20 10 / 2011
WRAPUP 4-French credit review threatens euro zone rescues
* Greece braces for strike, protests over more austerity* Merkel seeks permanent troika in Athens, deficit sinners
to courtBy Paul Taylor and Daniel FlynnPARIS, Oct 18 (Reuters) - Doubt cast on France’s triple-A
credit rating by Moody’s raised uncertainty over Europe’s hopes
of drawing a line under its sovereign debt crisis, five days
before a crucial EU summit.German Chancellor Angela Merkel said Sunday’s meeting would
be an important step but warned one summit would not be enough
to resolve the crisis, while the EU’s trade chief said the
currency zone could unravel unless tough action was taken.Moody’s said late on Monday it may slap a negative outlook
on France’s Aaa rating in the next three months if slower growth
and the costs of helping bail out banks and other euro zone
members stretch its budget too much.”The deterioration in debt metrics and the potential for
further contingent liabilities to emerge are exerting pressure
on the stable outlook of the government’s Aaa debt rating,” the
U.S. ratings agency said in its annual report on France.The warning, which sent the risk premium on French
government bonds shooting up to a euro lifetime high, came as
European Union leaders prepared measures to protect the region’s
financial system from a potential Greek debt default.That strategy includes new steps to reduce Greece’s debt,
strengthening the capital of banks with exposure to troubled
euro zone countries and leveraging the euro zone’s rescue fund
to prevent market contagion to bigger economies.Merkel told a news conference in Berlin that “further steps”
would be needed after Sunday’s summit to overcome the sovereign
debt crisis.”These sovereign debts have been built up over decades and
therefore one cannot resolve them with one summit but it will
take difficult, long-term work. Nonetheless, I do think we will
also be able to take relevant, important decisions,” she
said.The summit is likely to agree to leverage the bailout fund
by allowing it to underwrite a portion of newly issued euro zone
debt, euro zone officials said.With about 300 billion euros of its 440 billion-euro
capacity still available, by guaranteeing the first 20-30
percent of any losses, the European Financial Stability Facility
(EFSF) could stretch three to five times further.”This idea is the main contender,” one official said.Economy Minister Francois Baroin insisted that France’s AAA
status was not at risk but acknowledged that the 1.75 percent
growth forecast on which the government has based its 2012
budget was over-optimistic and would have to be revised down.”The triple-A is not in danger because we will be even ahead
of schedule on passing deficit reduction measures,” Baroin said
on France 2 television.”We will do everything to avoid being downgraded.”Asked if next year’s outlook would have to be reduced in
light of weak growth prospects, he added: “We will adapt it,
that much is clear.”France and Germany, the two strongest economies among the 17
euro zone members, form the backbone of the EFSF rescue fund and
are drafting a crisis-fighting strategy for Sunday’s summit.Without France’s triple-A rating, the whole edifice of
rescue measures for troubled peripheral euro zone states would
begin to crumble, putting more weight on Germany, where there is
a strong public backlash against bailouts.German leaders on Monday doused market hopes of a miracle
cure at Sunday’s Brussels summit, saying no one should expect a
“definitive solution”.Merkel told a closed-door meeting of her Christian Democrats
she favoured having a permanent presence of the so-called
“troika” of international inspectors in Greece to supervise its
public finances if there were doubts about fiscal management,
party sources said.She also expected agreement on proposals to send euro zone
countries that repeatedly breached EU deficit rules to the
European Court of Justice, the sources said.FRENCH SPREAD HITS RECORDSpeaking in Berlin, European Trade Commissioner Karel De
Gucht blamed political dithering and failure to enforce euro
zone rules for the problems, urging governments to act as one.”If Europe’s political class is unable to take unpopular
decisions on deficits, haircuts, the size of the European
Financial Stability Facility and bank recapitalisation, the
monetary union may well unravel with truly incalculable economic
and political costs,” he said.Analysts said Moody’s move was unusual, since it had not put
France on ratings watch, but it was a signal to the government
that it needed to adopt a more realistic growth assumption and
adjust its budget measures accordingly.Monday’s review was only a preliminary step, but a negative
outlook would be a sign that Moody’s could downgrade its rating
on France in the next couple of years. It placed the United
States’s Aaa rating on negative outlook in August.The spread on French 10-year bonds over benchmark German
bonds jumped to a 19-year high of 114 basis points, the first
time it had breached 1 percentage point in more than a decade.
Safe-haven German Bunds rose on ebbing hopes of a quick solution
to the debt crisis.The ratings review was a potential embarrassment for
conservative President Nicolas Sarkozy, who is expected to run
for re-election next April and May and faces a strong challenge
from Socialist candidate Francois Hollande, who won a primary
election run-off on Sunday.Prime Minister Francois Fillon made clear in a television
interview that if growth fell short of official forecasts, Paris
would take further austerity measures, though analysts say that
will be difficult with presidential and parliamentary elections
due next year.In Greece, unions representing around half of Greece’s 4
million-strong workforce have called a 48 hour general strike
for Wednesday and Thursday in protest at a sweeping package of
austerity measures due to be passed in parliament this week.Meanwhile Portugal, which has also received an EU/IMF
bailout, announced a draconian 2012 budget that risks a severe
recession. The European Commission called it “courageous”.Greece’s overall debt is forecast to climb to 357 billion
euros ($491.4 billion) this year, or 162 percent of annual
economic output — a level economists agree is unsustainable.To reduce this mountain, euro zone leaders are racing to
convince banks to accept “voluntary” writedowns of up to 50
percent on their sovereign holdings. At the same time, they are
trying to agree on a blueprint for recapitalising financial
institutions at risk from the deepening crisis.Negotiations with the Institute of International Finance,
representing the banks, were continuing in Brussels after
diplomats said Deutsche Bank chief Josef Ackermann,
who is also chairman of the IIF, met EU Council President Herman
Van Rompuy to discuss write-downs and recapitalisation.Ackermann has objected to efforts to force banks to raise
more capital and IIF lead negotiator Charles Dallara told
Reuters on Monday that bigger writedowns on Greek bonds could
only happen if policymakers addressed broader sovereign debt
issues in Europe.
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14 10 / 2011
RPT-RLPC-Market volatility hits Kondor financing -bankers
LONDON Oct 14 (Reuters) - Vista Equity Partners is facing
challenges financing its acquisition of Thomson Reuters’
trade and risk management software business, including flagship
product Kondor, banking sources said on Friday.Vista bought the businesses for more than $500 million in
cash in September after winning an auction. The private equity
company is trying to finalise a larger financing package than
originally envisaged, but the deterioration in market conditions
since August may limit the size of the loan, bankers said.Vista had agreed a $185 million of drawn debt with GE
Capital, ING, Lloyds and Royal Bank of Canada in September, but
subsequently tried to increase the amount of debt to $220-$230
million, which was in line with debt offered to rival bidders
Cinven, Bridgepoint and Montagu Private Equity, the bankers
added.Some of the four banks were unwilling to increase the size
of the financing due to market volatility. Vista is currently
approaching a wider group of banks after first talking to banks
that backed rival bidders.The financing was expected to be decided by early October,
but negotiations are still continuing, the bankers said.”Vista is struggling to get the higher amount of debt in
place,” one of the sources said.The level of debt Vista manages to raise will not affect the
acquisition itself, only the amount of equity Vista will have to
contribute.A final sale and purchase agreement for the proposed
transaction with news and information services provider Thomson
Reuters is expected to close by Jan. 31, 2012. Barclays Capital
acted as sole financial advisor to Thomson Reuters.The trade and risk management business operates under the
Thomson Reuters enterprise solutions business. Kondor provides
trade and risk software as well as liquidity risk systems for
treasury and cash management operations. Its main competitors
include Misys, SunGard and French software solutions company
Murex.Vista and GE were not immediately available to comment.
Permalink 85 notes
12 10 / 2011
CORRECTED-TEXT-S&P raises rtgs on European CDO V’s class A1 & A2 notes
OVERVIEW— GSC European CDO V’s class A1 and A2 notes have repaid about EUR9.99 million since our
previous review in December 2009.— In the same period, the portfolio’s proportions of defaulted assets and those rated in
the ‘CCC’ category have decreased.— Considering these factors, we have raised our ratings on the class A1 and A2 notes to
‘AA- (sf)’ to reflect the increased credit enhancement.— GSC European CDO V is a cash flow CLO transaction that securitizes loans to primarily
speculative-grade corporate firms.Standard & Poor’s Ratings Services today raised to ‘AA- (sf)’ its credit ratings on GSC
European CDO V PLC’s outstanding EUR208.16 million class A1 and A2 notes (see list below).Since we last reviewed this transaction in December 2009 (see “Transaction Update: GSC
European CDO V PLC,” published Dec. 17, 2009), the class A overcollateralization test, as
described in the transaction documents, has been failing. As a result, the issuer has used
interest proceeds to amortize the class A1 and A2 notes. These classes of notes, which rank
pari-passu, have repaid about EUR9.99 million since our previous review.On the assets side, we note that the amount of assets that we consider as defaulted has
reduced to 1.73% from 5.84% of the total collateral since our last review. Furthermore, our
analysis also shows that the amount of assets rated in the ‘CCC’ category (‘CCC+’, ‘CCC’, or
‘CCC-‘) has decreased to 11.06% from 15.09% since our last review.As a result of the above factors, we consider that the level of credit enhancement available
to the class A1 and A2 notes is now consistent with higher ratings than previously assigned. We
have therefore raised our rating on these classes of notes to ‘AA- (sf)’ from ‘A+ (sf)’.We note that the issuer currently holds EUR2.46 million of unhedged non-euro-denominated
assets. The portfolio manager has confirmed that it will not enter into any currency swap for
these assets. Therefore, we did not give credit to these assets in our cash flow model.None of the ratings was affected by either the largest obligor default test or the largest
industry default test-two supplemental stress tests that we introduced as part of our criteria
update (see “Update To Global Methodologies And Assumptions For Corporate Cash Flow And
Synthetic CDOs,” published Sept. 17, 2009).BNP Paribas Securities Services (AA/Negative/A-1+) acts as account bank and
custodian. Citibank N.A. (A+/Negative/A-1) and Credit Suisse International
(A+/Stable/A-1) currently provide currency swaps on an aggregate of EUR20.2 million
non-euro-denominated assets. We have applied our 2010 counterparty criteria and, in our view,
the participants to the transaction are appropriately rated to support a ‘AA- (sf)’ rating (see
“Counterparty and Supporting Obligations Methodology and Assumptions,” published on Dec. 6,
2010).GSC European CDO V is a cash flow collateralized loan obligation (CLO) transaction that
securitizes loans to primarily speculative-grade corporate firms.
Permalink 17 notes
12 10 / 2011
CORRECTED-TEXT-S&P raises rtgs on European CDO V’s class A1 & A2 notes
OVERVIEW— GSC European CDO V’s class A1 and A2 notes have repaid about EUR9.99 million since our
previous review in December 2009.— In the same period, the portfolio’s proportions of defaulted assets and those rated in
the ‘CCC’ category have decreased.— Considering these factors, we have raised our ratings on the class A1 and A2 notes to
‘AA- (sf)’ to reflect the increased credit enhancement.— GSC European CDO V is a cash flow CLO transaction that securitizes loans to primarily
speculative-grade corporate firms.Standard & Poor’s Ratings Services today raised to ‘AA- (sf)’ its credit ratings on GSC
European CDO V PLC’s outstanding EUR208.16 million class A1 and A2 notes (see list below).Since we last reviewed this transaction in December 2009 (see “Transaction Update: GSC
European CDO V PLC,” published Dec. 17, 2009), the class A overcollateralization test, as
described in the transaction documents, has been failing. As a result, the issuer has used
interest proceeds to amortize the class A1 and A2 notes. These classes of notes, which rank
pari-passu, have repaid about EUR9.99 million since our previous review.On the assets side, we note that the amount of assets that we consider as defaulted has
reduced to 1.73% from 5.84% of the total collateral since our last review. Furthermore, our
analysis also shows that the amount of assets rated in the ‘CCC’ category (‘CCC+’, ‘CCC’, or
‘CCC-‘) has decreased to 11.06% from 15.09% since our last review.As a result of the above factors, we consider that the level of credit enhancement available
to the class A1 and A2 notes is now consistent with higher ratings than previously assigned. We
have therefore raised our rating on these classes of notes to ‘AA- (sf)’ from ‘A+ (sf)’.We note that the issuer currently holds EUR2.46 million of unhedged non-euro-denominated
assets. The portfolio manager has confirmed that it will not enter into any currency swap for
these assets. Therefore, we did not give credit to these assets in our cash flow model.None of the ratings was affected by either the largest obligor default test or the largest
industry default test-two supplemental stress tests that we introduced as part of our criteria
update (see “Update To Global Methodologies And Assumptions For Corporate Cash Flow And
Synthetic CDOs,” published Sept. 17, 2009).BNP Paribas Securities Services (AA/Negative/A-1+) acts as account bank and
custodian. Citibank N.A. (A+/Negative/A-1) and Credit Suisse International
(A+/Stable/A-1) currently provide currency swaps on an aggregate of EUR20.2 million
non-euro-denominated assets. We have applied our 2010 counterparty criteria and, in our view,
the participants to the transaction are appropriately rated to support a ‘AA- (sf)’ rating (see
“Counterparty and Supporting Obligations Methodology and Assumptions,” published on Dec. 6,
2010).GSC European CDO V is a cash flow collateralized loan obligation (CLO) transaction that
securitizes loans to primarily speculative-grade corporate firms.
Permalink 14 notes
