/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/180718.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, July 18, 2018, Vol. 19, No. 141 Headlines B U L G A R I A BDZ: Reaches Agreement with Creditor Banks on Second Bond Loan C R O A T I A AGROKOR DD: Sberbank Won't Sell Stake Until Business Recovers D E N M A R K DKT HOLDINGS: Fitch Assigns 'B+' Final LT Issuer Default Rating G E R M A N Y CALYXO GMBH: TS Group Acquires Business Out of Bankruptcy I R E L A N D AURIUM CLO II: S&P Assigns B-(sf) Rating to Class F-R Notes BLACKROCK EUROPEAN IV: S&P Affirms B-(sf) Rating on Cl. F Notes BLACKROCK EUROPEAN VI: Moody's Rates EUR12MM Class F Notes (P)B2 CADOGAN SQUARE XI: Moody's Assigns B2 Rating to Class F Notes ST. PAUL'S IV: Moody's Assigns B2 Rating to Class E Notes ST. PAUL'S VII: Moody's Assigns B2 Rating to Class F Notes K A Z A K H S T A N BANK CENTERCREDIT: Moody's Alters Outlook on B2 Ratings to Stable L U X E M B O U R G INTELSAT SA: Moody's Alters Outlook to Stable & Affirms Caa2 CFR INTELSAT SA: S&P Cuts Corp. Credit Rating to 'SD' on Debt Buyback N E T H E R L A N D S NORTH WESTERLY IV: Fitch Affirms BB Rating on Class E Debt TIKEHAU CLO IV: Fitch Rates Class F Notes 'B-(EXP)sf' P O L A N D GETBACK SA: May Tighten Terms of Debt Restructuring Offer PFLEIDERER GROUP: S&P Affirms 'B+' ICR, Outlook Remains Stable P O R T U G A L BCP FINANCE: S&P Raises Series D Preference Shares Rating to 'CCC' T U R K E Y KOC HOLDING: S&P Lowers ICRs to BB+/B, Outlook Stable U N I T E D K I N G D O M AZURE FINANCE 1: Moody's Assigns Caa1 Rating to Class X Notes CALVETRON BRANDS: 102 Concessions to Close, 840 Jobs Affected HAVELOCK EUROPA: Bought Out of Administration, 300 Jobs Saved TWIN BRIDGES 2018-1: Fitch Rates GBP3MM Class X2 Notes 'CCCsf' ********* =============== B U L G A R I A =============== BDZ: Reaches Agreement with Creditor Banks on Second Bond Loan -------------------------------------------------------------- SeeNews reports that Bulgarian state-owned railway company BDZ said it has reached an agreement with its creditor banks on its second bond loan, as a result of which the sale of company assets has been terminated. According to SeeNews, BDZ said in a statement late on July 2 the outstanding obligations to the financial institutions will be covered through reimbursable state aid. In February, Bulgaria's government said it decided to extend financing in the amount of BGN30.95 million (US$19.5 million/EUR15.8 million) to BDZ to help the company repay outstanding debt on its bond issue, SeeNews recounts. Last month, Capital business newspaper reported that part of a historic building in Sofia where BDZ Passenger Services is headquartered, has been put up for sale by a private enforcement agent for a starting price of BGN7.3 million, SeeNews relates. In June 2017, the European Commission granted approval to Bulgaria to provide financing needed to repay certain debts of state-owned railways operator BDZ amounting to BGN224 million, SeeNews discloses. ============= C R O A T I A ============= AGROKOR DD: Sberbank Won't Sell Stake Until Business Recovers ------------------------------------------------------------- SeeNews reports that Russia's Sberbank does not want to own a retail business in the long run but it will not sell its stake in Croatia's Agrokor until the food-to-retail concern is back on its feet. "To sell our share would be irresponsible. Agrokor is in a bad financial state and at this time it is important to carry out a recapitalization and turn it from a story of failure into a success story," SeeNews quotes Maxim Poletaev, a special advisor on Agrokor to Sberbank's president, as saying in an interview with the Croatian subsidiary of TV broadcaster RTL on July 4, after the concern's creditors upheld a settlement deal which will see Sberbank acquire a 39.2% stake in the concern. "Honestly, we did not want this. Our main task was to recover our money. We never wanted to become an owner in Agrokor." He noted that strategically, however, Sberbank does not want to be in the retail business in the next 5 to 7 years, SeeNews relates. On July 4, Agrokor creditors holding 80.20% of total claims voted in favor of upholding the settlement deal, under which a new concern owned by the creditors will be established, SeeNews discloses. Along with Sberbank, Agrokor's new owners will be bond holders with a 24.9% stake, local financial institutions will own 15.3%, Russia's VTB bank 7.5%, while suppliers will hold 4.7%, SeeNews states. The High Commercial Court in Zagreb is now expected to validate the settlement, following which the implementation process is planned to last between three and four months, SeeNews discloses. Agrokor, which employs some 60,000 people in the region, has been undergoing restructuring led by a court-appointed crisis administrator under a special law on companies of systemic importance passed in April last year with the aim of shielding the country's economy from big corporate bankruptcies, SeeNews relays. 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. ============= D E N M A R K ============= DKT HOLDINGS: Fitch Assigns 'B+' Final LT Issuer Default Rating --------------------------------------------------------------- Fitch Ratings has assigned DKT Holdings ApS (DKT), the owner of Danish telecoms company TDC A/S (TDC), a final Long-Term Issuer Default Rating (IDR) of 'B+'/Stable. Fitch has also assigned final ratings to the EUR3.9 billion term loan B (TLB) ('BB+'/'RR1'/100%) and EUR1.4 billion equivalent senior secured notes ('B-'/'RR6'/0%) issued by TDC and DKT Finance ApS, respectively. The Long-term and Short-term IDRs of TDC have been withdrawn, as after the company's reorganisation DKT became the successor of the group. DKT has successfully completed the refinancing of the instruments following the acquisition of TDC. The final ratings follow the receipt of documents conforming to information already received and are in line with the expected rating assigned earlier. KEY RATING DRIVERS HoldCo/OpCo Debt Assessed Jointly: Following a change in TDC's ownership, the new owners refinanced the acquisition debt initially raised by its parent DKT and its intermediate holding companies (collectively known as HoldCo), as well as existing debt at TDC, the operating entity (OpCo). Fitch analyses HoldCo debt together with debt at TDC, as Fitch views the OpCo and HoldCo as tied together from a credit perspective. Fitch does not expect to see significant barriers to cash flow being up-streamed from the OpCo to the HoldCo. Any HoldCo debt would be structurally subordinate to both senior secured and unsecured debt at the OpCo. Strong Recoveries for TLB: Fitch estimates recoveries for the term loan B at 100%, corresponding to a Recovery Rating of 'RR1'. This implies a three-notch uplift to the IDR of 'B+', resulting in the 'BB+' rating for the term loan. The recovery rate for TDC's senior unsecured debt is 'RR4'/41%, which implies no notching relative to DKT's IDR of 'B+'. Large Prior-ranking Debt: The amount of prior ranking debt at TDC is EUR5.5 billion, including a senior secured term loan B of EUR3.9 billion, revolving credit facility of EUR500 million and senior unsecured debt of EUR1 billion. The debt at the HoldCo level is structurally subordinate to debt at the OpCo level. The large amount of debt at TDC's level reduces the recovery prospects for the HoldCo debt. The recovery rate for the senior secured debt at DKT is therefore 'RR6'/0%, which implies an instrument rating two notches below the 'B+' IDR, resulting in the 'B-' rating. Spike in Leverage: Fitch expects the group's FFO adjusted net leverage to increase to 6.7x by end-2018, from 3.6x at end-2017 following the acquisition. DKT's leverage previously benefited from 50% equity credit from DKK5.6 billion of hybrid instruments. The refinancing of these hybrids removed this equity credit. Fitch believes that the company should be able to decrease leverage to below 6.5x within the next 18-24 months through a combination of stable EBITDA generation, lower capex and potentially reduced dividends. Leverage Management: Fitch believes that the company retains substantial flexibility in managing its leverage. Fitch estimates its pre-dividend free cash flow (FCF) margin will remain strong, in the high single-digits in 2018-2021. The increase in interest expenses on the back of higher debt will be mitigated by lower capex intensity, which Fitch estimates at around 17%-18% in 2018- 2021, compared with 20%-22% in 2015-2017. Shareholder remuneration is another way for the owners of DKT to manage leverage and FCF, as they should have more flexibility with dividend policy. DERIVATION SUMMARY DKT's ratings reflect the company's leading position within the Danish telecoms market. The company has strong in-market scale and share that spans both fixed and mobile segments. Ownership of both cable and copper-based local access network infrastructure reduces the company's operating risk profile relative to domestic European incumbent peers, which typically face infrastructure-based competition from cable network operators. DKT is rated lower than other peer incumbents, such as Royal KPN N.V (BBB/Stable), due to notably higher leverage, which puts it more in line with cable operators with similarly high leverage, such as VodafoneZiggo Group B.V. (B+/Stable), Unitymedia GmbH (B+/RWP), Telenet Group Holding N.V. (BB-/Stable) and Virgin Media Inc. (BB-/Stable). TDC's incumbent status, leading positions in both fixed and mobile markets, and unique infrastructure ownership justify higher leverage thresholds than cable peers. KEY ASSUMPTIONS Fitch's Key Assumptions WithinIts Rating Case for the Issuer - Stabilisation of revenue in 2018 and a flat trend thereafter - Broadly stable EBITDA margin at around 40%-41% in 2018-2021 - Capex at around 17% of revenue in 2018-2021 (including spectrum) - Conservative dividend policy to support initial deleveraging - No M&A KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that the company would be considered a going concern in bankruptcy and that it would be reorganised rather than liquidated - A 10% administrative claim - Fitch's going-concern EBITDA estimate of DKK6.6 billion reflects its view of a sustainable, post-reorganisation EBITDA level upon which it bases the valuation of the company - Fitch's going-concern EBITDA estimate is 20% below LTM 2017 EBITDA, assuming likely operating challenges at the time of distress - An enterprise value (EV) multiple of 6x is used to calculate a post-reorganisation valuation and reflects a conservative mid- cycle multiple - Fitch estimates the total amount of debt for claims at EUR6.9 billion, which includes debt instruments at the OpCo and HoldCo levels, as well as drawings on available credit facilities RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action - Expectation that FFO adjusted net leverage will fall below 5.7x on a sustained basis - Strong and stable FCF generation, reflecting a stable competitive and regulatory environment Developments that May, Individually or Collectively, Lead to Negative Rating Action - FFO adjusted net leverage above 6.5x on a sustained basis - Further declines in the Danish business resulting in FCF margins in mid-to low-single digits LIQUIDITY Comfortable Liquidity: Fitch expects the OpCo and HoldCo to have comfortable liquidity positions upon refinancing, which will be supported by EUR600 million of credit facilities. Fitch expects this to comprise EUR500 million of RCF at the OpCo, and a EUR100 million RCF at the HoldCo. The maturity profile is yet to be established, but given the major refinancing of the existing instruments, Fitch expects the first large debt pay-out to be only in three to five years. The company's liquidity profile is also supported by strong pre-dividend FCF generation. FULL LIST OF RATING ACTIONS DKT Holdings ApS - Long-term IDR: assigned final rating of 'B+', Outlook Stable DKT Finance ApS - Senior secured debt: assigned final rating of 'B-'/'RR6'/0% TDC A/S - Senior secured debt: assigned final rating of 'BB+'/'RR1'/100% - Senior unsecured debt: affirmed at 'B+'/'RR4'/41% - Long-term IDR of 'B+': withdrawn - Short-term IDR of 'B': withdrawn ============= G E R M A N Y ============= CALYXO GMBH: TS Group Acquires Business Out of Bankruptcy --------------------------------------------------------- Renewables Now reports that Calyxo GmbH, the German thin-film solar module maker that filed for bankruptcy a few months back, has been sold to mechanical and plant engineering company TS Group with all jobs retained. The insolvency administrator Lucas Floether on July 3 announced that TS Group has signed a deal on July 2 to buy all business operations of Calyxo, including production and patents, Renewables Now relays citing news agency DPA. The company will remain at the current site but will operate under the name TS Solar, Renewables Now notes. Following the cancellation of a major order which brought financial difficulties for the company, Calyxo had to file for bankruptcy in April, Renewables Now recounts. The salaries of existing employees were secured by the insolvency money for three months until the end of June, Renewables Now discloses. The insolvency administrator said at the time that the company could begin production of the improved modules at its existing sites in a few months, Renewables Now relays. According to Renewables Now, he further noted that this milestone was important for the process of finding an investor. ============= I R E L A N D ============= AURIUM CLO II: S&P Assigns B-(sf) Rating to Class F-R Notes ----------------------------------------------------------- S&P Global Ratings assigned its credit ratings to the class A-R, B-R, C-R, D-R, E-R, and F-R notes from Aurium CLO II DAC, a collateralized loan obligation (CLO) managed by Spire Partners. The replacement notes were issued via a supplemental trust deed. The replacement notes were issued at a lower spread over Euro Interbank Offered Rate (EURIBOR) than the original notes they replace. The cash flow analysis demonstrates, in S&P's view, that the replacement notes have adequate credit enhancement available to support the ratings assigned. As part of the refinancing, the maximum weighted-average life test was also lengthened by 15 months, which we have incorporated in our analysis. The transaction has experienced overall stable performance since our previous review. The transaction's reinvestment period ends in July 2020, and all coverage ratios are well above the minimum triggers. Upon refinancing, the proceeds from the issuance of the replacement notes were used to redeem the original notes, upon which we withdrew the ratings on the original notes. CAPITAL STRUCTURE Current date after refinancing Class Amount Interest Ratings (mil. EUR) rate (%) A-R 210.00 3ME +0.68 AAA (sf) B-R 45.50 3ME +1.35 AA (sf) C-R 24.00 3ME +1.80 A (sf) D-R 18.00 3ME +2.75 BBB (sf) E-R 17.50 3ME +5.10 BB- (sf) F-R 10.50 3ME +7.50 B- (sf) Current date before refinancing Class Amount Interest (mil. EUR) rate (%) A 205.00 3ME +1.40 B 49.70 3ME +2.15 C 23.60 3ME +3.10 D 18.90 3ME +4.00 E 17.20 3ME +5.95 F 10.30 3ME +8.25 3ME--Three-month EURIBOR. RATINGS LIST Aurium CLO II DAC EUR360.5 Million Secured Floating-Rate Notes Ratings Assigned Replacement Rating class A-R AAA (sf) B-R AA (sf) C-R A (sf) D-R BBB (sf) E-R BB- (sf) F-R B- (sf) Ratings Withdrawn Class Rating To From A NR AAA (sf) B NR AA (sf) C NR A (sf) D NR BBB (sf) E NR BB (sf) F NR B- (sf) BLACKROCK EUROPEAN IV: S&P Affirms B-(sf) Rating on Cl. F Notes --------------------------------------------------------------- S&P Global Ratings affirmed its credit ratings on BlackRock European CLO IV DAC's class A, B1, B2, C, D, E, and F notes following the transaction's effective date as of May 10, 2018. Most European cash flow collateralized loan obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation"). S&P said, "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a "ramp-up period." Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary." PORTFOLIO BENCHMARKS BlackRock IV European average WAL 5.96 5.66 EPDR 31% 31% DRD 7% 7% ODM 124 93 IDM 19.83 16.89 RDM 1.51 1.58 AAA SDR 66.15% 65.76% EPDR--Expected portfolio default rate. DRD--Default rate dispersion. WAL--Weighted average life. ODM--Obligor diversity measure. IDM--Industry diversity measure. RDM--Regional diversity measure. SDR--Scenario default rate. RATINGS LIST BlackRock European CLO IV DAC EUR466.1 Million Secured Fixed-Rate And Floating-Rate Notes Ratings Affirmed Class Rating A AAA (sf) B1 AA (sf) B2 AA (sf) C A (sf) D BBB (sf) E BB (sf) F B- (sf) BLACKROCK EUROPEAN VI: Moody's Rates EUR12MM Class F Notes (P)B2 ---------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to eight classes of notes to be issued by BlackRock European CLO VI Designated Activity Company: EUR235,600,000 Class A-1 Senior Secured Floating Rate Notes due 2031, Assigned (P)Aaa (sf) EUR12,400,000 Class A-2 Senior Secured Fixed Rate Notes due 2031, Assigned (P)Aaa (sf) EUR25,150,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Assigned (P)Aa2 (sf) EUR11,850,000 Class B-2 Senior Secured Fixed Rate Notes due 2031, Assigned (P)Aa2 (sf) EUR28,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2031, Assigned (P)A2 (sf) EUR24,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Assigned (P)Baa3 (sf) EUR22,500,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Assigned (P)Ba2 (sf) EUR12,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2031, Assigned (P)B2 (sf) Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. Upon a conclusive review of a transaction and associated documentation, Moody's will endeavour to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating. RATINGS RATIONALE Moody's provisional ratings of the rated notes address the expected loss posed to noteholders by the legal final maturity of the notes in September 2031. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Furthermore, Moody's is of the opinion that the Collateral Manager, BlackRock Investment Management (UK) Limited ("BlackRock IM", the "Manager"), has sufficient experience and operational capacity and is capable of managing this CLO. BlackRock VI is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior obligations and up to 10% of the portfolio may consist of unsecured senior loans, second lien loans, mezzanine obligations and high yield bonds. At closing, the portfolio is expected to be comprised predominantly of corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the six month ramp-up period in compliance with the portfolio guidelines. BlackRock IM 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 4.5 year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit improved and credit risk obligations, and are subject to certain restrictions. In addition to the eight classes of notes rated by Moody's, the Issuer will issue EUR 40,100,000 of subordinated notes. Moody's will not assign a 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 performance of the notes is subject to uncertainty. The performance of the notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the notes. Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in 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. As such, Moody's encompasses the assessment of stressed scenarios. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. For modeling purposes, Moody's used the following base-case assumptions: Target Par Amount: EUR400,000,000 Diversity Score: 47 Weighted Average Rating Factor (WARF): 2775 Weighted Average Spread (WAS): 3.35% Weighted Average Coupon (WAC): 4.80% Weighted Average Recovery Rate (WARR): 42% Weighted Average Life (WAL): 8.50 years As part of its analysis, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency government bond ratings of A1 or below. According to the portfolio eligibility criteria, obligors must be domiciled in a jurisdiction the Moody's local currency country risk ceiling ("LCC") of which is "A3" or above. In addition, according to the portfolio constraints, the total exposure to countries with a local currency country risk bond ceiling ("LCC") between "A1" and "A3" shall not exceed 10.0%. As a result, in accordance with its methodology, Moody's did not adjust the target par amount depending on the target rating of each class of notes. Stress Scenarios: Together with the set of modeling assumptions, Moody's conducted an additional sensitivity analysis, which was a component in determining the provisional ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Here is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal. Percentage Change in WARF -- increase of 15% (from 2775 to 3191) Rating Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: 0 Class A-2 Senior Secured Fixed Rate Notes: 0 Class B-1 Senior Secured Floating Rate Notes: -2 Class B-2 Senior Secured Fixed Rate Notes: -2 Class C Senior Secured Deferrable Floating Rate Notes: -2 Class D Senior Secured Deferrable Floating Rate Notes: -1 Class E Senior Secured Deferrable Floating Rate Notes: -1 Class F Senior Secured Deferrable Floating Rate Notes: -2 Percentage Change in WARF -- increase of 30% (from 2775 to 3608) Rating Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: -1 Class A-2 Senior Secured Fixed Rate Notes: -1 Class B-1 Senior Secured Floating Rate Notes: -3 Class B-2 Senior Secured Fixed Rate Notes: -3 Class C Senior Secured Deferrable Floating Rate Notes: -4 Class D Senior Secured Deferrable Floating Rate Notes: -2 Class E Senior Secured Deferrable Floating Rate Notes: -2 Class F Senior Secured Deferrable Floating Rate Notes: -4 CADOGAN SQUARE XI: Moody's Assigns B2 Rating to Class F Notes ------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to notes issued by Cadogan Square CLO XI D.A.C.: EUR309,700,000 Class A-1 Senior Secured Floating Rate Notes due 2031, Definitive Rating Assigned Aaa (sf) EUR13,600,000 Class A-2 Senior Secured Floating Rate Notes due 2031, Definitive Rating Assigned Aaa (sf) EUR10,000,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Definitive Rating Assigned Aa2 (sf) EUR40,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2031, Definitive Rating Assigned Aa2 (sf) EUR36,200,000 Class C Senior Secured Deferrable Floating Rate Notes due 2031, Definitive Rating Assigned A2 (sf) EUR27,800,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Definitive Rating Assigned Baa2 (sf) EUR35,200,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Definitive Rating Assigned Ba2 (sf) EUR14,700,000 Class F Senior Secured Deferrable Floating Rate Notes due 2031, 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 2031. 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, Credit Suisse Asset Management Limited ("CSAM"), has sufficient experience and operational capacity and is capable of managing this CLO. Cadogan Square CLO XI D.A.C. is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be at least 90% ramped up as of the closing date and to consist predominantly of corporate loans to obligors domiciled in Western Europe. CSAM 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 obligations, and are subject to certain restrictions. The interest payment and principal repayment of the Class A-2 (junior Aaa (sf) rated) notes are subordinated to interest payment and principal repayment of the Class A-1. In addition to the eight classes of notes rated by Moody's, the Issuer will issue EUR47M of subordinated notes which will not be rated. 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. CSAM's investment decisions and management of the transaction will also affect the notes' performance. Loss and Cash Flow Analysis: Moody's modelled 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. As such, Moody's encompasses the assessment of stressed scenarios. Moody's used the following base-case modelling assumptions: Par amount: EUR 512,400,000 Diversity Score: 44 Weighted Average Rating Factor (WARF): 2850 Weighted Average Spread (WAS): 3.5% Weighted Average Coupon (WAC): 4.0% Weighted Average Recovery Rate (WARR): 43.5% Weighted Average Life (WAL): 8.5 years Stress Scenarios: Together with the set of modelling assumptions, Moody's conducted 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. Here 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 3278 from 2850) Ratings Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: 0 Class A-2 Senior Secured Floating Rate Notes: -1 Class B-1 Senior Secured Floating Rate Notes: -1 Class B-2 Senior Secured Fixed Rate Notes: -1 Class C Senior Secured Deferrable Floating Rate Notes: -2 Class D Senior Secured Deferrable Floating Rate Notes: -2 Class E Senior Secured Deferrable Floating Rate Notes: -1 Class F Senior Secured Deferrable Floating Rate Notes: -1 Percentage Change in WARF: WARF +30% (to 3705 from 2850) Ratings Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: -1 Class A-2 Senior Secured Floating Rate Notes: -2 Class B-1 Senior Secured Floating Rate Notes: -3 Class B-2 Senior Secured Fixed Rate Notes: -3 Class C Senior Secured Deferrable Floating Rate Notes: -4 Class D Senior Secured Deferrable Floating Rate Notes: -2 Class E Senior Secured Deferrable Floating Rate Notes: -2 Class F Senior Secured Deferrable Floating Rate Notes: -3 ST. PAUL'S IV: Moody's Assigns B2 Rating to Class E Notes --------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to re-issued notes issued by St. Paul's CLO IV Designated Activity Company: EUR2,916,667 Class X Senior Secured Floating Rate Notes due 2030, Assigned Aaa (sf) EUR289,500,000 Class A-1 Senior Secured Floating Rate Notes due 2030, Assigned Aaa (sf) EUR31,500,000 Class A-2A Senior Secured Floating Rate Notes due 2030, Assigned Aa2 (sf) EUR22,500,000 Class A-2B Senior Secured Fixed Rate Notes due 2030, Assigned Aa2 (sf) EUR29,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2030, Assigned A2 (sf) EUR24,600,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Baa2 (sf) EUR30,250,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Ba2 (sf) EUR14,300,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the notes address the expected loss posed to note-holders by the legal final maturity of the notes in 2030. The definitive ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets, the 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. The Issuer issued the Notes in connection with the re-issuance of the following classes of notes (the "Original Notes"): Class X Notes, Class A-1 Notes, Class A-2A Notes, Class A-2B Notes, Class B Notes, Class C Notes, Class D Notes, and Class E Notes, due April 25, 2030 previously issued on 25 October 2017, pursuant to a change in the approach used to address risk-retention regulatory requirements. St. Paul's CLO IV is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. 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 reinvestment period which ends in October 2021. 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 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 note-holders. 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 modelling assumptions based upon an analysis of the May 2018 monthly report: Par Amount: EUR 475,000,000 Diversity Score: 38 Weighted Average Rating Factor (WARF): 2944 Weighted Average Spread (WAS): 3.50% Weighted Average Coupon (WAC): 5.00% Weighted Average Recovery Rate (WARR): 45.60% Weighted Average Life (WAL): 7.8 years Moody's notes that the June 2018 monthly report has been recently issued. There is no material change in the key portfolio metrics compared to the May 2018 portfolio. As part of the base case, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with local currency country risk ceiling ratings of between A1 to A3 cannot exceed 10%. Following the effective date, and given these portfolio constraints and the current sovereign ratings of eligible countries, the total exposure to countries with a LCC of A1 or below may not exceed 10% of the total portfolio. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run without the need to apply any portfolio par haircut as further described in the methodology. Stress Scenarios: Together with the set of modelling assumptions, 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. Here 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 3386 from 2944) Ratings Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A-1 Senior Secured Floating Rate Notes: 0 Class A-2A Senior Secured Floating Rate Notes: -2 Class A-2B Senior Secured Fixed Rate Notes: -2 Class B Senior Secured Deferrable Floating Rate Notes: -2 Class C Senior Secured Deferrable Floating Rate Notes: -1 Class D Senior Secured Deferrable Floating Rate Notes: 0 Class E Senior Secured Deferrable Floating Rate Notes: 0 Percentage Change in WARF: WARF +30% (to 3827 from 2944) Ratings Impact in Rating Notches: Class X Senior Secured Floating Rate Notes: 0 Class A-1 Senior Secured Floating Rate Notes: -1 Class A-2A Senior Secured Floating Rate Notes: -3 Class A-2B Senior Secured Fixed Rate Notes: -3 Class B Senior Secured Deferrable Floating Rate Notes: -3 Class C Senior Secured Deferrable Floating Rate Notes: -2 Class D Senior Secured Deferrable Floating Rate Notes: -1 Class E Senior Secured Deferrable Floating Rate Notes: -3 ST. PAUL'S VII: Moody's Assigns B2 Rating to Class F Notes --------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to re-issued notes issued by St. Paul's CLO VII DAC: EUR 229,400,000 Class A-1 Senior Secured Floating Rate Notes due 2030, Assigned Aaa (sf) EUR 10,600,000 Class A-2 Senior Secured Fixed Rate Notes due 2030, Assigned Aaa (sf) EUR 23,150,000 Class B-1 Senior Secured Floating Rate Notes due 2030, Assigned Aa2 (sf) EUR 9,500,000 Class B-2 Senior Secured Fixed Rate Notes due 2030, Assigned Aa2 (sf) EUR 21,100,000 Class B-3 Senior Secured Floating Rate Notes due 2030, Assigned Aa2 (sf) EUR 5,000,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2030, Assigned A2 (sf) EUR 15,000,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2030, Assigned A2 (sf) EUR 21,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Baa2 (sf) EUR 25,250,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Assigned Ba2 (sf) EUR 10,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2030, Assigned B2 (sf) RATINGS RATIONALE Moody's definitive ratings of the notes address the expected loss posed to note-holders by the legal final maturity of the notes in 2030. The definitive ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets, the 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. The Issuer issued the Notes in connection with the re-issuance of the following classes of notes (the "Original Notes"): Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, Class B-2 Notes, Class B- 3 Notes, Class C-1 Notes, Class C-2 Notes, Class D Notes, Class E Notes and the Class F Notes due April 30, 2030 previously issued on March 21, 2017, pursuant to a change in the approach used to address risk-retention regulatory requirements. St. Paul's CLO VII is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. 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 reinvestment period which ends in April 2021. 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 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 note-holders. 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 modelling assumptions based upon an analysis of the May 2018 monthly report: Par Amount: EUR 400,000,000 Diversity Score: 39 Weighted Average Rating Factor (WARF): 2918 Weighted Average Spread (WAS): 3.60% Weighted Average Coupon (WAC): 5.00% Weighted Average Recovery Rate (WARR): 45.60% Weighted Average Life (WAL): 6.7 years As part of the base case, Moody's has addressed the potential exposure to obligors domiciled in countries with local currency country risk ceiling (LCC) of A1 or below. As per the portfolio constraints, exposures to countries with local currency country risk ceiling ratings of between A1 to A3 cannot exceed 10%. Following the effective date, and given these portfolio constraints and the current sovereign ratings of eligible countries, the total exposure to countries with a LCC of A1 or below may not exceed 10% of the total portfolio. The remainder of the pool will be domiciled in countries which currently have a LCC of Aa3 and above. Given this portfolio composition, the model was run without the need to apply any portfolio par haircut as further described in the methodology. Stress Scenarios: Together with the set of modelling assumptions, 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. Here 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 3356 from 2918) Ratings Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: 0 Class A-2 Senior Secured Fixed Rate Notes: 0 Class B-1 Senior Secured Floating Rate Notes: -2 Class B-2 Senior Secured Fixed Rate Notes: -2 Class B-3 Senior Secured Floating Rate Notes: -2 Class C-1 Senior Secured Deferrable Floating Rate Notes: -2 Class C-2 Senior Secured Deferrable Floating Rate Notes: -2 Class D Senior Secured Deferrable Floating Rate Notes: -1 Class E Senior Secured Deferrable Floating Rate Notes: -1 Class F Senior Secured Deferrable Floating Rate Notes: -1 Percentage Change in WARF: WARF +30% (to 3793 from 2918) Ratings Impact in Rating Notches: Class A-1 Senior Secured Floating Rate Notes: 0 Class A-2 Senior Secured Fixed Rate Notes: 0 Class B-1 Senior Secured Floating Rate Notes: -3 Class B-2 Senior Secured Fixed Rate Notes: -3 Class B-3 Senior Secured Floating Rate Notes: -3 Class C-1 Senior Secured Deferrable Floating Rate Notes: -3 Class C-2 Senior Secured Deferrable Floating Rate Notes: -3 Class D Senior Secured Deferrable Floating Rate Notes: -2 Class E Senior Secured Deferrable Floating Rate Notes: -1 Class F Senior Secured Deferrable Floating Rate Notes: -3 Moody's notes that the June 2018 monthly report has been recently issued. Model outputs for the base case, the 15% and 30% stressed WARF cases using June 2018 data are unchanged from the May 2018 model outputs. =================== K A Z A K H S T A N =================== BANK CENTERCREDIT: Moody's Alters Outlook on B2 Ratings to Stable ----------------------------------------------------------------- Moody's Investors Service, has affirmed Kazakhstan-based Bank CenterCredit's (BCC) B2 long-term local- and foreign-currency deposit ratings and changed the outlook to stable from negative. At the same time, Moody's affirmed the bank's baseline credit assessment (BCA) and adjusted BCA at caa1, as well as the junior subordinated debt rating at Caa3(hyb). The rating agency also affirmed the following ratings: the Not Prime short-term local and foreign currency deposit ratings, the B1/Not Prime Counterparty Risk Ratings (CR Rating), the Ba2.kz National Scale Bank Deposit Rating as well as the Baa3.kz long- term National Scale Counterparty Risk Rating. The overall outlook has been changed to stable from negative. In addition, Moody's affirmed the bank's long-term Counterparty Risk Assessment (CR Assessment) at B1(cr) and the bank's short- term CR Assessment of Not Prime (cr). RATINGS RATIONALE The change of outlook is principally driven by stabilization of asset quality of BCC and improved provisioning coverage. The bank's share of problem loans to gross loans has remained stable (albeit high) during the last two years at around 30%. Moody's does not expect it to grow materially in the next 12-18 months as the bank's new issuances are of a better quality and operating environment stabilised. At the same time, the bank's loan loss reserve to problem loan ratio has improved to 46% at end-Q1 2018 from 40% at end-2017 and 35% at end-2016. This improvement demonstrates better quality of the bank's capital which had a shortfall due to insufficient reserve coverage of problem loans. At the same time, Moody's considers that the reserve coverage is still low to result in significant change in BCC's credit profile. BCC participates in the five-year capital recovery programme initiated by the National Bank of Kazakhstan (NBK). To comply with the conditions of the programme each year before termination of agreement, the bank has to create minimum established amount of reserves in order to improve the coverage of problem loans. At the same time, the bank's shareholders should provide one-third of the total estimated reserves shortfall through the retained earnings of the bank. According to the programme, in November 2017, NBK purchased KTZ 60 billion, 15-years maturity subordinated bonds of the bank. The interest rate of 4% is considered to be below the market rate and the resulting gain from initial recognition of this issuance (KTZ 38 billion) has significantly improved pre- provision income and enabled the bank to create substantial reserves for loan losses. The bank's core profitability remains stable (albeit weak) with return on average assets below 1%. The bank managed to improve net interest margin in 2017-Q1 2018 via repayment of expensive retail deposits. Moody's anticipates that the profitability will unlikely deteriorate significantly due to new business and cost reduction measures. The bank is committed to maintain the minimum required profits under agreement with NBK. GOVERNMENT SUPPORT BCC's deposit rating incorporates Moody's assessment of a high probability that government support would be extended to the bank's depositors if a systemic crisis occurs. This assessment provides a two-notch uplift for BCC's deposit rating from its caa1 BCA. These support assumptions are based on the material market share of the bank, with total banking assets of 5.9% and retail customer deposits of 6.2% as of June 1, 2018. The NBK included BCC in its capital recovery programme. This action demonstrates the national government's increased willingness to supporting the bank. In the past, the NBK occasionally supported the bank's liquidity through loans. WHAT COULD MOVE THE RATINGS UP/DOWN The bank's ratings upside is currently limited. However, achievement of sufficient coverage of problem loans by reserves (over 70%), improvement in asset quality and profitability coupled with a stable liquidity profile and adequate capitalization could exert positive rating pressure. Any further deterioration in BCC's asset quality and profitability that would lead to a significant weakening in the bank's capital buffers or deposit outflow and result in a liquidity shortage could result in a negative pressure on the bank's ratings. LIST OF AFFECTED RATINGS Issuer: Bank CenterCredit Affirmed: Adjusted Baseline Credit Assessment, Affirmed at caa1 Baseline Credit Assessment, Affirmed at caa1 LT Bank Deposits, Affirmed at B2, Outlook changed to Stable from Negative Junior Subordinated Bond, Affirmed at Caa3(hyb) LT Counterparty Risk Assessment, affirmed at B1(cr) LT Counterparty Risk Ratings, affirmed at B1 ST Bank Deposits, Affirmed NP ST Counterparty Risk Assessment, Affirmed NP(cr) ST Counterparty Risk Ratings, Affirmed NP NSR LT Bank Deposits, Affirmed at Ba2.kz NSR LT Counterparty Risk Rating, Affirmed at Baa3.kz Outlook Action: Outlook, Changed to Stable from Negative The principal methodology used in these ratings was Banks published in June 2018. =================== L U X E M B O U R G =================== INTELSAT SA: Moody's Alters Outlook to Stable & Affirms Caa2 CFR ---------------------------------------------------------------- Moody's Investors Service changed Intelsat (Luxembourg) S.A.'s (Intelsat) ratings outlook to stable from negative and affirmed Intelsat's Caa2 corporate family rating (CFR), Caa3-PD probability of default rating (PRD), and ratings for all debt instruments in the Intelsat corporate family: Intelsat (Luxembourg) S.A.'s senior unsecured notes were affirmed at Ca; Intelsat Connect Finance S.A.'s senior unsecured notes were affirmed at Ca; Intelsat Jackson Holdings S.A.'s guaranteed senior secured term loan B was affirmed at B1, its senior secured notes were affirmed at B1, and its unsecured notes were affirmed at Caa2. The outlook change results from Moody's assessment that the company's liquidity profile and lack of near term, junior-ranking debt maturities, reduces the potential of near term material liability management transactions which could be assessed as limited defaults. That said, the Caa3-PD affirmation is based on continuing expectations of elevated default risks over the mid- term. The Caa2 CFR affirmation is based on enterprise value considerations that moderate expected losses such that the CFR is one notch higher than the PDR. The following summarizes Moody's ratings and the rating actions for Intelsat: Issuer: Intelsat (Luxembourg) S.A. Corporate Family Rating, Affirmed at Caa2 Probability of Default Rating, Affirmed at Caa3-PD Speculative Grade Liquidity Rating, Affirmed at SGL-3 Outlook, Changed to Stable from Negative Issuer: Intelsat (Luxembourg) S.A. GTD Senior Unsecured Regular Bond/Debenture, Affirmed at Ca (LGD5) Issuer: Intelsat Connect Finance S.A. GTD Senior Unsecured Regular Bond/Debenture, Affirmed at Ca (LGD4) Issuer: Intelsat Jackson Holdings S.A. GTD Senior Secured Bank Credit Facilities, Affirmed at B1 (LGD1) GTD Senior Secured Regular Bond/Debenture, Affirmed at B1 (LGD1) GTD Senior Unsecured Regular Bond/Debenture, Affirmed at Caa2 (LGD3) RATINGS RATIONALE Intelsat's Caa2 rating is based primarily on Moody's assessment that the company's capital structure is not sustainable, with elevated leverage and the potential of excess supply and sustained cash flow pressure stemming from evolving industry fundamentals combining to increase the potential of debt restructurings, that may be assessed as constituting distressed exchanges and limited defaults. Moody's-adjusted debt/EBITDA exceeds 9x, and evolving fundamentals cause cash flow visibility beyond the next year or so to be poor. Intelsat's rating benefits from the company's good scale, large revenue backlog, and sufficient liquidity to navigate through the next year. Intelsat's SGL-3 speculative grade liquidity rating indicates adequate liquidity based on the company being approximately cash flow break-even over the next four-to-six quarters, and holding approximately $500 million of cash to fund transitory cash flow deficits that may arise in interim periods. Intelsat relies on cash in lieu of an accessible third party provided revolving credit facility. Estimated compliance cushion with financial covenants in the company's term loan is about 10%. If not refinanced in advance of becoming a current obligation, Intelsat Jackson's 7.25% senior unsecured notes due October 2020 will roll into Moody's rolling forward four quarter SGL window in mid-2019, with the SGL rating subject to downgrade shortly before or at approximately the same time. Moody's general practice is to locate corporate-level ratings at the senior most legal entity in the corporate structure for which Moody's maintains debt instrument ratings, i.e., Intelsat (Luxembourg) S.A. (an indirect wholly-owned subsidiary of Intelsat S.A., the senior-most entity in the Intelsat group of companies, and the only company in the family issuing financial statements. Intelsat S.A. guarantees debts at its subsidiary, Intelsat (Luxembourg) S.A. and, as well, at Intelsat (Luxembourg)'s subsidiary, Intelsat Connect Finance S.A., and its subsidiary, Intelsat Jackson Holdings S.A. (Jackson). Moody's refers to family level ratings and outlook assigned at Intelsat (Luxembourg) S.A. as Intelsat. Rating Outlook The stable outlook is based on Moody's assessment that there is a limited potential of near term material liability management transactions which could be assessed as limited defaults. What Could Change the Rating - Up The rating could be considered for upgrade if, along with expectations of solid industry fundamentals, good liquidity, and clarity on capital structure planning, Moody's anticipated: Leverage of debt/EBITDA normalizing below 6x on a sustained basis; Cash flow self-sustainability over the life cycle of the company's satellite fleet. What Could Change the Rating -- Down The rating could be considered for downgrade if, Moody's expected: Near-term defaults; or Substantial and sustained free cash flow deficits; or Less than adequate liquidity arrangements. The principal methodology used in these ratings was Communications Infrastructure Industry published in September 2017. Headquartered in Luxembourg, and with executive offices in McLean, VA, Intelsat (Luxembourg) S.A. (Intelsat) is one of the two largest fixed satellite services operators in the world. Annual revenues are expected to be approximately $2.2 billion with EBITDA of approximately $1.6 billion. INTELSAT SA: S&P Cuts Corp. Credit Rating to 'SD' on Debt Buyback ----------------------------------------------------------------- S&P Global Ratings lowered its corporate credit rating on Luxembourg-based Intelsat S.A. to 'SD' from 'CCC+'. S&P said, "At the same time, we lowered our issue-level rating on Intelsat Luxembourg S.A.'s 7.75% senior notes due 2021 to 'D' from 'CCC-'. We expect that our issue-level rating on this debt will remain at 'D' because we believe it could be subject to further subpar repurchases. "The downgrade follows Intelsat's repurchase of around $600 million in face value of subsidiary Intelsat (Luxembourg) S.A.'s 7.75% senior notes due 2021 at a discount to par, which we view as tantamount to a default under our criteria because the lenders received less value than they were originally promised. We expect that Intelsat's leverage will remain elevated in the mid-8x area on modest EBITDA growth over the next few years and minimal free operating cash flow relative to its heavy debt burden of about $14 billion. "We plan to raise our corporate credit rating on Intelsat (most likely to 'CCC+') as soon as possible. While the transaction has reduced the company's interest expense and improved its cash flow, it only decreased its leverage by 0.1x because Intelsat partly funded the transaction with around $400 million of its recently issued 4.5% convertible notes due 2025 (the company also recently issued around $230 million of equity). With $2.2 billion of notes coming due in 2020 and $1.6 billion of notes maturing in 2021, we believe that Intelsat continues to depend on favorable business, financial, and economic conditions to meet its financial obligations." ===================== N E T H E R L A N D S ===================== NORTH WESTERLY IV: Fitch Affirms BB Rating on Class E Debt ---------------------------------------------------------- Fitch Ratings has upgraded two tranches of North Westerly CLO IV 2013 B.V. and affirmed the rest. The transaction is a structured finance collateralised loan obligation (SF CLO). KEY RATING DRIVERS Reinvestment Period End The upgrade was driven by the end of the reinvestment period, a shorter tenor and the performance of the transaction being above Fitch's expectations. Nevertheless the manager may still reinvest unscheduled principal proceeds. The weighted average life test (WAL) of the transaction has been extended twice by the manager and currently stands at 5.63 years. 'B' Portfolio Credit Quality Fitch places the average credit quality of obligors in the 'B' range. The Fitch-weighted average rating factor of the current portfolio is 32.89. High Recovery Expectations Senior secured obligations represent 98.1% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch- weighted average recovery rate of the current portfolio is 66.86%, above the minimum covenant of 62.3%. Diversified Asset Portfolio The top 10 obligors represent 21.84% of the portfolio. The transaction also includes limits on maximum industry exposure based on Fitch's industry definitions. The exposure to the three- largest Fitch industries in the portfolio is currently 34.62%, below the maximum covenant of 41%. Adverse Selection and Portfolio Management The transaction is governed by collateral quality and portfolio profile tests, which limit potential adverse selection by the manager. These limitations are based, among others, on Fitch ratings and recovery ratings. Cash Flow Analysis Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. Interest Rate Exposure Fixed-rate liabilities represent 8.67% of the target par, while fixed-rate assets represent 1.17% of the portfolio (with a covenant at 10%). The transaction is therefore partially hedged against rising interest rates. Portfolio Performance and Surveillance All of Fitch's coverage tests, quality tests and portfolio profile tests are in compliance. VARIATIONS FROM CRITERIA A significant percentage of the portfolio's assets have maturities close to the legal final maturity of the notes. To address this risk a haircut of 15% on the recovery rates was applied to 75% of the portfolio's assets. The proportion currently stands at 50%, but Fitch assumed that this may increase further due to reinvestment of unscheduled principal receipts. RATING SENSITIVITIES A 125% default multiplier applied to the portfolio's mean default rate, and with this increase added to all rating default levels, would lead to a downgrade of up to three notches for the rated notes. A 25% reduction in recovery rates would lead to a downgrade of up to five notches for the rated notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 No third-party due diligence was provided or reviewed in relation to these rating actions. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority-registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. The rating actions are as follows: EUR161 million Class A-1: affirmed at 'AAAsf'; Outlook Stable EUR16 million Class A-2: affirmed at 'AAAsf'; Outlook Stable EUR27 million Class B-1: upgraded to 'AA+sf' from 'AAsf'; Outlook Stable EUR10 million Class B-2: upgraded to 'AA+sf' from 'AAsf'; Outlook Stable EUR17.5 million Class C: upgraded to 'A+sf' from 'Asf'; Outlook Stable EUR16million Class D: affirmed at 'BBBsf'; Outlook Stable EUR21million Class E: affirmed at 'BBsf'; Outlook Stable TIKEHAU CLO IV: Fitch Rates Class F Notes 'B-(EXP)sf' ----------------------------------------------------- Fitch Ratings has assigned Tikehau CLO IV B.V.'s notes expected ratings, as follows: Class X: 'AAA(EXP)sf'; Outlook Stable Class A-1: 'AAA(EXP)sf'; Outlook Stable Class A-2: 'AAA(EXP)sf'; Outlook Stable Class B-1: 'AA(EXP)sf'; Outlook Stable Class B-2: 'AA(EXP)sf'; Outlook Stable Class B-3: 'AA(EXP)sf'; Outlook Stable Class C-1: 'A(EXP)sf'; Outlook Stable Class C-2: 'A(EXP)sf'; Outlook Stable Class D: 'BBB(EXP)sf'; Outlook Stable Class E: 'BB(EXP)sf'; Outlook Stable Class F: 'B-(EXP)sf'; Outlook Stable Subordinated notes: not rated Tikehau CLO IV B.V. is a cash flow collateralised loan obligation (CLO). Net proceeds from the notes will be used to purchase a portfolio of EUR400 million of mostly European leveraged loans and bonds. The portfolio is actively managed by Tikehau Capital Europe Limited. The CLO envisages a 4.5-year reinvestment period and an 8.5 year weighted average life (WAL) The assignment of final ratings is contingent on the receipt of final documents conforming to information already received. KEY RATING DRIVERS 'B' Portfolio Credit Quality Fitch places the average credit quality of obligors in the 'B' range. The Fitch-weighted average rating factor (WARF) of the identified portfolio is 31.97, below the indicative maximum covenant WARF of 32 for assigning the expected ratings. High Recovery Expectations At least 90% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-weighted average recovery rate (WARR) of the current portfolio is 67.23, above the indicative minimum covenant WARR of 63 for assigning the expected ratings Diversified Asset Portfolio The covenanted maximum exposure to the top 10 obligors for assigning the expected ratings is 20% of the portfolio balance. The transaction also includes limits on maximum industry exposure based on Fitch industry definitions. The maximum exposure to the three largest (Fitch-defined) industries in the portfolio is covenanted at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Reinvestment Criteria Similar to Peers The transaction features a 4.5-year reinvestment period and includes reinvestment criteria similar to other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Ratings Resilient to Rate Mismatch Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. A maximum of 10% of the portfolio can be invested in fixed-rate assets, while fixed-rate liabilities represent 7.5% of the target par. Fitch modelled both 0% and 10% fixed-rate buckets and found that the rated notes can withstand the interest rate mismatch associated with each scenario. Limited FX Risk The transaction is allowed to invest up to 25% of the portfolio in non-euro-denominated assets, provided these are hedged with perfect asset swaps within six months of purchase. Unhedged obligations are limited at 2.5% and subject to principal haircuts. Unhedged obligations can only be purchased if the transaction is above the reinvestment target par RATING SENSITIVITIES A 125% default multiplier applied to the portfolio's mean default rate, and with this increase added to all rating default levels, would lead to a downgrade of up to two notches for the rated notes. A 25% reduction in recovery rates would lead to a downgrade of up to four notches for the rated notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. =========== P O L A N D =========== GETBACK SA: May Tighten Terms of Debt Restructuring Offer --------------------------------------------------------- Polska Agencja Prasowa SA reports that defunct debt collector GetBack SA may tighten terms for a debt restructuring offer as assets appear weaker than at first sight, but could free small- time lenders from any haircut. According to PAP, GetBack hopes to have an updated debt restructuring proposal submitted to its bankruptcy court by end- August ahead of a possible mid-September vote amongst bondholders and creditors. "We are working one a new restructuring deal which in principle needs to be different," PAP quotes CEO Przemyslaw Dabrowski as saying on July 5. "Today we see that the situation is more serious and we will probably have to change the structure we initially proposed." He said GetBack may seek to have secured debts, chiefly with banks, take part in an eventual haircut, PAP relates. Small creditors of up to PLN50,000 could be paid in full, PAP notes. PFLEIDERER GROUP: S&P Affirms 'B+' ICR, Outlook Remains Stable -------------------------------------------------------------- S&P Global Ratings said that it affirmed its 'B+' long-term issuer credit rating on Poland-based wood panels producer Pfleiderer Group S.A. and its wholly owned German subsidiary PCF GmbH. The outlook remains stable. S&P said, "We are also assigning our 'B+' issue rating to the EUR480 million senior secured term loan B due 2024 borrowed by PCF GmbH and the EUR100 million senior secured revolving credit facility (RCF) available to the major companies of the Pfleiderer Group S.A., including PCF GmbH. This is based on our recovery rating of '4', indicating average recovery prospects (rounded estimate: 40%) in the event of default." Pfleiderer is upsizing its term loan B by EUR130 million to EUR480 million to fund potential share buybacks of up to EUR130 million. The transaction will likely lead to higher debt and interest expense, causing credit metrics to deteriorate. Although we view this transaction as aggressive, we still expect credit metrics to remain commensurate with a 'B+' rating. By year-end 2018, we anticipate leverage of about 4.2x and funds from operations (FFO) to debt of 17.6%, compared with our previous expectations of 3.3x and 22.5%, respectively. S&P said, "This transaction has led us to revise our financial policy assessment. Pfleiderer's ownership structure is dominated by investors Atlantik and SVP Global, who we view as financial sponsors. In our view, the company could proceed with further debt-funded shareholder returns in future, and leverage is unlikely to improve on a sustained basis while the financial sponsors remain in control of the group. "We view Pfleiderer's business risk profile as constrained by its exposure to the highly cyclical and commoditized wood-based panels industry, which is characterized by price-based competition, volatile demand, and a high sensitivity to the cost of raw materials. Pfleiderer has leading market positions in Germany and Poland (especially in raw and higher value-added particleboard and MDF product categories). "Our assessment is constrained by Pfleiderer's relatively limited size and scope. Its production is concentrated at eight sites in Germany and Poland, and most of its sales are in European markets. We also consider Pfleiderer's historical underinvestment in core assets as a constraint, although this is somewhat mitigated by recent investments to improve the efficiency of its plants. We expect capital investments to improve its competitive position in the long term, but undermine cash flow generation in the short term. "We consider that Pfleiderer's profitability will remain highly dependent on the general economic environment, its ability to implement price increases, and cost-saving initiatives. That said, we expect Pfleiderer to continue to benefit from strong market sentiment in Germany and Poland, a low-cost base in Poland, its focus on value-added products and cost savings, and the ongoing integration of the German and Polish business units. In 2018, we expect S&P Global Ratings-adjusted EBITDA margins to improve to 14%, due to price increases effective from January 2018, volume growth, and cost savings." S&P's base case for 2018 and 2019 assumes: -- Eurozone GDP growth of 1.9% in 2018 and 1.7% in 2019; Germany GDP growth of 2.0% in 2018 and 1.8% in 2019; and Poland GDP growth of 3.8% in 2018 and 3.5% in 2019. Organic sales growth of about 6% in 2018 and 5% in 2019, supported by the positive macroeconomic environment, especially in Poland. Growth is largely from investments in value-added products, such as ramping up a new lacquering line in Leutkirch, in Germany. -- Higher adjusted EBITDA margin of 14.0% in 2018 and 14.5% in 2019. -- S&P expects pricing improvements, higher volumes, and cost- reduction initiatives to offset higher wood and glue prices. -- Capital expenditure (capex) of about EUR80 million in 2018 and 2019, including maintenance capex of about EUR20 million. -- Annual dividends of about EUR17 million-EUR25 million in 2018 and 2019. -- Share buybacks of about EUR150 million in 2018 (EUR19 million made as of June 30, 2018). Based on these assumptions, S&P arrives at the following credit measures: -- S&P Global Ratings-adjusted FFO to debt of 17.6% in 2018 and 19.2% in 2019. -- Adjusted debt to EBITDA of 4.2x in 2018 and 3.9x in 2019. S&P assesses Pfleiderer's liquidity profile as adequate under its criteria and expect the group's sources of liquidity to exceed uses by 1.2x over the next 12 months, supported by modest cash balances and availability under the RCF. S&P anticipates the company will have the following principal liquidity sources over the next 12 months: -- Cash on balance sheet of about EUR57.3 million, as of March 31, 2018; -- S&P's forecast of unadjusted FFO of EUR100 million-EUR110 million; and -- Access to about EUR100 million of undrawn committed RCFs, consisting of a EUR50 million and a Polish zloty (PLN) 211 million (about EUR50 million) facility, both maturing in 2022. S&P anticipates the company will have the following principal liquidity uses over the same period: -- Capex of about EUR80 million; -- Minimal working capital outflows of EUR5 million-EUR10 million; and -- Dividend payments of about EUR17 million-EUR25 million. S&P said, "The stable outlook takes into account our expectations that Pfleiderer's operational performance will improve slightly in 2018 and that this, combined with a supportive financial policy, will allow the company to maintain rating-commensurate ratios, such as FFO to debt of about 17.6% in 2018 and 20% in 2019. "We could lower the rating if operating performance deteriorated sharply, causing FFO to debt to remain below 15% or recurring negative free operating cash flows. We could also lower the rating if Pfleiderer engaged in further large-scale, debt-funded shareholder returns or acquisitions, which could result in a further increase in leverage. "We are unlikely to raise the ratings over the next 12 months given our view of the sponsors' aggressive financial policies. An upgrade would require a commitment to maintain a more conservative financial policy, which we view as unlikely under the existing ownership structure." =============== P O R T U G A L =============== BCP FINANCE: S&P Raises Series D Preference Shares Rating to 'CCC' ------------------------------------------------------------------ S&P Global Ratings said that it has raised to 'CCC' from 'D' its issue rating on the EUR500 million perpetual non-cumulative guaranteed non-voting step-up preference shares (Series D) issued by BCP Finance Company and guaranteed by Banco Comercial Portugues S.A. (Millennium bcp). The issue has the ISIN number XS0231958520 and an outstanding amount of EUR15.94 million. The rating action follows Millennium bcp's resumption of the dividend payment on its EUR500 million legacy preference shares Series D on the due date of July 13, 2018. Since Oct. 13, 2012, the bank has missed all coupon payments on these instruments. S&P said, "We understand that after the approval of its 2017 audited results on April 23, 2018, Millennium bcp asked the European Central Bank (ECB) for authorization to resume the payment of coupons on its outstanding preference shares. Millennium bcp obtained this permission on July 10 for preference shares Series D. It had previously obtained this permission for preference shares Series C, for which it resumed the dividend payment on June 12." The 'CCC' rating on the preference shares is five notches below the bank's stand-alone credit profile, reflecting: -- Subordination risk (the standard two-notch adjustment for speculative-grade issuers; -- Discretionary coupon non-payment (two notches for legacy Tier 1 instruments that are now subject to Basel III or equivalent rules); and -- The risk of common-equity conversion or a principal write- down that the legal framework might enforce. S&P said, "We do not apply any additional notching because we do not consider there is any further non-payment risk on these notes that we do not already factor into the 'CCC' rating. "We view Millennium bcp's resumption of dividend payments on its preference shares--both Series C and D--as a positive step toward normalization that came after the bank, in 2017, successfully completed a capital increase, repaid to the state the remaining contingent convertible securities, and turned its profitability around. We anticipate the more sustained economic recovery and moderate decrease in credit losses in Portugal will likely help Millennium bcp gradually increase the profitability of its domestic operations, which turned positive in 2017. "We also rate at 'CCC' another preference share issuance by BCP Finance Company and guaranteed by Millennium bcp: the Series C instrument, for which Millennium bcp resumed coupon payment on June 12, 2018, after obtaining approval from the ECB." =========== T U R K E Y =========== KOC HOLDING: S&P Lowers ICRs to BB+/B, Outlook Stable ----------------------------------------------------- S&P Global Ratings lowered its long- and short-term issuer credit ratings on Turkey-based investment holding company Koc Holding A.S. (Koc) to 'BB+/B' from 'BBB-/A-3'. The outlook is stable. S&P said, "We also lower our rating on Koc's unsecured notes to 'BB+' from 'BBB-'. The recovery rating is '3', indicating our expectation of meaningful recovery (50%-70%; rounded estimate 65%) to the notes. "The downgrade is driven by our downgrade of Turkey (unsolicited foreign currency BB-/Stable/B; local currency BB/Stable/B), which reflected increasing macroeconomic imbalances in Turkey and our lower transfer and convertibility (T&C) assessment of 'BB+' compared with 'BBB-' previously (see "Turkey Ratings Lowered On Deteriorating External Performance and Higher Inflation; Outlook Stable," published May 1, 2018, on RatingsDirect). "The downgrade on Koc primary reflects our view that the long-term rating on the company is constrained by our 'BB+' T&C assessment on Turkey. While Koc has a net financial cash position, most of the cash is located in Turkey, and therefore Koc does not pass our T&C stress test, which is required to be rated above the T&C assessment. The T&C assessment reflects the likelihood that Turkey will limit the ability to exchange local currency for another currency and to remit it to any country in order to honor its debt-service obligations in case of a sovereign default. We therefore think Koc could be prevented from honoring its debt obligations, although we think that they would have capacity to do so, even under a sovereign default stress scenario, since the company's balance sheet is very strong. As of March 31, 2018, Koc had a cash surplus of Turkish lira (TRL) 1.8 billion ($455 million), adjusted for Koc's dividend payment in April 2018 and contribution to the Yapi ve Kredi Bankasi A.S. (Yapi) capital increase in June 2018. "Our rating on Koc is two notches higher than the sovereign foreign currency rating on Turkey, because Koc passes our hypothetical sovereign default stress test, thanks to its very strong balance sheet. Among other factors, this test assumes a 70% decline in listed shares, and a 10% haircut on cash. Koc passes the stress test thanks to its high cash position. As of March 31, 2018, Koc had total cash of about TRL7.7 billion ($2.0 billion), adjusted for Koc's dividend payment in April 2018 and contribution to the Yapi capital increase in June 2018. Of the cash, 79% is denominated in U.S. dollars ($1.5 billion) and the rest mainly in lira. This fully mitigates the impact of the depreciating lira on debt in our stress test, and Koc continues to be in a net cash position. Total outstanding debt as of March 31, 2018, was TRL5.9 billion ($1.5 billion), and we don't believe it has changed meaningfully since. We expect Koc will continue to carry a net cash position at least over the next two years. "We view as supportive of the rating that Koc's investee companies export a material part of their production, which implies that dividends to Koc are, to some extent, protected from currency devaluations. The three-largest investee companies -- Ford Otosan, Tofas, and Arcelik -- derive more than 60% of their revenue from international sales; and for refinery group Tupras, sales are U.S. dollar-linked. We believe this will continue to support Koc if the lira continues to depreciate against the U.S. dollar, and inflation pressure rises. Additionally, we view as positive that the abovementioned entities are also active in industries that we believe carry only moderate sensitivity to country risk. "We notice that over 2017 Koc's investment portfolio developed very positively; at year-end 2017 Koc had about TRL51.1 billion ($13 billion) of assets, up from TRL37.2 billion at year-end 2016 ($10.6 billion). The share prices of Tupras, Aygaz, and Ford Otosan were up 85%, 48%, and 108%, respectively. We notice that fiscal stimulations to the local economy was high however, which we believe supported asset prices in general. That said, we don't exclude the possibility that political turmoil, potentially fewer government stimulus efforts after the recent election, and domestic tensions could weaken growth rates and asset prices. We believe that economic growth in Turkey remains primarily driven by government measures targeted at stimulating the domestic economy." Koc's investments are diversified across industries, ranging from financial institutions, to auto manufacturing, retailing, consumer durables, and oil refining. Koc exerts control over most of its assets, which facilitates strategic planning and access to dividends. A clear majority, 90%, of assets are listed either directly or indirectly and actively traded on the Borsa Istanbul, supporting the liquidity of the asset portfolio. Although some assets are indirectly listed, we don't differentiate them from directly listed assets in our analysis, as there is no meaningful debt at the intermediate special purposes vehicles, and Koc can dispose of the assets at any time if they decide to do so, and therefore it does not impact liquidity, in our view. "Our view of Koc's financial risk profile reflects the net cash position at the holding level. This result in a very robust ratio against the appraised value of the company's investment portfolio of TRY48.9 billion as March 31, 2018. We believe the group has a very conservative financial policy. The company has a long history of being in a net cash position. We therefore continue to expect that its loan to value (LTV) ratio will remain well below 20%, and note that Koc currently has ample headroom under this ratio. In 2018, we expect Koc's cash flow adequacy ratio to improve to about 5x from about 3x in 2017. This predominantly reflects materially increased dividends from Tupras, given that acquisition debt was fully repaid in 2017. On the negative side, we note that Koc holds substantial cash at Turkish banks, which we generally rate below Koc. "The stable outlook on Koc primarily reflects our stable outlook on Turkey and our 'BB+' T&C assessment. We continue to expect that Koc will maintain its sound financial flexibility over the coming two years, including large cash balances and low debt at the holding company, and that its LTV ratio will be well below 20%. We believe that Koc will maintain a net cash position, which has been the case for more than seven years, and therefore we expect Koc will continue to pass our sovereign stress test. We also expect that its portfolio companies will deliver resilient operating performance, despite the weak macroeconomic environment in Turkey. "In our view, the ratings on Koc cannot be higher than our T&C assessment on Turkey. We could therefore upgrade Koc, if we raised our rating and T&C assessment on Turkey, or if Koc were to permanently move meaningful cash balances to a country with a higher T&C assessment to service its debt. An upgrade would also hinge on our expectations that Koc will continue to adhere to its prudent financial policy, and that we don't foresee any major changes to the investment portfolio. "A downgrade of Turkey would likely result in a downgrade of Koc. We believe a negative rating action triggered by other factors is unlikely at this stage, since we don't foresee any major changes in Koc's financial policy, or its investment position. Pressure on the ratings could build though, if Koc were unable to pass our sovereign stress test, which could be happen if its debt maturity profile were to shorten and at the same time Koc held materially less cash in hard currencies. We see this as an unlikely scenario though." =========================== U N I T E D K I N G D O M =========================== AZURE FINANCE 1: Moody's Assigns Caa1 Rating to Class X Notes ------------------------------------------------------------ Moody's Investors Service has assigned the following definitive ratings to Notes issued by Azure Finance No.1 plc: GBP242,700,000 Class A Floating Rate Notes due June 2027, Definitive Rating Assigned Aaa (sf) GBP69,300,000 Class B Floating Rate Notes due June 2027, Definitive Rating Assigned Aa2 (sf) GBP23,700,000 Class C Floating Rate Notes due June 2027, Definitive Rating Assigned Baa1 (sf) GBP11,000,000 Class D Floating Rate Notes due June 2027, Definitive Rating Assigned Ba1 (sf) GBP18,300,000 Class E Fixed Rate Notes due June 2027, Definitive Rating Assigned B1 (sf) GBP40,200,000 Class X Floating Rate Notes due June 2027, Definitive Rating Assigned Caa1 (sf) The transaction is a static cash securitisation of agreements entered into for the purpose of financing vehicles to obligors in the United Kingdom by Blue Motor Finance Limited ("Blue Motor") (NR). This is the first public securitisation transaction sponsored by Blue Motor. The originator will also act as the servicer of the portfolio during the life of the transaction. The portfolio of receivables backing the Notes consists of Hire Purchase ("HP") agreements granted to individuals resident in the United Kingdom. Hire Purchase agreements are a form of secured financing without the option to hand the car back at maturity. Therefore there is no explicit residual value risk in the transaction. Under the terms of the HP agreements, the originator retains legal title to the vehicles until the borrower has made all scheduled payments required under the contract. As of June 29, 2018, the final portfolio of underlying assets totaling GBP 365.0million, the portfolio consisted of 46,643 agreements mainly originated between 2017 and 2018 of predominantly used (99%) vehicles distributed through national and regional dealers as well as brokers. It has a weighted average seasoning of 9 months and a weighted average remaining term of 49 months. The pool's current weighted average LTV is 98%. RATINGS RATIONALE The transaction's main credit strengths are the significant excess spread, the static and granular nature of the portfolio, and counterparty support through the back-up servicer (The Nostrum Group Limited trading as Equiniti Credit Services (NR)), interest rate hedge provider (J.P. Morgan AG (Aa2/P-1 (cr))) and independent cash manager (Citibank N.A., London Branch (A1/(P)P-1 senior unsecured; A1(cr)/P-1(cr). The structure contains tranche specific cash reserves which cumulatively equal 1.7% of the pool, and will amortise in line with the Notes. Each tranche reserve will be purely available to cover liquidity shortfalls related to the relevant Note throughout the life of the transaction and can serve as credit enhancement following the tranche's repayment. The Class A reserve provides approximately 8 months of liquidity at the beginning of the transaction. The portfolio has an initial yield of 14.8%. Available excess spread can be trapped to cover defaults and losses, as well as to replenish the tranche reserves to their target level through the waterfall mechanism present in the structure. However, Moody's notes some credit weaknesses in the transaction. First, the pool includes material exposure to higher risk borrowers. For example, some borrowers may previously have been on debt management plans, received county court judgments within recent years, or currently be in low level arrears on other unsecured contracts. Although these features are reflected in the originator's scorecard, and exposure to the highest risk borrowers (risk tiers 6-8 under the originator's scoring) is limited at 11.5% of the initial pool, the effect is that the pool is riskier than a typical benchmark UK prime auto pool. Second, operational risk is higher than a typical UK auto deal because Blue Motor is a small, unrated entity acting as originator and servicer to the transaction. The transaction does envisage certain structural mitigants to operational risk such as a back-up servicer, independent cash manager, and tranche specific cash reserves, which cover approximately 8 months of liquidity for the Class A Notes at deal close. Third, the structure does not include principal to pay interest for any class of Notes, which makes it more dependent on excess spread and the tranche specific cash reserves combined with the back-up servicing arrangement to maintain timeliness of interest payments on the Notes. Fourth, the historic vintage default and recovery data is limited, reflecting Blue's short trading history (it began lending meaningful amounts in its current form in 2015). The data covers approximately three years that Blue Motor has been originating. In addition, the underlying obligors may exercise the right of voluntary termination as per the Consumer Credit Act, whereby an obligor has the option to return the vehicle to the originator as long as the obligor has made payments equal to at least one half of the total financed amount. If the obligor returns the vehicle, the issuer may be exposed to residual value risk. The potential for additional losses due to these risks has been incorporated into Moody's quantitative analysis. The pool contained exposure to 67.3% of diesel vehicles. The public and political debate about the future of diesel engines has heated up in recent months due to new proposals restricting diesel cars in various metropolitan areas in Europe, including the UK. As a consequence, diesel cars have recently shown signs of diminished attractiveness through declines in new car registrations and a softening in the residual value premium of diesel over petrol cars. Moody's is closely monitoring developments, but at this time believes that these recent trends are captured in current rating assumptions, such as the recovery rate. Moody's analysis focused, among other factors, on (i) an evaluation of the underlying portfolio; (ii) historical performance information; (iii) the credit enhancement provided by subordination, by the excess spread and the tranche reserves; (iv) the liquidity support available in the transaction through the tranche reserves; (v) the back-up servicing arrangement of the transaction; (vi) the independent cash manager and (vii) the legal and structural integrity of the transaction. MAIN MODEL ASSUMPTIONS: Moody's determined portfolio lifetime expected defaults of 12.0%, expected recoveries of 35.0% and a Aaa portfolio credit enhancement ("PCE") of 35.0% related to the borrower receivables. The expected default captures its expectations of performance considering the current economic outlook, while the PCE captures the loss Moody's expects the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio default distribution curve and to associate a probability with each potential future default scenario in its ABSROM cash flow model. The portfolio expected mean default level of 12.0% is higher than other UK auto transactions and is based on Moody's assessment of the lifetime expectation for the pool taking into account (i) the higher average risk of the borrowers, (ii) the historic performance of the loan book of the originator, (iii) benchmark transactions, and (iv) other qualitative considerations. Portfolio expected recoveries of 35.0% are lower than the UK auto average and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) older average age of the vehicles, (ii) historic performance of the loan book of the originator, (iii) benchmark transactions, and (iv) other qualitative considerations. The PCE of 35.0% is higher than the average of its UK auto peers and is based on Moody's assessment of the pool taking into account the higher risk profile of the pool borrowers and relative ranking to originator peers in the UK auto and consumer markets. The PCE of 35% results in an implied coefficient of variation ("CoV") of 37.4%. METHODOLOGY: The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in October 2016. The ratings address the expected loss posed to investors by the legal final maturity of the Notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal by legal final maturity of the Class A, B, C and D Notes, and ultimate payment of interest and principal with respect to the Class E and X notes by the legal final maturity. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed but may have a significant effect on yield to investors. Provisional Ratings were assigned on June 26, 2018. FACTORS THAT WOULD LEAD TO A UPGRADE OR DOWNGRADE OF THE RATINGS: Factors that may cause an upgrade of the ratings of Class B- X Notes include significantly better than expected performance of the pool together with an increase in credit enhancement of Notes. Factors that may lead to a downgrade of the ratings of the Notes include a decline in the overall performance of the pool, increased rates of voluntary terminations (pursuant to the Consumer Credit Act), worse than expected vehicle sale realisation values, or a significant deterioration of the credit profile of the originator or other key transaction counterparties. LOSS AND CASH FLOW ANALYSIS: Moody's used its cash-flow model 'Moody's ABSCORE' as part of its quantitative analysis of the transaction. Moody's ABSCORE model enables users to model various features of a standard European ABS transaction -- including the specifics of the loss distribution of the assets, their portfolio amortisation profile, yield as well as the specific priority of payments, swaps and reserve funds on the liability side of the ABS structure. STRESS SCENARIOS: In rating auto lease ABS, mean default rate and recovery rate are two key inputs that determine the transaction cash flows in the cash flow model. Parameter sensitivities for this transaction have been calculated in the following manner: Moody's tested 9 scenarios for the Class A to Class X Notes derived from the combination of mean default rate: 12% (base case), 14% (base case + 2%), 16% (base case + 4%) and mean recovery rate: 35% (base case), 30% (base case -5%), 25% (base case -10%). The 12% and 35% scenario would represent the base case assumptions used in the initial rating process. At the time the rating was assigned, the model output indicated that the Class A Notes would have achieved A1 (sf) if the mean default rate was as high as 16% with a mean recovery rate as low as 25% (all other factors unchanged). See the new issue report for the sensitivity results of Class B -- Class X Notes. Parameter sensitivities provide a quantitative/model indicated calculation of the number of notches that a Moody's rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather how the initial model output for Class A - X Notes might have differed if the two parameters within a given sector that have the greatest impact were varied. Results are model outputs, which are one of many inputs considered by rating committees, which take quantitative and qualitative factors into account in determining actual ratings. CALVETRON BRANDS: 102 Concessions to Close, 840 Jobs Affected ------------------------------------------------------------- Helen Cahill at Press Association reports that the administrators of Calvetron Brands, owner of Jacques Vert and Precis, have announced all of the retailer's concessions will now close, leading to the loss of around 840 jobs. According to Press Association, administrators Duff & Phelps have failed to find a buyer for the business, which first fell into administration in May. The closures and job losses follow the 102 concessions earmarked for closure in June, which impacted 445 employees, Press Association notes. There will be around 500 retail redundancies from the latest closures, plus around another 90 jobs in Calvetron's global head office and distribution centre, as well as another 250 roles in Canada, Press Association discloses. Calvetron had previously employed 1,408 people -- 997 in the UK, 155 in Ireland and 256 in Canada, Press Association states. "We have explored a number of potential options, however no viable offers for the business as a going concern have been received," Press Association quotes Benjamin Wiles -- benjamin.wiles@duffandphelps.com -- joint administrator at Duff & Phelps, as saying. "Calvetron Brands has faced the perfect storm of extremely difficult trading conditions on the high street, rising costs and low customer confidence all of which hindered our ability to secure a buyer." The company is one of a number of retailers that have collapsed this year due to rising costs and falling spending, according to Press Association. HAVELOCK EUROPA: Bought Out of Administration, 300 Jobs Saved ------------------------------------------------------------- BBC News reports that more than 300 jobs have been secured at Fife-based Havelock Europa after the business was bought out of administration. According to BBC, the firm was sold through a pre-pack administration process to Havelock International, a new firm established by turnaround specialist Rcapital. The sale came immediately after the appointment of PwC as administrators, BBC notes. A total of 320 jobs were threatened after Kirkcaldy-based Havelock suffered a drop in orders, BBC discloses. The firm, which makes furniture and fittings for shops and public buildings, blamed continuing pressures on the high street, BBC relates. Havelock had trading in its shares suspended over concerns about its financial position, BBC recounts. It is understood that all employees have now been transferred to the new company, BBC states. TWIN BRIDGES 2018-1: Fitch Rates GBP3MM Class X2 Notes 'CCCsf' -------------------------------------------------------------- Fitch Ratings has assigned Twin Bridges 2018-1 plc notes final ratings, as follows: GBP246,000,000 Class A: 'AAAsf'; Outlook Stable GBP15,000,000 Class B: 'AAsf'; Outlook Stable GBP16,500,000 Class C: 'Asf'; Outlook Stable GBP13,500,000 Class D: 'BBB+sf'; Outlook Stable GBP9,000,000 Class Z1: Not rated GBP6,000,000 Class Z2: Not rated GBP6,000,000 Class X1: 'BBsf'; Outlook Stable GBP3,000,000 Class X2: 'CCCsf' The transaction is a securitisation of buy-to-let (BTL) mortgages originated in the UK by Paratus AMC Limited (Paratus). The class X1 notes' final rating is higher than the expected rating. This is due to the lower proportion of prefunding and reduced maximum permissible swap rate compared with the assumptions given to Fitch when assigning expected ratings. KEY RATING DRIVERS Prime BTL Mortgage Loans The loans in this pool are exclusively BTL loans advanced to finance properties located in England and Wales. Under its origination policies, Paratus excludes borrowers with material adverse credit, including any borrower with a bankruptcy order or an individual voluntary arrangement (IVA), and obtains full independent verification of rental income. As a result, Fitch views the pool as prime and used its prime matrix to derive the pool's foreclosure frequency (FF). Low Interest Cover Ratio (ICR) The pool contains almost exclusively loans advanced with an initial fixed-rate period reverting to a margin above Libor at the end of the fixed-rate period. Fitch calculates its ICR by referencing the post reversion margin above a Libor rate of 4%. This pool has a lower ICR post reversion than many other BTL transactions rated by Fitch, therefore Fitch has made an upward adjustment to the base FF. High Portfolio Concentration The pool contains a significant proportion of loans advanced against properties in the London region (52.9% on a weighted basis and 34.5% on an unweighted basis). Fitch believes that portfolios with a high regional concentration are more vulnerable to an economic shock than those which are diversified. As the unweighted concentration is more than double the regional percentage of the national population, Fitch has applied an upward adjustment of 15% to the loans' FF. Unrated Seller Paratus, the seller, is unrated by Fitch and as a result may have an uncertain ability to make substantial repurchases from the pool in the event of a material breach in representations and warranties (R&W). Fitch considers there are mitigating factors to this risk, principally the nature of Paratus as a trading business with assets, the presence of only one breach of R&W in the Twin Bridges 2017-1 transaction and the clean agreed-upon procedures (AUP) report. RATING SENSITIVITIES Material increases in the frequency of defaults and loss severity on defaulted receivables producing losses greater than Fitch's base case expectations may result in negative rating action on the notes. Fitch's analysis showed that a 30% increase in the weighted average FF, along with a 30% decrease in the weighted average recovery rate, would imply a downgrade of the class A notes to 'AA-sf'. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of Paratus's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ********* 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 * * *