/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190131.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, January 31, 2019, Vol. 20, No. 022 Headlines A R M E N I A ID BANK: Moody's Cuts Deposit Ratings to B3, Outlook Developing F R A N C E REXEL SA: Fitch Withdraws BB LT IDR for Commercial Reasons G R E E C E GREECE: To Sell EUR2.5 Billion of Bonds Since End of Bailout I T A L Y ASTALDI SPA: Explores Sale of Istanbul-Izmir Toll Road L U X E M B O U R G TIGERLUXONE SARL: Moody's Hikes CFR to B2, Outlook Stable P O R T U G A L ENERGIAS DE PORTUGAL: Fitch Rates EUR1BB Hybrid Notes BB R U S S I A EVROKAPITAL-ALLIANCE: Put on Provisional Administration VSK INSURANCE: Fitch Corrects January 21 Ratings Release S P A I N SANTANDER EMPRESAS 2: Fitch Affirms Csf Rating on Class F Debt U N I T E D K I N G D O M FLYBE: Backs Chairman Amid Dispute with Large Shareholder PATISSERIE VALERIE: Failed to Share Fraud Report with Banks VENATOR MATERIALS: Moody's Affirms B1 CFR, Outlook Stable ********* ============= A R M E N I A ============= ID BANK: Moody's Cuts Deposit Ratings to B3, Outlook Developing --------------------------------------------------------------- Moody's Investors Service downgraded IDBank's long-term foreign and local currency deposit ratings to B3 from B2, long-term Counterparty Risk Ratings to B2 from B1, the bank's Baseline Credit Assessment and adjusted BCA to b3 from b2 and long-term Counterparty Risk Assessment to B2(cr) from B1(cr). Concurrently, the rating agency affirmed Not Prime short-term local and foreign currency deposit ratings, Not Prime short-term local and foreign currency CRRs, and Not Prime(cr) short-term CR Assessments. At the same time, Moody's changed the outlook on the long-term deposits ratings to Developing from Rating under Review. This rating action concludes the review for downgrade initiated on October 30, 2018. RATINGS RATIONALE The rating action reflects Moody's remaining concerns regarding the transparency of the corporate loan book, in particular certain large impaired transactions equivalent to around 30% of the bank's shareholders equity. The significant volatility of the bank's balance sheet in 2016-2017 and potential exposures to transactions with related parties suggest deficiencies in IDBank's governance practices which could be detrimental to the bank's financial performance in the long-term. The downgrade also reflects downward pressure on IDBank's credit profile, arising from (1) a high level of problem loans which carry relative low provisions under IFRS and (2) the bank's unresolved exposure to litigation risk, which creates potential additional downside pressure on the bank's capital. IDBank's problem loans (comprising individually impaired corporate loans and retail loans more than 90 days past due) remained high at around 25% of the loan book at the end-2018. The quality of the loan book deteriorated at end-2017 as a result of a 2.4x increase in individually impaired corporate loans. Despite this deterioration in asset quality, IDBank has a relatively low loan-loss coverage level of around 27% by loan loss reserves (under IFRS) and additional 12% coverage by cash collateral, according to the bank. Moody's therefore expects IDBank's profitability and capitalisation to come under pressure as a result of the additional provisioning that could be required to cushion these problem loans. Although IDBank has robust loss absorption capacity with Moody's estimated Tangible Common Equity (TCE) ratio of over 20% and a regulatory capital adequacy ratio of 38% at the end 2018, the bank's regulatory capital has been under pressure in 2018 (as a result of increased provisioning coverage to around 70% of problem loans as per central bank's requirements) and declined to AMD 35.6 billion at end-2018 from AMD 43.2 billion at end-2017, approaching the capital threshold of AMD 30 billion for Armenian banks. DEVELOPING OUTLOOK The developing outlook reflects (1) uncertainty regarding potential resolution of large problematic corporate exposures, which could be repaid during the outlook period and (2) the high level of uncertainty regarding the final outcome of litigation which could increase pressure on the bank's financial results. WHAT COULD CHANGE THE RATINGS UP/ DOWN A material improvement in asset quality, stable capitalisation and profitability along with reduced litigation risks could result in a positive rating action. Downward pressure on the ratings could materialize through a material weakening in capitalization as a result of significant litigation charges. Issuer: IDBank Downgrades: Adjusted Baseline Credit Assessment, Downgraded to b3 from b2 Baseline Credit Assessment, Downgraded to b3 from b2 Long-term Counterparty Risk Assessment, Downgraded to B2(cr) from B1(cr) Long-term Counterparty Risk Ratings, Downgraded to B2 from B1 Long-term Bank Deposits, Downgraded to B3 from B2, Outlook Changed To Developing From Rating Under Review Affirmations: Short-term Counterparty Risk Assessment, Affirmed NP(cr) Short-term Counterparty Risk Ratings, Affirmed NP Short-term Bank Deposits, Affirmed NP Outlook Action: Outlook Changed To Developing From Rating Under Review PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks published in August 2018. =========== F R A N C E =========== REXEL SA: Fitch Withdraws BB LT IDR for Commercial Reasons ---------------------------------------------------------- Fitch Ratings has affirmed both Rexel SA's Long-Term Issuer Default Rating and senior unsecured rating of 'BB'. All ratings have been withdrawn. The Long-Term IDR was on Stable Outlook at the time of withdrawal. Fitch has withdrawn the ratings for commercial reasons. Accordingly, Fitch will no longer provide ratings or analytical coverage for the electrical distribution group. The affirmation and Stable Outlook reflect the positive impact of management refocusing on core geographies, market segments and organic sales growth, particularly in the US, over the next two to three years. The ratings also factor in the group's high leverage, although Fitch expects some deleveraging by 2020. The ratings were withdrawn for commercial reason KEY RATING DRIVERS Sustained Organic Growth: Rexel has reported positive organic sales growth in all geographic divisions over the last two years. The overall like-for-like revenue growth of 4.1% in 9M18 was ahead of inflation, and was driven by the re-focusing on core geographies through a new organisation in the US and transformations in Germany and Spain, along with the disposal of unprofitable assets in Asia-Pacific. This is in contrast with the negative organic growth in 2015-2016 of 1.9% and 1.6% respectively. In spite of its expectations of a global GDP growth slowdown over the next two years, and important challenges in key markets such as the US, with the new trade tariffs, and Europe, with Brexit, Fitch expects organic sales growth to continue, although at a slower pace of 1.5%-1.8% in 2019-21. Steady EBITDA Margin: Fitch expects EBITDA margin to remain above 5% over the next four years. In 9M18, the group reported 5.2% EBITDA margin, broadly in line with 9M17, a level which Fitch expects to have been maintained at year-end. Operations in North America are a key driver. The renewed focus on specific US regions, which represent almost 80% of North America sales, and investments in new and existing branches, helped the company to achieve a 4% EBITA margin in this region in 9M18, compared with 3.7% a year ago. Although Fitch expects EBITA margin in North America to decrease by 10bp per annum over the next four years due partly to a rising tariff environment, this should be offset by branch closure cost savings in Europe by 2019 and positive margin growth in Asia-Pacific. Limited Leverage Headroom: Rexel's funds from operations (FFO) adjusted net leverage still exceeds Fitch's guideline of 5.0x for a 'BB' rating, although Fitch sees a positive trend in deleveraging. Net leverage fell to 5.6x in 2017 (6.2x at end- 2016) due to adequate cash flow generation from improved profits and lower interest costs, and Fitch estimates this ratio to have reached 5.2x at end-2018 and to decrease below 5.0x in 2019-20. Fitch expects this to be achieved through higher FFO in 2019-20, due to lower cash interest and taxes, along with a mild revenue and margin uplift. Potential Acquisition Programme: Fitch believes Rexel may expand its bolt-on acquisition programme in 2019 as it attempts to improve its position in its three main US markets. If these acquisitions are significant and debt-funded, they could hold back de-leveraging, which is a key determinant of the rating at 'BB'. Resilient Free Cash Flow: Rexel has a good record of converting EBITDA into free cash flow (FCF) given its asset-light nature and active working capital control. Good FCF is critical for the rating given its persistently high leverage. As in 2017, Fitch expects FCF to have remained positive in 2018, despite heavy, increased working capital requirements to sustain US expansion. Fitch also expects FCF margins to improve to 1.3%-1.6% in 2019- 2020, on stable dividend and capital expenditure. Adequate Financial Flexibility: The group's financial flexibility remains adequate for a 'BB' rating despite some weakness in FCF generation in 2017 compared with 2014-16. Financial flexibility is also underpinned by the group's healthy FFO fixed-charge cover, which Fitch expects to be 2.8x-2.9x (2017: 2.5x) over the next three years, driven by reduced cash interest payments and favourable tax rates. Rexel's securitisation debt, finance lease obligations and debt incurred by subsidiaries (together referred to as senior debt) rank ahead of debt incurred by Rexel. However, any structural subordination at the time of withdrawal is mitigated by limited senior debt leverage, which is below the 2x- 2.5x total senior debt /EBITDA threshold for downward notching on the senior unsecured rating. DERIVATION SUMMARY Rexel has weak operating profitability in terms of EBITDA and EBITDAR margins, and weak leverage metrics for the 'BB' rating category. However, these factors are balanced by its high cash conversion ratio throughout the cycle (FFO/EBITDA 60% in 2017), resulting in resilient FCF and adequate financial flexibility relative to cyclical industrial manufacturers or building materials producers in the 'BB' category. The group also has strong geographical diversification, with strong representation in Europe and North America, and to a lesser extent in Asia. Rexel has lower operating margins than fellow distribution group Kingfisher Plc (BBB/Stable), due to its greater focus on trade customers. It is also more highly leveraged due to its legacy debt-funded acquisition programme, although Rexel generates a positive FCF margin. KEY ASSUMPTIONS - Revenue growth by 2019 at between 0.8% and 1.8%, sustained by organic sales growth - Steady EBITDA margin in 2018, increasing to 5.3% by 2019 - Working capital outflows to stabilise by 2020 - Capital expenditure totalling around 0.8% of sales in 2018- 2021 - Limited annual increase in dividend distributions RATING SENSITIVITIES Rating sensitivities are no longer relevant given ratings withdrawal. LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Rexel's liquidity position was adequate as of September 30, 2018, with a reported EUR350.9 million of cash on balance sheet and EUR850 million of undrawn multi- currency revolving credit facilities. Liquidity is further underpinned by an additional revolving credit facility of USD40 million maturing in 2020. Rexel is also extensively using the securitisation programme to finance its working capital cycle, which is approaching the maximum utilisation capacity of EUR1.245 million (EUR1.148 million outstanding in September 2018). Rexel's securitisation programme represents the majority of the group's maturities over the next three years (in addition to EUR108.1 million of commercial paper securities), which Fitch believes will be repaid through the normal course of the business, when receivables fall due and are paid. In addition, Rexel regularly reviews its securitisation programmes with lenders and extends their maturities. No other major debt repayment is due before June 2023. =========== G R E E C E =========== GREECE: To Sell EUR2.5 Billion of Bonds Since End of Bailout ------------------------------------------------------------ Sotiris Nikas and Leo Laikola at Bloomberg News report that Greece will sell EUR2.5 billion (US$2.9 billion) of bonds for the first time since the end of its international bailout as it tests investor interest in the country's newfound economic independence. According to Bloomberg, a person familiar with the matter, who asked not to be named because they're not authorized to speak about it, said the offer for the 2024 notes will price to yield 3.6%, less than an initial target of as much as 3.88%. The person said investor orders for the sale topped EUR10 billion, Bloomberg notes. The funds raised could be used to repay bondholders or to buy back International Monetary Fund loans or even as collateral to create a special purpose vehicle to help shrink lenders' bad loans, Bloomberg discloses. Greece, which exited its third and final bailout in August, last tapped the bond market in February, issuing a seven-year bond that yielded 3.5%, Bloomberg recounts. Its current debt sale would come after monitors from the euro area and the IMF concluded a week-long mission to Athens to discuss Greece's post-bailout era progress, Bloomberg notes. Greece's creditors emphasized the need for the country to implement reforms agreed to under the bailout and urgent measures necessary to reduce the mountains of bad loans at banks, Bloomberg relates. ========= I T A L Y ========= ASTALDI SPA: Explores Sale of Istanbul-Izmir Toll Road ------------------------------------------------------ Ercan Ersoy, Kerim Karakaya and Chiara Albanese at Bloomberg News report that Astaldi SpA, the cash-strapped Italian builder, and its Turkish partners are looking into the possible sale of their Istanbul-Izmir toll road. According to Bloomberg, the joint venture that's building the highway asked international banks to bid for the right to advise them on the future of the road, said Kerim Kemahli, chief financial officer of Nurol Holding AS, which holds a 27% stake in the partnership. Astaldi, which is a junior partner with 18%, is looking to sell assets wherever possible to raise money, Bloomberg states. Mr. Kemahli said in a phone interview the options may include an outright sale of the venture known as Otoyol Yatirim ve Isletme AS, or a partial stake sale, Bloomberg relates. He said the project will have cost US$7 billion, Bloomberg notes. "Our aim is to find what options we have on the asset and to determine if there is interest in the asset," Bloomberg quotes Mr. Kemahli as saying on Jan. 28. "We plan to complete the selection of international advisers in two to three months." Astaldi, Italy's second-biggest builder, has been hit hard by a crisis in that country's construction sector and entered special administration after a re-capitalization plan failed, Bloomberg discloses. =================== L U X E M B O U R G =================== TIGERLUXONE SARL: Moody's Hikes CFR to B2, Outlook Stable --------------------------------------------------------- Moody's Investors Service has upgraded the corporate family rating of TigerLuxOne S.a.r.l., the top entity in TeamViewer's restricted group, to B2 from B3, as well as its probability of default rating to B2-PD from B3-PD. Concurrently, Moody's has upgraded to B1 from B2 the ratings on the senior secured first lien term loan B tranches due 2024, borrowed by Regit Eins GmbH and TV Borrower US, LLC and pari passu ranking $35 million revolving credit facility due 2022, borrowed by Regit Eins GmbH. The rating agency has also upgraded the rating on the group's $200 million senior secured second lien term loan, borrowed by TV Borrower US, LLC, to Caa1 from Caa2. The The rating actions reflect the following factors: -- Renewed strong billings and EBITDA growth in 2018 -- Material deleveraging to below 6.0x despite adverse effect of subscriptions shift -- Improvement in free cash flow generation and good liquidity position RATINGS RATIONALE "Following an EBITDA decline in 2017, TeamViewer's earnings growth has bounced back strongly in the first three quarters of 2018 (YTD Q3 2018), reducing Moody's adjusted gross debt/cash EBITDA to 5.8x and lifting free cash flow/adjusted gross debt to 7.5%" says Frederic Duranson, a Moody's Assistant Vice President and lead analyst for TeamViewer. "The current credit metrics are in line with the original transaction as well as the requirements for a B2 and we expect that, under the current capital structure, they will continue to strengthen in 2019" Mr Duranson adds. TeamViewer grew billings and management adjusted EBITDA by +30% and +27% respectively in YTD Q3 2018, supported by a significant rebound in new sales and close to +20% growth with existing customers through upgrades, updates and new capacity purchases. The group's underlying growth was even higher because reported numbers include the negative effect of TeamViewer's shift to annual subscriptions from perpetual licences, which management estimates was approximately EUR16 million so far in 2018. By contrast, in the full year 2017, the group increased billings by only +4% including a decline in sales to new customers and after only a small drag from the subscriptions shift. Despite material investments in key areas to support the growth including sales, marketing and corporate infrastructure, the EBITDA margin has only slightly reduced in YTD Q3 2018. As a result of its strong EBITDA growth, the group reduced Moody's adjusted gross debt to cash EBITDA to 5.8x at the end of September 2018 from 7.3x a year prior and brought the adjusted leverage closer to the level at the time of the LBO by Permira. Given the relatively weak comparables in 2017, Moody's forecasts that the group will grow EBITDA further in Q4 2018 so that leverage will decline to around 5.6x by the end of 2018. In the last twelve months to September 2018, TeamViewer generated EUR52 million free cash flow (FCF) after interest, compared to EUR36 million for the full year 2017, which largely reflects the EBITDA growth. The group's cash generation has also benefited both in 2016 and 2017 from tax credits arising from the 2017 refinancing. Therefore, FCF/debt has risen to 7.5% in the LTM Q3 2018 versus approximately 5% for the full year 2017. Initiated in 2016, TeamViewer's shift to subscriptions is essentially complete as perpetual license sales have represented less than 5% since Q3 2018 and approximately 80% of the billings base is made up of subscriptions. Moody's views this development as a credit positive because it reduces the group's need to sell new contracts to reach the previous year's topline and grow on top of it. Despite expected attrition on the subscriptions, the rating agency anticipates that TeamViewer will be able to generate new billings in line with its long-term track record. As a result, the earnings growth will remain high in 2019, the continuation of investments necessary to support the growth notwithstanding. Moody's therefore expects adjusted leverage to fall further in 2019 to 5.0x or below. Moody's anticipates that the group will generate FCF of at least EUR50- EUR60 million in 2019. The cash flows will be supported by growth in EBITDA but will be largely offset by an increase in tax payments as the tax benefits arising from the 2017 refinancing reduce. The rating agency expects that capex and non-recurring items together will remain stable in 2019 as TeamViewer completes the roll-out of its new IT system. Moody's views TeamViewer's liquidity profile as good. it is supported by a cash balance of EUR65 million as of September 2018 and access to a fully undrawn $35 million equivalent revolving credit facility (RCF). The RCF has a springing net first lien leverage covenant acting as a draw stop, tested if 35% of the facility is utilised. RATING OUTLOOK The stable outlook reflects Moody's expectation that TeamViewer's billings and cash EBITDA will continue to grow as the group reaps the benefits of the shift to subscriptions, maintaining current retention rates and new sales in line with its long-term track record. The stable outlook factors in FCF generation (after interest) of around EUR50 - EUR60 million per annum and adequate liquidity. WHAT COULD CHANGE THE RATING UP/DOWN While TeamViewer's rating is constrained by its high reliance on a single product, positive ratings pressure could arise if the group (1) increases business diversification, (2) demonstrates a track record of retention rate of around 100% after new sales to existing customers and maintains its current level of sales to new customers, (3) reduces Moody's adjusted gross debt to cash EBITDA sustainably below 4.5x, and (4) increases FCF to debt above 10% on a sustainable basis. Conversely, TeamViewer's ratings could come under negative pressure if (1) cash EBITDA decreases as a result of the churn rate exceeding current levels for a prolonged period of time and new sales to existing and new customers not covering necessary increases in the cost base or, (2) the group's financial policy becomes more aggressive and leads to adjusted leverage rising materially above 6.0x and, (3) FCF debt decreases below 5% and liquidity deteriorates. LIST OF AFFECTED RATINGS Issuer: TigerLuxOne S.a.r.l. Upgrades: Corporate Family Rating, Upgraded to B2 from B3 Probability of Default Rating, Upgraded to B2-PD from B3-PD Outlook Actions: Outlook, Remains Stable Issuer: Regit Eins GmbH Upgrades: BACKED Senior Secured Bank Credit Facility, Upgraded to B1 from B2 Outlook Actions: Outlook, Remains Stable Issuer: TV Borrower US, LLC Upgrades: BACKED Senior Secured Bank Credit Facility, Upgraded to B1 from B2 BACKED Senior Secured Bank Credit Facility, Upgraded to Caa1 from Caa2 Outlook Actions: Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Software Industry published in August 2018. =============== P O R T U G A L =============== ENERGIAS DE PORTUGAL: Fitch Rates EUR1BB Hybrid Notes BB -------------------------------------------------------- Fitch Ratings has assigned EDP - Energias de Portugal, S.A.'s (EDP; BBB-/Stable) EUR1 billion 4.496% fixed to first reset date deeply subordinated hybrid securities' a final rating of 'BB'. The securities qualify for 50% equity credit. The rating reflects the highly subordinated nature of the notes, which Fitch considers to have low recovery prospects in a liquidation or bankruptcy scenario. The equity credit reflects the equity-like characteristics of the instruments including subordination, maturity in excess of five years and deferrable interest coupon payments. Equity credit is limited to 50% given the notes' cumulative interest coupon, a feature considered more debt-like in nature. The hybrid is not replacing the existing EUR750 million hybrid issued in 2015, which has a first call date in 2021 and will therefore retain its equity content. Fitch understands from the company that both outstanding hybrids will be part of the long- term strengthening of EDP's capital structure. EDP will use the hybrid proceeds to finance or refinance, in whole or in part, its Eligible Green Project portfolio. The notes' rating and assignment of equity credit are based on Fitch's hybrid methodology, "Corporate Hybrids Treatment and Notching Criteria" published on November 9, 2018. KEY RATING DRIVERS KEY RATING DRIVERS FOR THE NOTES Deep Subordination and Deferral Option: The notes are rated two notches below EDP's Long-Term Issuer Default Rating (IDR) given their deep subordination and consequently the lower recovery prospects in a liquidation or bankruptcy scenario relative to the issuer's senior obligations, and the deferral option. 50% Equity Treatment: The securities qualify for 50% equity credit as they meet Fitch's criteria with regard to deep subordination, remaining effective maturity of at least five years, full discretion to defer coupons for at least five years and limited events of default. These are key equity-like characteristics, affording EDP greater financial flexibility. The interest coupon deferrals are cumulative, which results in 50% equity treatment and 50% debt treatment of the hybrid notes by Fitch. This is a feature similar to debt-like securities and reduces the company's financial flexibility. According to Fitch's criteria, the agency would reduce the equity credit of 50% to 0% five years before the effective remaining maturity date. Effective Maturity Date: The notes' maturity is 2079. Fitch treats the day on which the replacement intention language expires as an effective maturity date. Under the instrument terms, this date coincides with the second step-up date, which is not earlier than 2039. From this date, the coupon step-up is within Fitch's aggregate threshold rate of 100bp, but the issuer will no longer be subject to replacement intention language. The second step-up date is defined as 2039 given the five-year plus three months non-call instrument, if the issuer is rated below investment grade by another rating agency 30 days before the first reset date. Otherwise, the second step-up date would be 2044. Early Redemption: The issuer has the option to redeem the notes on the 90-day period prior up to a day in April 2024, which is the first call date for a five-year plus three months non-call instrument, and on any coupon payment date thereafter. In addition, there are extraordinary call rights in case of adverse changes to tax or rating agency treatment as well as a call right in case of minimum outstanding amounts and a change of control or gross-up event. The change of control, if followed by an event-driven downgrade, is designed to trigger an interest rate increase of 500bp as a way to compensate the creditors. However, the issuer would have the right to redeem the notes in this instance. Its view is that the change of control provision cannot force an event of default as redemption is designed as an option for the issuer and not a right of the creditor, while the 500bp increase is within the limit, according to its methodology. Full Ability to Defer: EDP can opt to defer coupons on a cumulative basis without any constraint at a given time. The company will be obliged to make a mandatory settlement of deferred interest payments if it chooses to pay cash dividends or make other distributions on junior instruments, including parity securities interest payment, or repurchase of share capital or equally ranked securities. KEY RATING DRIVERS FOR THE ISSUER Expansion Capex Anticipated: Fitch estimates capex for 2018-2020 at EUR5.6 billion, which is EUR800 million higher than its expectations last year. This is due to expectations that US wind farm capex will capture full production tax credits (PTC) before they are phased out gradually from 2020 and also that progress in its Brazilian transmission projects will be faster than expected. In the absence of managerial actions, this would put temporary pressure on leverage metrics for 2018-2019 until the contribution from new assets starts to materialise. Measures to Stabilise Net Debt: Fitch expects EDP to offset higher capex with additional asset divestments, US tax equity partnerships and hybrid capital issuance to keep net debt flat or slightly decreasing by end-2019. Ongoing tariff deficit (TD) sales, liability management actions and opex savings should also contribute to the net debt control goal. Fitch expects funds from operations (FFO) adjusted net leverage to be around 5.0x in 2018- 2019, from 5.3x (4.8x adjusted by TD related cash taxes) in 2017 and slightly improving further in 2020. Fitch forecasts the impact on the FFO adjusted net leverage of the hybrid to be - 0.2x. Further Deleveraging Postponed: EDP has a target of 3.0x net debt to EBITDA (as reported by EDP, not including regulatory receivables (RR)) by 2020 and achieved a EUR3.1 billion net debt reduction in 2016-2017, largely through disposals and TD monetisation. Net debt-to-EBITDA decreased to 3.7x by end-2017 from 4.2x by end-2015. However Fitch estimates the 3.0x target achievement to be delayed to beyond the current business plan, due to operating challenges affecting actual earnings (ie. FX, weather conditions and regulatory adjustments). For 2020, Fitch forecasts 3.7x net debt- to-EBITDA (as defined by EDP), in line with 2017. Harsh Stance on CMEC Revenue: Fitch has seen a more aggressive stance from the Portuguese regulatory authority and government on the maintenance of contractual equilibrium mechanism (CMEC). The controversial final CMEC adjustment, to be recovered annually between 2018 and 2027, was finally established in April by Entidade Reguladora dos Servicos Energeticos (ERSE) at EUR154 million, far from the EUR256 million claimed by EDP. Moreover, EDP was notified in September of the decision of the Secretary of State for Energy to charge the company EUR285 million related to an alleged non-recurring and past overcompensation received under the CMEC regime. An additional EUR73 million charge is still under regulatory scrutiny. EDP has revised down its net income guidance for 2018, and announced it would start a litigation process. Conservatively, Fitch has included the alleged impact as operating and non-recurring cash- outflow over 2019-2021. CTG's Tender at Early Stage: China Three Gorges Corporation (CTG), which is CTG Europe's ultimate parent, is currently working to obtain the regulatory approvals for its tender offer for EDP and EDP Renovaveis (EDPR). In addition, another pre- condition of the takeover offer is that EDP's general shareholders meeting must approve changes in the company's bylaws to bypass the current limitation in voting rights for CTG Europe. Fitch views both events as still being at an early stage (the offer will not be launched before 2H19) and therefore will take no rating action until there is material progress. EDP's management stated that the price offered is not reflective of EDP's value. Limited Impact from PSL Criteria: CTG is rated 'A+'/Stable, equalised with the Chinese sovereign. CTG's standalone credit profile, to which Fitch would most likely link the rating of EDP according to its Parent and Subsidiary Linkage (PSL) Criteria, is currently 'BBB'. Should the acquisition materialise, Fitch sees limited rating impact on EDP, ie. within a single notch uplift to no impact. LV Electricity Distribution Renewal Risk: Electricity distribution low voltage concessions in Portugal, largely operated by EDP, mature between 2016 and 2026, with the bulk of them maturing between 2021 and 2022. The Portuguese government is seeking to introduce more competition (tendering process) and higher efficiencies (grouping current 278 too small to be efficient municipalities into two to five territorial areas). Fitch expects this to be a lengthy process, as the timeline for the tenders is uncertain. Fitch considers renewal risk as limited, as Fitch expects any concession loss is accompanied by a reimbursement value broadly aligned with the value of the regulatory asset base (RAB), and the tendering process potentially leading to lower overall returns. The LV concessions represent around EUR1 billion in RAB and Fitch estimates them to contribute around EUR130 million to EDP's EBITDA (4% of total consolidated). Declining Portuguese RRs: Fitch forecasts RRs owned by EDP at EUR0.7 billion by end-2018, down from a peak of EUR2.5 billion in 2014. Fitch expects EDP to continue selling its RRs at a pace that largely mirrors new annual and decreasing TD created in the system. This implies limited impact on working capital and cash taxes paid forecast for 2018-2020. DERIVATION SUMMARY EDP is smaller than Iberdrola S.A. (BBB+/Stable) and Enel S.p.A. (BBB+/Stable) and its business risk profile has a lower share of fully regulated businesses, although it benefits from a higher share of long-term contracted and incentivised renewables business. The higher leverage and larger leakage due to minorities within EDP justifies the two notches of rating differential from peers. Fitch does not apply the one-notch uplift to the senior unsecured rating as the regulated EBITDA share is below 50% (or 40% including 10% of contribution from renewables). KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: - 2018 EBITDA slightly below EUR3.4 billion (excluding non- recurring items) and a CAGR of around 2.5% for 2018-2021, driven by organic growth largely in wind and transmission projects in Brazil; - Average gross capex of EUR1.9 billion a year; - Divestment plan linked to wind and mini-hydro plants at around EUR920 million and net tax equity credit cash-ins at around EUR400 million for 2018-2021; - Dividends in line with a dividend floor of EUR0.19 per share; - Declining Portuguese RR on balance sheet driven by TD sales of EUR0.9 billion on average for 2018-2021, in line with new TD generated in the period, and no meaningful TD created in Spain and Brazil; - Special levy in Portugal treated as restricted cash and cash outflows related to alleged overcompensation for CMEC plants; - Brazilian real and US dollar to depreciate against the euro to 5.45 and to 1.27 respectively by 2021; - Potential impact from future tenders from low voltage electricity distribution concessions in Portugal and CTG's tender offer are not included in its rating case; - Issuance of EUR1 billion hybrid capital in January 2019, eligible for 50% equity content. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - FFO adjusted net leverage trending towards 4.5x (2018E: 5.0x) and FFO fixed charge coverage above 3.7x (2018E: 3.7x) on a sustained basis, assuming no major changes in the activities' mix other than that expected by Fitch. - Sustained positive free cash flow, together with the consistent reduction of the TD in Portugal in line with Fitch's expectations. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - FFO net adjusted leverage above 5.0x and FFO fixed charge coverage below 3.2x over a sustained period, for instance as a result of negative developments on the upcoming tenders for electricity distributions concessions, delays in the divestment plan or greater regulatory scrutiny than expected by Fitch. - Substantial increase of operations in emerging markets with higher business risk or a substantial shift in business mix towards unregulated activities that is higher than expected by Fitch, which could result in a tighter credit ratio guideline for the rating. LIQUIDITY Strong Liquidity: EDP had EUR0.9 billion of available cash and cash equivalents, and EUR5.3 billion of available committed credit lines at end-September 2018 (EUR5 billion due after 2019). This liquidity position is enough to cover debt maturities and operating requirements up to 2020. Standard Funding Structure: EDP has a largely centralised debt structure with no impact on the ratings. Capital-market debt issued by the parent is issued via Dutch-registered finance subsidiary EDP Finance BV. The relationship between EDP and EDP Finance is governed by a keepwell agreement under English law. EDP Brazil is ring-fenced, self-funded in local currency and non- recourse to EDP. As of September 2018, around 82% of EDP Renovaveis net debt was inter-company (ie parent)-funded. =========== R U S S I A =========== EVROKAPITAL-ALLIANCE: Put on Provisional Administration ------------------------------------------------------- The Bank of Russia, by virtue of its Order No. OD-155, dated January 25, 2019, revoked the banking license of credit institution commercial bank Evrokapital-Alliance (limited liability company) or LLC CB Evrokapital-Alliance (Registration No. 2672, the Yaroslavl Region, Pereslavl-Zalessky) from January 25, 2019. According to its financial statements, as of January 1, 2019, the credit institution ranked 322nd by assets in the Russian banking system. The bank's business model focused on issuing bank guarantees through a narrow network of intermediaries (agents) on non-market conditions which contradicted regular business practices. The portfolio of guarantees issued by the credit institution totalled 9 billion rubles and exceeded its capital more than sevenfold. Furthermore, a formal approach to assessing principals' business resulted in a regular underestimation of credit risks under the issued bank guarantees assumed by LLC CB Evrokapital-Alliance, which prompted the regulator to repeatedly send respective orders to the bank. Moreover, the credit institution was involved in dubious transit operations. The Bank of Russia repeatedly (eight times over the last 12 months) applied measures against LLC CB Evrokapital-Alliance. The credit institution's operations showed signs of misconduct by its executives who sought to withdraw liquid assets to the detriment of creditors' and depositors' interests. The Bank of Russia submitted information about the bank's transactions bearing signs of a criminal offence to law enforcement agencies. Under these circumstances, the Bank of Russia took the decision to revoke the banking license of LLC CB Evrokapital-Alliance. The Bank of Russia takes this extreme measure -- revocation of the banking license -- because of the credit institution's failure to comply with federal banking laws and Bank of Russia regulations, due to repeated application within a year of measures envisaged by the Federal Law 'On the Central Bank of the Russian Federation (Bank of Russia)'. The Bank of Russia, by virtue of its Order No. OD-156, dated January 25, 2019, appointed a provisional administration to LLC CB Evrokapital-Alliance for the period until the appointment of a receiver pursuant to the Federal Law "On Insolvency (Bankruptcy)" or a liquidator under Article 23.1 of the Federal Law "On Banks and Banking Activities". In accordance with federal laws, the powers of the credit institution's executive bodies were suspended. LLC CB Evrokapital-Alliance is a member of the deposit insurance system. The revocation of a banking license is an insured event as stipulated by Federal Law "On the Insurance of Deposits with Russian Banks" in respect of the bank's deposit obligations. This Federal Law stipulates the procedure and amount of insurance indemnities to the bank's depositors. VSK INSURANCE: Fitch Corrects January 21 Ratings Release -------------------------------------------------------- Fitch Ratings replaced a ratings release published on January 21, 2019 to correct the name of the obligor for the bonds. Fitch Ratings has affirmed Russia-based VSK Insurance Joint Stock Company's Insurer Financial Strength Rating and senior unsecured rating at 'BB-'. The Outlook is Negative. All ratings have been removed from Rating Watch Negative, where they were placed on July 12, 2018. KEY RATING DRIVERS The removal from RWN reflects Fitch's view that the regulatory compliance risk related to Urban Group case has been eliminated for VSK. The Negative Outlook reflects VSK's significant outstanding exposure to surety business as this could again cause a deficit in the regulatory prudential metrics. The deficit should be manageable but would require potentially expensive short-term funding for VSK. The affirmation reflects VSK's strong operating profitability and weak risk-adjusted capital position. Like other Russian insurers, VSK establishes two parallel sets of technical reserves. The first is based on the inflexible regulatory methodology and is used for a number of prudential metrics. The second is set based on the actuarial best estimate and is used for financial reporting, both consolidated and standalone. The difference between the two reserving estimates is dramatic for the surety insurance, as the Central Bank of Russia (CBR) has required establishing surety regulatory claims case reserves at 100% of the sum insured. Based on the regulatory methodology, VSK estimated Urban Group's loss reserves at RUB9.6 billion on a gross basis and RUB7.2 billion on a net basis at end-2018. Initially, the setup of this reserve in July 2018 triggered a deficit in the regulatory coverage of technical reserves by certain classes of assets. To mitigate regulatory risks throughout 2H18, VSK withdrew RUB1.2 billion of dividends from its subsidiary Insurance Company Interi and attracted RUB2 billion of interest-free financing from its 49%-minority owner, PJSC Safmar Financial Investments, in July 2018. This financing was repaid in October 2018, when VSK managed to establish some cushion in its asset coverage metrics. This cushion was achieved due to improved operating cash flow after a 15% growth in gross written premiums (GWP) in 9M18 from 9M17. However, Fitch notes that this growth was accompanied by notable growth in the commission ratio to 35% from 27%. Additionally, in 3Q18, VSK acquired reinsurance protection for its motor damage portfolio, which accounted for 25% of non- consolidated GWP in 9M18. It reduced the volume of net technical reserves eligible for asset coverage calculation. At present, VSK is comfortably compliant with the prudential asset coverage metrics, even with full Urban Group's reserve used in the formula. VSK's regulatory solvency margin was a comfortable 155% at end-9M18. Based on new clarifications from CBR, VSK now expects to be able to align the regulatory and actuarial reserves in 2Q19. Based on the best estimate actuarial approach, VSK estimated Urban Group's loss reserve at much lower RUB1.7 billion on a gross basis and RUB1.4 billion on a net basis at end-2018. Given RUB0.6 billion claims paid in 2H18, VSK therefore expects to record the incurred loss of Urban Group's case at RUB2.3 billion on a gross basis and RUB2.0 billion on a net basis in its 2018 reporting. The insurer expects that the loss will not prevent it achieving its RUB8.8 billion target for consolidated net profit in 2018. Fitch believes that the rapid business growth in 2H18 could have some moderately negative consequences for future underwriting results, but views the risks of VSK's capital depletion as low due to Urban Group's case. VSK continues to carry a few major concentrations to other groups of contractors, where a group is defined as contractors owned by the same beneficiaries. A bankruptcy of any of these groups could result in VSK having to set up regulatory reserves significantly exceeding those established for Urban Group, and the company facing a deficit in admissible assets from the point of view of the prudential regulation. However, as estimated by VSK at mid- December 2018, such bankruptcy would be unlikely to hit the insurer's IFRS-based capital. VSK believes it would be able to reduce the volume of net technical reserves to be covered by admissible assets through the purchase of extensive non-proportional reinsurance both for surety risks and the core portfolio. VSK also believes that some support could be provided by the shareholders on the asset side as it was done for Urban Group case in July 2018. The best estimate reserve for these top three exposures, as in Urban Group's case, is estimated by VSK at a much lower level of RUB1.7 billion, RUB1.1 billion and RUB0.5 billion. Each of the three exposures are unlikely to hit VSK's RUB25.7 billion consolidated capital (as at end-9M18), given RUB6.7 billion consolidated unaudited net profit in 9M18 and a track record of sound operating performance. However, Fitch notes that VSK's best estimate relies on the expectation that municipal funding would again be provided for construction projects with high completion rates, as in Urban Group's case. Fitch understands that it is unlikely that VSK could terminate the existing surety coverage prematurely unless there is any change in the regulatory environment. Fitch placed the ratings on RWN on July 12, 2018. The rating action followed a new requirement from July 10, 2018 by the CBR to establish claims case reserves at 100% of the total sum insured for surety insurance in residential construction. As a result, VSK had to establish claims case reserve for the surety policies covering Urban Group's developers in the gross amount of RUB9.8 billion (slightly revised from RUB9.7 billion) as of July 9, 2018, when the arbitration court of Moscow region adjudged the developers bankrupt. RATING SENSITIVITIES VSK's ratings could be downgraded if the insurer is impacted by any further major surety claims. The ratings could also be downgraded if VSK faces a sharp deterioration in its operating profitability with the combined ratio deteriorating to 105% or higher on a sustained basis or if VSK's capital strength, as assessed by Fitch, weakens significantly. The Outlook could be revised to Stable if VSK's outstanding exposure to surety risks reduced, eliminating any potential risk of non-compliance with prudential metrics. FULL LIST OF RATING ACTIONS -- IFS Rating affirmed at 'BB-', off RWN; Outlook Negative -- Long-Term Issuer Default Rating affirmed at 'BB-', off RWN; Outlook Negative -- Senior unsecured long-term rating affirmed at 'BB-', off RWN ========= S P A I N ========= SANTANDER EMPRESAS 2: Fitch Affirms Csf Rating on Class F Debt -------------------------------------------------------------- Fitch Ratings has affirmed FTA Santander Empresas 2 and removed the notes from Rating Watch Positive (RWP), as follows: Class D (ISIN ES0338058045): affirmed at 'Asf'; off RWP; Outlook Stable Class E (ISIN ES0338058052): affirmed at 'Asf'; off RWP; Outlook Stable Class F (ISIN ES0338058060): affirmed at 'Csf'; revised Recovery Estimate to 50% from 0% KEY RATING DRIVERS Excessive Counterparty Exposure The affirmation of the class D and E notes at 'Asf' reflect the replacement of Santander UK with Banco Santander S.A (Santander), which provides excessive support acting as both account bank and swap counterparty. The class D and E notes are credit-linked to Santander's deposit rating as its jump-to-default would have a major impact on the ratings given most of the notes' credit enhancement is provided by the EUR38.0 million reserve fund deposited at the account bank. Robust Portfolio Performance Fitch has reduced the transaction's one year probability of default (1Y PD) to 3.2% from 3.4% based on the positive macroeconomic environment expectations over the next two years and its robust performance over the last three years. As of November 2018, 90 days past due delinquencies remained low at around 0.35% of the outstanding portfolio balance. Furthermore, cumulative defaults since the transaction closed in December 2006 amounted to EUR54.2 million, only 1.9% of the initial balance. Highly Seasoned Portfolio The transaction is close to the end of its life as outstanding assets only represent 2.2% of the initial balance. The largest obligor and top 10 obligors currently represent 9.3% and 22.6% of the outstanding portfolio, respectively. Fitch captured top obligors concentration risk assuming a 1Y PD of 25% to obligors representing more than 50bp of the outstanding portfolio balance. Class F Notes Under-collateralised The class F notes were issued at closing to fund the reserve, which remains deeply under-funded. Fitch believes the replenishment of the reserve fund with excess spread and the repayment of the class F is highly unlikely, so the default of the class F notes is inevitable as reflected by their 'Csf' rating. RATING SENSITIVITIES The large credit enhancement for the class D (104%) and E (59.3%) notes makes their ratings very resilient to adverse changes of the asset assumptions. However, any change in Santander's rating could lead to a change in the class D and E notes' ratings as they are credit-linked to Santander's rating. The class F notes' rating is at a distressed level and is therefore unlikely to be affected by a further deterioration of the pool. 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 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 affected the rating 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. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. 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. =========================== U N I T E D K I N G D O M =========================== FLYBE: Backs Chairman Amid Dispute with Large Shareholder --------------------------------------------------------- Josh Spero at The Financial Times reports that UK regional airline Flybe on Jan. 28 backed its chairman in the face of a challenge from one of its largest shareholders over its proposed sale. Flybe confirmed that Hosking Partners, which owns 19% of the group, called at the end of last week for the company's chairman, Simon Laffin, to be ousted, the FT relates. Mr. Laffin has been chairman since late 2013, the FT notes. Mr. Hosking is pushing to unseat Mr. Laffin in a dispute over the 1p-a-share takeover of Flybe by a consortium including Virgin Atlantic and Stobart Air, agreed this month, the FT discloses. The sale valued the company's equity at GBP2.2 million, vastly below its closing market value of GBP36 million the day before, the FT states. Mr. Hosking, the FT says, wants to appoint Eric Kohn to scrutinize the sale process. Mr. Kohn told the FT on Jan. 28 that he expected support from at least 40% of shareholders by the end of the day. A consortium called Connect Airways, made up of Virgin Atlantic, Stobart Air and investment firm Cyrus Capital, had its offer of GBP2.2 million for Flybe's equity accepted in earlier this month, the FT recounts. The buyers injected GBP10 million into the company as a bridging loan to help the airline's capital position as part of an updated deal, according to the FT. Flybe has been experiencing severe cash flow problems, worsened by its credit card acquirers retaining cash meant for the business as collateral, the FT relays. PATISSERIE VALERIE: Failed to Share Fraud Report with Banks ----------------------------------------------------------- According to The Telegraph's Oliver Gill, Patisserie Valerie failed to share a devastating fraud report with its banks as it grappled to secure a funding lifeline prior to its collapse. The Telegraph understands neither HSBC nor Barclays were given sight of analysis prepared by forensic accountants from PwC. The revelation raises fresh questions over the role of top executives at Patisserie Valerie during the final throes of its existence, The Telegraph relates. The PwC report shone a light on Patisserie Valerie's suspected GBP40 million fraud, allegedly detailing how suppliers provided fake invoices and multimillion-pound cheques were submitted to artificially inflate cash balances, The Telegraph discloses. VENATOR MATERIALS: Moody's Affirms B1 CFR, Outlook Stable --------------------------------------------------------- Moody's Investors Service affirmed Venator Materials plc's ratings at B1 and changed the outlook to stable from positive. Moody's also affirmed Venator Materials LLC's Ba3 rating on the senior secured term loan B, and the B2 rating on Venator Materials Corporation's senior unsecured bonds. The change in outlook reflects the lack of debt reduction, (a key upgrade trigger since the rating and positive outlook were assigned back in 2017) the likelihood that the company will be unable to reduce debt in 2019 due to the ongoing expenditures for the Pori plant restructuring and related costs, and expectations of lower EBITDA for the year. "To maintain the current rating and outlook, debt reduction is needed before the upcycle in TiO2 ends to better position Venator ahead of the next TiO2 downcycle," according to Joseph Princiotta, VP and Senior Credit Officer covering Venator. "Moody's believes the end to the upcycle could still be several years away but there are risks to this outlook including softer demand if key economies were to weaken, or in the event of an extended inventory destocking cycle, which is currently underway." Outlook Actions: Issuer: Venator Materials Corporation Outlook, Assigned Stable Issuer: Venator Materials LLC Outlook, Changed To Stable From Positive Issuer: Venator Materials plc Outlook, Changed To Stable From Positive Affirmations: Issuer: Venator Materials Corporation Senior Unsecured Regular Bond/Debenture, Affirmed B2 (LGD5) Issuer: Venator Materials LLC Senior Secured Bank Credit Facility, Affirmed Ba3 (LGD3) Issuer: Venator Materials plc Probability of Default Rating, Affirmed B1-PD Speculative Grade Liquidity Rating, Affirmed SGL-2 Corporate Family Rating, Affirmed B1 RATINGS RATIONALE The rebuild of the Pori, Finland TiO2 plant, which was heavily damaged by fire in January, 2017, has not gone well in terms of costs or timing and the company has abandoned plans to rebuild the plant, choosing to operate it at 26,000 tons of the 130,000 ton plant capacity. The lost tonnage reduces total capacity by about 13%. Insurance proceeds of $551 million received in 2017 and 2018 for plant damage and business interruption have supported liquidity, EBITDA and repair costs to date; but the repair expenditures plus closure and capacity transfer expenditures, along with cash use for normal capex, working capital, restructuring, and pensions have exceeded internal cash generation and is reducing cash balances. Moody's outlook for free cash flow is better in 2019 as the Pori closure and transfer costs and other cash uses are expected to decline versus 2018. However, free cash flow might still be neutral or slightly negative, depending on working capital release for the year, EBITDA and the strength of the TiO2 markets through the year. Moody's remains optimistic that the upcycle in TiO2 has staying power over the next several years, assuming global demand growth trends remain favorable with limited new supply contemplated or under construction, including the Lomon Billions project in China and Chemours' debottlenecking efforts. However, in the short term, Moody's expects price and volume pressure in the TiO2 markets over the next few quarters due to elevated inventory levels. The weaker markets commenced in the third quarter of last year and are likely to extend through much of 2019; it could take until mid-year or longer for industry destocking to run its course, Moody's believes. Under this scenario, Moody's expects Venator's EBITDA to decline to the $240-$260 range in 2019, then rebound in 2020 as favorable industry fundamentals reassert themselves. The rating currently benefits from top-cycle credit metrics for the B1 rating, market position as the world's third largest titanium dioxide producer with a strong presence in specialty products, earnings diversity from the additives business, prospective benefits from a business improvement program, and adequate liquidity. However, the rating incorporates expectations for significant fluctuations in market conditions, and therefore key credit metrics in this highly cyclical industry. Venator's credit profile is principally constrained by heavy exposure to the highly cyclical titanium dioxide industry, which is currently facing high inventories and a destocking environment which needs to run its course before favorable fundamentals can be restored. Inevitably, industry conditions will weaken and credit metrics will probably decline significantly, outside the normal boundaries for the current rating category. Hence, some debt reduction is needed and anticipated during the upcycle to prepare for the next trough. Venator commenced operations as an independent company with $750 million of secured and unsecured debt, and access to an undrawn $300 million asset-based revolving credit facility. Moody's believes that the company would be challenged to maintain reasonable credit metrics for the B1 CFR during a significant industry downturn reminiscent of what the industry experienced prior to the start of price recovery in early 2016. Although the company has publicly stated a $350 million net debt target before instituting share buybacks, it's uncertain what this means precisely for a gross debt level. Adjusted gross financial leverage is 1.7x for the twelve months ended September 30, 2018, which includes income related to insurance recoveries, and includes its standard adjustments mostly for underfunded pension plans and modestly lower add-backs compared to management calculations. Net leverage was 1.3x at the end of the quarter. The SGL-2 Speculative Grade Liquidity Rating ("SGL") indicates good liquidity to support operations in the near-term with $251 million in cash, as of September 30, 2018. Venator is expected to generate nuetral or slightly negative free cash flow in 2019 and has access to a $300 million asset-based revolving credit facility. However, the company does not have full access to the facility due to borrowing base restrictions. The credit agreement contains a springing fixed charge coverage ratio test that does not become effective unless excess availability falls below 10% of the facility. Moody's does not expect the covenants will be tested in the near-term and believe that the covenant lite structure is well-aligned with the cyclicality of the company's business over a longer horizon. The stable outlook anticipates that favorable industry fundamentals are sustained after the inventory destocking period runs its course, supported by assumptions for continuing demand growth globally, allowing time for Venator to reduce gross debt to $600 million or less to support the B1 ahead of the next downcycle. Moody's would be unlikely to consider an upgrade given this highly cyclical industry and the company's relative margin and performance in the previous industry downcycle. However, if debt were to be meaningfully reduced below $600 million, Moody's might consider an upgrade. Moody's could downgrade the rating with expectations for substantive weakening in the titanium dioxide industry before the company is able to start repaying debt or substantive deterioration in prospects for free cash flow generation. Given expectations for solid industry conditions over at least the next several quarters, adjusted financial leverage above 4.0x beyond the end of 2019 or available liquidity below $200 million could have negative rating implications. The principal methodology used in these ratings was Chemical Industry published in January 2018. Headquartered in the United Kingdom, Venator Materials plc is the world's third-largest producer of titanium dioxide pigments used in paint, paper, and plastics, and a producer of performance additives for a wide variety of end markets. Venator was created through an IPO transaction from Huntsman Corporation. Venator generated approximately $2.3 billion in revenues for the twelve months ended September 30, 2018. ********* 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 2019. 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 * * *