at 'B-'; Recovery Rating 'RR4' EXPRESSBANK OPEN: Fitch Affirms 'B' LT IDR, Outlook Stable ---------------------------------------------------------- Fitch Ratings has affirmed Azerbaijan-based Expressbank Open Joint Stock Company's (EB) Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook. At the same time, the agency has withdrawn Atabank's OJSC (AB) ratings, including its 'CCC' Long- Term IDR on Rating Watch Evolving (RWE), as the issuer has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings and it will no longer provide ratings or analytical coverage for AB. KEY RATING DRIVERS - ALL RATINGS EB The affirmation of EB's ratings reflects its stabilised asset quality, solid capital buffers, limited exposure to foreign- exchange risks and comfortable liquidity. The ratings take into account EB's high level of related-party lending and its limited franchise in the vulnerable Azerbaijan's operating environment. The Stable Outlook on EB reflects Fitch's expectation that the bank will continue to gradually reduce its related-party exposure while risks stemming from rapid growth of third-party exposure can be covered by the bank's solid capital buffer. At end-1Q18, non-performing loans (NPLs; loans overdue by more than 90 days) were a moderate 3% of loans (largely unchanged from end-2017) and were fully covered by total reserves. Restructured loans added a further 2%. The bulk of problem loans (NPLs and restructured) was originated in the SME portfolio (the segment amounted to 9% of total loans), while problem loans in EB's corporate loan book (66%) and retail portfolio (25%) remained low. NPL origination ratio in retail (estimated as the net increase in NPLs plus write-offs divided by average performing loans) decreased to 2% in 2017 from 7% in 2016, also helped by a low share of foreign-currency loans (10% of retail loans). At end-2017, exposure to related parties included corporate loans (56% of loans, or 78% of Fitch Core Capital (FCC)) issued to a large company engaged in infrastructure construction and a government-supported start-up diversified production plant, and an AZN25 million uncovered guarantee in favour of these related companies (17% of FCC). In 2017-1Q18, related-party loans decreased by AZN18 million, while third-party corporate loans increased by AZN27 million to 14% of loans at end-1Q18 (end-2016: 1%). Retail lending returned to growth, up by 19% in 1Q18, after contracting by 24% in 2017 and by 28% in 2016. EB's robust capital position, as expressed by its high FCC ratio, improved to 59% at end-2017 from 50% at end-2016 due to a moderate decrease in risk-weighted assets. The regulatory Tier 1 ratio was a lower 26% at end-1Q18 due to a partial deduction of the related-party exposures, while the total capital ratio was 28%, both comfortably above the respective minimums of 5% and 10%. The bank plans to reduce its related-party exposure further to avoid deterioration to regulatory capital ratios. Fitch estimates the ratios would be still above the regulatory minimums at end-1Q18 even if the exposure to related parties was fully deducted from the regulatory capital. EB is funded by customer balances (88% of liabilities at end- 2017) with the majority of funds raised from individuals (61% of the total). Corporate accounts are highly concentrated with one state-owned energy company comprising 24% of liabilities. Reported related-party funding is negligible. Buffer of highly liquid assets (cash and equivalents, net short-term interbank placements and placements with the Central Bank of Azerbaijan, including short-term bonds) remains sizeable, equal to a large 57% of customer funding at end-1Q18. The EB's Support Rating Floor of 'No Floor' and Support Rating of '5' reflect its limited scale of operations and market share. Although Fitch believes some regulatory forbearance may be available for the bank in case of need, any extraordinary direct capital support from Azerbaijan authorities is very uncertain. This view is supported by the recent default of Open Joint Stock Company International Bank of Azerbaijan (B-/Stable), which is the largest bank in the country and is owned by the government. As a result, state support for less systemically important, privately owned banks cannot be relied upon. The potential for support from the bank's private shareholders is not factored into the ratings. AB Fitch has withdrawn AB's ratings without resolving the Rating Watch on its Long-Term IDR and Viability Rating due to insufficient information to assess the bank's credit profile. The agency placed AB's Long-Term IDR and VR on RWE on December 10, 2017 following the publication of the Exposure Draft of Fitch's revised Bank Rating Criteria, which expanded the rating scale by introducing '+' and '-' modifiers for the 'CCC' rating category. The revised Bank Rating Criteria was published on March 23, 2018. Fitch notes that the main areas of concern with respect to the bank's credit profile remain weak asset quality and low reserve coverage of problem loans. RATING SENSITIVITIES - ALL RATINGS Positive rating action for EB would require a substantial franchise development through profitable growth of third-party business and a reduction in volumes of operations with affiliated parties, while maintaining adequate capitalisation and liquidity. Capital erosion as a result of asset-quality deterioration may lead to negative rating actions. Fitch believes that positive rating actions on the Support Rating and Support Rating Floor are unlikely in the near term. Rating sensitivities are not applicable for AB as its ratings have been withdrawn. The rating actions are as follows: EB Long-Term IDR: affirmed at 'B', Outlook Stable Short-Term IDR: affirmed at 'B' Viability Rating: affirmed at 'b' Support Rating: affirmed at '5' Support Rating Floor: affirmed at 'No Floor' AB Long-Term IDR: 'CCC/RWE'; withdrawn Short-Term IDR: 'C'; withdrawn Viability Rating: 'ccc/RWE'; withdrawn Support Rating: '5'; withdrawn Support Rating Floor: 'No Floor'; withdrawn ============= C R O A T I A ============= AGROKOR DD: Combined Stake of Russian Banks to Remain Below 50% --------------------------------------------------------------- Anna Baraulina, Jasmina Kuzmanovic and Jake Rudnitsky at Bloomberg News report that two state-owned Russian banks will gain a combined stake of between 40% and 50% in Agrokor d.d., which will put them on the verge of a controlling interest in the embattled Croatian company after creditors reached a settlement. According to Bloomberg, three people familiar with the deal said Sberbank PJSC and VTB Group's will together own the biggest stake in the retail and food conglomerate, though their holding will remain below 50%. They earlier indicated their stake would "exceed 30%", Bloomberg notes. First Deputy Chief Executive Officer Yuri Soloviev said VTB is focused on recouping its lending and will sell its stake as soon as it finds a buyer, Bloomberg relates. One of the people, as cited by Bloomberg, said Sberbank is conscious of the risk that gaining a majority stake would raise the risk of sanctions on Agrokor. Agrokor creditors on May 31 agreed on the final settlement text, including recovery rates, Bloomberg relays, citing Marica Vidakovic, a member of Agrokor's creditors' council. The people said the deal foresees Sberbank receiving payments of between 60 million euros and EUR80 million (US$70-US$93 million) over the next four years from future operating revenues, Bloomberg notes. Agrokor's total debt is estimated at more than US$7 billion, with Sberbank its largest creditor, according to Bloomberg. About Agrokor DD Founded in 1976 and based in Zagreb, Crotia, Agrokor DD is the biggest food producer and retailer in the Balkans, employing almost 60,000 people across the region with annual revenue of some HRK50 billion (US$7 billion). On April 10, 2017, the Zagreb Commercial Court allowed the initiation of the procedure for extraordinary administration over Agrokor and some of its affiliated or subsidiary companies. This comes on the heels of an April 7, 2017 proposal submitted by the management board of Agrokor Group for the administration proceedings for the Company pursuant to the Law of Extraordinary Administration for Companies with Systemic Importance for the Republic of Croatia. Mr. Ante Ramljak was simultaneously appointed extraordinary commissioner/trustee for Agrokor on April 10. In May 2017, Agrokor dd, in close cooperation with its advisors, established that as of March 31, 2017, it had total liabilities of HRK40.409 billion. The company racked up debts during a rapid expansion, notably in Croatia, Slovenia, Bosnia and Serbia, a Reuters report noted. ============= G E R M A N Y ============= MINIMAX VIKING: Moody's Cuts CFR to B1, Outlook Stable ------------------------------------------------------ Moody's Investors Service (Moody's) has downgraded the corporate family rating (CFR) of German active fire detection and protection solutions provider Minimax Viking GmbH (Minimax) to B1 from Ba3. Concurrently, Moody's downgraded the ratings on the group's senior secured credit facilities to B1 (LGD3) from Ba3 (LGD2) and affirmed the probability of default rating (PDR) of Minimax at B1-PD. The outlook on all ratings has been changed to stable from positive. RATINGS RATIONALE "Today's rating action reflects company's decision to distribute EUR552 million of dividends to its parent company MV Holding GmbH that will use it to buy back shares held by some of its shareholders, in particular KIRKBI Invest A/S, subject to anti- trust clearance, allowing the Intermediate Capital Group (ICG) to increase its shareholding in the group from 42% to 90%. The dividend distribution will be financed by EUR423 million additional debt and EUR129 million of cash on the balance sheet. As a result, the group's credit metrics will deteriorate below our previously communicated downgrade trigger levels" says Vitali Morgovski, a Moody's Assistant Vice President-Analyst and lead analyst for Minimax. Given that additional debt load, the group's leverage ratio (Moody's adjusted) is projected to increase to 5.5x by the end of FY2018 compared to Moody's previous expectation of around 3.5x. While this initially keeps Mininax weakly positioned in the B1 rating category, Moody's anticipates a deleveraging in the coming years on the back of moderately rising earnings and positive free cash flow generation and in absence of further dividend payments that the company's management has committed to. Minimax has evidenced a good track record in steadily improving leverage ratios over the past few years. Since last dividend recap in 2013 gross debt/ EBITDA (Moody's adjusted) declined from 5x to 3.8x in 2017. Net debt/ EBITDA reduction was even stronger, from 4.4x to 2.6x, as the company primarily used its positive FCF to boost cash that soared from EUR101 million to EUR 262 million during 2013-17 period. Minimax's business profile continues to benefit from group's strong market position (#1 or #2 in Europe, US and parts of Asia) and high barriers to entry related to strict regulation. The company claims to have a high portion of recurring revenues (around 50%), mainly through aftermarket services and modernisation activities. This limits earnings volatility despite group's exposure to cyclical end markets. Additionally, favourable market conditions for the next few years (Moody's has a positive outlook for global manufacturing industry) combined with supportive market fundamentals (e.g. increasing safety demand, more stringent regulation and tightening insurance norms) support the group's underlying business. The resilience of Minimax's vertically integrated business model, which covers the entire fire protection value chain, can to some extent mitigate weaker credit metrics post dividend recap. LIQUIDITY Minimax's liquidity profile is good. As of March 31, 2018, the group's available cash sources include a sizeable cash balance of EUR263 million and Moody's projected funds from operations of around EUR130 - 140 million per annum over the next 12-18 months. While EUR129 million of cash will be distributed in form of dividends to shareholders in 2018, a similar amount will stay on the balance sheet, which together with EUR40 million commitments under its revolving credit facility (fully undrawn) comfortably cover all expected liquidity requirements of the group this and next year. Cash needs mainly comprise capital expenditures of around EUR65 - 70 million p.a. (2/3 of which is expansionary capex), minor working capital consumption and debt amortization of about EUR10 million p.a. OUTLOOK The stable outlook assumes sustained healthy market environment in Minimax's key regions Germany and the US, which should support moderate organic growth in sales. It also reflects the expectation that the group will continue to generate positive FCF and use it primarily for debt reduction and/or potential add-on acquisitions, allowing the leverage ratio to strengthen towards 5x or below over the next 18 months. WHAT COULD CHANGE THE RATING An upgrade of Minimax's ratings would require a sustained improvement in credit metrics, including (1) EBITA margins (Moody's-adjusted) of around 12%, (2) leverage (Moody's adjusted) of 4.5x gross debt/EBITDA or below, (3) FCF/debt ratios (Moody's adjusted) in the mid-single-digits, combined with (4) a conservative financial policy, evidenced by no excessive profit distributions to shareholders and/or larger debt-funded acquisitions. Downward pressure on Minimax's ratings would evolve, if (1) profitability were to weaken, exemplified by Moody's-adjusted EBITA margins reducing to 10% or lower, (2) leverage (Moody's- adjusted) in excess of 5.5x gross debt/EBITDA, and/or (3) negative free cash flows generation. List of affected ratings: Rating Actions: Issuer: Minimax Viking GmbH Corporate Family Rating, Downgraded to B1 from Ba3 Probability of Default Rating, Affirmed at B1-PD Backed Senior Secured Bank Credit Facility, Downgraded to B1 from Ba3 Issuer: Minimax GmbH & Co. KG Backed Senior Secured Bank Credit Facility, Downgraded to B1 from Ba3 Issuer: MX Holdings US, Inc. Backed Senior Secured Bank Credit Facility, Downgraded to B1 from Ba3 Outlook Actions: Issuer: Minimax Viking GmbH Outlook, Changed to Stable from Positive Issuer: Minimax GmbH & Co. KG Outlook, Changed to Stable from Positive Issuer: MX Holdings US, Inc. Outlook, Changed to Stable from Positive TECHEM ENERGY: S&P Places 'BB-' ICR on CreditWatch Negative ----------------------------------------------------------- S&P Global Ratings placed on CreditWatch with negative implications its 'BB-' long-term issuer credit ratings on Techem Energy Metering Service GmbH & Co. KG and its subsidiary Techem GmbH. S&P affirmed its 'B' short-term issuer credit ratings on both entities. S&P said, "At the same time, we put our 'BB-' long-term issue rating on Techem's senior secured facilities on CreditWatch with negative implications, with an unchanged recovery rating of '3'. The CreditWatch placement follows the announcement by Macquarie Infrastructure and Real Assets (Macquarie) that it has signed an agreement to sell its 100% interest in Techem via Macquarie European Infrastructure Fund 2 to a consortium of Partners Group, Ontario Teachers' Pension Plan, Caisse de dÇpìt et placement du QuÇbec and management, for an enterprise value of EUR4.6 billion. S&P expects that Techem's new capital structure will be highly leveraged, with higher adjusted debt than at present. S&P said, "Although the terms of the transaction and future capital structure have yet to be disclosed, we believe that there is a one-in-two likelihood that the proposed transaction could result in weaker credit metrics than our previous base-case forecast for Techem, including debt to EBTIDA of about 4.5x-5.0x in the financial year ending March 31, 2019. We consider the prospective new owners will likely act as financial sponsors, and therefore expect they will pursue aggressive financial policies for the company with the acquisition to be funded largely with debt. "We aim to resolve the CreditWatch in the third quarter of 2018, once the LBO has been completed and we have reviewed Techem's capital and ownership structure, as well as the strategy and business plan of the new owners. "We could lower our rating on Techem by one notch or more if the LBO is completed and depending on the company's credit metrics, liquidity, and cash flow generation after closing, as well as on our assessment of the financial policy that the new financial sponsor owners plan to pursue." ============= G E R M A N Y ============= STEINHOFF INTERNATIONAL: Insurance Cover for Loans Withdrawn ------------------------------------------------------------ Reuters reports that credit insurers have decided to withdraw insurance cover for South African retailer Steinhoff International's loans, Steinhoff's Austrian subsidiary Kika/Leiner said on June 4. "The loss of the credit insurance is a result of the Steinhoff crisis," Reuters quotes Kika/Leiner as saying in a statement. Steinhoff, whose retail chains include Britain's Poundland, Mattress Firm in the U.S. and Conforama in France, has been fighting to recover from the fallout from accounting irregularities discovered in December, Reuters relates. Steinhoff's Austrian furniture retailer Kika/Leiner had faced one of the biggest problems within the group, but said in January it secured enough cash to see it through this year, Reuters recounts. But international credit insurers decided on June 1 to withdraw insurance cover for Steinhoff's loans against the risk of default from Monday, June 4, onwards, Reuters relays, citing several Austrian media outlets. According to Reuters, Kika/Leiner's Chief Executive Gunnar George told radio station ORF when asked about the reasons for the cancellation of the insurance "Steinhoff International's global situation has still not improved." "A large amount of debt still has to be rescheduled," Mr. George, as cited by Reuters, said. "This complex situation makes credit insurers very nervous." Mr. George said the credit insurers' decision caught him by surprise and that major Kika/Leiner's suppliers have given him until the end of the week to find a solution, Reuters notes. Steinhoff said on May 10 it hoped to have a restructuring plan in place soon to put to creditors that would include measures such as fixing the maturity for all loans at three years from the restructuring date, according to Reuters. Steinhoff International is a South African international retail holding company that is dual listed in Germany. ============= I R E L A N D ============= IRISH NATIONWIDE: Probe Into Credit Committee Failings Ongoing -------------------------------------------------------------- Joe Brennan at The Irish Times reports that Irish Nationwide Building Society's (INBS) credit committee acted against its own rules in recommending the lender's board approve hundreds of millions of euros of loans during the boom, an inquiry into the failed institution heard on June 5. Brian O'Moore SC, of the legal team assisting the inquiry, highlighted a number of instances in late 2004 when the credit committee reviewed loan applications with only two members in attendance, before sending them on to the board for sanctioning, The Irish Times relates. The terms of reference for the committee dictated that it needed a quorum of three to hold meetings, The Irish Times discloses. According to The Irish Times, Mr. O'Moore spent much of the hearing on June 5 trying to establish that Mr. McMenamin was the effective head of the commercial lending department and de facto chairman of the credit committee during most of the period under review. Mr. McMenamin ultimately accepted both were the case, The Irish Times notes. The inquiry, which started public hearings last December, is currently looking at one of seven alleged contraventions of financial law, The Irish Times states. While Mr. McMenamin told the inquiry he was aware of the credit committee's obligation to have a quorum of three to carry out its duties, he said he didn't know about the other requirements, The Irish Times relays. Mr. McMenamin, INBS's former long-standing managing director Michael Fingleton and one-time finance director John Stanley Purcell are subject to the inquiry into alleged failings of the credit committee, The Irish Times discloses. The three, as well as the society's former head of UK lending, Gary McCollum, are being investigated for their involvement in the other alleged regulatory breaches, The Irish Times says. =================== K A Z A K H S T A N =================== STANDARD INSURANCE: A.M. Best Affirms Then Withdraws 'b+' ICR ------------------------------------------------------------- A.M. Best has affirmed the Financial Strength Rating of C++ (Marginal) and the Long-Term Issuer Credit Rating of "b+" of Standard Insurance Company JSC (Standard) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains stable. Concurrently, A.M. Best has withdrawn the ratings as the company has requested to no longer participate in A.M. Best's interactive rating process. The ratings reflect Standard's balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, very limited business profile and weak enterprise risk management. Standard's balance sheet strength is underpinned by its risk- adjusted capitalization, as measured by Best's Capital Adequacy Ratio, being at the strongest level. The company's risk-adjusted capitalization improved in 2017, due to a reduction in underwriting risk following the non-renewal of a significant part of the insurance portfolio of Alliance Policy Insurance Company JSC, which was absorbed by the company in the previous year. Factors that negatively affect the balance sheet strength assessment are the company's weak financial flexibility, questions over its ability to manage its catastrophe exposure, as well as its elevated investment risk profile, due to the high financial system risk in Kazakhstan. As at May 1, 2018, the company's regulatory solvency margin reached 1.89 (compared with a minimum requirement of 1.00). Standard's performance has been volatile, with its return on equity ranging between -3.1% and 20.4% over the 2013-2017 periods. Technical performance is weak, with losses reported in each of the past six years, apart from 2016. The company has a five-year weighted average combined ratio of 106.9% (2013-2017). In 2017, the company reported a combined ratio of 107.9% (2016: 94.3%), with performance impacted by the reduction in premium income and a high level of expenses. Standard ranked as the 11th largest among Kazakhstan's 25 non- life insurers in 2017 with a 3% market share. The company's top line has fluctuated in recent years, as a 93.8% increase in gross written premium for 2016 was followed by a decline of approximately 23% in 2017, due to the non-renewal of a material part of the recently absorbed business and a number of large fronted contracts. A.M. Best expects a further decline in 2018. The company's underwriting portfolio is concentrated, with approximately 60% of its net written premium in 2017 derived from compulsory motor third-party liability (MTPL) business. A.M. Best expects the company's relatively small size and limited diversification to limit its ability to defend its market position in challenging conditions. ===================== N E T H E R L A N D S ===================== VIVAT NV: Fitch Rates Perpetual Restricted Tier 1 Notes 'BB-' ------------------------------------------------------------- Fitch Ratings has assigned VIVAT NV's proposed perpetual restricted tier 1 (RT1) write-down notes a 'BB-' rating. The notes are rated four notches below VIVAT's Issuer Default Rating (IDR) of 'BBB', comprising two notches for 'poor' expected recovery and two notches for 'moderate' non-performance risk. KEY RATING DRIVERS The notes are expected to be issued with a fixed coupon, with interest rate reset and call dates at the first call date between seven and 10 years after issue and thereafter at every fifth anniversary. In the event of a winding-up, the notes will rank junior to any present or future unsubordinated creditors and subordinated creditors with respect to instruments that qualify Tier 2 or Tier 3 capital, and rank senior to any present or future classes of share capital other than any class of preferred share capital that qualifies as a parity obligation. The deep level of subordination results in a baseline recovery assumption of 'poor'. Fitch therefore notches down two notches from the IDR for expected recovery. The notes contain optional interest cancellation feature at the absolute discretion of the issuer, and a mandatory interest cancellation feature triggered if any solvency capital requirement (SCR) applicable to the issuer is not met, or if the Dutch Central Bank has notified the issuer that payments under the notes have to be cancelled, or if the aggregate interest payments on all Tier 1 own funds exceeds the amount of the issuer's distributable items. Fitch regards the interest cancellation features as leading to 'moderate' non-performance risk. To reflect the higher non- performance risk arising from the fully flexible interest cancellation (as opposed to just the mandatory cancellation features), it has notched down the notes' rating by a further two notches from the IDR. The notes include a feature whereby it will be fully or partially written down under specific trigger events, including a full write-down if the amount of own funds eligible to cover the SCR is equal to or less than 75% of the SCR. The write-down feature does not affect Fitch's rating notching over and above. The notes will be structured to qualify as RT1 capital under Solvency II and as such do not have a coupon step-up feature at any call/reset dates. Given that they are a non-cumulative perpetual instrument with no step-ups on call dates, they are treated as 100% equity both in Fitch's Prism Factor Based Capital Model and in Fitch's financial leverage calculation. However, they are treated as 100% debt in its calculation of the total financing and commitments ratio, in line with any other debt. The proceeds of the notes are intended to be used to replace certain existing subordinated obligations of the group. Fitch views the issue as positive for VIVAT's financial leverage ratio due to the equity credit given to the notes, and expects only limited impact on VIVAT's fixed charge coverage ratio. RATING SENSITIVITIES The notes' rating is subject to the same sensitivities that may affect VIVAT's Long-Term IDR ========= S P A I N ========= BBVA RMBS 11 FTA: DBRS Raises Rating on Series C Notes to BB(low) ----------------------------------------------------------------- DBRS Ratings Limited took the following rating actions on the notes issued by eight Spanish residential mortgage-backed securities (RMBS) transactions originated and serviced by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA). All ratings address the timely payment of interest and ultimate payment of principal by the legal final maturity date. BBVA RMBS 5 FTA: The Series A, Series B and Series C notes issued by BBVA RMBS 5 FTA were originally placed Under Review with Positive Implications (UR-Pos.) on April 30, 2018, following the upgrade of the Kingdom of Spain's Long-Term Foreign and Local Currency - Issuer Rating to 'A' from A (low). The Series A, Series B and Series C notes continue to be placed UR-Pos. pending DBRS's analysis of the recent performance of the Spanish real estate market. BBVA RMBS 9, FTA: -- Bonds confirmed at A (high) (sf) BBVA RMBS 10 FTA: -- Series A confirmed at A (high) (sf) -- Series B upgraded to BBB (low) (sf) from BB (sf) BBVA RMBS 11 FTA: -- Series A confirmed at A (high) (sf) -- Series B upgraded to BBB (sf) from BB (high) (sf) -- Series C upgraded to BB (low) from B (high) (sf) BBVA RMBS 12 FTA: -- Series A confirmed at A (sf) -- Series B confirmed at BB (high) (sf) BBVA RMBS 13 FTA: -- Series A Notes confirmed at A (high) (sf) -- Series B Notes upgraded to BBB (low) from BB (high) (sf) BBVA RMBS 15 FTA: -- Bonds confirmed at A (high) (sf) BBVA RMBS 16 FT: -- Bonds confirmed at A (high) (sf) The ratings are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults and losses. -- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining portfolios. -- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels. PORTFOLIO PERFORMANCE -- For BBVA RMBS 5 FTA, the current cumulative default ratio is 7.4%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 1.6%. -- For BBVA RMBS 9 FTA, the current cumulative default ratio is 2.2%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 1.0 %. -- For BBVA RMBS 10 FTA, the current cumulative default ratio is 0.5%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.2%. -- For BBVA RMBS 11 FTA, the current cumulative default ratio is 2.0%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.8%. -- For BBVA RMBS 12 FTA, the current cumulative default ratio is 0.6%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.7%. -- For BBVA RMBS 13 FTA, the current cumulative default ratio is 0.5%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.6%. -- For BBVA RMBS 15 FTA, the current cumulative default ratio is 0.1%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.3%. -- For BBVA RMBS 16 FT, the current cumulative default ratio is 0.1%. As of 30 April 2018, the 90+ delinquency ratio (including defaulted loans) was 0.2%. PORTFOLIO ASSUMPTIONS DBRS conducted a loan-by-loan analysis of the remaining pool of receivables in each transaction and has updated its base case PD and LGD assumptions as follows: -- For BBVA RMBS 5 FTA, DBRS has updated its base case PD and LGD assumptions to 6.3% and 49.5%, respectively. -- For BBVA RMBS 9 FTA, DBRS has updated its base case PD and LGD assumptions to 6.3% and 48.7%, respectively. -- For BBVA RMBS 10 FTA, DBRS has updated its base case PD and LGD assumptions to 5.2% and 44.9%, respectively. -- For BBVA RMBS 11 FTA, DBRS has updated its base case PD and LGD assumptions to 7.7% and 46.0%, respectively. -- For BBVA RMBS 12 FTA, DBRS has updated its base case PD and LGD assumptions to 5.4% and 39.3%, respectively. -- For BBVA RMBS 13 FTA, DBRS has updated its base case PD and LGD assumptions to 5.1% and 39.7%, respectively. -- For BBVA RMBS 15 FTA, DBRS has updated its base case PD and LGD assumptions to 4.8% and 30.5%, respectively. -- For BBVA RMBS 16 FT, DBRS has updated its base case PD and LGD assumptions to 7.2% and 31.8%, respectively. CREDIT ENHANCEMENT For each transaction, CE to the rated notes is provided by subordination of junior classes and a Cash Reserve. -- For BBVA RMBS 5 FTA, Series A CE was 23.2%, Series B CE was 13.0% and Series C CE was 10.0%, as of the March 2018 payment date. -- For BBVA RMBS 9 FTA, CE to the Bonds was 23.2%, as of the March 2018 payment date. -- For BBVA RMBS 10 FTA, Series A CE was 25.3% and Series B CE was 6.7%, as of the April 2018 payment date. -- For BBVA RMBS 11 FTA, Series A CE was 25.3%, Series B CE was 14.0% and Series C CE was 6.7%, as of the April 2018 payment date. -- For BBVA RMBS 12 FTA, Series A CE was 28.4% and Series B CE was 6.5%, as of the April 2018 payment date. -- For BBVA RMBS 13 FTA, Series A CE was 24.5% and Series B CE was 6.1%, as of the April 2018 payment date. -- For BBVA RMBS 15 FTA, CE to the Bonds was 25.9%, as of the February 2018 payment date. -- For BBVA RMBS 16 FT, CE to the Bonds was 22.3%, as of the February 2018 payment date. BBVA acts as the account bank for the transactions. The account bank reference rating of A (high) - being one notch below the DBRS public Long-Term Critical Obligations Rating of BBVA of AA (low), is consistent with the Minimum Institution Rating given the rating assigned to the most senior class of rated notes in each transaction, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in euros unless otherwise noted. CAIXABANK CONSUMO: DBRS Finalizes BB(high) Rating on Cl. B Notes ---------------------------------------------------------------- DBRS Ratings Limited finalized its provisional ratings on the following notes issued by Caixabank Consumo 4 FT (the Issuer): -- AA (low) (sf) to the Class A Notes -- BB (high) (sf) to the Class B Notes The notes are backed by an approximately EUR 1.7 billion pool of receivables related to unsecured consumer loans originated by CaixaBank, S.A. (CaixaBank, the originator and the servicer), granted to individuals in Spain. The rating of the Class A Notes addresses the timely payment of interest and ultimate repayment of principal on or before the final maturity date. The rating of the Class B Notes addresses the ultimate payment of interest and ultimate repayment of principal on or before the final maturity date. The ratings are based on DBRS's review of the following analytical considerations: -- The transaction's capital structure including the form and sufficiency of available credit enhancement in the form of (1) subordination, (2) reserve fund and (3) excess spread. -- Credit enhancement levels are sufficient to support DBRS's projected expected cumulative loss assumptions under various stressed cash flow assumptions for the notes; -- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents; -- CaixaBank's financial strength and capabilities with respect to origination, underwriting and servicing; -- DBRS conducted an operational risk review at CaixaBank's premises in Barcelona and deems it an acceptable originator and servicer; -- The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral; -- The sovereign rating of the Kingdom of Spain, which is currently rated at "A" by DBRS; and -- The consistency of the transaction's legal structure with DBRS's "Legal Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions that address the assignment of the assets to the issuer. The transaction's cash flow structure was analyzed with Intex DealMaker. Notes: All figures are in euros unless otherwise noted. IM GRUPO 3: DBRS Keeps C(sf) Rating on Series B Notes UR-Pos. ------------------------------------------------------------- DBRS Ratings Limited maintained the Under Review with Positive Implications (UR-Pos.) status on its A (low) (sf) and C (sf) ratings of the Series A and Series B notes (together, the Notes), respectively, issued by IM Grupo Banco Popular MBS 3, FT (IM GBP MBS 3). The rating on the Series A notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in December 2058. The rating on the Series B notes addresses the ultimate payment of interest and principal payable on or before the Final Maturity Date in December 2058. The Notes were placed UR-Pos. on April 30, 2018, following the upgrade of the Kingdom of Spain's Long-Term Foreign and Local Currency - Issuer Rating to 'A' from A (low) and DBRS's ongoing analysis of the Spanish real estate market. The maintenance of the UR-Pos. status on the Notes follows an annual review of the transaction that incorporates the Spanish sovereign rating upgrade and the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults and losses. -- Updated portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables. -- Current available credit enhancement (CE) to the Notes to cover the expected losses at their respective rating levels. IM GBP MBS 3 is a securitization of Spanish prime residential mortgage loans originated by Banco Popular Espa§ol, S.A. (BPE) and Banco Pastor, S.A. (Pastor), which closed in December 2015. After its acquisition of Banco Popular, Banco Santander SA (Santander) began acting as the servicer of the portfolio. PORTFOLIO PERFORMANCE AND ASSUMPTIONS The portfolio is performing within DBRS's expectations. As of the March 2018 payment date, the loans in arrears for over 90 days represented 1.1% of the outstanding collateral portfolio, while the current cumulative default ratio was at 1.5% of the original portfolio balance, up from 0.36% a year ago. DBRS conducted a loan-by-loan analysis on the remaining collateral pool of receivables and updated its PD and LGD assumptions. The updated base-case PD and LGD of the transaction are 13.6% and 45.4%, respectively. The improvement of the PD and LGD assumptions, which is credit positive to the transaction, reflects the Spanish sovereign rating upgrade, and the decrease of the portfolio loan-to-value ratio as the portfolio continues to deleverage. The Notes will remain UR-Pos while DBRS continues to analyze the possible effect of the recent developments in the Spanish real estate market. CREDIT ENHANCEMENT The CE available to the notes has continued to increase as the transaction deleverages. The Series A notes are supported by the subordination of the Series B notes and a non-amortizing reserve fund (RF), which is available to cover senior fees, interest and principal on the Series A notes until the Series A notes are paid in full, after which time the RF will be available to support the Series B notes. As of March 2018, the RF was at its target of EUR 27 million, and the CE to the Series A notes and Series B notes was 28.4% and 3.4%, respectively, increasing from 26.6% and 3.1% as of March 2017. Banco Santander SA acts as the Account Bank for the transaction. The Account Bank's reference rating of A (high), being one notch below its DBRS public Long-Term Critical Obligations Rating of AA (low), is consistent with the Minimum Institution Rating, given the rating assigned to the Series A notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in euros unless otherwise noted. FTA RMBS SANTANDER 1: DBRS Confirms C Rating on Series C Notes -------------------------------------------------------------- DBRS Ratings Limited took the following rating actions on the Notes issued by five Santander Spanish residential mortgage- backed securities (RMBS) transactions: FTA RMBS Santander 1 (SAN1): -- Series A Notes maintained at AA (sf) Under Review with Positive Implications (UR-Pos.) -- Series B Notes maintained at CCC (sf) UR-Pos. -- Series C Notes confirmed at C (sf) FTA RMBS Santander 2 (SAN2): -- Series A Notes confirmed at AA (sf) -- Series B Notes upgraded to BB (low) (sf) from CCC (sf) -- Series C Notes confirmed at C (sf) FTA RMBS Santander 3 (SAN3): -- Series A Notes maintained at AA (sf) UR-Pos. -- Series B Notes maintained at CCC (sf) UR-Pos. -- Series C Notes confirmed at C (sf) FT RMBS Santander 4 (SAN4): -- Series A Notes maintained at A (high) (sf) UR-Pos. -- Series B Notes maintained at CCC (sf) UR-Pos. -- Series C Notes confirmed at C (sf) FT RMBS Santander 5 (SAN5): -- Series A Notes maintained at A (high) (sf) UR-Pos. -- Series B Notes maintained at CCC (sf) UR-Pos. -- Series C Notes confirmed at C (sf) For the five transactions, the ratings on the Series A Notes address the timely payment of interest and ultimate payment of principal on or before the respective final maturity dates. The ratings on the Series B Notes and Series C Notes address the ultimate payment of interest and principal on or before the respective final maturity dates. The Series A Notes and Series B Notes of SAN1, SAN3, SAN4 and SAN5 were originally placed UR-Pos. on 30 April 2018, following the upgrade of the Kingdom of Spain's Long-Term Foreign and Local Currency - Issuer Rating to "A" from A (low). The Series A Notes and Series B Notes of SAN1, SAN3, SAN4 and SAN5 continue to be placed UR-Pos. pending DBRS's analysis of the recent performance of the Spanish real estate market. The rating actions follow an annual review of the transactions and are based on the following analytical considerations: -- Portfolio performances, in terms of delinquencies and defaults, as of the latest payment date for each transaction; -- Updated portfolio default rates (PD), loss given defaults (LGD) and expected loss assumptions on the remaining collateral portfolios; -- Current available credit enhancement (CE) to the rated Notes to cover the expected losses at the respective rating levels. All five transactions are securitizations of Spanish first-lien mortgage loans. The pools of SAN1 and SAN2 are originated and serviced by Banco Santander S.A. (Santander). The pools of SAN3 and SAN4 are originated by Santander and Banco de CrÇdito Espa§ol (Banesto, now fully integrated into Santander) and serviced by Santander. The pool of SAN5 is originated by Santander, Banesto and Banco Banif S.A.U., and serviced by Santander. As of the March 2018 payment date, the SAN1 portfolio totaled 927.4 million with a pool factor of 71.3%. As of the May 2018 payment date, the SAN2 portfolio totaled 2,230.5 million with a pool factor of 74.3% and the SAN3 portfolio totaled 4,892.2 million with a pool factor of 75.3%. As of the March 2018 payment date, the SAN4 portfolio totaled 2,341.0 million with a pool factor of 79.4%. As of the April 2018 payment date, the SAN5 portfolio totaled 1,058.0 million with a pool factor of 83.0%. PORTFOLIO PERFORMANCE The portfolios are performing within DBRS's expectations. The delinquent loans have decreased in all five transactions, while defaulted loans have slightly increased over the past year. The 90+ delinquency ratios stood at 1.9%, 0.7%, 0.9%, 1.2% and 1.2% of the outstanding collateral pool of SAN1, SAN2, SAN3, SAN4 and SAN5, respectively, as of the latest payment dates. The cumulative defaulted ratios were 3.2%, 1.3%, 2.0%, 1.3% and 1.0% computed on the original portfolio balances of SAN1, SAN2, SAN3, SAN4 and SAN5, respectively. PORTFOLIO ASSUMPTIONS DBRS conducted loan-by-loan analyses on the remaining collateral pools of receivables and updated its PD and LGD assumptions as follows: -- In SAN1, the base case PD and LGD are 15.4% and 39.2%, respectively; -- In SAN2, the base case PD and LGD are 6.8% and 34.0%, respectively; -- In SAN3, the base case PD and LGD are 9.8% and 40.7%, respectively; -- In SAN4, the base case PD and LGD are 11.0% and 42.1%, respectively; -- In SAN5, the base case PD and LGD are 13.7% and 39.3%, respectively. CREDIT ENHANCEMENT The CEs available to the rated Series A Notes have continued to increase as the transactions continue to deleverage with the CEs to the rated Series B Notes remaining fairly stable. The rated Series C Notes funded the Reserve Funds and hence do not benefit from CE. The CEs consist of the overcollateralization provided by the outstanding collateral portfolios and include the Reserve Funds in all transactions. The CEs were as follows: -- In SAN1, the Series A and Series B Notes CEs were 42.3% and 3.5% as of the March 2018 payment date, compared to 39.3% and 3.7% as of the March 2017 payment date; -- In SAN2, the Series A and Series B Notes CEs were 35.5% and 6.1% as of the May 2018 payment date, compared to 32.5% and 5.6% as of the May 2017 payment date; -- In SAN3, the Series A and Series B Notes CEs were 37.4% and 5.3% as of the May 2018 payment date, compared to 34.6% and 5.1% as of the May 2017 payment date; -- In SAN4, the Series A and Series B Notes CEs were 30.5% and 5.3% as of the March 2018 payment date, compared to 28.7% and 5.6% as of the March 2017 payment date; -- In SAN5, the Series A and Series B Notes CEs were 30.1% and 5.4% as of the April 2018 payment date, compared to 28.1% and 5.5% as of the April 2017 payment date. The Reserve Funds were funded through the issuances of junior series and are available to cover principal losses, senior fees and interest shortfall on the rated Notes. As of the latest payment dates, the reserves were at EUR 32.9 million in SAN1, EUR 135.9 million in SAN2, EUR 259.8 million in SAN3, EUR 123.8 million in SAN4 and EUR 57.4 million in SAN5. None of the Reserve Funds are at target level. Santander acts as the account bank for all five transactions. The DBRS public ratings on the account bank are consistent with the Minimum Institution Rating, given the ratings assigned to the Series A Notes of each transaction, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in euros unless otherwise noted. =========== T U R K E Y =========== * TURKEY: Banks Face Surge in Debt Restructuring Demands -------------------------------------------------------- Ercan Ersoy and Fercan Yalinkilic at Bloomberg News reports that after piling on corporate loans only a few years ago, Turkish banks are now facing a surge in demand from companies seeking to reorganize debt repayments. The rise in restructurings threatens to spur an increase in unpaid loans as a plunge in the nation's currency causes the cost of corporate Turkey's foreign-currency debt -- equal to about 40% of economic output -- to surge, Bloomberg states. An interest- rate increase to try and stem the lira's decline is also pushing up borrowing costs as the country's biggest businesses seek to rearrange almost US$20 billion of loans, Bloomberg notes. "A lack of standards in recognizing these loans could obscure real asset-quality deterioration trends within the industry," Tomasz Noetzel, a Bloomberg Intelligence analyst, said in emailed comments. "Now with lending rates higher, the lira still weak despite recent central bank moves, the ability to service debt could deteriorate further." Billionaire Ferit Sahenk's Dogus Holding AS, which operates restaurants including steak chain and social-media phenomenon Salt Bae, last month asked lenders to restructure as much as US$2.5 billion, Bloomberg relays. Yildiz Holding AS, owner of Godiva chocolates and McVitie's snacks, said this month it agreed with banks to reorganize US$5.5 billion of loans through a new four-year facility that has can be extended by another four years, Bloomberg recounts. =========================== U N I T E D K I N G D O M =========================== FRESHPACK LTD: Difficult Trading Period Prompts Administration -------------------------------------------------------------- Rachel Constantine at Business-Sale reports that Alsager-based pie and sausage roll manufacturer Freshpack Ltd has appointed administrators after more than six decades in the industry. According to Business-Sale, the family-owned firm, which is based in the Excalibur Industrial Estate, said the decision follows a difficult period of trading but has still left the company in an attractive position for potential buyers. Matt Dunham -- matt.dunham@dunhamdeanadvisory.co.uk -- of Dunham Dead Advisory, has been appointed administrator for the company, and has suggested that the sale of the business would present an ideal opportunity for any other manufacturer looking to expand their operations, Business-Sale relates. The administrators said the company is now in negotiation with suppliers and customers to ensure that all its operations continue to run smoothly while the administration and sales process goes ahead, Business-Sale discloses. Founded in 1952, Freshpack Ltd supplied frozen pastry products, snacks and ready meals to frozen food firms and discount shops around the country. The technology used to conserve and package the food includes some of the latest packing technology, including fully-automated puff pastry production. ZEPHYR MICDO 2: Moody's Assigns (P)B3 CFR, Outlook Stable --------------------------------------------------------- Moody's Investors Service has assigned a provisional (P)B3 corporate family rating (CFR) to Zephyr Midco 2 Limited ("Zephyr"), a newly incorporated entity, which is expected to be the future holding company of ZPG Plc, owner of the second largest UK property portal (Zoopla) and of leading UK price comparison websites (uSwitch and Money.co.uk), and the topco entity of the new restricted group. Concurrently, Moody's has assigned provisional (P)B2 instruments ratings to the GBP740 million senior secured 7-years first lien term loan B and the GBP150 million equivalent 6.5-years senior secured revolving credit facility (RCF) which are issued by Zephyr Bidco Limited. The outlook is stable on all the ratings. As part of the transaction, Zephyr has also placed a GBP180 million 8-years senior secured second lien term loan (unrated). The new first and second lien term loans alongside equity to be provided by funds managed by Silver Lake and funds managed and/or advised by GIC and PSP, accounting for around 67% of the funding sources, will be used to fund the acquisition of ZPG Plc ("ZPG"). It is Moody's understanding that only common equity will enter the restricted group to finance the acquisition. In order for the acquisition to become effective, ZPG will need to obtain approval from at least 75% in value of the ordinary share capital present and voting (in person or by proxy) at the relevant meetings. Currently, the buyers have received irrevocable undertaking to vote in favour of the acquisition from 31.03% of ZPG's ordinary share capital votes (29.87% from DMGZ, the majority shareholder of ZPG, and 1.16% from ZPG Directors). A Court Meeting and General Meeting are expected to be held around June 18, 2018. Upon the closing of this take-private transaction (expected to take place in third quarter of 2018 subject to regulatory approval), the de-listing of ZPG Plc from the London Stock Exchange, and the repayment of the existing facilities Moody's will withdraw the existing CFR, PDR, and instrument ratings of ZPG Plc. Moody's issues provisional ratings in advance of the final sale of securities. Upon closing of the transaction and a conclusive review of the final documentation, Moody's will endeavour to assign definitive ratings. A definitive rating may differ from a provisional rating. RATINGS RATIONALE Zephyr's provisional (P)B3 corporate family rating (CFR) reflects the group's very high opening adjusted leverage post LBO of ZPG by Silver Lake. After the completion of the transaction, ZPG's pro forma adjusted leverage (as adjusted by Moody's mainly for deferred considerations/earn-outs and pro forma for the disposal of Hometrack's Australian operations but excluding uplifts from identified cost saving initiatives) will increase to approximately 8.9x as of LTM March 2018 from 3.4x pre-LBO as of the same date. Moody's expects that Moody's adjusted leverage will trend towards 8.0x by September 2018 and, absent any M&A transaction, to around 7.0x by September 2019 supported by ongoing revenue and EBITDA growth, reduction in outstanding deferred considerations/earn-outs and good execution in consolidating acquired businesses. The ratings reflect (1) the company's established brands and good position in the UK property classified market (#2 and #3 property classified portals) and among the top Price Comparison Websites (PCWs) in the UK, (2) the diversified revenue stream between subscription-based (property division) and transactional (comparison division) contracts, (3) the good free cash flow generation albeit historically absorbed by acquisitions and despite the anticipated increase in interest expenses following Silver Lake acquisition of the company, (4) the clear strategy of consolidating the company's role as a value-added intermediary for end-consumers and partners/suppliers, and (5) the good growth prospects supported by pricing and cross-selling opportunities in the property division, growth within the comparison segment and the secular shift of advertising spend to online from traditional channels. The ratings also reflect (1) the modest scale and the predominantly UK geographic presence, (2) the exposure to cyclical property market and online advertising spending (although the early stage of the secular trend from print to digital helped to grow online classifieds spend even during the 2008-09 crisis), (3) the highly competitive environment heightened by constant threat of new disruptive technologies and business models which could erode established position and margins, (4) the M&A strategy which, while core for consolidating the company's position in the UK and expanding its presence in Europe, carries re-leveraging and execution risks, (5) the dependence on third parties' search engines to direct traffic toward its platforms (partially mitigated by ZPG high share of unpaid traffic), and (6) the high Moody's adjusted gross leverage post-LBO. At closing of the transaction, the company is expected to have cash balances of approximately GBP60 million and access to an undrawn GBP150 million revolving credit facility (RCF). The new RCF has one springing covenant (first lien net leverage -- as calculated by the management) that is tested when the facility is drawn by more than 40%. The first lien net leverage covenant level is set at 8.75x. The new capital structure is expected to increase annual interest expense by approximately GBP45 million. The incremental cash outflow will be partially offset by the suspension of dividend payments (currently at around GBP20-30 million per annum). Moody's expects the company to deliver positive annual free cash flow (FCF) -- calculated after interest expenses, cash taxes and capex but before acquisitions or deferred considerations/earn- outs payments -- of GBP60-70 million in the next 12-18 months after closing of the transaction, supported by high margins and limited capex needs. However, as a consequence of the acquisitions done in 2017, the company will have significant deferred considerations/earn-outs payments during 2018 and 2019. As such residual cash flow -- calculated after interest expense, deferred considerations and earn-outs payments -- is expected to be at around GBP10-20 million in 2019. Excluding permitted payments carve outs included in the new credit facility agreement, dividends can be paid only once company's consolidated first lien net leverage falls below 4.0x. At opening, the company's reported consolidated first lien net leverage is estimated at 5.7x (or 4.9x including effect of pro- forma run-rate synergies). The SFA also contains provisions for debt prepayments out of excess cash flow until the company senior secured first lien net leverage reduces below 4.0x which could support the company's deleveraging trajectory. Structural Considerations The provisional (P)B2 ratings assigned to the first-lien term loans and RCF, all ranking pari-passu and issued by Zephyr Bidco Limited, are one notch above the CFR and reflect the cushion provided by the second lien term loans ranking below. The first lien term loans and the RCF will benefit from guarantees from material subsidiaries representing at least 80% of consolidated EBITDA of the group (excluding the EBITDA of any entity of the group that is not required to become a guarantor). The first lien facilities will also benefit from security limited to a pledge over shares and, solely with respect to English guarantors, an all-asset debenture. The second lien term loans will benefit from the same guarantee and security package as the first lien facilities but on a second lien basis. Rating outlook The stable outlook on the ratings reflects Moody's expectation that the company will be able to de-leverage to around 7.0x by the end of September 2019 supported by revenue and EBITDA growth, reduction in outstanding deferred considerations/earn-outs and good execution in consolidating acquired businesses. The outlook assumes no major debt-funded acquisitions and that the company will maintain an adequate liquidity profile. What Could Change the Rating -- Up Upward pressure on the rating could materialize if: (i) revenue continues to grow steadily and EBITDA margins improve on a sustained basis; (ii) Moody's adjusted debt/EBITDA is sustained below 6.5x; (iii) it generates positive free cash-flow; and (iv) it maintains an adequate liquidity profile. What Could Change the Rating -- Down Conversely, downward ratings pressure could develop if: (i) ZPG's competitive profile weakens, for example as result of a material erosion in the company's market share; (ii) Moody's adjusted debt/EBITDA is sustained above 8.0x; or (iii) its liquidity profile significantly weakens. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. CORPORATE PROFILE Founded in 2007 and headquartered in London, ZPG Plc operates some of the most relevant UK home-related digital platforms including the #2 and #3 UK property portals Zoopla and PrimeLocation and the price comparison websites for home services switching (uSwitch) and for financial services products (Money.co.uk). The company also offers software for estate agents (PSG) and automated residential property valuation tools (Hometrack and Calcasa) for estate agents and financial institutions. The company generates approximately 52% of revenue from comparison services (22% from energy vertical, 16% communications, 14% finance) and 48% from property services (30% marketing division, 10% data, 8% software). For the last twelve months to March 2018, pro-forma for acquisitions, ZPG reported revenue of GBP295.8 million and company's adjusted EBITDA - which excludes exceptional payments and share-based compensations - of GBP118.5 million. ********* 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 * * *