/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190529.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, May 29, 2019, Vol. 20, No. 107 Headlines G E O R G I A GEORGIAN WATER: Fitch Affirms BB- Issuer Default Ratings I T A L Y ALITALIA SPA: Italian Economic Minister Seeks Healthy Investors L U X E M B O U R G MARCEL LUX IV: S&P Assigns 'B' Rating, Outlook Stable R O M A N I A TASSULO: Hasit Romania Takes Over Insolvent Bolintin-Deal Factory R U S S I A MTS BANK: Fitch Alters Outlook to Stable & Affirms 'BB-' IDR S E R B I A JUGOREMEDIJA: Bankruptcy Supervision Agency Sets June 24 Auction U N I T E D K I N G D O M LAMP: Gibraltar Court to Hear Liquidation Application on May 31 LONDON CAPITAL: Customers Express Concern Over Investigation PG TAVERNS: 100 Jobs Saved Following Rescue Deal REDHALL GROUP: Intends to Appoint Administrators Within Days STANDARD BANK: Fitch Gives BB+/B Ratings on $4MM Medium-Term Note THOMAS COOK: S&P Cuts ICR to 'CCC+' on Weak Trading, Outlook Neg. - - - - - ============= G E O R G I A ============= GEORGIAN WATER: Fitch Affirms BB- Issuer Default Ratings -------------------------------------------------------- Fitch Ratings has affirmed Georgian Water and Power LLC's (GWP) Long-Term Foreign and Local-Currency Issuer Default Ratings (IDR) at 'BB-' with a Stable Outlook. The affirmation is based on Fitch's expectation that the breach of Fitch's negative rating guideline for leverage in 2017-2018 is temporary, mainly on the back of accelerated capex and a new dividend policy and that the company will be able to deleverage to levels commensurate with the rating from 2019. The company's inability to deleverage to 3x in 2019 would be negative for the rating. The rating is supported by GWP's natural monopoly position, solid profitability, with an expected increase in EBITDA following deregulation of the energy market from May 2019, improving regulatory environment, reducing water losses, good receivables collection rates, assets ownership following the completion of the privatization agreement and low sector risk. This is offset by the increased leverage resulting in reduced financial flexibility, FX risk, heavily worn-out water infrastructure, and related-party transactions, albeit decreasing and on market terms. KEY RATING DRIVERS Elevated Leverage: GWP's FFO adjusted net leverage (excluding connection fees) increased to about 3.9x at end-2018 from about 3.4x in 2017 and 1.2x on average over 2014-2016, which is above Fitch's negative guideline for leverage of 3x. The leverage increase has mainly been driven by the accelerated capex programme and new dividend policy. Capex peaked in 2017 and 2018 at GEL107 million and GEL117 million, respectively, and the company expects it to gradually decrease to around GEL50 million by 2021. The dividend policy has been revised in anticipation of the planned IPO in the medium term. Although GWP does not have a set dividend payout ratio, Fitch expects it to pay dividends of about GEL28 million annually on average over 2019-2022, which limits financial flexibility. Fitch expects GWP will generate healthy cash flows from operations in 2019-2022, but that its FCF will be negative in 2019, possibly turning positive in 2020 from capex moderation. Fitch expects FFO adjusted net leverage (excluding connection fees) to decrease to an average of about 3x over 2019-2022. Power Generation Supports EBITDA: Fitch expects electricity sales to increase from 2019, mainly on the back of the curtailment of electricity consumption for own needs following the recent capex acceleration. This focused on the replacement of pumped water with gravity flow among other things. Sales will also improve following the deregulation of the energy market that started in May 2019, forcing large consumers (over 35kW) out of the regulated pricing schemes to the open market with higher electricity market prices versus regulated tariffs; and an expected increase in electricity generation volumes in 2019 versus 2017-2018, as the latter two were relatively dry in East Georgia. Combined with the consolidation of the Gardabani Sewage Treatment Plant LLC (GSTP), this will improve EBITDA, which Fitch currently expects to average slightly below GEL100 million over 2019-2022 up from an average of GEL65 million in 2015-2018. Fitch expects electricity business's share of total EBITDA to increase from 2019. However, the regulated business will continue to dominate EBITDA. Improved Regulation: Fitch views positively the introduction of new regulation in water supply and sanitation sector in 2018. Previously, GWP had not seen tariff growth since 2010. The new regulatory framework is based on the regulatory asset base (RAB) principle, which is the key component in determining capex, although it is based on assets' book value rather than replacement value. The first three-year regulatory period started in 2018 and has been consistently implemented so far. The weighted average cost of capital was set at 15.99%. This resulted in a tariff increase of 23.8% for residential customers and a 0.4% decrease in tariffs for industrial customers in 2018 compared with 2017. The introduction of RAB regulation in Georgia should ensure appropriate remuneration, enhance cash flow predictability and make the regulatory environment more comparable with the Russian one, although the latter is not based on RAB. Slower Reduction of Water Losses: Reduction of water losses, mainly for pumped water supplied at altitude, continues to be an important driver of EBITDA growth for the company despite the recent tariff increases. It has a multiplicative effect on earnings as it reduces water production costs and frees up electricity produced by GWP's hydro power plants for external sales. In 2018, the company reported water losses of about 42%, down from 52% in 2014. Management has revised its expectations for losses reduction compared with last year to around 37% in 2020 versus 29% previously budgeted, although it remains within regulatory targets. This follows the company's decision to focus on water supply system optimization, lowering electricity consumption and redirecting released electricity for external sales. Fitch expects water losses to improve gradually, although at a slower pace than management's expectations. FX Exposure Remains: GWP remains exposed to FX fluctuations, as about half of its debt at end-2018 was denominated in foreign currencies, mainly Euros. Although the company benefits from cheaper debt financing, Fitch believes the significant exposure to FX fluctuations could lead to pressure on credit metrics in the event of marked adverse fluctuations in currency markets. Fitch believes implementation of an FX hedging policy is challenging as the financial hedging products available in the local market are limited and expensive. GWP hedges around 20% of its euro currency exposure with Georgia Capital Plc, GWP's ultimate parent, and maintains a portion of cash in foreign currencies. In addition, some of the electricity sales are priced in US dollars although the payment is received in lari (about 3% of total revenue in 2018). 2019 Results to Improve: In 2018 GWP reported revenue of GEL129 million and Fitch-calculated EBITDA of GEL68 million up from GEL119 million and GEL63 million in 2017, respectively. The revenue increase following the implementation of RAB regulation was offset by an increase in waste water treatments expenses paid to GSTP, which GWP expects to merge with by end-2019. GWP's reported revenue and EBITDA were mainly in Iine with Fitch's expectations, but its net debt was higher on the back of higher capex and dividends than Fitch's expectations. Fitch anticipates revenue and EBITDA to improve from 2019 from increasing power sales and consolidation of GSTP. SPA Agreement Terminated: In April 2019, the shareholder purchase agreement (SPA) was terminated and the government confirmed the fulfillment of all obligations under SPA by GWP's sole shareholder Georgian Global Utilities Limited (GGU), and its unconditional/unencumbered title to its shareholdings in privatized subsidiaries, including GWP. Additionally, the state has undertaken to ensure that possessed, but not owned by GWP assets are to be transferred to GWP's ownership. Merger of GSTP: Following the termination of the SPA agreement in April 2019, GWP expects to merge GSTP by end-2019 and to consolidate it for the full 2019 year, which is part of Fitch's rating case assumptions. Fitch does not expect this transaction to materially affect GWP's credit metrics, although it will improve EBITDA and to a lesser extent FFO, and total debt will increase by about GEL21 million and cash by about GEL2.4 million at end-2019. This will also reduce related party transactions. At end-2018, GWP on-lent GEL46 million (16% of total debt) to its sister companies, including GEL30 million to GSTP. Part of Larger Group: GWP is fully owned by GGU, which also owns several water channels, GSTP and Saguramo Energy LLC. Fitch assesses GWP's and GGU's credit profiles similarly, as in 2018 GWP generated 93% of the group's EBITDA and held 87% of the group's debt. Fitch will continue monitoring the group relationship and related party transactions to ensure these are appropriately reflected in the ratings. GGU is fully owned by Georgia Capital Plc, a Georgia-focused investment platform targeting opportunistic investments. The shareholder is looking to increase the value of GGU in the medium term and monetize it via a planned IPO. DERIVATION SUMMARY GWP is a small water company in terms of its asset base and geographic diversity relative to the rated peer universe. It is also an outlier in terms of the asset quality as legacy underinvestment in Georgia's infrastructure has led to water losses of around 50%, which is extremely high compared with an average of 24% in Russia or 20% in the Czech Republic. Russia's Ventrelt Holdings S.a.r.l. (BB-/Stable) is rated the same as GWP. Ventrelt's stronger asset quality, larger size and no FX exposure, which are to some extent compensated by GWP's asset ownership, support a higher negative leverage guideline of 4x compared with 3x for GWP. Although the regulatory framework has improved in Georgia, it still lacks the track record of consistent implementation. Ventrelt's financial profile is strong compared with peers and the company has comfortable leverage headroom within its rating. KEY ASSUMPTIONS Fitch's Key Assumptions within Its Rating Case for the Issuer - Georgian GDP growth of 4.5%-4.7% and CPI of 3% over 2019-2022 - Stable population in Tbilisi over the forecast period - Water tariff to remain at 2018 level for 2019-2020 and to increase at about inflation level for households in 2021 - Water losses dropping from 42% in 2018 to below 35% in 2022 - Blended electricity price at a low double digit from 2019 - Electricity sales volume increase to about 160 GWh - 180 GWh in 2019-2022 from about 100 GWh in 2018 - Inflation driven cost increase - Capital expenditure of GEL215 million over 2019-2022 - Average annual dividends of around GEL28 million over 2019-2022 - Restricted cash of around GEL1 million in 2019-2022 - Consolidation of GSTP for the full 2019 RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Actions - A decrease in FFO net-adjusted leverage (excluding connection fees) below 2.0x on a sustained basis. - An improvement in asset quality and the share of network losses. - Track record of successful implementation of the RAB regulatory framework. - Sustainable positive FCF generation. Developments That May, Individually or Collectively, Lead to Negative Rating Action - A sustained increase in FFO net-adjusted leverage (excluding connection fees) above 3.0x. - A sustained reduction in profitability and cash flow generation through a failure to reduce water losses or deterioration in cash collection rates. - A material increase in the company's exposure to foreign-currency fluctuations. - A material increase in related-party transactions. ========= I T A L Y ========= ALITALIA SPA: Italian Economic Minister Seeks Healthy Investors --------------------------------------------------------------- Helen Massy-Beresford at Air Transport World reports that Italy's economic development minister said the choice of a new investor to help rescue bankrupt Alitalia would be independent of any other dossier, in a reference to the Atlantia transport and infrastructure holding company that is said to be interested in taking part. According to ATW, Alitalia's special administrators and the Italian government are working toward a new June 15 deadline for the presentation of a firm bid from railway company Ferrovie dello Stato, which is set to lead the relaunch alongside Atlanta-based Delta Air Lines and the Italian state. But deputy prime minister and economic development minister Luigi Di Maio said that, just before the extension of a previous end-April deadline for Ferrovie dello Stato to present its detailed bid and business plan, offers from other investors were coming in, ATW relates. Italian media have been reporting that Atlantia, which is controlled by the Benetton family, is interested in the carrier, ATW notes. "Alitalia is a market-led operation and we want healthy investors—investors who are approaching the dossier with a healthy attitude. The important thing is that those who take part in Alitalia aren't having strange ideas about other dossiers," ATW quotes Mr. Di Maio as saying in a video posted on the ANSA website. About Alitalia With headquarters in Fiumicino, Rome, Italy, Alitalia is the flag carrier of Italy. It’s main hub is Leonardo da Vinci-Fiumicino Airport, Rome. On May 2, 2017, the airline went into administration. As previously reported by the Troubled Company Reporter - Europe, state-appointed administrators have been running Alitalia since 2017, after former shareholder Etihad Airways pulled the plug on funding and workers rejected a EUR2 billion recapitalization plan tied to 1,600 job cuts from a workforce of 12,500, Bloomberg News cited. =================== L U X E M B O U R G =================== MARCEL LUX IV: S&P Assigns 'B' Rating, Outlook Stable ----------------------------------------------------- S&P Global Ratings assigned its 'B' ratings to newly formed intermediate holding company Marcel LUX IV (SUSE) and to the $700 million equivalent secured first-lien term loan and $81 million revolving credit facility. In March 2019, private equity investor EQT completed the acquisition of global provider of open-source Linux-based software solutions and services SUSE from Micro Focus for about $2.5 billion in cash. The transaction was funded by about $700 million equivalent first lien-term loans, a $270 million second-lien term loan, as well as equity from EQT and, to a small extent, from SUSE's management team. Following closing, the process of carving SUSE out of Micro Focus is well underway, with a view to enable SUSE to operate as a stand-alone entity. The rating on SUSE is primarily constrained by its highly leveraged capital structure following the leveraged acquisition and ownership by EQT, which we view as the financial sponsor. S&P said, "The capital structure reflects our forecast adjusted total gross cash-paying debt to EBITDA of about 9.0x-9.5x in fiscal 2019 (ending Oct. 31, 2019), which we consider aggressive compared with other highly leveraged peers. This is only partly offset by our forecast of 12%-15% EBITDA growth prospects, which we think will provide scope for a meaningful reduction in adjusted leverage to 8.0x-8.5x in fiscal 2020. Additional support for the rating derives from our expectation of solid free operating cash flow (FOCF) thanks to SUSE's business model, which relies on upfront subscription fees by customers and very limited capital expenditure (capex). We forecast reported annual FOCF of $40 million-$50 million in fiscal 2019-2020, which equates to about $50 million-$65 million excluding our estimate of one-off costs associated with the carve-out. This reflects high free cash flow conversion, with FOCF to EBITDA of more than 40% despite meaningful pro forma annual cash interest payments of about $60 million." S&P said, "We think, however, that under the new financial sponsor ownership, SUSE's future financial policy could prevent it from meaningfully reducing leverage over time, as we believe the company may pursue acquisitions to strengthen its product portfolio or look to distribute cash to the owners in the medium term, noting that the sponsor has indicated that it may provide equity for future acquisitions." SUSE provides software solutions and services globally. Its core product is a paid version of the open-source Linux server operating system, which SUSE enhances with value-added tools, support, maintenance and security services, and necessary hardware and software certifications. S&P said, "Our assessment of SUSE's business risk is constrained by the company's lack of own intellectual property (IP), based on the open-source nature of the underlying Linux code. Although this is typical of companies operating in the open-source software space, we think it represents a weakness relative to rated peers who develop their own proprietary enterprise software. In our view, the open-source nature of Linux somewhat lowers the technological barriers to entry, and means that business customers, notably smaller ones, could switch to a free alternative. Equally, larger providers of public cloud services such as Amazon Web Services could decide to provide their customers with their own paid Linux product, in addition to the free version they offered." Moreover, SUSE's business is currently strongly concentrated on its core paid-Linux server product, which contributes about 95% of revenues. SUSE is currently making significant investments in the development of several adjacent products, but these are still nascent at this stage. This makes SUSE much more dependent on favorable dynamics in its specific niche market than other globally diversified software peers with broader product portfolios. While competition specifically within the paid-Linux market is fairly limited--with the two main players capturing about 90% of the market--SUSE's No. 2 position is well behind that of No. 1 provider Red Hat, which captures about 75% market share. SUSE's paid-Linux platform also competes with larger and better capitalized players in the wider server operating system market, such as Microsoft or Oracle. SUSE's business risk assessment benefits, however, from its strong brand and customer relationships in the paid-Linux market, its high share of recurring revenue, and leading position in selected verticals including SAP and IBM environments. S&P said, "We think this will enable it to capture its share in the substantial market growth for paid-Linux products, which the company forecasts at a compound annual growth rate of 11% until 2023. This is driven by growth in the overall installed base of server operating systems and a shift from Windows server environments toward paid-Linux. This is supported by strong growth in hybrid and public cloud architecture and the trend of movement of many applications to the cloud. Although SUSE does not benefit from its own IP, we view its core enterprise server product as relatively mission-critical to its customers, notably large enterprise clients. This is because these customers run critical applications on Linux servers, which place high demand on reliability, performance, and server uptime. These customers also require service levels, security, and certifications not provided by the alternative of free Linux. As a result, renewal rates as measured by renewal value (including up-selling) for large customers are currently about 98%, compared with average historical renewals rates across the customer base of about 90%. In addition, we think SUSE's pricing remains lower than for a comparable Windows solution and paid-Linux provides greater flexibility for application developers, which should support continued increase in Linux penetration." SUSE's business model is predominantly subscription-based, resulting in a high share of recurring revenues of about 95% with an average contract duration of somewhat more than two years, resulting in minimal revenue volatility. SUSE's top 20 clients accounted for about 25% of revenue in 2018, which indicates some concentration risk, in S&P's view. However, its revenue base is well diversified geographically, with about 40% of revenue coming from each North America and Europe, Middle East, and Africa, and the remainder predominantly from the Asia-Pacific region. Historically, SUSE shared a number of services and processes with its parent Micro Focus, which SUSE will have to replace with its own resources, particularly including areas such as support, IT infrastructure, and central functions. S&P sees some degree of risk that delays with the set-up of own capabilities may lead to higher costs for transitional services from Micro Focus or diversion of management attention from the core business. S&P said, "The stable outlook reflects our expectation that SUSE will successfully maintain its market position in the paid-Linux segment, enabling it to tap into growth in the overall paid-Linux market. We think this will facilitate revenue growth of 11%-13% and adjusted EBITDA margins of 24%-26% in the 12 months following transaction close. We forecast this will translate into S&P Global Ratings-adjusted debt to EBITDA of 9.0x-9.5x and sustainably positive reported FOCF of $40 million-$50 million in fiscal 2019, with leverage improving to less than 8.5x in fiscal 2020 (less than 8.0x excluding one-time carve-out costs). "We could lower our rating if lower-than-expected revenue growth or EBITDA margins, or an aggressive financial policy prevented SUSE's adjusted leverage from receding to less than 8.0x in the course of fiscal 2020 or if adjusted free operating cash flow to debt declined to sustainably below 5%, with both measures before deducting one-time carve-out related costs and cash outflows. "In our view, this would most likely be caused by slower take up of emerging products, unexpected higher churn or declining market share, or if delays with the carve-out lead to a loss of organizational focus on the core business. It could also happen if the company takes advantage of growth in EBITDA to make a dividend recapitalization. "We see rating upside as unlikely over the next 12 months given the very highly leveraged capital structure. However, we could raise the rating if SUSE reduced adjusted debt to EBITDA to sustainably below 6.0x while at the same time improving FOCF to adjusted debt to above 10%." Marcel Lux IV S.a.r.l. is an intermediate holding company and the parent of Germany-headquartered paid-Linux software and services vendor SUSE Linux. SUSE mainly focuses on providing a paid distribution of the open-source Linux server operating system and related software and services. In addition, SUSE is developing new products in the areas of enterprise storage as well as cloud and so-called container solutions. However, these accounted for less than 5% of total billings in the 12 months ending March 2019. Following the carve-out, SUSE is more than 99% owned by private equity firm EQT and its limited partner co-investors, with the remainder held by management. ============= R O M A N I A ============= TASSULO: Hasit Romania Takes Over Insolvent Bolintin-Deal Factory ----------------------------------------------------------------- Romania-Insider.com reports that Hasit Romania, the local subsidiary of Fixit, a German manufacturer of building materials, took over an insolvent dry mortar and plaster factory in Bolintin-Deal near Bucharest from Italian owner Tassulo, refurbished it and resumed operations as of May 1. The total investments, including the price paid to Tassulo's creditors and the cost of refurbishment, reached EUR4.5 million, Romania-Insider.com relays, citing Ziarul Financiar. The German group already operates a factory in Turda, in Transylvania, and is planning to open two more: one in the western part of Romania (already approved project) and another one in the eastern part of the country, Romania-Insider.com discloses. =========== R U S S I A =========== MTS BANK: Fitch Alters Outlook to Stable & Affirms 'BB-' IDR ------------------------------------------------------------ Fitch Ratings has revised Public Joint-Stock Company MTS Bank's (MTSB) Outlook to Stable from Negative and affirmed its Long-Term Issuer Default Rating (IDR) at 'BB-'. This follows a similar rating action on the parent, PJSC Mobile TeleSystems. KEY RATING DRIVERS IDRS AND SUPPORT RATING MTSB's IDRs and Support Rating are driven by potential support, in case of need, from the bank's parent, MTS. In Fitch's view, MTS has a strong propensity to support the bank given its majority 95% ownership; strategic synergies between the bank and the telecom company, which may be realized with increasing integration; shared brand and reputational considerations. The two-notch difference between the ratings of MTS and MTSB reflects the subsidiary's limited franchise and therefore strategic importance for the parent; still limited, albeit increasing integration with the parent and a limited record of profitable performance. RATING SENSITIVITIES IDRS AND SUPPORT RATING The bank's IDRs and Support Rating are sensitive to MTS's ratings or any change in the parent's propensity to support. The rating actions are as follows: Long-Term IDR affirmed at 'BB-'; Outlook revised to Stable from Negative Short-Term IDR affirmed at 'B' Viability Rating: 'b+'; unaffected Support Rating affirmed at '3' =========== S E R B I A =========== JUGOREMEDIJA: Bankruptcy Supervision Agency Sets June 24 Auction ---------------------------------------------------------------- SeeNews reports that Serbia's Bankruptcy Supervision Agency said it will hold an auction on June 24 for the sale of the factory of bankrupt pharmaceutical company Jugoremedija in Zrenjanin at a starting price of RSD800 million (US$7.6 million/EUR6.8 million). Interested parties are required to pay a deposit of RSD762.7 million by June 18 to participate in the auction, SeeNews discloses. Jugoremedija was declared bankrupt in November 2016, after which the Zrenjanin Commercial Court ordered the sale of its assets to repay creditors, SeeNews recounts. =========================== U N I T E D K I N G D O M =========================== LAMP: Gibraltar Court to Hear Liquidation Application on May 31 --------------------------------------------------------------- Aara Syed at Insurance Age reports that liquidation application of unrated insurer, LAMP, will be heard in Court on May 31 as insolvent provider says it is still pursuing sale options. Lamp applied for liquidation at the Supreme Court of Gibraltar, Insurance Age relates. In a statement, the Gibraltarian firm, as cited by Insurance Age, said that it made efforts to secure more investment but has been unsuccessful. According to Insurance Age, the statement read: "Having recently ceased to enter into new contracts of insurance or renew existing contracts the directors of Lamp Insurance Company and its parent company have been exploring all options available to them to obtain additional finance to enable the Company to meet its obligations under existing contracts and recommence issuing new contracts. "Regrettably, negotiations have failed to secure appropriate funding and the directors of the Company concluded that they had no option other than to submit an Application to the Supreme Court of Gibraltar for the Company to be placed into liquidation." The company explained that its cash flow predictions indicate that it does not have sufficient money to pay its debts and obtaining enough liquid assets within the time constraints is not possible, Insurance Age discloses. This means that the firm is insolvent, Insurance Age notes. According to the firm, any current Lamp policies remain valid but the firm's insolvency means that it cannot provide payout for claims, Insurance Age relays. Lamp warned that policyholders should start looking for alternative cover now and urged customers to talk to their broker, Insurance Age relates. According to Insurance Age, the statement also detailed that the firm is considering all options, including selling the business. It noted that any solution would still be subject to the purchaser fulfilling its due diligence requirements, regulatory approval, and making a firm financial commitment before the May 31 court date, Insurance Age discloses. The Gibraltar Financial Services Commission (GFSC) has also released a comment and said that it is likely that it will work closely with the appointed Official Receiver and/or the designated Insolvency Practitioner once chosen, Insurance Age states. Lamp offered general insurance products such as legal expenses, healthcare and general & warranty insurance to clients in the, UK, Europe and Asia. LONDON CAPITAL: Customers Express Concern Over Investigation ------------------------------------------------------------ Caroline Binham at The Financial Times reports that the UK Treasury ignored calls from customers of London Capital & Finance for a meeting to discuss the terms of an investigation into the GBP236 million scandal at the failed mini-bond provider and how regulators responded to it. LCF customers expressed concern on May 24 about several elements of the investigation, whose official remit the Treasury has confirmed by announcing that a former Court of Appeal judge, Dame Elizabeth Gloster, would head the review, the FT relates. According to the FT, bondholders were dismayed that the Treasury failed to meet their representatives before publishing the direction on May 23, arguing the investigation's terms do not include a requirement for Dame Elizabeth to study the impact of LCF's collapse on its customers. LCF's collapse into administration left 11,600 bondholders -- many of whom were first-time investors and pensioners -- wondering whether they will get their money back, the FT recounts. A spokesman for the bondholders, as cited by the FT, said they welcomed Dame Elizabeth's review but "given the FCA direction is two pages long, it is not clear why it has taken so long for HM Treasury to issue it. The bondholders had also requested HM Treasury meet the bondholder representatives before the publication of the direction, but this request was not honoured." There are further concerns about the year-long deadline, given "the demographics of the bondholder population and may have an adverse impact on their emotional wellbeing, the FT states. Furthermore, the prima facie evidence of serious regulatory failure is so compelling that it should be much shorter", the FT notes. Bondholders are hoping for a statutory finding of "serious regulatory failure", which would trigger automatic compensation, the FT relays. According to the FT, the Treasury said that it fully understood the concerns of those who had lost out from the collapse of LCF and that it had launched a wide-ranging and independent investigation that should be allowed enough time to be carried out correctly. PG TAVERNS: 100 Jobs Saved Following Rescue Deal ------------------------------------------------ Fiona Pringle at Edinburgh News reports that plans for two new pubs plunged pub chain PG Taverns (Scotland) Limited dangerously close to financial ruin threatening 100 jobs and the loss of popular pubs including The Jolly Botanist, The Doghouse, The Mousetrap, The King's Wark and the Fork & Field. But licensed insolvency specialists Wilson Field appointed administrators Kelly Burton and Lisa Hogg to negotiate a deal to save the bars and jobs, Edinburgh News relates. The demise has been blamed on spiralling costs and significant delays in setting up The Jolly Gin and Craft in Falkirk and The Grape in East Calder which sparked cashflow problems as the two new pub openings stalled, Edinburgh News discloses. PG Taverns also blamed "poor weather" for lower customer footfall in the existing pubs, Edinburgh News notes. Matters came to a head when the company was served with a winding-up petition by HMRC due to a significant historical backlog in tax payments, Edinburgh News relates. According to Edinburgh News, new company Clubhouse Bars Ltd has now been set up and is operating under licence from the administrators. The Joint Administrators are working closely with the bank, the landlord and Clubhouse to secure the long term future of the venues while will continue to be run by the same management team, offering the same levels of service to existing and new customers, Edinburgh News states. "It is always good to see businesses survive after facing difficulties. As well as saving 100 jobs, this process mitigated preferential claims for wages, holiday pay, redundancy, etc., estimated at almost GBP130,000," Edinburgh News quotes Ms. Burton as saying. REDHALL GROUP: Intends to Appoint Administrators Within Days ------------------------------------------------------------ Alliance News reports that Redhall Group PLC on May 28 said it intends to appoint administrators within 10 business days, unless "circumstances change". On May 24, the engineering services company said it has been in active discussions with some of its major shareholders and creditors to provide additional funding capacity to allow the company to alleviate the short-term cash flow pressure, Alliance News relates. The announcement came after a number of projects won by Redhall's subsidiaries Jordan Manufacturing and Booth Industries have been delayed, and a contract on an associated major nuclear infrastructure programme saw its value reduced amid design changes, Alliance discloses. According to Alliance, Redhall on May 24 requested its shares to be suspended from trading on London's AIM. Shares remain suspended, pending further notice, Alliance notes. STANDARD BANK: Fitch Gives BB+/B Ratings on $4MM Medium-Term Note ----------------------------------------------------------------- Fitch Ratings has assigned Standard Bank Group's (SBG) USD4 billion euro medium-term note (EMTN) programme final long and short-term ratings of 'BB+' and of 'B', respectively. The assignment of final ratings to the EMTN programme follows the receipt of final documents conforming to information already received. The final ratings are in line with the expected ratings assigned on May 10, 2019. The EMTN programme includes SBG and its wholly owned subsidiary, The Standard Bank of South Africa (SBSA), as issuers. The programme ratings are in line with SBG and SBSA's Foreign-Currency Long- and Short-Term Issuer Default Ratings (IDRs) of 'BB+' and 'B', respectively, and apply only to senior unsecured notes issued under the programme. All other notes that can be issued under the programme, including subordinated notes and local-currency notes, will be rated on a case-by-case basis. There is no assurance that all notes issued under the programme will be rated or that all rated notes will be aligned with the programme's ratings. KEY RATING DRIVERS The programme's ratings are driven by, and equalized with, SBG and SBSA's Long- and Short-Term IDRs. In Fitch's view, the likelihood of default on the senior unsecured notes under the programme reflects the likelihood of default of the group and the bank. RATING SENSITIVITIES The programme's ratings are sensitive to changes in SBG and SBSA's Long- and Short-Term IDRs. SBG's ratings are, among other things, sensitive to an increase in the group's double leverage. The rating actions are as follows: Standard Bank Group Limited Senior unsecured long-term programme rating assigned at 'BB+' Senior unsecured short-term programme rating assigned at 'B' THOMAS COOK: S&P Cuts ICR to 'CCC+' on Weak Trading, Outlook Neg. ----------------------------------------------------------------- S&P Global Ratings lowers to 'CCC+' from 'B-' its long-term issuer credit and issue-level ratings on U.K.-based tour operator Thomas Cook Group PLC. On May 16, 2019, Thomas Cook released interim results reflected further weakening in underlying profitability amid challenging conditions in the tour operator market, which has led to high levels of discounting. The company posted an underlying loss before interests and taxes (EBIT) of EUR245 million, compared to a loss of EUR170 million the year before. Thomas Cook expects this underperformance to continue such that underlying EBIT in second-half financial year ending Sept. 20, 2019 (FY2019) lags the same period last year. S&P said, "Following the first-half results--and with the challenging market environment unlikely to improve, along with pressures from higher fuel and hotel costs--we have revised down our base case expectations. We now anticipate revenues, and to a greater extent, underlying earnings, to both contract in FY2019. We forecast this will lead to negative free operating cash flows (FOCF) in FY2019 and S&P Global Ratings-adjusted leverage to climb to 7x-8x in FY2019, a level which we view as unsustainable. "Given this weak trading outlook and high financial leverage, we believe that the group now has reduced headroom for underperformance and will depend on favorable business and financial conditions to continue to meet its financial commitments. We also believe there is a material likelihood of suppliers tightening payment terms. Although we understand suppliers have not materially altered terms to date, we believe the group's ability to absorb this working capital-related liquidity pressure would be limited." Positively, it has announced that it has agreed to a term sheet for EUR300 million of short-term external funding in the form of a secured bank facility. Access to the facility depends on progress in the strategic review of the group's airline, but not on a specific outcome. S&P therefore envisage full availability of the facility. Absent any further operating setbacks, underperformance relative to our forecast, or a weakening of supplier terms, this should provide Thomas Cook with sufficient liquidity headroom to ensure it can cover the significant seasonal working capital outflow (estimated to be between EUR1.0 billion and EUR1.2 billion) expected during the first quarter of FY2020. As part of the earnings release, Thomas Cook says it has received multiple credible bids for all, or part of, the group's airline. While any potential sale of its airline business could help improve the group's liquidity and funding position, we continue to see execution risk related to this accelerated sale process as high, given overcapacity in the airline sector and that both the valuation and the timing of such a transaction are very uncertain. S&P said, "The negative outlook reflects our opinion that soft market conditions will continue to suppress Thomas Cook's earnings and lead to higher volatility in its cash flows and liquidity in the next six to 12 months, particularly in light of potential stresses on working capital. With the weak trading outlook weak and the group's leverage high, we now believe the group depends on favorable business conditions outside of its control to continue to meet its financial commitments in the medium term. "We could lower the ratings in the next 12 months if, in light of soft trading conditions, Thomas Cook's performance continues to deteriorate or suppliers materially alter payment terms, thereby weakening liquidity or leading the group to launch a distressed restructuring transaction. "We could revise the outlook back to stable in the next 12 months if Thomas Cook were to sustainably restore its earnings base and generate reported FOCF, thereby enhancing liquidity and reducing leverage to sustainable levels." An outlook revision to stable would also be contingent on Thomas Cook solidifying its competitive standing despite the challenging market conditions. ********* 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. 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