/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190524.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 Friday, May 24, 2019, Vol. 20, No. 104 Headlines I R E L A N D OPENHYDRO: IDA Ireland Lodges Legal Action to Recoup Grants L U X E M B O U R G BECTON DICKINSON: Moody's Rates New EUR Sr. Unsecured Notes 'Ba1' LINCOLN FINANCING: Fitch Rates EUR1.35BB Secured Notes 'BB-' S P A I N BANKIA SA: DBRS Assigns BB(low) Rating to AT1 Debt U N I T E D K I N G D O M ARCADIA GROUP: Plans to Close 23 Stores Under CVA Proposals BRITISH STEEL: UK Gov't Draws Up Rescue Plan Following Collapse CARLYLE GLOBAL 2016-2: S&P Assigns Prelim BB Rating on D-R Notes HOMEBASE: Last Remaining Cardiff Store to Close in August LONDON CAPITAL: UK Treasury Launches Probe Into Collapse MARSTON'S ISSUER: Fitch Affirms BB+ on B Notes, Outlook Stable OCP EURO 2019-3: Fitch Assigns B- Rating on Class F Debt PRECISE MORTGAGE 2019-1B: Fitch Gives BB+(EXP) Rating on X Notes SMALL BUSINESS 2018-1: DBRS Confirms BB(high) Rating on D Notes SMYTH & GIBSON: Draws Up CVA Proposal, 34 Workers Affected X X X X X X X X [*] BOOK REVIEW: Macy's for Sale - - - - - ============= I R E L A N D ============= OPENHYDRO: IDA Ireland Lodges Legal Action to Recoup Grants ----------------------------------------------------------- Jack Horgan-Jones at The Irish Times reports that IDA Ireland has taken a High Court case against French warship company Naval Energies, which previously owned the failed Irish renewable energy outfit OpenHydro. According to The Irish Times, the court action, which was lodged on May 20, is understood to be part of an effort by IDA Ireland to recoup some EUR1.4 million in grants given to OpenHydro, which designed and built tidal and wave energy prototypes. It is thought that IDA Ireland needed to lodge the court case action in order to recover some, or all, of the money from the company's administrators, The Irish Times states. The company went into examinership in 2018 and was then wound up after Deloitte insolvency specialist Ken Fennell concluded that there was no chance of it surviving under its EUR280 million debt load, The Irish Times recounts. Majority shareholder Naval Energies, the company which is being sued by IDA Ireland, ultimately ended up opposing the company's examinership, arguing that it would continue to lose money the longer it was kept up and running, The Irish Times notes. =================== L U X E M B O U R G =================== BECTON DICKINSON: Moody's Rates New EUR Sr. Unsecured Notes 'Ba1' ----------------------------------------------------------------- Moody's Investors Service assigned Ba1 ratings to the senior unsecured notes to be offered by Becton Dickinson Euro Finance S.a.r.l. ("BD Euro Finance"), a newly-formed wholly owned financing subsidiary of Becton, Dickinson and Company ("BD"). Net proceeds from the notes and cash on hand will be used to repay existing indebtedness and to cover associated fees and expenses. As part of the refinancing, BD plans to repay at maturity its euro 1 billion notes due in June 2019 and to tender for certain other outstanding notes of BD. All other ratings for the company remain unchanged. The outlook of BD is positive. Moody's views the note offering and associated tender offer as credit positive for BD. The company will benefit from lower cash interest costs and will extend its debt maturity profile. The transaction will be largely leverage neutral, with the exception of some premiums paid. BD's euro denominated debt serves as a hedge to the company's euro denominated assets and cash flows. BD Euro Finance's principal activities include debt issuance and intercompany group financing and it has no subsidiaries. It holds no material assets and does not engage in any other business activities. Its obligations under the proposed notes will be fully and unconditionally guaranteed by BD on an unsecured basis. The notes are rated Ba1 reflecting the senior unsecured rating of BD as the guarantor. Ratings assigned: Becton Dickinson Euro Finance S.a.r.l. New EUR senior unsecured notes, Ba1 (LGD 4) RATINGS RATIONALE BD's Ba1 Corporate Family Rating reflects its high financial leverage with debt/EBITDA near 4.2 times for the most recent LTM period. The rating also reflects the company's rapid pace of acquisitions, evidenced by the announcement of the $25.2 billion acquisition of C.R. Bard approximately two years after the $12.5 billion acquisition of CareFusion. The ratings reflect the company's meaningful scale in the medical device industry with revenues exceeding $17 billion and global reach, with approximately 43% of sales generated outside the United States. The company is well diversified, with market leading positions across multiple product categories. The company has made significant progress integrating the Bard acquisition and Moody's expects BD to achieve $300 million of cost savings by fiscal 2020. BD's SGL-1 Speculative Grade Liquidity Rating reflects its very good liquidity profile. The company's liquidity profile benefits from its holdings of approximately $700 million in cash, and Moody's expects free cash flow (after capital expenditures and dividends) will exceed $2 billion in the next year. BD also has full access to a substantially undrawn $2.25 billion revolving credit facility. Moody's expects BD will use free cash flow to redeem maturing debt in the next year as the company executes on its deleveraging plans. Ratings could be upgraded if the company continues to reduce leverage while maintaining a balanced approach to capital allocation. BD would also need to continue to successfully integrate the Bard acquisition. Quantitatively, ratings could be upgraded if debt/EBITDA approaches 3.5 times. Ratings could be downgraded if the company encounters problems integrating Bard or if the company pursues meaningful debt-financed acquisitions while leverage remains at elevated levels. Quantitatively, ratings could be downgraded if Moody's expects debt/EBITDA to be sustained above 4.25 times. Becton, Dickinson and Company, headquartered in Franklin Lakes, New Jersey, is a global medical technology company engaged in the development, manufacture and sale of a broad range of medical supplies, devices, and laboratory equipment used by healthcare institutions, physicians, clinical laboratories, and the general public. Revenues are approximately $17 billion. LINCOLN FINANCING: Fitch Rates EUR1.35BB Secured Notes 'BB-' ------------------------------------------------------------ Fitch Ratings has assigned Lincoln Financing S.a.r.l's (LF) EUR1.35 billion senior secured notes a final long-term rating of 'BB-'. At the same time, Fitch has affirmed the Long-Term Issuer Default Rating (IDR) of the notes' guarantor, Lincoln Financing Holdings Pte. Limited (LFHPL), at 'BB-' with a Stable Outlook. The ratings of LeasePlan Corporation N.V. (BBB+/Stable), the main operating entity within the group, are unaffected by this rating action. The EUR1.35 billion senior secured notes comprise EUR750 million in fixed-rate notes and EUR600 million in floating-rate notes, maturing in April 2024. The notes were issued by LF, a special-purpose vehicle (SPV), and guaranteed by LFHPL. Issuance proceeds (in addition to available cash reserves at the guarantor level) have been used to refinance EUR1.55 billion existing senior secured notes (rated 'BB-') issued by Lincoln Finance Limited (LFL) in March 2016 in connection with the acquisition of LeasePlan by a consortium of new owners. The assignment of the final ratings follows the receipt of documents conforming to information already received. The final rating assigned to the senior secured notes is in line with the expected rating assigned on March 25, 2019. KEY RATING DRIVERS IDR AND SENIOR SECURED DEBT LeasePlan continues to represent LFHPL's only significant asset, and neither LFHPL nor LF are expected to have any material source of income other than dividends from LeasePlan. There are no cross-guarantees of debt between LF and LeasePlan, and the ratings reflect the structural subordination of LFHPL's and LF's creditors to those of LeasePlan. In Fitch's view, debt issued by LF is sufficiently isolated from LeasePlan so that failure to service it, all else being equal, would have limited implications for the creditworthiness of LeasePlan. Consequently, the instrument rating is based on the standalone profile of LF and LFHPL as the issuance guarantor. Financing terms (in addition to prevailing covenants) of LFL's senior secured notes entail reference to an interest reserve account, targeting a cash balance that corresponds to a minimum of 2.5 years of coupon payments on the senior secured notes. Failing adherence to this threshold would, among other implications, restrict an incremental increase in the company's indebtedness or limit payments to entities further up the corporate structure. Replenishment of this cash is dependent on LeasePlan's ability to generate profits and upstream dividends (subject to De Nederlandsche Bank approval), which we consider as sound in light of LeasePlan's solid profitability and distribution record (2018 net income: EUR424 million; average dividend payout ratio between 2015 and 2018: 56%). In turn, this has historically supported good debt service coverage at LFHPL level, which Fitch expects to be sustained. RATING SENSITIVITIES IDR AND SENIOR SECURED DEBT LFHPL's Long-Term IDR and the notes' rating are sensitive to any significant depletion of liquidity close to covenanted levels that affected its continuing ability to service its debt obligations. This would most likely be prompted by a material fall in earnings within LeasePlan, which restricted its capacity to pay dividends. Positive rating action would be likely to require the accumulation of significant additional cash within LFHPL, accompanied by expectation of its retention there, as this would reduce the dependence of debt service on future LeasePlan dividends. The ratings could also be sensitive to the addition of new liabilities or assets within LFHPL, but the impact would depend on the balance struck between increasing LFHPL's debt service obligations and diversifying its income away from reliance on LeasePlan dividends. ========= S P A I N ========= BANKIA SA: DBRS Assigns BB(low) Rating to AT1 Debt -------------------------------------------------- DBRS Ratings GmbH assigned ratings to Bankia SA's Senior Non-Preferred Debt at BBB and Subordinated Debt at BBB (low). These instruments are included in the Bank's EUR 30 billion "Folleto Base de Valores no Participativos" dated July 19, 2018 and the EUR 10 billion "Folleto EMTN Bankia 2018" dated July 6, 2018 (the Programmes). At the same time, DBRS assigned a BB (low) rating to the Additional Tier 1 (AT1) Instruments of Bankia. All ratings have a Stable Trend. In line with the Debt Obligations Framework set out in DBRS's Global Methodology for Rating Banks and Banking Organizations (July 2018), Senior Non-Preferred Debt issued under the Programmes, will be rated one notch below the Bank's Long-Term Issuer Rating and Intrinsic Assessment (IA) of BBB (high). The Subordinated Debt issued under the Programmes will be rated two notches below Bankia's IA. In assigning the BB (low) rating to the AT1 Instruments, five notches below the Bank's IA of BBB (high), DBRS highlights that the AT1 obligations are deeply subordinated and constitute the most junior debt instruments of the Bank. They are perpetual in tenor and can be converted if the Issuer or Regulator determines there is a Trigger Event. The trigger level for the conversion is set at a minimum Common Equity Tier 1 (CET1) ratio for Bankia of 5.125%. While the instruments can be converted at the full discretion of the Bank, there are required conditions of positive and distributable net income which need to be met. Bankia can cancel interest payments on the AT1 Instruments in part or in total and under some circumstances may be required to cancel interest payments. The rating incorporates the probability of the Bank tripping the capital trigger. In the case of Bankia, the notching from the IA takes into consideration the sizeable buffer of 7.485% between the 5.125% trigger point and the Bank's 12.61% fully loaded CET1 ratio (or 3.36% above the minimum CET1 9.25% under the SSM SREP 2019). It also takes into account the Bank's BBB (high) IA. For more detail on DBRS's approach, see Global Methodology for Rating Banks and Banking Organizations (July 2018). RATING DRIVERS Any positive change in the Bank's Intrinsic Assessment would have positive implications for the Senior Non-Preferred Debt, Subordinated Debt, and Additional Tier 1 Instrument ratings. Similarly, any negative change in the Bank's Intrinsic Assessment would have negative implications for the ratings. Notes: All figures are in Euros unless otherwise noted. =========================== U N I T E D K I N G D O M =========================== ARCADIA GROUP: Plans to Close 23 Stores Under CVA Proposals ----------------------------------------------------------- James Davey at Reuters reports that British retail tycoon Philip Green's Arcadia Group said on May 22 it planned to close 23 of its 566 stores in the UK and Ireland in a major restructuring of the fashion business that could also see its Topshop/Topman stores close in the U.S. According to Reuters, Arcadia said it had instigated seven Company Voluntary Arrangements (CVAs), mechanisms that allow the business to avoid insolvency. Under the proposals, which will require creditor approval, Arcadia is also requesting a reduction in rental costs and revised lease terms across 194 other UK and Ireland locations, Reuters discloses. The sites which have been identified for potential closure employ 520 people, Reuters notes. Arcadia has also commenced a process which may result in the closure of all 11 of its Topshop/Topman stores in the United States, Reuters relays. As part of the CVA proposals Philip Green's wife Tina, the group's shareholder, will invest a further GBP50 million (US$63.4 million) of equity into Arcadia to support its turnaround, Reuters states. Tina Green will also provide affected landlords with an entitlement to a pro-rata share of 20% of any equity value in Arcadia if it is sold in the future, Reuters says. Landlords can also claim from a GBP40 million compromised creditor fund, Reuters notes. According to Reuters, the restructuring will also see Arcadia reduce contributions to its two largest pensions schemes from GBP50 million to GBP25 million per year for three years, with security over certain assets also being granted. Ms. Green has offered to bridge the pension schemes' shortfall with funding of GBP25 million per year for the next three years, plus an additional GBP25 million contribution, resulting in total payments into the schemes of GBP100 million, Reuters discloses. Arcadia, Reuters says, is seeking creditor approval on the proposals at meetings on June 5. Arcadia Group Ltd. is the UK's largest privately owned fashion retailer with seven major high street brands: Burton, Dorothy Perkins, Evans, Miss Selfridge, Topshop, Topman and Wallis, along with its out-of-town fashion destination Outfit. BRITISH STEEL: UK Gov't Draws Up Rescue Plan Following Collapse --------------------------------------------------------------- Michael Pooler, Jim Pickard, Patrick Jenkins, Javier Espinoza and Josh Spero at The Financial Times report that the UK business secretary Greg Clark has drawn up a rescue plan for British Steel, where the government would act as a cornerstone investor alongside a consortium of private companies. Britain's second-largest steelmaker collapsed into insolvency proceedings on May 22, putting thousands of jobs at risk after its pleas for an emergency state bailout were rejected, the FT relates. Mr. Clark has commissioned legal advice on whether his new proposal might comply with state-aid rules, unlike an outright loan to a failing company, the FT discloses. However, government figures said the idea had met with some resistance from within the Treasury, the FT notes. The High Court ordered a compulsory liquidation on May 22 but the process leaves some hope for a rescuer to emerge, the FT recounts. Mr. Clark, as cited by the FT, said "[potential] buyers have already made contact". Possible bidders for all or parts of the company include the Chinese steel group Hesteel and UK-based private equity fund Endless, which was a losing bidder last time the business was sold in 2016, the FT states. Wages of the 5,000 staff at British Steel will continue to be paid by the Official Receiver, a civil servant who will oversee the process alongside accountancy firm EY, according to the FT. The May 22 insolvency came after the breakdown of talks over an additional emergency state loan of about GBP30 million, the FT relays. The company asked for the loan after a slump in orders that it blamed on uncertainty over Brexit, according to the FT. Negotiations ground to a halt because ministers concluded that the financial assistance would breach EU state-aid rules that bar most subsidies, Mr. Clark told the House of Commons, the FT recounts. British Steel has about 5,000 employees. There are 3,000 at Scunthorpe, with another 800 on Teesside and in north-eastern England. The rest are in France, the Netherlands and various sales offices round the world. CARLYLE GLOBAL 2016-2: S&P Assigns Prelim BB Rating on D-R Notes ---------------------------------------------------------------- S&P Global Ratings assigned its preliminary credit ratings to Carlyle Global Market Strategies Euro CLO 2016-2 DAC's class A-1-R, B-R, C-R, and D-R notes. On June 6, 2019, the issuer will refinance the original class A-1, B, C, and D notes by issuing replacement notes of the same notional. The replacement notes are largely subject to the same terms and conditions as the original notes, except for the following: -- The replacement notes have a lower spread over Euro Interbank Offered Rate (EURIBOR) than the original notes. -- The portfolio's maximum weighted-average life has been extended by one year. -- In accordance with the portfolio profile tests, the fixed rate bucket of assets has been extended to a maximum of 10% from 5%. The preliminary ratings assigned to Carlyle Global Market Strategies Euro CLO 2016-2's refinanced notes reflect S&P's assessment of: -- The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. S&P said, "We expect that the transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned preliminary ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "At closing, we consider that the transaction's legal structure will be bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our preliminary ratings are commensurate with the available credit enhancement for the class A-1-R, B-R, C-R, and D-R notes." Carlyle Global Market Strategies Euro CLO 2016-2 is a broadly syndicated collateralized loan obligation (CLO) managed by CELF Advisors LLP. PRELIMINARY RATINGS ASSIGNED Carlyle Global Market Strategies Euro CLO 2016-2 DAC Class Rating Amount Replacement notes Original notes (mil. EUR) int. rate (%) int. rate (%) A-1-R AAA (sf) 232.00 3M Eur + 0.87 3M Eur + 1.00 B-R A (sf) 24.00 3M Eur + 2.35 3M Eur + 2.50 C-R BBB (sf) 19.00 3M Eur + 3.20 3M Eur + 3.60 D-R BB (sf) 25.00 3M Eur + 6.15 3M Eur + 6.25 3M Eur--Three-month EURIBOR. HOMEBASE: Last Remaining Cardiff Store to Close in August --------------------------------------------------------- WalesOnline reports that DIY-to-garden retailer Homebase has confirmed another store closure in Wales. The retailer, which last year announced 42 store closures across the UK as part of a company voluntary arrangement (CVA) struck with creditors, has confirmed its last remaining store in Cardiff will close this summer, WalesOnline relates. According to WalesOnline, it said that with a break clause on the lease of its Llanishen store at Ty Glas Road, the landlord has secured a new tenant. As a result, the store is expected to cease trading in August, WalesOnline discloses. Last year's CVA resulted in the closure of its Newport Road store Cardiff, as well as further store closures in Wrexham and Swansea, WalesOnline notes. In March last year, before the CVA, it closed what was then its largest store in Cardiff with a 30,000 sq ft outlet at Culverhouse Cross, WalesOnline recounts. About Homebase Homebase -- http://www.homebase.co.uk/-- is a British home improvement retailer and garden centre with stores across the United Kingdom and Republic of Ireland. Homebase operates over 170 stores in the United Kingdom at December 2018 and another 11 in Ireland. The company moved its headquarters within Milton Keynes in December 2016, from premises previously shared with former sister company Argos. Founded by Sainsbury's and GB-Inno-BM in 1979, the company was owned by Home Retail Group from October 2006, until it was sold to the Australian conglomerate Wesfarmers in February 2016. Wesfarmers' management ended in financial disaster, and in 2018, the company was sold to Hilco Capital for GBP1. The sale to Hilco Capital completed on June 11, 2018, rebranded stores reverted to the Homebase brand soon after. On August 14, 2018, Hilco announced that it would close 42 stores and cut 1,500 jobs through a company voluntary arrangement, which was passed following a vote on August 31, 2018. LONDON CAPITAL: UK Treasury Launches Probe Into Collapse -------------------------------------------------------- Caroline Binham at The Financial Times reports that the UK Treasury has launched an investigation into the collapse of London Capital & Finance, which sold unregulated "mini-bonds" on retail customers, appointing a former Court of Appeal judge to lead it. According to the FT, the Treasury said on May 23 Dame Elizabeth Gloster will lead the independent inquiry into both LCF's collapse and the reaction of the Financial Conduct Authority. Dame Elizabeth, who is now an arbitrator, will also look into whether the rules around mini-bonds, the proceeds of which go to fund small businesses, need to be tightened, the FT discloses. The FCA has been criticized for not reacting sooner to red flags about LCF, the FT relates. A GBP236 million investment scandal left 11,600 customers, many of whom were first-time investors and pensioners, wondering if they will get their money back, the FT notes. LCF was authorized by the FCA but mini-bonds are not regulated products, meaning customers cannot typically call on the Financial Services Compensation Scheme, which is the UK's guarantee scheme, the FT states. LCF's collapse in January sparked an FCA investigation and a parallel criminal probe by the Serious Fraud Office, which has arrested and bailed without charge four men including the group's chief executive and the chairman of its biggest borrower, the FT relays. MARSTON'S ISSUER: Fitch Affirms BB+ on B Notes, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Marston's Issuer PLC's (Marston's) class A notes and liquidity facility at 'BBB' and class B notes at 'BB+'. The Outlooks are Stable. KEY RATING DRIVERS The ratings reflect the progress on the transformation of Marston's estate, with an improved quality of tenanted and franchised pubs and a stable managed estate. The debt structure is robust and benefits from the standard whole business securitization (WBS) legal and structural features and a comprehensive covenant package. Fitch's rating case free cash flow debt service coverage ratios (FCF DSCRs) to legal final maturity, at 1.5x for Class A and 1.4x for Class B, are in line with criteria guidance for the rating levels, as well as with Marston's closest peers. Fitch compares Marston's ratings with those of Greene King, Spirit and Mitchells & Butlers (M&B). Structural Decline but Strong Culture: Industry Profile - Midrange Operating Environment: 'weaker' The pub sector in the UK has a long history, but trading performance for some assets has shown significant weakness in the past. The sector is exposed to discretionary spending, strong competition including from the off-trade and various forms of home or other entertainment, as well as other factors such as minimum wages, taxes and utility costs. The UK's decision to leave the EU adds uncertainty. Patronage of pubs could decline as a result of falling consumer confidence and a weaker pound. The statutory pub code introduced the market rent-only option (MRO) in the tenanted/leased segment in 2016. The MRO breaks the traditional tied model that requires tenants to buy drinks from the pubcos, usually in exchange for a lower rent. Fitch expects that the implementation of the national living wage could put margins under pressure. Increased competition in the eating-out market hurts trading. Barriers to Entry: 'midrange' We perceive UK licensing laws and regulations as moderately stringent and managed pubs and tenanted pubs as capital intensive. However, switching costs within the drinking/eating-out market are low, although there may be some positive brand and captive market effects. Sustainability: 'midrange' The sector has been in structural decline for the past three decades, but Fitch expects the strong pub culture in the UK to persist. The forecasts for mild population growth in the UK also credit positive. Transformed Estate: Company Profile – Midrange Financial Performance: 'midrange' Marston's has been progressing well with an effort to transform its estate, including selling low-performing tenanted pubs, converting many tenanted pubs to the franchise model, upgrading existing pubs and offering accommodation to drive additional pub sales. Company Operations: 'midrange' Management has been proactive in turning around its tenanted business including being the first to launch hybrid tenanted/managed pubs with its franchise agreement model. Many converted pubs have experienced a double-digit percentage increase in sales. However, we believe that long-term profit levels remain uncertain given weak industry fundamentals despite the turnaround efforts. By contrast, the managed estate is relatively unchanged. Transparency: 'midrange' Information is sufficient to form a view on key trends. The securitized estate contributes about half of Marston's total EBITDA, and other than key financial metrics, much of the information is available on a total estate basis, which reduces transparency. Financial reporting follows the managed/tenanted format, without separating out the franchise model pubs. Dependence on Operator: 'midrange' Due to the large size of the estate, we do not view operator replacement as straightforward but it should be possible within a reasonable period of time. Asset Quality: 'midrange' Fitch considers the pubs to be reasonably well-maintained. In the past, management channeled a portion of the disposal proceeds into debt repayment (repayment of the GBP80.0 million AB facility in January 2014) and some capital enhancement of the estate. Marston's spent in the securitization around 10% of sales on capital enhancement and maintenance CapEx, which is above the covenant level and in line with peers. The secondary market is reasonably strong, demonstrated by Marston's recently concluded significant disposals programme and ongoing disposals within the tenanted estate. Standard WBS Structure: Debt Structure - Stronger (Class A), Junior's Back-Ended Amortization: Debt Structure - Midrange (Class B) Debt Profile: Class A: 'stronger'; Class B: 'midrange' All debt is fully amortizing on a fixed schedule, eliminating refinancing risk. Class A notes benefit from deferability of the junior class B notes. Amortization for the class B notes is back-ended and their interest-only period is substantial. Both classes of notes are fixed rate or fully hedged. Security Package: Class A: 'stronger'; Class B: 'midrange' Fitch views the security package as 'stronger' for the class A notes and 'midrange' for the class B notes. The security package is strong with comprehensive first-ranking fixed and floating charges over borrower assets. Class A is the senior ranking controlling creditor, with the class B lower ranking, resulting in a 'midrange' assessment. Structural Features: Class A/B: 'stronger' All standard WBS legal and structural features are present, and the covenant package is comprehensive. The restricted payment condition levels are standard, with 1.5x EBITDA DSCR and 1.3x FCF DSCR. The liquidity facility is covenanted at 18 months' peak debt service. All counterparties' ratings are at or above the rating of the highest-rated notes. The issuer is an orphan bankruptcy-remote special-purpose vehicle. Financial Profile Fitch's rating case forecast DSCR averages 1.5x for class A and 1.4x for class B, broadly in line with our last year's forecast. Marston's metrics are in line with criteria guidance, although with a limited cushion at the 'BBB' rating for the class A notes. The underperformance of the forecast could lead to a revision of the Outlook to Negative or a downgrade. PEER GROUP Fitch compares Marston's ratings with those of Greene King, Spirit, and M&B. M&B comprises 100% managed pubs, whereas the other two transactions comprise managed and tenanted pubs. Managed pubs generate about 78% of EBITDA for Greene King, close to the proportion at Spirit. In contrast, Marston's managed division generates only around 48% of securitization EBITDA. We consider a higher proportion of managed pubs to be a stronger feature due to managed pubs having greater transparency and control. The contribution per pub in the managed and tenanted estate of Marston's is lower than in Greene King's securitization. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: - A significant outperformance of the rating case due to strong growth in the managed estate division and further success of the franchise model, resulting in consistent deleveraging, could lead to an upgrade. - Fitch could consider an upgrade if its rating case DSCR rises to 1.8x for class A and 1.5x for class B. Future Developments That May, Individually or Collectively, Lead to Positive Rating Action: - The ratings could be negatively impacted if performance is significantly below the current rating case. This could be due to further pub disposals in the managed estate, greater-than-expected cost pressure from the national living wage, Brexit if it leads to a weaker economic environment or even weaker-than-expected performance of tenanted pubs. - A further deterioration of the Fitch rating case DSCR below 1.5x for class A and 1.3x for class B could lead to a downgrade. CREDIT UPDATE Performance Update The securitization has performed in line with Fitch's expectations. The estate's trailing 12-month EBITDA as of end-December 2018 stood at GBP119.2 million and was 2% above Fitch's rating case forecast. The securitization estate has a good proportion of wet-led pubs and benefited from the 2018 FIFA World Cup in Russia and good weather. However, Marston's destination and premium pubs' like-for-like sales declined as they are mostly food-led and suffered due to good weather, the World Cup and oversupply in the casual dining market. Business rate increases had a limited impact but Marston's remained exposed to increased labor costs. The major disposal programme of lower-performing pubs is now mostly concluded as the securitization sold 102 tenanted and four managed pubs over three years to end-2018. We expect further disposals to be opportunistic. Swap Re-Profiling In March 2019, Marston's amended the interest rate swap agreement, which hedges the issuer's interest rate risk of class A1, class A2, class A3, and class B notes. The amendment obliges the swap counterparty to make additional payments (GBP2 million quarterly, GBP8 million annually) to the issuer on top of the existing interest payable under the interest rate swap agreement over the next five-year period (until January 2024), and then obliges the issuer to make additional payments to the swap counterparty on top of the existing interest payable for the final four-year period of its term. We consider such an amendment to be effectively a tap of the securitization through borrowing under the interest rate swap agreement with proceeds being used to lower the debt service payments in the next five years but with an increase in the debt service after 2031. In other words, the drawdown of the quasi loan occurs in 2019-2024 and repayment occurs in 2031-2035. This loan is documented as a confirmation under the existing hedging agreement. Fitch highlights that the new quasi-debt ranks senior to all existing notes as the payments under the interest rate swap agreement rank senior to all notes in both the pre- and post-enforcement waterfall. However, the amount of the new debt is not sufficiently material to change the ratings. We estimate that the amounts received by the issuer until 2024 add around 0.4x to net debt/EBITDA. However, by that time, we project the leverage to decline by around 1.7x (excluding the amendment) as the securitization continues to amortize. This means that the transaction will deleverage but at a slower pace. Moreover, Fitch's rating case FCF DSCR to legal final maturity including the amendment remains effectively unchanged. The amendment partially smooth's the FCF DSCR profile and uses the existing debt capacity of the transaction created by prepayment of AB1 notes in 2014. UK Decision to Leave the EU The multiple postponements of Brexit deadlines reduce but do not eliminate the risk of a 'no-deal' Brexit. Marston's has mitigated the risk of short-term supply interruption by stockpiling key products such as food and drink that are sourced in the EU. 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. The patronage of pubs could decline as a result of falling consumer confidence in the case of a disruptive Brexit. In addition, if tariffs are introduced after the UK leaves the EU, this could lead indirectly to further inflationary pressures on the company's cost base. Fitch Cases Fitch has assumed, among other things, that the number of managed and tenanted pubs in the portfolio will remain stable. Overall, the Fitch rating case assumes a combined estate EBITDA 17-year CAGR to final maturity of the notes of 0.5% and marginally declining FCF. Asset Description The transaction is a securitization of both managed and tenanted pubs operated by Marston's comprising 279 managed pubs and 846 tenanted pubs at end-2018. OCP EURO 2019-3: Fitch Assigns B- Rating on Class F Debt -------------------------------------------------------- Fitch Ratings has assigned OCP Euro CLO 2019-3 Designated Activity Company final ratings as follows: Class A: 'AAAsf'; Outlook Stable Class B-1: 'AAsf'; Outlook Stable Class B-2: 'AAsf'; Outlook Stable Class C: 'Asf'; Outlook Stable Class D: 'BBBsf'; Outlook Stable Class E: 'BB-sf'; Outlook Stable Class F: 'B-sf'; Outlook Stable Subordinated notes: not rated The transaction is a cash flow collateralized loan obligation (CLO) of mainly European senior secured obligations. Net proceeds from the issuance of the notes are used to fund a portfolio with a target of EUR425 million. The portfolio is managed by Onex Credit Partners, LLC. The CLO features a two-year reinvestment period and a 6.5-year weighted average life (WAL). KEY RATING DRIVERS 'B' Portfolio Credit Quality Fitch expects the average credit quality of obligors in the 'B' category. The Fitch weighted average rating factor (WARF) of the current portfolio is 32.7. High Recovery Expectations At least 90% of the portfolio comprises senior secured obligations. Recovery prospects for these assets are typically more favorable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rating (WARR) of the identified portfolio is 66.3%. Diversified Asset Portfolio The transaction will include Fitch test matrices corresponding to different top 10 obligor concentration limits. The transaction also includes various concentration limits, including the maximum exposure to the three largest Fitch-defined industries in the portfolio at 40% with 17.5% for the top industry. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management The transaction has a two-year reinvestment period and includes reinvestment criteria similar to other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash Flow Analysis Fitch used a customized proprietary cash flow model to replicate the principal and interest waterfalls. This was also used to test the various structural features of the transaction, as well as to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. Recovery Rate to Secured Senior Obligations For the purpose of Fitch's recovery rate (RR) calculation, in case no recovery estimate is assigned, Fitch secured senior loans with a revolving credit facility (RCF) limit of 15% will be assumed to have a strong recovery. For secured senior bonds, recovery will be assumed at RR3. The different treatment in regards to recovery is on account of historically lower recoveries observed for bonds and the fact RCFs typically rank pari passu for loans but senior for bonds. The transaction features an RCF limit of 15% to be considered while categorizing the loan or bond as senior secured. RATING SENSITIVITIES A 25% 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 two notches for the rated notes. A 25% reduction in recovery rates would lead to a downgrade of up to three notches for the 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 The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. PRECISE MORTGAGE 2019-1B: Fitch Gives BB+(EXP) Rating on X Notes ---------------------------------------------------------------- Fitch Ratings has assigned Precise Mortgage Funding 2019-1B Plc's (PMF 2019-1B) notes expected ratings as follows: Class A1: 'AAA(EXP)sf'; Outlook Stable Class A2: 'AAA(EXP)sf'; Outlook Stable Class B: 'AA(EXP)sf'; Outlook Stable Class C: 'A(EXP)sf'; Outlook Stable Class D: 'BBB+(EXP)sf'; Outlook Stable Class E: 'BBB-(EXP)sf'; Outlook Stable Class X: 'BB+(EXP)sf'; Outlook Stable The assignment of final ratings is contingent on the receipt of final documents conforming to information already received. This transaction is a securitization of buy-to-let (BTL) mortgages that were originated by Charter Court Financial Services (CCFS), trading as Precise Mortgages (Precise), in England and Wales. KEY RATING DRIVERS Prime Underwriting Fitch has treated the loans as prime. The loans have been granted to borrowers with no adverse credit, full rental income verification, and full property valuations and with a clear lending policy in place. The available data, although limited, show robust performance, which would be expected of prime loans. Fitch has applied a lender adjustment of 1.10x to account for a certain feature in CCFS's underwriting process and its limited performance history. Geographical Diversification The pool displays no geographical concentration (i.e. concentration by loan count in excess of 2x population). However, compared with Precise Mortgage Funding 2018-2B Plc (PMF 2018-2B) there is an increased exposure to London (28.0% by current balance, versus 14.1%); this has resulted in a higher weighted average (WA) sustainable price discount, contributing to higher WA sustainable LTV (sLTV) and base foreclosure frequency (FF). Borrower Affordability The pool displays a higher concentration of five-year fixed rate loans (56.6% versus 36.7%) and a lower stressed WA interest coverage ratio (94.3% versus 105.4%) when compared with PMF 2018-2B. This has contributed to a higher base FF. Fixed Hedging Schedule The issuer will enter into a swap at closing to mitigate the interest rate risk arising from the fixed-rate mortgages in the pool versus the SONIA linked bonds. The swap will be based on a defined schedule, rather than the balance of fixed-rate loans in the pool; in the event that loans prepay or default, the issuer will be over hedged. The excess hedging is beneficial to the issuer in a high-interest-rate scenario and detrimental in a declining interest rate scenario. RATING SENSITIVITIES Material increases in the frequency of defaults and loss severity on defaulted receivables producing losses greater than Fitch's base case expectations may result in negative rating action on the notes. Fitch's analysis revealed that a 30% increase in the WAFF, along with a 30% decrease in the WA recovery rate, would imply a downgrade of the class A notes to 'AA-sf' from 'AAAsf'. SMALL BUSINESS 2018-1: DBRS Confirms BB(high) Rating on D Notes --------------------------------------------------------------- DBRS Ratings Limited took the following rating actions on the notes issued by Small Business Origination Loan Trust 2018-1 DAC (SBOLT 2018-1 or the Issuer): -- Class A Notes confirmed at A (high) (sf); -- Class B Notes upgraded to A (high) (sf) from A (sf); -- Class C Notes upgraded to A (low) (sf) from BBB (sf); and -- Class D Notes confirmed at BB (high) (sf) (together, the Rated Notes). The ratings on the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date (falling in December 2026). The ratings on the Class B Notes, the Class C Notes, and the Class D Notes address the ultimate payment of interest and principal on or before the Final Maturity Date. The transaction documents permit the deferral of interest on non-senior bonds and this is not considered an event of default. The rating actions follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults and losses as of the April 2019 payment date. -- Portfolio default rates, recovery rates and expected loss assumptions for the remaining collateral pool. -- Currently available credit enhancement (CE) to the Rated Notes to cover the expected losses at their respective rating levels. The transaction is a cash flow securitization collateralized by a portfolio of term loans and originated through the Funding Circle Ltd lending platform (Funding Circle or the Originator) to small and medium-sized enterprises (SMEs) and sole traders based in the United Kingdom (U.K.). All the loans are unsecured, fully amortizing, pay on a monthly basis and bear a fixed interest rate. As of the April 2019 payment date, the transaction's outstanding portfolio performing balance was GBP 126.7 million, including 3,045 loans to 2,998 obligors. PORTFOLIO PERFORMANCE As of the April 2019 payment date, loans between two to three months in arrears represented 1.20% of the outstanding portfolio balance, following an increasing trend since the first payment date in June 2018. The cumulative gross default ratio was 3.85% of the original outstanding portfolio balance, below the 6.5% threshold that would trigger sequential payment of principal on the Rated Notes. PORTFOLIO ASSUMPTIONS DBRS conducted a loan-by-loan analysis on the pool of receivables and updated its portfolio default rate and recovery rate assumptions on the outstanding portfolio to 39.3% and 23.4%, respectively, at the A (high) (sf) rating level, 36.5% and 23.4%, respectively, at the A (low) (sf) rating level and 24.4% and 32.9%, respectively, at the BB (high) (sf) rating level. CREDIT ENHANCEMENT CE to the Rated Notes (calculated as a percentage of the outstanding collateral balance) is provided by the subordination of junior classes and the Cash Reserve. As of the April 2019 payment date, CE to the Class A Notes is 42.4%, CE to the Class B Notes is 36.4%, CE to the Class C Notes is 29.4% and CE to the Class D Notes is 22.4%. CE to the Rated Notes has increased since the DBRS initial rating, solely due to an increase in the size of the Cash Reserve. As of the April 2019 payment date, the Cash Reserve has increased to its target level of GBP 5.7 million over the life of the transaction, from GBP 3.6 million at the DBRS initial rating in May 2018. The Cash Reserve is available to cover any shortfalls of senior fees and expenses, interest and principal on the Rated Notes via the principal deficiency ledgers. As of the April 2019 payment date, the Class Z PDL has been debited by an amount of GBP 370,953. As of the April 2019 payment date, the Rated Notes are amortizing on a pro rata basis, as none of the thresholds triggering the sequential amortization of the principal have been breached. In particular, each Class of the Rated Notes stands at 61.4% of its original balance, which is below the 60.0% trigger required for sequential amortization. Citibank N.A., London Branch is the Issuer Account Bank for the transaction. Based on the DBRS private rating of Citibank N.A., London Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the Issuer Account Bank to be consistent with the ratings assigned to the Rated Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology. NatWest Markets Plc acts as the cap counterparty for the transaction. DBRS's public Long-Term Critical Obligations Rating of NatWest Markets Plc of "A" is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology. The transaction structure was analyzed in DBRS's proprietary Excel-based cash flow engine. Notes: All figures are in British pound sterling unless otherwise noted. SMYTH & GIBSON: Draws Up CVA Proposal, 34 Workers Affected ---------------------------------------------------------- Donna Deeney at Belfast Telegraph reports that Smyth & Gibson, one of Londonderry's last remaining shirt factories is set to close with all 34 workers to be made redundant. The company has been struggling for some time, Belfast Telegraph notes. Last April staff were laid off for a number of weeks after the firm lost a number of contracts, and this revenue has not been replaced, leading to the decision to close, Belfast Telegraph recounts. According to Belfast Telegraph, the firm will be proposing a Company Voluntary Arrangement (CVA) with creditors following an increase in production costs and a drop in retail sales. Smyth & Gibson on the Victoria Road made high quality shirts which retailed at around GBP150 each. Customers included Marks and Spencer, JW Anderson, Fred Perry, Tiger of Sweden and Margaret Howell. =============== X X X X X X X X =============== [*] BOOK REVIEW: Macy's for Sale -------------------------------- Author: Isadore Barmash Paperback: 180 pages List price: $34.95 Review by Henry Berry 99 Order your personal copy today at http://www.beardbooks.com/beardbooks/macys_for_sale.html Isadore Barmash writes in his Prologue, "This book tells the story of Macy's managers and their leveraged buyout, the newest and most controversial device in the modern financial armament" when it took place in the 1980s. At the center of Barmash's story is Edward S. Finkelstein, Macy's chairman of the board and chief executive office. Sixty years old at the time, Finkelstein had worked for Macy's for 35 years. Looking back over his long career dedicated to the department store as he neared retirement, Finkelstein was dismayed when he realized that even with his generous stock options, he owned less than one percent of Macy's stock. In the 185 years leading up to his unexpected, bold takeover, Finkelstein had made over Macy's from a run-of-the-mill clothing retailer into a highly profitable business in the lead of the lucrative and growing fashion and "lifestyle" field. To aid him in accomplishing the takeover and share the rewards with him, Finkelstein had brought together more than three hundred of Macy's top executives. To gain his support for his planned takeover, Finkelstein told them, "The ones who have done the job at Macy's are the ones who ought to own Macy's." Opposing Finkelstein and his group were the Straus family who owned the lion's share of Macy's and employees and shareholders who had an emotional attachment to Macy's as it had been for generations, "Mother Macy's" as it was known. But the opponents were no match for Finkelstein's carefully laid plans and carefully cultivated alliances with the executives. At the 1985 meeting, the shareholders voted in favor of the takeover by roughly eighty percent, with less than two percent opposing it. The takeover is dealt with largely in the opening chapter. For the most part, Barmash follows the decision making by Finkelstein, the reorganization of the national company with a number of branches, the activities of key individuals besides Finkelstein, Macy's moves in the competitive field of clothing retailing, and attempts by the new Macy's owners led by Finkelstein to build on their successful takeover by making other acquisitions. Barmash allows at the beginning that it is an "unauthorized book, written without the cooperation of the buying group." But as he quickly adds, his coverage of Macy's as a business journalist and his independent research for over a year gave him enough knowledge to write a relevant and substantive book. The reader will have no doubt of this. Barmash's narrative, profiles of individuals, and analysis of events, intentions, and consequences ring true, and have not been contradicted by individuals he writes about, subsequent events, or exposure of material not public at the time the book was written. First published in 1989, the author places the Macy's buyout in the context of the business environment at the time: the aggressive, largely laissez-faire, Reagan era. Without being judgmental, the author describes how numerous corporations were awakened from their longtime inertia, while many individuals were feeling betrayed, losing jobs, and facing uncertain futures. Isadore Barmash, a veteran business journalist and author, was associated with the New York Times for more than a quarter-century as business-financial writer and editor. He also contributed many articles for national media, Reuters America, and the Nihon Kenzai Shimbun of Japan. He has published 13 books, including a novel and is listed in the 57th edition of Who's Who in America. ********* 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 * * *