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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                          E U R O P E

          Friday, August 2, 2019, Vol. 20, No. 154

                           Headlines



C R O A T I A

3 MAJ: Croatia Gov't. Ready to Support Business to Avert Bankruptcy


G E R M A N Y

SENVION SA: Insolvency to Hit Downer's Full Year 2019 Results


I R E L A N D

CAVENDISH SQUARE: Fitch Affirms EUR9MM Class C Notes at 'BBsf'
HENLEY CLO I: Moody's Assigns B2 Rating to EUR10MM Class F Notes
PENTA CLO 6: Moody's Assigns B3 Rating to EUR10MM Class F Notes


N E T H E R L A N D S

EUROSAIL-NL 2007-1: Moody's Affirms Class D Notes Rating at Caa1


R U S S I A

HMS JSC: Fitch Affirms B+ Issuer Default Rating, Outlook Stable


U N I T E D   K I N G D O M

CO-OPERATIVE BANK: Fitch Maintains 'B' IDR on Rating Watch Negative
HAVELOCK INTERNATIONAL: Cash Flow Issues Prompt Administration
LENDY: Investors Must Wait Until October to Get Money Back
[*] UK: Almost Half of Scottish SMEs Face Cash Flow Issues


X X X X X X X X

[*] BOOK REVIEW: THE SUCCESSFUL PRACTICE OF LAW

                           - - - - -


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C R O A T I A
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3 MAJ: Croatia Gov't. Ready to Support Business to Avert Bankruptcy
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SeeNews reports that the Croatian government stated on Aug. 1 its
readiness to provide support to troubled 3 Maj shipyard in order to
help it avoid bankruptcy and restart production.

The government said in a statement filed with the Zagreb Stock
Exchange (ZSE) that it is ready to get involved in the process of
unblocking 3 Maj's accounts via issuing state guarantees, and thus
help the struggling shipyard restart production and complete
vessels already under construction, SeeNews relates.

According to SeeNews, the government also said it decided to put
the economy ministry together with Croatian Shipbuilding
Corporation -- Jadranbrod (CSC) in charge of making a detailed
analysis of the plan.

Zagreb-based CSC was established by the government with the main
task of providing expert monitoring of the restructuring process
and modernization programs of Croatian shipyards, SeeNews
discloses.

Once the analysis is made, the economy ministry should prepare a
list of concrete measures and decisions that need to be taken in
order to help 3 Maj avoid bankruptcy and restart production, and
submit it to the ministries of finance and justice, SeeNews states.
The two ministries should then propose to the government by Aug.
29 the legislative steps it needs to take in order to implement the
plan, SeeNews notes.

The government also said it has adopted the plan in response to a
request for the issuance of state guarantees submitted by the 3
Maj's management on July 30, according to SeeNews.

Following the government's announcement, the commercial court in
Rijeka postponed the hearing on the launch of bankruptcy
proceedings against 3 Maj which was scheduled for Aug. 1, SeeNews
discloses.

The Rijeka court said in a filing that the bankruptcy hearing
against 3 Maj was rescheduled for Sept. 26, since the government
pledge to intervene should result in unblocking the company's
account, thus removing the main reason for the launch of bankruptcy
proceedings, SeeNews relays.

The court also said that Croatia's financial agency, FINA, which
had requested the launch of bankruptcy, has informed the court that
3 Maj's overdue debt including interest totalled HRK81.48 million
(US$12 million/EUR11 million) as of Aug. 1, including HRK34.19
million of unpaid wages, HRK19.33 million owed to the government,
HRK10.32 million owed to state power utility firm HEP, and HRK17.63
million of unpaid debt to suppliers, SeeNews relates.




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G E R M A N Y
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SENVION SA: Insolvency to Hit Downer's Full Year 2019 Results
-------------------------------------------------------------
Nikhil Subba at Reuters reports that Downer EDI Ltd warned on Aug.
1 that it expects a negative impact to its full year 2019 results
following the insolvency of Germany's Senvion SA, the company's
construction partner in the Murra Warra wind farm in Victoria.

According to Reuters, Sydney-based Downer said wind turbine
manufacturer Senvion's bankruptcy would result in a charge of A$45
million (US$30.83 million) for the full year, related to
obligations for completing the wind farm.

In April, Senvion, which has more than a billion euros of debt,
received approval for insolvency from a German court, as the
Hamburg-based company faced delays and penalties related to big
projects, while the wind industry as a whole has seen falling
prices and increased competition, Reuters relates.




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I R E L A N D
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CAVENDISH SQUARE: Fitch Affirms EUR9MM Class C Notes at 'BBsf'
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Fitch Ratings has upgraded Cavendish Square Funding plc's class A-2
notes, and affirmed the others, as follows

EUR14.4 million class A2 notes upgraded to 'Asf' from 'BBBsf';
Outlook Stable

EUR9.3 million class B notes affirmed at 'BBBsf'; Outlook Stable

EUR9.0 million class C notes affirmed at 'BBsf'; Outlook Stable

Cavendish Square Funding plc is a securitisation of mainly European
structured finance securities that closed in 2006.

KEY RATING DRIVERS

Amortisation Impact

The upgrade of the class A2 notes reflects the increased credit
protection available for the rated notes as a result of portfolio
amortisation. The class A2 notes have paid down by EUR4.9 million
since June 2018 and credit enhancement (excluding defaulted assets)
increased by 6.2% for the class A-2 notes.

CDO Structure and Cash Flow Analysis

All over-collateralisation tests are passing with a reasonable
cushion. As such, all rated notes are currently paying interest on
a timely basis. A non-timely interest payment on the most senior
notes, currently the class A2, is an event of default for the
transaction. In a high default environment, the transaction would
rely on principal to cover interest payments. Principal
amortisation for mezzanine ABS tranches is hard to predict. The
class B and C notes could still accrue a significant amount of
deferred interest caused by defaults in the portfolio. This
interest may not be paid in full on the date when they become the
most senior causing an event of default. Therefore, Fitch has
affirmed both classes of notes.

Default Probability of Assets

The average credit quality of the performing portfolio is in the
'BBB-'/'BB+' category, an improvement from the 'BB' category 12
months ago. Assets classified as defaulted by Fitch (rated 'CCsf'
or below) now represent 32.1% of the total portfolio, a 2.1%
increase compared with last year.

Correlation Impact

The portfolio remains diversified despite the amortisation. There
are currently 50 performing issuers in the portfolio, down from 53
as of the last review. Performing assets are concentrated in RMBS
as they comprise 91.8% of the performing portfolio, i.e. decrease
from 93.5% last year. Spanish assets represent 39.3% of the
performing portfolio as of the June 2019 investor report.

Recovery on Defaulted Assets

As most of the assets within the portfolio are subordinated
tranches, its recovery expectation for the portfolio is low, near
0%.

VARIATIONS FROM CRITERIA

The model-implied ratings for the class B and C notes are 'BBsf'
and 'CCCsf', i.e. three notches and six notches below their current
ratings, respectively. This is caused by deferred interest and the
event of default definition, under the agency's principal
amortisation schedule assumption. The affirmation of the class B
and C notes at 'BBBsf' and 'BBsf', respectively, is a variation
from Fitch's criteria. This variation takes into account Fitch's
view on the uncertainty around the portfolio repayment profile and
repayment of any deferred interest on the class B and C notes once
they have become the most senior ones.

Fitch has also analysed the maximum achievable ratings for the
class B and C notes, assuming that all interest on these classes
would be paid in full by the end of the transaction. This amendment
has no impact on the class A2 notes' rating, while the class B and
C notes would achieve an upgrade to 'Asf'.

However, as the indenture does not allow for the deferral of the
interest of the junior notes when most senior, the current ratings
are appropriate in the agency's view. The class B and C notes have
consequently been affirmed.


HENLEY CLO I: Moody's Assigns B2 Rating to EUR10MM Class F Notes
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Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Henley CLO I
Designated Activity Company:

EUR2,000,000 Class X Senior Secured Floating Rate Notes due 2032,
Definitive Rating Assigned Aaa (sf)

EUR247,000,000 Class A Senior Secured Floating Rate Notes due 2032,
Definitive Rating Assigned Aaa (sf)

EUR29,000,000 Class B-1 Senior Secured Floating Rate Notes due
2032, Definitive Rating Assigned Aa2 (sf)

EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2032,
Definitive Rating Assigned Aa2 (sf)

EUR25,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned A2 (sf)

EUR27,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned Baa3 (sf)

EUR22,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned Ba3 (sf)

EUR10,000,000 Class F Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned B2 (sf)

RATINGS RATIONALE

The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.

The Issuer is a managed cash flow CLO. At least 90% of the
portfolio must consist of secured senior loans or senior secured
bonds and up to 10% of the portfolio may consist of unsecured
senior obligations, second-lien loans, high yield bonds and
mezzanine obligations. The portfolio is expected to be around 87%
ramped up as of the closing date and to be comprised predominantly
of corporate loans to obligors domiciled in Western Europe. The
remainder of the portfolio will be acquired during the ramp-up
period in compliance with the portfolio guidelines.

Napier Park Global Capital Ltd will manage the CLO. It will direct
the selection, acquisition and disposition of collateral on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four and a half
year reinvestment period. Thereafter, subject to certain
restrictions, purchases are permitted using principal proceeds from
unscheduled principal payments and proceeds from sales of credit
risk obligations and credit improved obligations.

Interest and principal amortisation amounts due to the Class X
Notes are paid pro rata with payments to the Class A Notes. The
Class X Notes amortises by 12.5% over the 8 payment dates starting
on the second payment date.

In addition to the eight classes of notes rated by Moody's, the
Issuer issued EUR 34.2M of Subordinated Notes which are not rated.

The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
March 2019.

Factors that would lead to an upgrade or downgrade of the ratings:

The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.

Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in March 2019.

Moody's used the following base-case modeling assumptions:

Target Par Amount: EUR 400,000,000

Diversity Score: 46

Weighted Average Rating Factor (WARF): 2890

Weighted Average Spread (WAS): 3.75%

Weighted Average Coupon (WAC): 5.0%

Weighted Average Recovery Rate (WARR): 43.25%

Weighted Average Life (WAL): 8.5 years

Moody's has addressed the potential exposure to obligors domiciled
in countries with local currency ceiling (LCC) of A1 or below. As
per the portfolio constraints and eligibility criteria, exposures
to countries with LCC of A1 to A3 cannot exceed 10% and obligors
cannot be domiciled in countries with LCC below A3.

PENTA CLO 6: Moody's Assigns B3 Rating to EUR10MM Class F Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Penta CLO 6
Designated Activity Company:

EUR248,000,000 Class A Senior Secured Floating Rate Notes due 2032,
Definitive Rating Assigned Aaa (sf)

EUR23,000,000 Class B-1 Senior Secured Floating Rate Notes due
2032, Definitive Rating Assigned Aa2 (sf)

EUR15,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2032,
Definitive Rating Assigned Aa2 (sf)

EUR25,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned A2 (sf)

EUR27,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned Baa3 (sf)

EUR22,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned Ba3 (sf)

EUR10,000,000 Class F Senior Secured Deferrable Floating Rate Notes
due 2032, Definitive Rating Assigned B3 (sf)

RATINGS RATIONALE

The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in its methodology.

Penta CLO 6 Designated Activity Company is a managed cash flow CLO.
At least 90.0% of the portfolio must consist of senior secured
loans and senior secured bonds and up to 10.0% of the portfolio may
consist of unsecured obligations, second-lien loans, mezzanine
loans and high yield bonds. The portfolio is expected to be
approximately 80% ramped up as of the closing date and to be
comprised predominantly of corporate loans to obligors domiciled in
Western Europe.

Partners Group (UK) Management Ltd (the "Manager") will manage the
CLO. It will direct the selection, acquisition and disposition of
collateral on behalf of the Issuer and may engage in trading
activity, including discretionary trading, during the transaction's
four and a half year reinvestment period. Thereafter, purchases are
permitted using principal proceeds from unscheduled principal
payments and proceeds from sales of credit risk and credit improved
obligations are subject to certain restrictions.

In addition to the seven classes of notes rated by Moody's, the
Issuer issued EUR 37,600,000 of subordinated notes, which are not
rated.

The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
March 2019.

Factors that would lead to an upgrade or downgrade of the ratings:

The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. Partner Group's investment decisions and
management of the transaction will also affect the notes'
performance.

Moody's modeled the transaction using CDOEdge, a cash flow model
based on the Binomial Expansion Technique, as described in Section
2.3 of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in March 2019.

Moody's used the following base-case modeling assumptions:

Par amount: EUR 400,000,000

Diversity Score: 42

Weighted Average Rating Factor (WARF): 2885

Weighted Average Spread (WAS): 3.60%

Weighted Average Coupon (WAC): 4.50%

Weighted Average Recovery Rate (WARR): 43.50%

Weighted Average Life (WAL): 8.5 years

Moody's has addressed the potential exposure to obligors domiciled
in countries with local currency ceiling (LCC) of A1 or below. As
per the portfolio constraints and eligibility criteria, exposures
to countries with LCC of A1 to A3 cannot exceed 10% and obligors
cannot be domiciled in countries with LCC below A3.



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EUROSAIL-NL 2007-1: Moody's Affirms Class D Notes Rating at Caa1
----------------------------------------------------------------
Moody's Investors Service upgraded the rating of Class B Notes in
Eurosail-NL 2007-1 B.V.. The rating action reflects:

  - The increased levels of credit enhancement for the affected
Notes.

Moody's affirmed the ratings of the Notes that had sufficient
credit enhancement to maintain current ratings on the affected
Notes.

LIST OF AFFECTED RATINGS:

EUR306.25M Class A Notes, Affirmed Aaa (sf); previously on Feb 13,
2015 Upgraded to Aaa (sf)

EUR14.53M Class B Notes, Upgraded to Aaa (sf); previously on Feb
13, 2015 Confirmed at Aa2 (sf)

EUR14.00M Class C Notes, Affirmed A3 (sf); previously on Feb 13,
2015 Downgraded to A3 (sf)

EUR12.78M Class D Notes, Affirmed Caa1 (sf); previously on Feb 13,
2015 Downgraded to Caa1 (sf)

RATINGS RATIONALE

The rating action is prompted by:

Deal deleveraging resulting in an increase in credit enhancement
for the affected tranche.

Increase in Available Credit Enhancement:

Sequential amortization and non-amortizing reserve funds led to the
increase in the credit enhancement available in this transaction.

For instance, the credit enhancement for the tranche B Notes
affected by the rating action increased from 20.7% to 29.5% since
the last rating action in February 2015.

The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
July 2019.

The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors or circumstances that could lead to an upgrade of the
ratings include: (1) performance of the underlying collateral that
is better than Moody's expected; (2) deleveraging of the capital
structure; (3) improvements in the credit quality of the
transaction counterparties; and (4) a decrease in sovereign risk.

Factors or circumstances that could lead to a downgrade of the
ratings include: (1) an increase in sovereign risk; (2) performance
of the underlying collateral that is worse than Moody's expected;
(3) deterioration in the Notes' available credit enhancement; and
(4) deterioration in the credit quality of the transaction
counterparties.



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R U S S I A
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HMS JSC: Fitch Affirms B+ Issuer Default Rating, Outlook Stable
---------------------------------------------------------------
Fitch Ratings has affirmed Russian pumps & compressors manufacturer
JSC HMS Group's Foreign- and Local-Currency Issuer Default Rating
at 'B+'. The Outlook is Stable. Fitch has also affirmed JSC
Hydromashservice's senior unsecured rating at 'B+'/'RR4'.

The ratings reflect HMS's lack of geographic and customer
diversification, smaller scale of operations versus international
peers', volatile free cash flow generation and a low share of
aftermarket services revenue. The ratings also reflect HMS's
leading market position, strong customer base, comfortable
liquidity and stable fundamentals of the oil industry.

KEY RATING DRIVERS

Squeezed Profitability: HMS's revenue reached RUB50 billion in 2018
due to an increasing order intake and stable demand from oil & gas
(O&G) majors. However, EBITDA margin declined in 2018 to 11.5% as a
result of ongoing tough competition and a lower share of large
orders in the pumps segment. Fitch does not expect any further
material deterioration in HMS' business performance and with
continued capex and modernisation of the O&G equipment segment and
pump business Fitch expects margins to stabilise. However, given
squeezed EBITDA and funds from operations (FFO) margins relative to
previous years', continued weakening in operating performance could
move the company close to its negative rating sensitivities.

Volatile FCF: Historically volatile FCF is a key rating constraint.
In line with its previous expectations FCF in 2018 turned negative
due to grown working capital needs, continued capex and significant
dividend payments. Fitch expects negative FCF in 2019, due mainly
to a smaller share of large contracts, which imply less advance
payments from customers. As a result Fitch forecasts
working-capital outflow in 2019 and together with capex and
dividends pay-out of about RUB1 billion it will further affect FCF.
To cover working-capital needs the company has increased its debt
load with FFO adjusted net leverage reaching 2.9x as at end-2018
versus 2.1x at end-2017. Fitch does not expect further rise of
leverage metrics; however, severe volatility of profitability and
FCF might affect the company's leverage.

Leading Market Position: HMS is the leading manufacturer of
industrial pumps and O&G equipment in Russia and CIS with a market
share of about 32% and 45% respectively. HMS possesses the largest
installed base in Russia. A strong position, successful long-term
cooperation with major customers and high capital expenses in
manufacturing facilities act as significant barriers to entry in
the company's niche market and helps to protect margins over the
long-term. Nevertheless, growing competition from a large number of
small producers affects HMS's profitability. Competition from
foreign producers is limited due to differences between national
and international engineering standards.

End-Markets of Cyclical Nature: Over 75% of HMS's revenue is
exposed to the cyclical O&G industry. Fitch has a stable outlook
for the Russian oil and gas (O&G) sector, and expects oil
production will be broadly stable due to OPEC+ restrictions. Russia
remains one of the leading oil producers in the world. Russian O&G
majors continue to spend on capex and Fitch does not expect
material reduction of capex in the short- to medium-term. However,
dependence of HMS's business on the capex programme of major O&G
companies makes its business vulnerable to the cyclicality of the
O&G industry, which Fitch views as rating-negative.

Limited Diversification: HMS's ratings are constrained by limited
geographic diversification as the company's primary focus is
Russia. The share of exports at around 10% of sales is not
significant. However, its strong market position underpins stable
demand for the company's products over the long-term.  HMS has a
wide range of customers covering around 5,000 clients. However,
customer diversification is limited given the dominance of O&G as
customers, three of whom contributed about 50% of HMS's revenue in
2018.

Low Share of Aftermarket Services: Service and aftermarket revenue
typically represents recurring income that is less sensitive to
economic cycles. The majority of HMS's customers usually have their
own service departments. As a result the share of aftermarket
services revenue is in low single-digits for HMS, which is a rating
constraint.

No FX Exposure: HMS has no material FX mismatch. It operates
primarily in Russia, with the majority of its revenue generated in
Russian roubles. Operating costs are also mainly denominated in the
local currency and almost all debt as of end-H119 was in Russian
roubles.

DERIVATION SUMMARY

The ratings of HMS reflect its leading market position in Russia
and CIS, relatively high barriers to entry, long-term and
successful relationship with leading O&G companies, comfortable
liquidity and expected stable demand for its products.

HMS is comparable to its Russian and foreign manufacturing peers in
terms of business nature, such as Borets International Limited
(Borets; BB-/Stable) and Flowserve Corporation (Flowserve;
BBB-/Negative), which also produce pumps and equipment for the O&G
industry. A smaller scale of operations than that of Flowserve and
FCF vulnerability are offset by a strong market position and
long-term relationship with Russian O&G majors, limited FX mismatch
and moderate leverage metrics. Similar to other Russian industrial
peers, such as Borets and CJSC Transmashholding (TMH; BB/Stable),
HMS's business profile is characterised by limited geographical and
customer diversification. However, HMS's lower share of aftermarket
revenue, weaker profitability and volatile FCF results in the
ratings being lower than those of the Russian peers.

No country-ceiling, parent/subsidiary or operating environment
aspects have an impact on the ratings.

KEY ASSUMPTIONS

Fitch's Key Assumptions within its Rating Case for the Issuer

  - Revenue to grow 14% in 2019 on execution of large contracts,
and on average 2.5% p.a. in 2020-2022

  - EBITDA margin deteriorating to an average of 11% over 2019-2022
due to growing competition.

  - Capex intensity at around 3% over 2019-2022

  - Dividend pay-out ratio in line with management's dividend
policy at above 50%

  - Share buy-back to continue in 2019

Key Recovery Rating Assumptions

  - The recovery analysis assumes that the company would be
considered a going concern in bankruptcy and that it would be
reorganised rather than liquidated

  - A 10% administrative claim

  - Its going-concern EBITDA estimate of RUB4.9 billion reflects
Fitch's view of a sustainable, post-reorganisation EBITDA level
upon which Fitch bases the valuation of the company

  - Its going-concern EBITDA estimate is 25% below projected 2019
EBITDA, assuming likely operating challenges at the time of
distress

  - An enterprise value (EV) multiple of 4x is used to calculate a
post-reorganisation valuation and is in line with the multiple
applied to other Russian industrial peers

  - Fitch estimates the total amount of debt for claims at RUB19.7
billion, which includes secured bank debt of RUB330 million and
unsecured debt of RUB19.4 billion

  - Fitch calculates the recovery prospects at 89%-100%, but the
Recovery Rating for the RUB3 billion of senior unsecured bond is
limited to 'RR4' due to country considerations.



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U N I T E D   K I N G D O M
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CO-OPERATIVE BANK: Fitch Maintains 'B' IDR on Rating Watch Negative
-------------------------------------------------------------------
Fitch Ratings has maintained The Co-operative Bank p.l.c.'s 'B'
Long-Term Issuer Default Rating on Rating Watch Negative (RWN). At
the same time Fitch has affirmed The Co-operative Bank's Viability
Rating at 'b'.

Fitch placed the Long-Term IDR on RWN on March 1, 2019, to reflect
the heightened uncertainty over the ultimate outcome of the UK's
exit from the European Union and the increased risk that a
disruptive 'no-deal' Brexit could result in negative action on UK
banks, most likely with Negative Outlooks being assigned.

Fitch expects to resolve the RWN on the UK's scheduled exit from
the EU. In the event a Brexit agreement is concluded, all else
being equal, Fitch would resolve the RWN and assign a Stable
Outlook.

KEY RATING DRIVERS

IDRs and VR

The Co-operative Bank's IDRs and VR primarily reflect the
vulnerability of the bank's capital to continued losses. It also
incorporates heightened execution risk as the bank continues to
restructure in the context of economic uncertainties and
competitive pressures in the market. The ratings also reflect the
improvements the bank has been making on its risk controls and its
resilient franchise.

The Co-operative Bank reported a pre-tax loss of GBP141 million in
2018 and Fitch expects that the bank will remain loss-making for
the next two to three years. This is due to tight margins and the
bank's ongoing investment in IT systems and digital capabilities.
Profitability benefits from cyclically low impairment charges, and
progress in growing revenue, strengthening the net interest margin
and improving cost efficiency in line with the bank's strategy are
key to returning to profitability and mitigating increased
through-the-cycle impairments. Fitch considers profitability to be
a factor of higher importance to the bank's VR.

Fitch also views capitalisation as a higher-importance factor to
The Co-operative Bank's VR. The bank's sound common equity Tier 1
(CET1) ratio of 22.3% at end-2018 benefits from recent capital
raises and several years of legacy asset deleveraging (particularly
the securitisation of a large portion of the legacy Optimum
portfolio in 2017) and provides headroom to absorb moderate losses.
While the CET1 ratio now meets regulatory requirements, partly
thanks to a reduced Pillar 2a requirement in 2018, Fitch
understands that the bank is not fully in line with its minimum
capital guidance as set by the PRA, but retains a significant
surplus to its overall capital requirements. The capital ratios,
which are due to fall over the next three to four years, remain
vulnerable to significant unexpected losses.

The bank's franchise is resilient and benefits from a loyal
customer base, although its size makes it a modest player and a
price-taker in the UK retail market. Wholesale market funding is
limited and focuses on secured issuances although the bank
successfully issued GBP200 million Tier 2 debt in April 2019.

Asset quality continues to improve and deleveraging progress means
that legacy assets now form a small proportion of the loan book.
The core book is mainly comprised of moderate-loan/value prime
mortgage loans. Deleveraging and supportive economic conditions
have driven a continued decline in impaired loans (Stage 3 loans
accounted for 1% of end-2018 loans, while Stage 3 and POCI loans
formed 2.8%) to be closer in line with UK mortgage lending peers.
Fitch expects asset quality to benefit from a strengthened risk
appetite and improving risk controls in the medium term. This
includes increased automation in the credit risk underwriting and
monitoring process, although the strengthened risk framework has
yet to be tested under conditions of strong core loan growth.

The Short-Term IDR maps to the Long Term-IDR.

SUPPORT RATING (SR) AND SUPPORT RATING FLOOR (SRF)

The Co-operative Bank's SR of '5' and SRF of 'No Floor' reflect
Fitch's view that senior creditors cannot rely on extraordinary
support from the UK authorities in the event the group becomes
non-viable, both due to its low systemic importance and because in
its opinion the legislation and regulation implemented in the UK is
likely to require senior creditors to participate in losses for
resolving the group.

RATING SENSITIVITIES

IDRs and VR

The Long-Term IDR is primarily sensitive to the manner in which the
UK leaves the EU as indicated by the RWN, which reflects the
heightened probability that Fitch will assign a Negative Outlook in
the event of a disruptive 'no-deal' Brexit. Fitch believes that in
an adverse Brexit scenario, the bank would face severe headwinds
affecting its ability to execute its strategy and return to
profitability in the medium term.

The IDR and the VR could be downgraded if the bank is not able to
successfully implement the outstanding areas of restructuring or if
business growth accelerates without an adequate risk control
infrastructure in place. A failure to improve structural
profitability or to stem losses in the next two to three years,
which would cause an erosion of capital, could also result in a
downgrade.

An upgrade of the bank's ratings will require evidence of a
sustained improvement of its structural profitability.

SUPPORT RATING AND SUPPORT RATING FLOOR

Fitch does not expect any changes to the SR and the SRF given the
low systemic importance of the bank as well as the legislation in
place that is likely to require senior creditors to participate in
losses for resolving The Co-operative Bank.

The rating actions are as follows:

Long-Term IDR: 'B' maintained on RWN

Short-Term IDR: affirmed at 'B'

Viability Rating: affirmed at 'b'

Support Rating: affirmed at '5'

Support Rating Floor: affirmed at 'No Floor'

HAVELOCK INTERNATIONAL: Cash Flow Issues Prompt Administration
--------------------------------------------------------------
Gordon Holmes at Fife Today reports that almost 250 people have
lost their jobs after Kirkcaldy-based Havelock International
entered administration.

According to Fife Today, it was revealed on July 31 that staff at
the interior fit-out specialist had not been paid after what was
described as a "cashflow" issue, but reassurances were made that
the company was still viable and had a full order book.

However, a statement on Aug. 1 from joint administrators David
Baxendale and Zelf Hussain of PricewaterhouseCoopers (PwC) said the
directors had concluded that it was not possible to continue to
operate the business while a buyer was sought, Fife Today relates.

It is understood a small number of staff will be kept on to assist
the administrators while the company winds down operations, Fife
Today notes.



LENDY: Investors Must Wait Until October to Get Money Back
----------------------------------------------------------
Adam Williams at The Telegraph reports that the City watchdog gave
its seal of approval on the now collapsed peer-to-peer platform
Lendy despite knowing of issues at the firm, it has emerged, as
investors are told to wait until October to get their money back.

In a bizarre set of circumstances, the Financial Conduct Authority
(FCA) said it approved Lendy's business as there was greater
potential for "consumer harm" had it not, as the company would have
collapsed immediately, The Telegraph relates.

The regulator said the lender was already paying compensation for
previous wrongdoings--payments that would have been at risk had the
FCA denied authorization, The Telegraph notes.

Lendy was given the seal of approval by the Financial Conduct
Authority (FCA) in July 2018, The Telegraph recounts.




[*] UK: Almost Half of Scottish SMEs Face Cash Flow Issues
----------------------------------------------------------
Hannah Burley at The Scotsman, citing the latest confidence tracker
from Bibby Financial Services, reports that nearly half of
Scotland's small businesses are struggling with cashflow as they
attempt to prepare for Brexit.

According to The Scotsman, almost 160,000--or 46%--of Scottish
small and medium-sized enterprises (SMEs) suffered cashflow issues
in the second quarter, while 34% actively sourced funding in the
period.

Invoice finance specialist Bibby indicated that smaller firms were
turning to additional investment to offset risks associated with a
no-deal Brexit, The Scotsman states.

More than half (54%) of SMEs in Scotland believe a recession is
likely in the next 12 months, The Scotsman notes.




===============
X X X X X X X X
===============

[*] BOOK REVIEW: THE SUCCESSFUL PRACTICE OF LAW
-----------------------------------------------
Author: John E. Tracy
Publisher: Beard Books
Soft cover: 470 pages
List Price: $34.95

Order a copy today at https://is.gd/fSX7YQ

Originally published in 1947, The Successful Practice of Law still
ably serves as a point of reference for today's independent lawyer.
Its contents are based on a series of non-credit lectures given at
the University of Michigan Law School, where the author began
teaching after 26 years of law practice. His wisdom and experience
are manifest on every page, and will undoubtedly provide guidance
for today's hard-pressed attorney.

The Successful Practice of Law provides timeless fundamental
guidelines for a successful practice. It is intended neither as a
comprehensive reference work, nor as a digest of law. Rather, it is
a down-to-earth guide designed to help lawyers solve everyday
problems -- a ready-to-tap source of tested proven methods of
building and maintaining a sound practice.

Mr. Tracy talks at length about developing a client base. He
contends that a firemen's ball can prove just as useful as an
exclusive party at the country club in making contacts with future
clients. He suggests seeking work from established firms as a way
to get started before seeking collections work out of desperation.

In his chapter on keeping clients, Mr. Tracy gives valuable lessons
in people skills: "(I)f a client tells you he cannot sleep nights
because of worry about his case, you will ease his mind very much
by saying, 'Now go home and sleep. I am the one to do the worrying
from now on.'" Rather than point out to a client that his legal
predicament is partly his fault, "concentrate on trying to work out
a program that will overcome his mistakes." He cautions against
speculating aloud to clients on what they could have done
differently to avoid current legal problems, lest they change their
stories and suddenly claim, falsely, that they indeed had done that
very thing. He also advises against deciding too quickly that a
client has no case: "After you have been in practice for a few
years you will be surprised to find how many seemingly desperate
cases can be won."

Mr. Tracy advises studying as the best use of downtime. He quotes
Mr. Chauncey M. Depew: "The valedictorian of the college, the
brilliant victors of the moot courts who failed to fulfill the
promise of their youth have neglected to continue to study and have
lost the enthusiasm to which they owed their triumphs on mimic
battle fields." Mr. Tracy advises against playing golf with one's
client every time he asks: "My advice would be to accept his
invitation the first time, but not the second, possibly the third
time but not the fourth."

Other topics discussed by Mr. Tracy, with the same practical, sound
advice, include fixing fees, drafting legal instruments, examining
an abstract of title, keeping an office running smoothly, preparing
a case for trial, and trying a jury case. But some of best counsel
he offers is the following: You cannot afford to overlook the fact
that you are in the practice of law for your lifetime; you owe a
duty to your client to look after his interests as if they were
your own and your professional future depends on your rendering
honest, substantial services to your clients. Every sound lawyer
will tell you that straightforward conduct is, in the end, the best
policy. That kind of advice never ages.

John E. Tracy was Professor Emeritus and Member of University of
Michigan Law School Faculty from 1930 to 1969. Professor Tracy
practiced law for more than a quarter century in Michigan,
New York City, and Chicago before joining the Law School faculty in
1930. He retired in 1950. He was born in 1880. He died in December
1969.



                           *********


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 * * *