/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190515.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 15, 2019, Vol. 20, No. 97 Headlines C R O A T I A ULJANIK SHIPYARD: Croatian Court Opens Bankruptcy Proceedings F R A N C E ALTICE SA: To Pay Hefty Interest Rate on New Debt Deal G E R M A N Y E-MAC DE 2007-I: S&P Affirms 'D(sf)' Rating on Class E Notes I R E L A N D BOSPHORUS CLO III: Fitch Affirms Bsf Rating to EUR7.3MM F Notes WEATHERFORD INT'L: Executes Restructuring Support Agreement WEATHERFORD INT'L: Moody's Cuts CFR to Ca Amid RSA with Noteholders WEATHERFORD INT'L: S&P Cuts ICR to 'CC', Outlook Negative I T A L Y ITALY: CDP Seeks More Guarantees for Rescue of Construction Sector PAPERGROUP: Pro-Gest Acquires Business for EUR14.42 Million N O R W A Y B2HOLDING ASA: Moody's Gives '(P)B1' Rating to New LT Unsec. Bonds P O R T U G A L MILLENNIUM BCP: S&P Assigns 'B+' Rating on Sr. Non-Preferred Notes S P A I N DIA GROUP: Posts Net Loss of EUR144.4 Million in 2019 Q1 T U R K E Y IZMIR METROPOLITAN: Fitch Affirms BB/BB+ LT IDRs, Outlook Negative U N I T E D K I N G D O M BRITISH STEEL: Needs Up to GBP75MM Loan to Avert Collapse BURRSWOOD HEALTH: Enters Administration, Halts Operations CELLNOVO LTD: Goes Into Administration, 100 Jobs Affected HUTCHINSON NETWORKS: Enters Administration, 94 Jobs Affected HW ARCHITECTURAL: Loss of Major Contract Prompts Administration MONARCH AIRLINES: Airline Seat Levy Proposed Following Collapse SANDWELL COMMERCIAL 2: Fitch Cuts GBP14.5MM Class D Notes to 'Csf' SPIRIT ISSUER: Fitch Alters Outlook on 'BB' Notes to Stable - - - - - ============= C R O A T I A ============= ULJANIK SHIPYARD: Croatian Court Opens Bankruptcy Proceedings ------------------------------------------------------------- SeeNews reports that a Croatian commercial court has decided to launch bankruptcy proceedings against Uljanik Shipyard, its parent company, Uljanik Group said on May 13. The group announced the Pazin court decision in a statement submitted to the Zagreb Stock Exchange (ZSE), SeeNews notes. According to SeeNews, following the announcement, the ZSE said in a separate note that it is suspending trading in Uljanik Group's shares as of May 13 due to the opening of bankruptcy proceedings against Uljanik Shipyard. The court's decision grants a request of Croatia's financial agency FINA submitted in March seeking the shipyard's bankruptcy over an outstanding debt of HRK28.2 million (US$4.3 million/EUR3.8 million), SeeNews discloses. Also in March, prime minister Andrej Plenkovic said the government cannot endorse a proposed restructuring of Uljanik and 3 Maj shipyards, as the operation would require a huge financial exposure by the state, SeeNews recounts. Mr. Plenkovic pointed out that Croatia spent HRK31.7 billion between 1992 and 2017 for the recovery of its shipyards, with HRK4.3 billion of the total going to Uljanik and HRK9 billion to 3 Maj, or an overall HRK13.3 billion for what is today Uljanik Group, SeeNews relays. The Uljanik Group comprises two major shipyards -- Uljanik and 3 Maj, along with smaller subsidiaries. The group has been in financial trouble for some time due to the adverse effects of the global financial crisis on the shipbuilding sector, SeeNews notes. =========== F R A N C E =========== ALTICE SA: To Pay Hefty Interest Rate on New Debt Deal ------------------------------------------------------ Robert Smith at The Financial Times reports that junk-bond investors have forced cable company Altice S.A. to pay a hefty rate of interest on a new debt deal, after the heavily leveraged group faced resistance from big Wall Street fund managers. According to the FT, the sprawling telecom group's Luxembourg unit paid a lofty 10.5% yield on a new US$1.6 billion eight-year bond on May 3, while also raising a EUR1.4 billion bond of the same maturity at 8% yield. That double-digit coupon is much higher than this part of the group has previously paid in the debt markets, although Altice plans to swap these dollar bonds into euros, reducing the interest bill, the FT notes. The deal faltered after US investors demanded significantly higher yields than those originally pitched by the banks running the deal, led by Goldman Sachs, the FT states. Franco-Israeli billionaire Patrick Drahi built Altice's sprawling cable and telecom empire through a rapid series of debt-funded acquisitions, harnessing the strong demand for high-yield bonds and leveraged loans in an era of very low base interest rates, the FT relates. Investors' sentiment soured towards the end of 2017, however, after poor results heightened concerns over the company's ability to keep servicing its then EUR50 billion debt pile, the FT discloses. ============= G E R M A N Y ============= E-MAC DE 2007-I: S&P Affirms 'D(sf)' Rating on Class E Notes ------------------------------------------------------------ S&P Global Ratings took various rating actions in E-MAC DE 2005-I B.V., E-MAC DE 2006-II B.V., and E-MAC DE 2007-I B.V. The rating actions follow S&P's credit and cash flow analysis of the most recent transaction information it has received. S&P said, "In our opinion, the current outlook for the German residential mortgage and real estate market is benign. The generally favorable economic conditions support our view that the performance of German residential mortgage-backed securities (RMBS) collateral pools will remain stable in 2019. Given our outlook on the German economy, we consider the base-case expected losses of 0.4% at the 'B' rating level for an archetypal pool of German mortgage loans, and the other assumptions in our European residential loans criteria, to be appropriate." Credit enhancement has increased for the senior classes of notes due to sequential repayment of the notes. Additionally, since mid-2015, prepayments have increased significantly. This increase is because borrowers tend to negotiate the terms of their mortgage loans with other lenders at the end of the fixed period, which typically allows prepayments without penalty 10 years after loan origination. However, S&P does not expect this trend to continue and have factored this in our analysis. The collateral pools' poor performance in all three transactions has resulted in the reserve funds being fully depleted. Furthermore, in all three transactions, the principal deficiency ledgers (PDLs) for the subordinated notes have been credited, leading to interest shortfalls for the class E notes in E-MAC DE 2006-II, and the class D and E notes in E-MAC DE 2007-I. The observed loss severities on the foreclosed properties in these transactions are higher compared to loss severities as calculated under our European residential loans criteria. S&P said, "Therefore, we are considering the reliability of original valuations given this difference. That said, our criteria do not include adjustments to account for the reliability of original valuations for the calculation of loss severities as this constitutes an originator-specific risk. Therefore, to account for this originator-specific risk in our analysis, we have applied a valuation haircut (discount) of 20%." S&P's credit analysis results show a decrease in the weighted-average foreclosure frequency (WAFF) for each rating level compared with those at our previous review. The decrease in the WAFF is primarily due to the benefit of seasoning in these pools. The decrease in the weighted-average loss severity (WALS) is mainly due to the decrease in the weighted-average current loan-to-value (LTV) ratio as the pools continue to pay down. S&P said, "Although the senior classes of notes in all transactions pass our cash flow stresses at higher ratings than those currently assigned, under our counterparty criteria, our ratings on the class B notes in E-MAC DE 2005-I (now the most senior tranche), and the class A notes in E-MAC DE 2006-II and E-MAC DE 2007-I are capped at 'A (sf)' as they are linked to the ratings on the swap counterparty and bank account provider, respectively. We have therefore affirmed our ratings on E-MAC DE 2006-II and E-MAC DE 2007-I's class A notes, and raised to 'A (sf)' from 'BBB+ (sf)' our rating on E-MAC DE 2005-I's class B notes. "We have raised to 'BB+ (sf)' from 'B (sf)' our rating on E-MAC DE 2005-I's class C notes because we consider the current available credit enhancement to be commensurate with a higher rating than that currently assigned. Our analysis also indicates that the available credit enhancement for E-MAC DE 2005-I's class D and E notes, E-MAC DE 2006-II's class C and D notes, and E-MAC DE 2007-I's class C notes is commensurate with the currently assigned ratings. We have therefore affirmed our ratings on these classes of notes. We also considered our view of the tail-end risk, given the transactions' small pool factor (the outstanding collateral balance as a proportion of the original collateral balance), and collateral pools' poor performance and sensitivity to recoveries. "E-MAC DE 2005-I's class D and E notes, E-MAC DE 2006-II's class C and D notes, and E-MAC DE 2007-I's class C notes do not pass our 'B' stressed rating level scenario in our analysis under our European residential loans criteria. In our view, given the increase in PDLs, the likelihood of default is higher for these notes. We have therefore affirmed our ratings on these classes of notes. "At the same time, we have affirmed our 'D (sf)' ratings on E-MAC DE 2006-II's class E notes and E-MAC DE 2007-I's class D and E notes, as interest is not being paid on these classes of notes. We also consider credit stability in our analysis. To reflect moderate stress conditions, we adjusted our WAFF assumptions by assuming additional arrears of 16% for one- and three-year horizons. This did not result in our rating deteriorating below the maximum projected deterioration that we would associate with each relevant rating level as outlined in our credit stability criteria. "Upon publication of our revised criteria for assessing counterparty risk in structured finance transactions, we added the under criteria observation (UCO) identifier to ratings that could be affected by the change in criteria." All three transactions are true sale German RMBS transactions, originated and serviced by Adaxio AMC (previously GMAC-RFC Servicing). RATINGS RAISED Class Rating To From E-MAC DE 2005-I B.V. B A (sf) BBB+ (sf) C BB+ (sf) B (sf) E-MAC DE 2006-II B.V. B BBB+ (sf) BB+ (sf) E-MAC DE 2007-I B.V. B BBB- (sf) BB (sf) RATINGS AFFIRMED E-MAC DE 2005-I B.V. D CCC+ (sf) E CCC (sf) E-MAC DE 2006-II B.V. A2 A (sf) C CCC+ (sf) D CCC (sf) E D (sf) E-MAC DE 2007-I B.V. A1 A (sf) A2 A (sf) C CCC (sf) D D (sf) E D (sf) ============= I R E L A N D ============= BOSPHORUS CLO III: Fitch Affirms Bsf Rating to EUR7.3MM F Notes --------------------------------------------------------------- Fitch Ratings has upgraded Bosphorus CLO III DAC, as follows EUR197.2 million class A notes affirmed at 'AAAsf'; Outlook Stable EUR34.7 million class B notes affirmed at 'AA+sf'; Outlook Stable EUR23.7 million class C notes upgraded to 'A+sf' from 'Asf'; Outlook Stable EUR17.7 million class D notes upgraded to 'BBB+sf' from 'BBBsf'; Outlook Stable EUR22.3 million class E notes affirmed at 'BBsf'; Outlook Stable EUR7.3 million class F notes affirmed at 'Bsf'; Outlook Stable Bosphorus CLO III DAC is a cash flow collateralised loan obligation. Net proceeds from the issuance of the notes were used to purchase a EUR346.4m portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Commerzbank AG. The transaction included a two-year reinvestment period where the manager was only allowed to reinvest unscheduled principal proceeds. The upgrades of the class C, and D notes follow the strong performance of the underlying portfolio being above target par and the reduced risk horizon after the maximum weighted average life of the transaction has reduced by almost two years since closing leading to lower default assumptions in the cash flow modelling. In addition, the portfolio has started to deleverage, leading to increases of credit enhancements of these notes. The affirmations of the class A and B notes are in line with model-implied ratings and follow increases of credit enhancement, compared with the levels at closing. While the model-implied ratings for the class E and F notes are one notch above their current ratings, Fitch has decided to affirm these notes due to minimal cushions of less than 1% in the rating scenarios following the implied upgrade. Such low cushions would raise the risk of future downgrades for these notes if the portfolio deteriorates during the tail end of the transaction. KEY RATING DRIVERS 'B+/B' Portfolio Credit Quality Fitch places the average credit quality of obligors in the 'B+'/'B' range. The portfolio does not contain any 'CCC' rated assets and the Fitch-weighted average rating factor of the current portfolio is 31.3. High Recovery Expectations The portfolio comprises senior secured loans and bonds. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-weighted average recovery rate of the current portfolio is 69.5%. Diversified Asset Portfolio The Fitch-calculated current exposure to the largest 10 obligors currently is 26.8%, while the largest obligor comprises 2.7% and the largest Fitch-defined industry comprises 32.8% of the portfolio notional. These concentrations are in line with other CLO 2.0 transactions. Limited Interest Rate Risk Since fixed-rate assets amount to 3% of the current portfolio and the liabilities are all paid interest on a floating-rate basis, the interest rate risk is considered partially hedged against interest rate risk. Cash Flow Analysis Fitch has performed cash flow analysis as the portfolio has started to deleverage and credit enhancement has built up. RATING SENSITIVITIES A 125% default multiplier applied to the portfolio's mean default rate, and with this increase added to all rating default levels, would lead to a downgrade of up to three notches for the rated notes. Decreasing the recovery rates assigned to the underlying obligors by 25% could result in a downgrade of up to four notches for the class E notes and up to three notches for the remaining rated notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Prior to the transaction closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. WEATHERFORD INT'L: Executes Restructuring Support Agreement ----------------------------------------------------------- Weatherford International plc ("Weatherford" or the "Company") on May 10 disclosed that it has executed a restructuring support agreement (the "Restructuring Agreement") with a group of its senior noteholders (the "Ad Hoc Noteholder Group") that collectively holds or controls approximately 62% of the Company's senior unsecured notes. The proposed comprehensive financial restructuring would significantly reduce the Company's long-term debt and related interest costs, provide access to additional financing and establish a more sustainable capital structure. The transaction results in pro forma net leverage at or below 2.7x at year-end 2019. The Company's business plan implies significant free cash flow generation under the new capital structure, resulting in reduction of net leverage to 1.8x in 2020 and 1.2x in 2021. Weatherford expects to implement the Restructuring Agreement through a "pre-packaged" Chapter 11 process and expects to file U.S. chapter 11 and Irish examinership proceedings (collectively, the "Cases"). As part of this process, Weatherford intends to continue engaging in discussions with, and begin soliciting votes from, its creditors in connection with a proposed Plan of Reorganization prior to filing. "During the past year, we have been executing a company-wide transformation to fundamentally improve the way we operate our business and to strengthen Weatherford for the long run," said Mark A. McCollum, President and CEO of Weatherford. "Despite the challenging market dynamics our industry continues to face, we believe that our transformation strategy, which is designed to improve our execution capabilities, lower our cost structure and create efficiency to allow us to better price our products and services, will position Weatherford for long-term success. However, we still face a high level of debt that affects our ability to make investments in our Company and implement further elements of our transformation plan. We are pleased that our noteholders recognize the long-term value Weatherford can create with an improved balance sheet as we work to achieve the full potential of our business transformation. We expect that the new capital structure will allow us to continue to capitalize on our momentum and build a truly integrated service company with sustainable profitability and long-term growth potential." FINANCIAL RESTRUCTURING TERMS Under the terms of the Restructuring Agreement, the Company's unsecured noteholders would exchange approximately $7.4 billion of senior unsecured notes for approximately 99% of the equity in the Company and $1.25 billion of new tranche B senior unsecured notes (the "Tranche B Notes"). The Restructuring Agreement contemplates that Weatherford will receive commitments for approximately $1.75 billion in the form of debtor-in-possession (DIP) financing comprised of an approximately $1.0 billion DIP term loan that would be fully backstopped by certain members of the Ad Hoc Noteholder Group and an undrawn $750 million revolving credit facility provided by certain of Weatherford's bank lenders, which would be available as part of the chapter 11 process and be led by Citigroup subject to conditions to be agreed. The Restructuring Agreement also contemplates a commitment of up to $1.25 billion in new tranche A senior unsecured notes (the "Tranche A Notes"), backstopped by certain members of the Ad Hoc Noteholder Group, that would be funded at emergence to repay the DIP financing, pre-petition revolving credit debt, case costs, and to recapitalize the Company at exit. Pro forma for the transaction, the Company would have up to $2.50 billion in total funded debt, which could be reduced based on several factors at exit. The size of the Tranche A Notes issuance can be adjusted downward by the Company based on expected cash needs at exit and could result in a smaller issuance than the $1.25 billion Tranche A Notes backstopped by certain members of the Ad Hoc Group of Noteholders. Additionally, up to $500 million of the $1.25 billion of Tranche B Notes can, at the discretion of individual holders prior to emergence, be converted to equity at the midpoint of the chapter 11 plan equity value. Based on $2.50 billion of funded debt at emergence and year-end expected cash of approximately $500 million, $750 million and $1.18 billion in 2019, 2020 and 2021, the Company forecasts net leverage of 2.7x, 1.8x and 1.2x, respectively. BUSINESS AS USUAL The Restructuring Agreement contemplates the Company will continue operating its businesses and facilities without disruption to its customers, vendors, partners or employees and that all trade claims against the Company (whether arising prior to or after the commencement of the Chapter 11 Cases) will be paid in full in the ordinary course of business. Mr. McCollum said, "I would like to thank all of our valued employees, customers, vendors and partners for their ongoing commitment and support. We are taking these actions to ensure we can do an even better job of meeting our commitments to all of our key stakeholders by creating the strongest Weatherford possible. We do not anticipate any operational disruptions as a result of this announcement. Our customers, partners, employees and vendors should not experience any changes in the way we do business, and we expect their experience will improve after a restructuring is complete. We expect a restructuring will provide us with improved liquidity and greater financial stability and flexibility to make investments to enhance our platform while we continue to invest in the resources necessary for our business to grow. We are confident that these steps will allow us to continue our transformation journey and position Weatherford for long-term success." Lazard is acting as financial advisor for the Company, Latham & Watkins, LLP as legal counsel, and Alvarez & Marsal as restructuring advisor. Evercore is acting as financial advisor for the Ad Hoc Noteholder Group and Akin Gump Strauss Hauer & Feld LLP as legal counsel. About Weatherford Weatherford (NYSE: WFT), an Irish public limited company and Swiss tax resident -- http://www.weatherford.com/-- is a multinational oilfield service company providing innovative solutions, technology and services to the oil and gas industry. The Company operates in over 80 countries and has a network of approximately 700 locations, including manufacturing, service, research and development, and training facilities and employs approximately 26,500 people. Weatherford reported a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2018, compared to a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2017. As of Dec. 31, 2018, Weatherford had $6.60 billion in total assets, $10.26 billion in total liabilities, and a total shareholders' deficiency of $3.66 billion. Weatherford's credit ratings have been downgraded by multiple credit rating agencies and these agencies could further downgrade the Company's credit ratings. On Dec. 24, 2018, S&P Global Ratings downgraded the Company's senior unsecured notes to CCC- from CCC+, with a negative outlook. Weatherford's issuer credit rating was lowered to CCC from B-. On Dec. 20, 2018, Moody's Investors Services downgraded the Company's credit rating on its senior unsecured notes to Caa3 from Caa1 and its speculative grade liquidity rating to SGL-4 from SGL-3, both with a negative outlook. The Company said its non-investment grade status may limit its ability to refinance its existing debt, could cause it to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest rates of its borrowings. Suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with the Company thereby increasing the need for higher levels of cash on hand, which would decrease the Company's ability to repay debt balances, negatively affect its cash flow and impact its access to the inventory and services needed to operate its business. WEATHERFORD INT'L: Moody's Cuts CFR to Ca Amid RSA with Noteholders ------------------------------------------------------------------- Moody's Investors Service downgraded Weatherford International Ltd.'s (Bermuda) (Weatherford, a Bermuda incorporated entity) Corporate Family Rating to Ca from Caa2 and Probability of Default Rating to Ca-PD from Caa2-PD. Moody's also downgraded the senior unsecured notes of both Weatherford and Weatherford International, LLC (Delaware) (Weatherford LLC, incorporated in Delaware) to Ca from Caa3. Weatherford's SGL-4 Speculative Grade Liquidity Rating was affirmed. The outlook remains negative. "These downgrades follow Weatherford's May 10, 2019 announcement that it has entered into a restructuring support agreement (RSA) with the majority of holders of its senior unsecured notes, which contemplates implementing a financial restructuring through a prepackaged Chapter-11 plan of reorganization under the US Bankruptcy Code," said Sajjad Alam, Moody's Senior Analyst. Downgraded: Issuer: Weatherford International Ltd. (Bermuda) Corporate Family Rating, Downgraded to Ca from Caa2 Probability of Default Rating, Downgraded to Ca-PD from Caa2-PD Senior Unsecured Notes, Downgraded to Ca (LGD4) from Caa3 (LGD4) Senior Unsecured Shelf, Downgraded to (P)Ca from (P)Caa3 Subordinate Shelf, Downgraded to (P)C from (P)Ca Preferred Shelf, Downgraded to (P)C from (P)Ca Preference Shelf, Downgraded to (P)C from (P)Ca Issuer: Weatherford International, LLC (Delaware) Senior Unsecured Notes, Downgraded to Ca (LGD4) from Caa3 (LGD4) Senior Unsecured Shelf, Downgraded to (P)Ca from (P)Caa3 Subordinate Shelf, Downgraded to (P)C from (P)Ca Affirmed: Issuer: Weatherford International Ltd. (Bermuda) Speculative Grade Liquidity Rating, Affirmed SGL-4 Senior Unsecured Commercial Paper, Affirmed NP Outlook actions: Issuer: Weatherford International Ltd. (Bermuda) Outlook, Remains Negative Issuer: Weatherford International, LLC (Delaware) Outlook, Remains Negative RATINGS RATIONALE Weatherford's Ca CFR reflects its high probability of default and Moody's estimates around potential recoveries for creditors in the event of a restructuring. The company has an unsustainable capital structure relative to its cash flow prospects with roughly $8.9 billion of total adjusted debt and over $600 million in annual interest expense. The company is also facing over $3 billion of debt maturities through 2021 in a challenged and slowly improving industry environment. The company's extensive ongoing business transformation initiatives will continue to present elevated execution risk. Additionally, the company will face reduced liquidity from the expiration of roughly two-thirds of its revolver commitment early in the third quarter of 2019. Weatherford has weak liquidity based on its upcoming debt maturities, which is reflected in the SGL-4 rating. As of March 31, 2019, the company had $598 million of cash and only $93 million in available borrowing capacity under revolving credit facilities that had a combined commitment amount of $846 million. The company will have only $303 million of revolver commitment after August 15, 2019, and that remaining commitment will expire on July 13, 2020. Moreover, Weatherford will have a $250 million term loan due and a $364 million bond maturity in 2020, and is facing $2 billion of bond maturities in 2021. The negative outlook reflects the high and imminent risk of a bankruptcy filing. Weatherford's PDR will be downgraded to D if the company files for bankruptcy. Ratings are unlikely to be upgraded in the near future absent material debt reduction. The Ca rating on the senior unsecured notes reflects Moody's recovery estimates for noteholders in the event of a default, which is likely to be in the 35%-65% range. The unsecured notes of Weatherford and Weatherford LLC are contractually and structurally subordinated to Weatherford's credit facilities, including the term loan. Weatherford's credit facilities have upstream guarantees from a material portion of its operating and holding company subsidiaries. The term loan has a first lien security on a substantial portion of Weatherford's assets and the $317 million 364-day revolver has a second-lien claim. Neither the unsecured notes of Weatherford nor Weatherford Delaware benefit from upstream guarantees from operating subsidiaries, where nearly all of the consolidated company's assets, leases, and non-debt liabilities reside. Weatherford International Ltd. (Bermuda) and Weatherford International, LLC (Delaware) are wholly-owned subsidiaries of Weatherford International plc, which is headquartered in Switzerland and is a diversified international company that provides a wide range of services and equipment to the global oil and gas industry. WEATHERFORD INT'L: S&P Cuts ICR to 'CC', Outlook Negative --------------------------------------------------------- S&P Global Ratings lowers its issuer credit rating on Ireland-based oilfield services provider Weatherford International PLC to 'CC' from 'CCC'. S&P is also lowering its issue-level ratings on the company's secured term loan to 'CCC' from 'B-', senior unsecured guaranteed revolving credit facility to 'CCC-' from 'CCC+', and senior unsecured notes to 'C' from 'CCC-'. The outlook is negative. The downgrade follows Weatherford's announcement that it has entered into an RSA with certain of its unsecured noteholders, representing 62% of the unsecured debt outstanding. The noteholders agreed to exchange existing unsecured debt for 99% of the company's equity, plus up to $1.25 billion of new tranche B senior unsecured notes. The consenting noteholders also agreed to backstop up to $1.25 billion of new tranche A senior unsecured notes to repay the debtor-in-possession (DIP) financing at emergence. The negative outlook reflects Weatherford's intention to commence a prepackaged Chapter 11 proceeding. ========= I T A L Y ========= ITALY: CDP Seeks More Guarantees for Rescue of Construction Sector ------------------------------------------------------------------ Chiara Albanese at Bloomberg News, citing daily La Repubblica, reports that Italy's state lender Cassa Depositi e Presiti SpA is looking for additional guarantees before committing to a project led by Salini Impregilo SpA designed to rescue the country's troubled construction sector. According to Bloomberg, the plan would involve absorbing assets of struggling companies including Astaldi SpA and Condotte SpA. But with just eight days to go before a deadline for Astaldi to present a detailed rescue plan -- in which Salini would play a crucial role -- Cassa Depositi is not yet satisfied with the conditions on offer and is pushing for a broader restructuring of the whole sector, Bloomberg relates. Italy's top six construction companies are either insolvent or negotiating with creditors, leaving lenders on the hook for more than EUR100 billion and putting thousands of jobs at risk, Bloomberg notes. PAPERGROUP: Pro-Gest Acquires Business for EUR14.42 Million ----------------------------------------------------------- EUWID reports that Italian integrated packaging and tissue manufacturer Pro-Gest is in the process of acquiring Italian tissue manufacturer Papergroup. Papergroup, which operates sites near Lucca in Tuscany, has been insolvent since July last year and was auctioned off on May 7, EUWID relates. Pro-Gest reportedly was the only interested party and bought the company at auction for the minimum price of EUR14.42 million, excluding the value of stocks, EUWID discloses. Papergroup operates a total of three facilities in Capannori near Lucca, an area traditionally home to many tissue manufacturers. =========== N O R W A Y =========== B2HOLDING ASA: Moody's Gives '(P)B1' Rating to New LT Unsec. Bonds ------------------------------------------------------------------ Moody's Investors Service has assigned a provisional (P)B1 rating to the proposed long-term senior unsecured bonds to be issued by B2Holding ASA. B2Holding's Ba3 Corporate Family Rating and B1 issuer rating are unaffected by this rating action, while the outlook is stable. Moody's issues provisional ratings in advance of the final sale of securities. These ratings represent the rating agency's preliminary credit opinion. A definitive rating may differ from a provisional rating if the terms and conditions of the final issuance are materially different from those of the draft prospectus reviewed. The rating action follows B2Holding's announcement on 6 May 2019 that it expects to issue a minimum of EUR 200 million senior unsecured bonds, and to amend and offer a buy-back of its EUR150m bond maturing in December 2020 and its EUR175 million bond maturing in October 2021. RATINGS RATIONALE The assignment of a (P)B1 rating to B2Holding's proposed issuance of senior unsecured bonds reflects the results of Moody's LGD model and the priorities of claims and asset coverage in the company's capital stack. The size of B2Holding's senior secured revolving credit facility indicates higher loss-given-default for senior unsecured creditors, leading to a one notch differential relative to B2Holding's Ba3 CFR. WHAT COULD CHANGE THE RATING UP / DOWN Moody's could upgrade B2Holding's CFR if the company successfully meets its financial targets while (i) reducing liquidity risk; and/or (ii) reducing operational and execution risks related to its rapid expansion. An upgrade of B2Holding's CFR would likely result in an upgrade of the issuer and senior unsecured ratings. B2Holding's issuer and senior unsecured ratings could also be upgraded due to a positive change to its debt capital structure that would increase the recovery rate for senior unsecured debt classes. Moody's could downgrade B2Holding's CFR if the company's (i) liquidity position deteriorates beyond the rating agency's expectations, for example if the RCF is fully utilised over a prolonged period or the company is unable to reduce RCF utilisation and extend its maturity profile through new bond issuance over the next 12-18 months; (ii) capitalisation falls materially, with tangible common equity to tangible assets dropping below 15%; and/or (iii) profitability metrics falls below peers. A downgrade of B2Holding's CFR would likely result in a downgrade of the issuer and senior unsecured ratings. B2Holding's issuer and senior unsecured ratings could also be downgraded if the company were to materially increase its EUR510 million RCF, which is senior to the company's senior unsecured liabilities. =============== P O R T U G A L =============== MILLENNIUM BCP: S&P Assigns 'B+' Rating on Sr. Non-Preferred Notes ------------------------------------------------------------------ S&P Global Ratings said that it has assigned its 'B+' issue rating to the senior nonpreferred notes, which may be issued by Portugal-based Millennium BCP (BCP) under its recently updated EUR25 billion debt issuance program (according to the current terms and conditions). The issue rating relies on our analysis of BCP's updated base prospectus for its EUR25 billion euro medium-term note program, under which the notes would be issued. S&P said, "The rating also takes into account our assessment of the bank's stand-alone credit profile (SACP) at 'bb'. The rating is subject to our review of the notes' final documentation." In March 2019, the Portuguese Parliament approved Law No. 23/2019, which transposed Directive EU 2017/2399 into Portuguese law, thereby creating the senior non-preferred debt category in Portugal. In a liquidation, this new category would rank junior to ordinary unsecured creditors and preferred debts, but senior to subordinated debt. S&P said, "The rating on BCP's proposed senior nonpreferred notes is two notches below the bank's SACP, reflecting our deduction of two notches for subordination risk (our standard notching for speculative-grade issuers). This follows our approach when an instrument is subordinated to senior unsecured debt, and is consistent with our approach to other rated senior nonpreferred notes. In our view, holders of senior nonpreferred notes face a higher default risk than holders of senior preferred notes and other senior liabilities, since senior nonpreferred notes would be bailed in before more senior debt in the event of a resolution under the EU's bank recovery and resolution directive." The rating on BCP's proposed notes also reflects S&P's view that: -- The notes would convert into equity or be written off in the event of bankruptcy and not before the bank reaches the point of nonviability. -- The resolution authority would have the power to convert or write down the proposed notes only after subordinated liabilities and shareholders' equity had absorbed losses in full. -- The write-down or conversion of the notes in resolution would not be an event of default and would not cause the default of the bank or more senior instruments. -- Unlike regulatory capital instruments, the proposed notes would be excluded from burden-sharing under EU state-aid rules, in S&P's view. -- The senior nonpreferred notes do not carry additional default risk relative to BCP's SACP, other than the subordination in resolution and liquidation to senior preferred notes and other senior liabilities. The terms and conditions of BCP's debt issuance program include the possibility of having a put option by bondholders, which the bank will consider on a case-by-case basis at the time of issuance. S&P said, "In case of inclusion, we understand that, for MREL purposes, the put option may only be set at least one year after the issue date, and that the issue will count for MREL purposes only until the first date of the put option. We also understand that the exercise of such a put option would not require regulatory approval." S&P said, "As a result of the above-mentioned features and our view that Portugal has an effective resolution regime, we would likely consider the notes--once issued--eligible for inclusion in our calculation of BCP's additional loss-absorbing capacity (ALAC), depending on each issue's specific characteristics. At the moment, the long-term issuer credit rating on BCP does not benefit from any uplift under our ALAC criteria because we believe BCP's ALAC ratio would remain below our 4% threshold over our projection horizon. We will continue to monitor BCP's funding plan to assess the amount of its ALAC-eligible instruments to be considered in our ratings." ========= S P A I N ========= DIA GROUP: Posts Net Loss of EUR144.4 Million in 2019 Q1 -------------------------------------------------------- Isla Binnie at Reuters reports that sales slid and losses continued at Spain's DIA in the first three months of the year, the supermarket chain said on May 14, as investors awaited the next step in a takeover bid by Russian tycoon Mikhail Fridman's investment fund. Squeezed by tough competition from domestic and foreign rivals who have invested heavily in their stores, DIA has failed to stem a haemorrhage of market share it built up by discounting during a prolonged recession, Reuters discloses. It reported a net loss of EUR144.4 million (US$162.3 million) for January-March, in line with a previous estimate it gave in April, of EUR140-EUR150 million, Reuters relates. Like-for-like sales, a key measure of retailers' performance, fell 4.3% from a year earlier, Reuters notes. According to Reuters, DIA said in a statement progress in the bid by Fridman's LetterOne (L1) fund to buy the roughly 70% of the company it does not already own would help stabilize the situation. It also needs an agreement with financing banks and a capital hike. Without all three elements "the situation could deteriorate rapidly and the company could eventually be forced to file for creditor protection and/or liquidation," Reuters quotes DIA as saying. Earlier this year, L1 offered to buy the rest of the company for 0.67 euros per share and try to turn it around, Reuters recounts. Opposition from some shareholders then prompted L1 to extend a deadline for them to accept the offer until May 13, Reuters notes. The market regulator will publish shareholder take-up in the next few days, Reuters states. L1 has said it is prepared to loan its own funds to rescue DIA, whose EUR1.7 billion in debt and negative equity position have put it at risk of having to declare insolvency, Reuters relays. =========== T U R K E Y =========== IZMIR METROPOLITAN: Fitch Affirms BB/BB+ LT IDRs, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has affirmed Izmir Metropolitan Municipality's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BB ' and 'BB+', respectively with Negative Outlooks. Fitch has affirmed the National Long-Term Rating at 'AAA(tur)' with a Stable Outlook. Izmir's Long-Term Foreign-Currency IDR is capped by Turkey's Long-Term Foreign-Currency IDR (BB/Negative) and Fitch assesses Izmir's standalone credit profile at 'bbb' Izmir is the third-largest city in Turkey by population and is the major economic hub of the country's Aegean region. The city has a strategic trade position as a port serving the large hinterland from southern Marmara to the lower Mediterranean rim and from central west Anatolia to the Aegean Sea. With about 4.3 million inhabitants, the metropolitan area is home to 5.3% of Turkey's population. Izmir's GDP per capita as of 2017 was USD12,344, which is 16.4% above the national GDP per capita (USD10,602). Fitch does not expect notable changes to the city's socio-economic profile. According to budgetary regulation Izmir can borrow on both domestic and external markets. Its budget accounts are presented on a modified accrual basis while the law on budgets is approved for two years. KEY RATING DRIVERS Revenue Robustness Assessed as Weaker Izmir's tax base is well-diversified and buoyant with sound growth prospects, but Fitch expects it to be adversely affected by the continued negative national operating environment. In 2017, the city's real GDP growth rate of 9.8% was well above the national level of 7.4%, Nevertheless, due to the continuing weak national economy, Fitch conservatively forecasts the local economy will underperform the national economy. Izmir's tax revenue income is defined by law and is the main source of the city's income. The bulk of the city's operating revenue comes from the nationally collected and allocated tax revenues attributable to the city's local performance, which constitutes almost 80% (2018: 76%) of its total revenue. This is followed by current transfers received, comprising tax revenue allocation by the central government according to population and area, which made up 11.5% of operating revenue. Nonetheless, the stability of these transfers should be viewed against the 'BB' sovereign rating. Non-tax revenues such are charges, rental income and fees levied for public services such as car parking, private bus lines, and museum entrance fees. The city does not have full discretion on these items, as the range for charges and fees' rates is set by the central government. In 2018, 8.6% of operating revenue was generated by non-tax revenue. Revenue Adjustability Assessed as Weaker Fitch assesses Izmir's ability to generate additional revenue in response to possible economic downturns as limited. Within the unitary administrative structure of the government, the central government is the rate-setting authority, which significantly limits Turkish local governments' fiscal autonomy and revenue adjustability. LGs have very limited rate-setting power over local taxes such as property tax, natural gas and electricity consumption tax, advertisement and promotion, fire insurance and entertainment tax. Expenditure Sustainability Assessed as Midrange Historically, the city has controlled its opex growth below that of operating revenue or broadly in line, but due to local elections in March 2019, operating expenditure growth was around 3% higher than operating revenue in 2018. Nevertheless, Izmir's robust track record of cost control over opex is evidenced by an average operating margin of over 50%, which is high compared with its international peers. Like other Turkish metros, Izmir is responsible for the provision of essential and large infrastructure investments such as water and sewerage services, public transport, construction, maintenance and cleaning of roads that connect neighborhoods to metropolitan municipality districts. It is also responsible for the discretionary provision of health centres for elderly and disabled persons, construction and maintenance of shrines, and culture and sports facilitates for metropolitan areas. In line with other Turkish metros, Izmir has a strong investment profile, making capital expenditure its largest single expense. At end-2018, Izmir's share of capital expenditure constituted 58% of metropolitan municipalities' total expenditure. Izmir is not required to adopt anti-cyclical measures, which would inflate capex during downturns. Expenditure Adjustability Assessed as Midrange Like most Turkish LGs, Fitch assesses Izmir's expenditure adjustability as moderate. The spending profile is largely driven by the investment profile as defined by law, which can be cut or postponed in times of economic downturn. In comparison with their international peers, the responsibilities of Turkish LGs do not involve resource-hungry areas such as healthcare and education, leaving room in their opex structure, with rigid costs such as staff costs largely no higher than 25% of opex. Fitch also believes after the local elections the city will manage to contain non-mandatory items in its opex. Liabilities and Liquidity Robustness Assessed as Weaker According to national budgetary regulation, Turkish LGs are subject to debt revenue limits and approval from an upper tier government for their external borrowings, which Fitch views as credit positive. However, Fitch believes that national debt regulation has resulted in material unhedged FX risk, to which large Turkish metros are exposed, making a significant dent in their budgets in times of significant lira volatility. Although the use of hedging is not prohibited by law, the lack of available counterparties impedes the use of these instruments. This reflects the structural weakness of capital markets in Turkey, which are less deep and liquid. Compared with its national peers, Izmir is heavily exposed to unhedged FX risk, as 84% of its total debt consists of unhedged foreign debt. This is a material risk throughout the Fitch-rated Turkish metropolitan municipalities, making a significant dent in their budgets in times of currency volatility. At end-2018, the Turkish lira had depreciated by 33.8% yoy against the euro. This led to an increase in Izmir's debt stock of TRY 595.8 million or 19.5%, as 84% of its debt stock comprised euro-denominated loans at end-2018. The city's debt is amortising and its debt stock has a lengthy weighted average maturity of 8.5 years, while 12.0% of its debt matures within one year, increasing refinancing pressure. Debt consists solely of bank loans, with a majority at fixed rates, which hedges the city against a rise in interest rates. The city is not exposed to material off-balance sheet risk. Liabilities and Liquidity Flexibility Assessed as Weaker Izmir's liquidity is solely restricted to its own cash reserves, where the year-end cash coverage of debt servicing costs declined to 49.4% from a four-year average of 68.0%, mainly due to increased capex spending. Izmir has no committed bank lines. In addition, there is no emergency bail out mechanisms or Treasury facilities in place to overcome any financial squeeze. Debt Sustainability Assessment: 'aaa' Izmir's SCP assessment is 'bbb', which reflects a combination of its weaker assessment of the city's risk profile and an 'aaa' assessment of debt sustainability. The SCP also factors in an appropriated comparison of Izmir with its peers. Fitch did not identify any asymmetric risk or extraordinary support from the central government that could affect the IDR beyond SCP assessment. Izmir's Long-Term Foreign-Currency IDR is capped by Turkey's Long-Term Foreign-Currency IDR. The debt sustainability 'aaa' assessment is derived from a combination of a strong payback ratio (net adjusted debt/operating balance), which is in line with a 'aaa' assessment, a fiscal debt burden (net adjusted debt to operating revenue) corresponding to a 'aa' assessment, and a sound actual debt service coverage ratio (ADSCR: operating balance-to-debt service, including short-term debt maturities) assessed at 'aaa'. Like other Turkish LGs Izmir is classified by Fitch as a type B LG, under which the city covers debt service from its cash flow on an annual basis. According to Fitch's rating case the payback ratio, which is the primary metric of debt sustainability assessment for type B LRGs, will remain between 1.3x and 1.6x over its five-year projected period. For the secondary metrics Fitch's rating case projects that the fiscal debt burden will increase to 87.7%, during most of the forecast period while the ADSCR will remain above 3x on average in 2019-2023. KEY ASSUMPTIONS Fitch's key assumptions within its base case for the issuer include: - Operating revenue to grow in 2020-2023 annually by 12.5% - 1.3% lower than national GDP growth - Opex growth in line with inflation on average by 12% yoy - Capital expenditure at 52% of total expenditure - Deficit is covered by new debt - Cost of debt increasing to 8.7% on average in 2019-2023 - EUR/TRY exchange rate at 6.48 for 2019 and 6.71 for 2020- 2023 Fitch's rating case envisages the following stress compared with base case: - Nominal growth rate of operating revenue 11.7% yoy on average 2.0% below that of the national nominal GDP growth rate - Nominal growth of operating expenses to grow at an expected rate of inflation on average by 12% yoy - 15% yoy depreciation of the lira against the euro in 2020-2023. RATING SENSITIVITIES A downgrade of the sovereign or sharp deterioration of the net payback ratio to beyond nine years according to the rating case, leading to a reassessment of debt sustainability could result in a downgrade. An upgrade would be possible if the sovereign was upgraded, provided that the city maintains its robust debt sustainability. =========================== U N I T E D K I N G D O M =========================== BRITISH STEEL: Needs Up to GBP75MM Loan to Avert Collapse --------------------------------------------------------- BBC News reports that British Steel has said it is seeking further financial support from the government to help it address "Brexit-related issues". It follows reports the company needs a loan of up to GBP75 million to keep trading in the coming months, BBC notes. According to BBC, the company said "uncertainties around Brexit are posing challenges for all businesses including British Steel". It added: "We are holding constructive discussions with our stakeholders on how to navigate them. "Discussions are continuing about a package of additional support to assist the company address broader Brexit-related issues, whilst continuing with [the company's] investment plans." The move comes just two weeks after British Steel secured a GBP100 million loan from the government to pay its EU carbon bill, BBC states. In recent days, the steel maker has met its lenders and the government to finalize another loan, BBC relays, citing Sky News. The firm has reportedly faced a slump in orders from European customers ‎due to uncertainty over the Brexit process, BBC discloses. It has also been struggling with the prolonged weakness of sterling since the EU referendum in June 2016 and the escalating trade US-China trade war, BBC says. Quoting people close to the process, Sky, as cited by BBC, said insolvency experts have been placed on standby in case British Steel cannot secure the funds it needs. The GMB union called on the government to guarantee the future of the firm and safeguard thousands of jobs, according to BBC. British Steel's 'main plant is at Scunthorpe, but it also has sites in Teesside, Cumbria and North Yorkshire. The UK's second largest steel firm employs 4,500 people, and about 20,000‎ indirectly via its supply chain. BURRSWOOD HEALTH: Enters Administration, Halts Operations --------------------------------------------------------- Marcus Jones at Premier reports that Burrswood Health & Wellbeing, a Christian centre which addressed both physical and spiritual needs, has ceased operations and has been placed into administration. According to Premier, the Dorothy Kerin Trust trading as Burrswood Health and Wellbeing previously said it has faced considerable financial challenges for a number of years and has come to the conclusion that the current situation is "untenable". In a statement, the trustees, as cited by Premier, said: "Despite sporadic sizeable single donations and legacies, there has also been a significant shortfall in reaching fundraising targets. "On top of this, the cost of ensuring compliance with Care Quality Commission (CQC) regulations continues to grow, and this has also been a further contributory factor in the number of burdens on the Trust's limited resources. "All of these issues combined have led to Burrswood facing an unsustainable financial position." Mark Newman -- mark.newman@crowe.co.uk -- and Vincent Green -- vince.green@crowe.co.uk -- of Crowe UK LLP have been appointed joint administrators of The Dorothy Kerin Trust, Premier discloses. CELLNOVO LTD: Goes Into Administration, 100 Jobs Affected --------------------------------------------------------- Pat Sweet at Accountancy Daily reports that Graham Bushby -- graham.bushby@rsmuk.com -- partner, and Nick Edwards -- nick.edwards@rsmuk.com -- director, of RSM Restructuring Advisory have been appointed joint administrators of insulin pump manufacturer Cellnovo Ltd, which has ceased trading putting up to 100 jobs at risk. The company developed, manufactured and marketed the first mobile, connected, all-in-one diabetes management system from its operations base in Bridgend's Pencoed Technology Park, Accountancy Daily discloses. The system was innovative and required further development to improve its robustness, Accountancy Daily notes. According to Accountancy Daily, this has negatively impacted on sales growth, the group's ability to generate the investment it needed, and its ability to meet its financial covenants to its lenders. Following the appointment of administrators, it became clear that it was no longer viable for the company to continue to manufacture product, Accountancy Daily states. As a result, around 70 staff have been made redundant, while over 20 key staff have been retained to ensure an orderly wind down of the company's operations, provide customer support, and to assist with finding new investors or achieving a sale of the business and assets, Accountancy Daily relates. "As administrators, we also have to undertake our duties to creditors and we will be taking steps to seek a buyer for the business or the assets including Cellnovo's innovative IP. We will be carrying out a marketing exercise shortly and would be very keen to hear from interested parties," Accountancy Daily quotes Graham Bushby, RSM partner and one of the joint administrators, as saying. Cellnovo Ltd. is the UK affiliate of French company Cellnovo Group which is listed on the Euronext Paris exchange. HUTCHINSON NETWORKS: Enters Administration, 94 Jobs Affected ------------------------------------------------------------ Doug Woodburn at CRN reports that Hutchinson Networks, a Scottish Cisco partner dubbed a "rising star in global IT network deployment", has gone bust with the loss of 94 jobs. According to CRN, the Edinburgh-based company was put into administration on May 13 after efforts to invest heavily in future growth backfired. Administrator KPMG confirmed on May 14 that 94 of the firm's 109 staff have been made redundant with immediate effect. HW ARCHITECTURAL: Loss of Major Contract Prompts Administration --------------------------------------------------------------- Business Sale reports that HW Architectural Limited, a construction industry supplier based in West Yorkshire, has been forced to cease its trading operations and call in administrators due to the loss of a major contract. The company, which traces its roots to the 1880s, has been forced to call in professional advisory firm Deloitte to handle the administration process, with partners Adrian Berry -- aberry@deloitte.co.uk -- and Clare Boardman -- cboardman@deloitte.co.uk -- appointed as joint administrators, Business Sale relates. According to Business Sale, a statement released by Deloitte stated: "Due to the contractual nature of the business, the administrators do not anticipate a sale of the business is possible and therefore the business unfortunately will cease trading with immediate effect." It is expected that the company's assets will be auctioned off to potential buyers, Business Sale notes. "HW Architectural incurred significant losses on a large and challenging contract in 2018 and had subsequently seen delays in order intake arising from challenging market conditions," Business Sale quotes Mr. Berry as saying. "This combination was too much for the business to withstand, and the directors were left with no other option that to appoint administrators to the business." HW Architectural Limited, which was originally established as Helliwell Patent Glazing, caters specifically to the construction industry by designing, manufacturing and installing curtain walls and aluminium frame window systems. MONARCH AIRLINES: Airline Seat Levy Proposed Following Collapse --------------------------------------------------------------- Alistair Smout at Reuters reports that airlines operating in Britain should pay a seat levy to cover the costs of getting passengers home in case a carrier goes bust, a government commissioned review said on May 9. According to Reuters, the recommendations seek to even out anomalies in protection for British travelers, highlighted when Monarch Airlines collapsed in 2017, but airlines rejected the review's proposed "airline seat levy" which it said would cost less than 50 pence per passenger. "Although airline insolvencies are relatively rare . . . they do happen -- and at times have required government to step in to repatriate passengers at great cost to the taxpayer," Reuters quotes Peter Bucks, who chaired the review, as saying in a statement. British transport minister Chris Grayling said he would consider the proposals by the Airline Insolvency Review, which was set up by finance minister Philip Hammond after the government and the Civil Aviation Authority had to step in to help repatriate Monarch customers, Reuters relates. British holidaymakers who are booked onto a package holiday have what is called Air Travel Organiser's License (ATOL) protection, ensuring they can return home and do not lose money, Reuters notes. Monarch, which had both ATOL-protected and flight-only customers, highlighted the discrepancy in British law, Reuters relays. The CAA did not assist in repatriating customers of airlines such as Flybmi when it went bust earlier this year, Reuters states. The review also suggests that airlines should provide a security to be called on in the event of its insolvency, according to Reuters. But Airlines UK, which represents Britain's carriers, said that any tax would make travel more expensive, according to Reuters. SANDWELL COMMERCIAL 2: Fitch Cuts GBP14.5MM Class D Notes to 'Csf' ------------------------------------------------------------------ Fitch Ratings has downgraded Sandwell Commercial Finance No. 2 plc's (Sandwell 2) class C and D notes, and affirmed Sandwell Commercial Finance No. 1 plc (Sandwell 1). The transactions are securitisations of commercial mortgage loans originated in the UK by West Bromwich Building Society. KEY RATING DRIVERS Over the last 12 months, GBP6.4 million has been debited to the Sandwell 2 class D principal deficiency ledger (the PDL now stands at GBP7.2million), adding to GBP9.4 million on the class E notes PDL. The PDL accounts for realised loan principal losses (as inflated for related deductions in respect to fixed rate loans to indemnify the issuer for swap breakage costs) as well as diversion of issuer principal receipts to cover revenue shortfalls on notes (the latter only if the notes do not have PDL debit balances greater than 50% of their balances). Sandwell 2's class D notes have received interest from reallocated principal and are nearing this 50% threshold. This raises the prospect of prolonged interest deferrals, which along with principal deficiencies, Fitch considers irrecoverable. This is because the sole potential remedy - excess spread - is absent. Fitch considers default of the class D notes inevitable, reflected in the downgrade to 'Csf'. The Recovery Estimate has been reduced to zero given two-thirds of the loan collateral is watchlisted, with indicative property sale prices suggestive of heavy losses (materially compounded in some cases by swap breakage given the long maturities). Sandwell 2 also has high exposure to UK secondary retail property, a sector that is underperforming, and Fitch expects further principal deficiencies to write off the class D notes and impair the class C notes, reflected in the downgrade to 'CCCsf' and RE of 70%. The pool is bar-belled, and the presence of higher quality credit provides a measure of safety for the class B notes, reflected in the affirmation. The minor upwards revision of the RE for Sandwell 1's class D notes to 100% reflects better-than-expected recoveries on loans that have repaid or been resolved over the last 12 months. RATING SENSITIVITIES Recoveries on defaulted loans significantly above or below Fitch's expectations may result in changes to the REs and ratings. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. The rating actions are as follows: Sandwell 1 GBP1 million class D (XS0191373686) affirmed at 'CCCsf; Recovery Estimate (RE) revised to 100% from 95% GBP5 million class E (XS0191373926) affirmed at 'Csf'; RE0% Sandwell 2 GBP6.7 million class B (XS0229030472) affirmed at 'BBsf'; Outlook Stable GBP11.5 million class C (XS0229030712) downgraded to 'CCCsf' from 'Bsf'; RE 70% GBP14.5 million class D (XS0229031017) downgraded to 'Csf' from 'CCsf'; RE revised to 0% from 20% GBP9.4 million class E (XS0229031280) affirmed at 'Csf'; RE0% SPIRIT ISSUER: Fitch Alters Outlook on 'BB' Notes to Stable ----------------------------------------------------------- Fitch Ratings has revised the Outlook on Spirit Issuer plc's - a securitisation of managed and tenanted pubs - notes to Stable from Negative, while affirming their rating at 'BB'. The Outlook revision reflects an improved Fitch rating case projected lease-adjusted free cash flow debt service coverage ratio, driven by ongoing disposals and debt prepayments as part of Spirit's ongoing asset migration strategy, in addition to stable operating performance. KEY RATING DRIVERS The rating reflects the quality of the estate, with financial performance stabilising in recent years, albeit with some recent variability in the managed estate. The debt structure is robust and benefits from the standard whole business securitisation legal and structural features and a comprehensive covenant package. FRC lease-adjusted FCF DSCR to final maturity at 1.4x is broadly in line with Spirit's closest peers Greene King, Marston's and M&B. The forecast minimum of 0.9x in 2027 and 2028 is, however, below the minimum coverage for close peers. However, Spirit has dedicated liquidity to support debt service during low coverage periods. Structural Decline but Strong Pub Culture - KRD: Industry Profile - Midrange While the pub sector in the UK has a long history, trading performance for some assets has shown significant weakness in the past. The sector is highly exposed to discretionary spending, strong competition (including from the off-trade), and other macro factors such as minimum wages, rising utility costs and potential changes in regulation (with the proposed statutory code in the tenanted/leased segment). In terms of barriers to entry, licencing laws and regulations are moderately stringent, and managed pubs and tenanted pubs (i.e., non-full repairing and insuring) are fairly capital-intensive. However, switching costs are generally viewed as low, even though there may be some positive brand and captive market effects. In terms of sustainability, Fitch expects the strong pub culture in the UK to persist, thereby taking a significant portion of the eating- and drinking-out market. In relation to demographics, mild forecast population growth in the UK is credit-positive. Sub KRDs: operating environment - Weaker; Barriers to Entry - Midrange; Sustainability - Midrange. Hybrid Model, Ongoing Disposals - KRD: Company Profile - Midrange Branded pubs represent a significant portion of total securitised pubs. Spirit has limited pricing influence but it is a fairly large operator within the pub sector. Its acquisition by Greene King in 2015 supports further economies of scale. Operating leverage has been increasing over the last few years as a result of a growing food offer. However, Fitch views the change in strategy favourably given that the food-led approach has generally led to revenue growth, although increased competition in the eating-out sector could put pressure on sales performance. The more transparent managed business (self-operated) represents around 70% of the securitised group by EBITDA. Historically, management has demonstrated some ability to adapt to industry changes with the extensive rollout of branding and food-led offers to mitigate the declining performance of the tenanted model. Operator replacement is not straightforward but would be possible within a reasonable period of time (several alternative operators available). Centralised management of the managed and tenanted estates and common supply contracts result in close operational ties between both estates. Fitch views the pubs as well-maintained following the completion of a conversion programme of the managed estate in 2017. Assets are also well-located (with a significant portion in London and the south-east). The secondary market is fairly liquid (extensive disposal programmes across the industry have been absorbed). However, Spirit has a significant portion of managed pubs on leasehold, with an annual lease expense of around GBP35 million. Sub-KRDs: Financial Performance - Midrange; Company Operations - Midrange; Transparency - Midrange; Dependence on Operator - Midrange; Asset Quality - Midrange Prepayments Result in Uneven Debt Profile - KRD: Debt Structure - Midrange All debt is fully amortising via scheduled amortisation. However, following extensive prepayments/purchase and cancellation there is a two-year period of higher debt service from 2026-28 due to the concentrated class A2 notes' amortisation. As a result, scheduled amortisation is not very well aligned with its forecast cash available for debt service. However, debt service coverage is comfortable both before and after the class A2 repayment and the transaction will continue to benefit from the dedicated liquidity facility. The swaps in relation to the class A2, A4 and A5 notes result in moderate mark-to-market liabilities of around GBP100 million as at October 2018, or around 23% of total debt outstanding, with a low perceived likelihood of materialisation (apart from pro-rata swap breakage upon notes' prepayments). The notes are fully-hedged until maturity. The class A notes have comprehensive first ranking fixed and floating charges over the issuer's assets and ultimately over all of the operating assets. All standard WBS legal and structural features are present, and the covenant package is comprehensive. The financial covenant level is fairly high (with a DSCR at 1.3x) and the restricted payment condition, calculated using synthetic (annuity-based) debt service, is currently set at 1.45x DSCR, higher than industry levels. The liquidity facility reduces in line with principal, meaning it falls below the usual 18 months of peak debt service coverage (to less than 12 months by 2027). Sub-KRDs: Debt Profile - Midrange; Security Package - Stronger; Structural Features - Midrange Financial Profile Revised FRC lease-adjusted FCF DSCR metrics have improved from the previous year to 1.4x from 1.2x for the class A notes driven by ongoing prepayments and stable operating performance. However, the minimum has declined to 0.9x from 1.0x. This is driven by further prepayments, meaning debt service now increases sharply from 2025 and remains high until 2028. PEER GROUP The primary WBS peer transactions are Greene King Finance plc, Marston's Issuer plc and Mitchells & Butlers Finance. M&B comprises solely managed pubs, whereas the other two transactions comprise managed and tenanted pubs, although the share of tenanted pubs in Spirit is much lower. Compared with Marston's 'BB+' rated class B notes, Spirit's notes share similar FRC FCF DSCR, but a significantly lower minimum FRC FCF DSCR. Compared with M&B's class D1 notes (rated BB+/Stable), Spirit's notes have higher average/median FRC FCF DSCR of 1.4x but again a significantly lower minimum FCF DSCR. In both cases, the uneven debt profile and 'pinch-point' where the projected FCF DSCR falls below 1.0x offsets the comparatively strong overall minimum of median and average DSCR. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: - Deterioration of forecasted FCF DSCR to below 1.2x Future Developments That May, Individually or Collectively, Lead to Positive Rating Action: - An improvement in FRC FCF DSCR consistently above 1.4x CREDIT UPDATE Performance Update Combined TTM EBITDA to October 2018 declined 15% yoy to GBP135 million, driven by ongoing disposals. Managed EBITDA declined 20%, driven primarily by ongoing disposals with the average number of pubs decreasing 18% yoy. Tenanted EBITDA declined 1%, also driven by disposals. Revenue per pub improved yoy for both the managed and tenanted estates, as a result of the sale of smaller pubs with lower EBITDA, which improves per pub figures, and due to stable operating performance. Spirit sold 169 pubs during the year to October 2018, with the majority of pubs sold being managed. Brexit Risk According to Fitch's sovereign group, the multiple postponements of Brexit deadlines reduce but do not eliminate the risk of a 'no-deal' Brexit. Greene King Group has mitigated the risk of short-term supply interruption by securing the supply of key products such as food and drink. Other mitigants include that some products are already sourced from outside of the EU, or from within the UK already. In terms of medium-term risk, while KPI projections for the pub sector are driven more by sector-specific considerations and are not directly linked to Fitch's updated GDP and inflation assumptions, it is possible that pub operators' performance could be negatively impacted by the UK's departure from the EU if it leads to a weaker economic environment for the UK. Fitch Cases Fitch has assumed among other things that the number of managed and tenanted pubs in the portfolio will remain stable. Overall, the FRC assumes a combined estate FCF long-term CAGR to final maturity of the notes of 0%. Fitch has run a stress scenario that assumes a 2% annual revenue decline for four years, with all other assumptions aligned to the FRC. Under this relatively harsh scenario, the projected FCF DSCR falls to 1.0x. Asset Description The transaction is a securitisation of both managed and tenanted pubs operated by Greene King, comprising 468 managed pubs and 363 tenanted pubs as at October 2018. The securitised pubs represent around 30% of Greene King group's pub portfolio and are considered a reasonably representative sample of the total estate. ********* 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. 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