/raid1/www/Hosts/bankrupt/TCREUR_Public/240305.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
Tuesday, March 5, 2024, Vol. 25, No. 47
Headlines
C Y P R U S
ARAGVI HOLDING: Fitch Hikes LongTerm IDRs to 'B+', Outlook Stable
F I N L A N D
MULTITUDE SE: Fitch Alters Outlook on 'B+' LongTerm IDR to Positive
F R A N C E
FORVIA SE: S&P Rates New EUR800MM Senior Unsecured Notes 'BB'
PLASTIC OMNIUM: S&P Assigns 'BB+' ICR, Outlook Stable
G E R M A N Y
CIDRON ATRIUM: EUR125MM Bank Debt Trades at 33% Discount
SUSE SA: S&P Affirms 'B+' LongTerm ICR & Alters Outlook to Stable
TIEFDRUCK SCHWANN-BAGEL: Files for Insolvency Following Takeover
TK ELEVATOR: Moody's Affirms 'B2' CFR, Outlook Remains Negative
TK ELEVATOR: S&P Affirms 'B' LongTerm ICR, Outlook Negative
WITTUR HOLDING: EUR565MM Bank Debt Trades at 32% Discount
I R E L A N D
ALKERMES PLC: Upgrades ICR to 'BB' on Oncology Business Spin-off
CAIRN CLO XI: Fitch Affirms 'B-sf' Rating on Class F Notes
EUROMAX V ABS: S&P Affirms 'CC' Rating on Class A4 Notes
SIGNAL HARMONIC II: S&P Assigns Prelim. B-(sf) Rating on F Notes
TRINITAS EURO VI: S&P Assigns B-(sf) Rating in Class F Notes
K A Z A K H S T A N
NOMAD LIFE: S&P Affirms 'BB+' ICR & Alters Outlook to Positive
M O N T E N E G R O
MONTENEGRO: S&P Affirms 'B/B' Sovereign Credit Ratings, Outlook Pos
N E T H E R L A N D S
SPRINT BIDCO: EUR700MM Bank Debt Trades at 60% Discount
[*] NETHERLANDS: Company Bankruptcies Likely to Rise This Year
U N I T E D K I N G D O M
BODY SHOP: Administrators Look Into Claims of Unaccounted Funds
CARTON EDGE: Goes Into Liquidation, 31 Jobs Affected
HIRETEST LIMITED: Set to Go Into Administration
INEOS QUATTRO: S&P Rates EUR700MM Fungible Term Loan B Add-On 'BB'
LANEBROOK MORTGAGE 2022-1: S&P Raises F Notes Rating to 'BB+'
SAIETTA GROUP: Set to Fall Into Administration
TSM SPORTS: Goes Into Voluntary Liquidation
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C Y P R U S
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ARAGVI HOLDING: Fitch Hikes LongTerm IDRs to 'B+', Outlook Stable
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Fitch Ratings has upgraded Aragvi Holding International Limited's
(Trans-Oil) Long-Term Foreign Currency (FC) Issuer Default Rating
(IDR) and Long-Term Local Currency (LC) IDR to 'B+' from 'B'. The
Outlook is Stable.
The upgrade of the LC IDR reflects Trans-Oil's strengthened credit
profile over the last three years with increased scale of
operations and wider geographical diversification outside Moldova.
The upgrade also reflects its expectations of consistently positive
free cash flows (FCF) from FY24 (year end June) and the company's
continued adherence to a conservative financial policy since FY22.
The upgrade of the FC IDR reflects a sufficient hard-currency debt
service ratio of more than 1x over the next 18 months to justify an
uplift above Moldova's Country Ceiling in accordance with Fitch's
criteria.
Trans-Oil's 'B+' IDR benefits from its dominant and well-protected
market position in agricultural exports and sunflower seed crushing
in Moldova, while expanding operations to Serbia and Romania and
maintaining superior EBITDA margin compared with larger peers'.
KEY RATING DRIVERS
Improved Business Profile: Trans-Oil's business profile has
improved over the last three years with an increase in scale and
wider geographic diversification, growing both sunflower oil
crushing and grain trading volumes, and a strengthening of its
logistic operations.
Fitch calculates Trans-Oil's EBITDA at above USD180 million over
FY24-FY27, up from USD94 million in FY20, which firmly positions
Trans-Oil among the largest sunflower producers and commodities
traders in eastern Europe. This, however, represents a moderation
from USD240 million in FY22 when it benefited from peak commodity
prices and large origination volumes from Ukraine. Fitch expects
gradually declining commodity prices and lower trading volumes from
Ukraine to be partly offset by ramped-up operations in Serbia and
Romania.
Foreign-Currency IDR Above Country Ceiling: Trans-Oil's FC IDR is
above Moldova's Country Ceiling as Fitch estimates hard-currency
external debt service ratio will be sustained at above 1x to over
next 18 months. Its projections are premised on its expectation
that Trans-Oil will continue generating a growing share of EBITDA
from outside Moldova and maintain substantial offshore cash
balances and a comfortable schedule of repayments for its
foreign-currency debt. Fitch also assumes its eurobond maturing in
April 2026 will be refinanced in advance.
Moderation in Commodity Price Cycle: Trans-Oil benefited from high
agricultural commodity prices in FY22, which boosted its revenue
and profits, but also led to large cash outflows, due to an
increase in working-capital (WC) needs. Prices normalised
moderately in FY23-1HFY24 and Fitch assumes further declines of up
to 10% in FY25 and of below mid-single digits in FY26-FY27, but
remaining above pre-FY21 levels. As a result, Fitch views a
majority of the EBITDA increase achieved during the time of
exceptionally high and volatile prices for agricultural commodities
as sustainable.
Improved Diversification: Over the last three years Trans-Oil has
expanded to oil crushing facilities in Romania and in Serbia,
invested in silo and port terminal infrastructure on the Danube
river and grown its origination and trading segment outside
Moldova, including in Ukraine and Latin America. EBITDA share
generated outside of Moldova was 61% in FY23, a significant
increase from 20% in FY20. Trans-Oil plans further expansion and
modernisation of its oil crushing plant in Romania in 2024, with
its ramp up further contributing to diversification outside
Moldova.
Fitch estimates EBITDA from Serbia and Romania will not be
sufficient to cover hard-currency gross interest expense over the
medium term, and thus continue to apply Moldova's Country Ceiling
to the rating.
Leverage in Line with Rating: Trans-Oil's readily marketable
inventories (RMI)-adjusted EBITDA net leverage increased to 2.8x in
FY23 from 2.2x in FY22, but remained below historical levels and
its previous positive rating sensitivity for the LC IDR of below
3x. Fitch expects EBITDA of around USD180 million-USD190 million to
be sufficient for leverage to remain in line with the LC IDR. Fitch
sees possible leverage declines on sustained positive free cash
flow (FCF) in FY24-FY27 as the company's WC requirements normalise
and capex reduces after large investments in FY23.
Superior EBITDA Margin: Trans-Oil has higher EBITDA margins than
most Fitch-rated peers in the commodity trading sector at an
estimated 8%-9% over FY24-FY27 (FY23: 8.3%). This is despite EBITDA
margin decline over the past four years as the company expanded
into trading, which has lower operating margins than crushing
operations. Fitch believes this margin can be sustained in the
medium term, assuming organic business growth, a stable revenue
share of sunflower oil crushing operations and increased efficiency
at its modernised production facilities.
Improved Cash Flows: Trans-Oil's FCF turned a positive USD97
million (6.4% of revenue) in FY23 as WC normalised and despite
increased capex of USD40 million, up from USD13 million in FY22.
This followed free cash outflows of 2%-7% in FY21-FY22 on increased
WC requirements amid high agricultural commodities prices and
increased trading volumes. Fitch expects FCF margins to remain
positive at low single digits over FY24-FY27, creating a buffer for
potential additional investments, bolt-on acquisitions and
supporting deleveraging, as underlined in the upgrade of the LC
IDR.
Strong Market Position in Moldova: Trans-Oil's dominant market
position in Moldova's agricultural exports and sunflower seed
crushing underpins the IDRs. It is the largest oil producer and
exporter of agricultural commodities in Moldova. A major
competitive advantage is its ownership of material infrastructure
assets as it operates the country's largest inland silo network and
owns a port terminal in the only seagoing vessel port.
DERIVATION SUMMARY
Trans-Oil is considerably smaller in size and has a weaker ranking
on a global scale than international agricultural commodity traders
and processors, such as Cargill Incorporated (A/Stable), Archer
Daniels Midland Company (A/Stable) and Bunge Global SA (BBB/RWP).
Comparing Trans-Oil with Tereos SCA (BB/Stable), the two-notch
rating differential reflects the latter's stronger business profile
supported by its larger scale, stronger geographic diversification
and a more flexible cost structure. This is partly offset by its
weaker financial structure.
Trans-Oil compares well with Ukrainian sunflower seed crusher and
grain trader Kernel Holding S.A. (CC) due to the similarity of
their operations and vertically-integrated models, which include
sizeable logistics and infrastructure assets. The main difference
in business models is Kernel's integration into crop growing, which
limits sourcing and procurement risk, and a wider and diversified
customer base. Kernel also has greater business scale and a larger
sourcing market, which before the Ukraine and Russia war provided
greater protection from weather risks.
In contrast, competition risks for Trans-Oil are lower than
Kernel's due to its stronger market position and the absence of
competition from global commodity traders and processors in
Moldova. Kernel's 'CC' IDR reflects heightened operational and
financial risks since Ukraine's military invasion by Russia.
KEY ASSUMPTIONS
- Agricultural commodity prices for the origination segment to
decline on average 15% over FY24-FY27 versus FY23 and in the
crushing segment to gradually decline from FY25 toward the
five-year average by FY27
- Sales volumes improving in FY24 after a poor harvest in Moldova
in FY23, with a steady reduction of origination volumes from
Ukraine from FY25
- To maintain its ability to preserve profit margins in the
origination and crushing segments, supporting 8%-9% EBITDA margins
- Slightly decreasing interest expense on floating-rate trade
finance facilities, driven by expected lower interest rates in
FY24-FY27
- Moderating WC outflows, resulting in positive FCF margins at low
single digits
- Annual capex of USD25 million in FY24-FY26
- No dividends
RECOVERY ANALYSIS
KEY RECOVERY RATING ASSUMPTIONS
The senior secured eurobond is rated in line with Trans-Oil's IDR
of 'B+', reflecting average recovery prospects given default. The
eurobond is secured by pledges over a majority of assets of key
Moldovan entities, excluding commodities.
Its recovery approach assumes the company will be liquidated
instead of restructured in financial distress. The increase in
liquid assets, such as RMI resulting from Trans-Oil's increased
scale, will likely encourage creditors secured by these assets to
pursue a liquidation. Under such an outcome, Fitch expects
bondholders to receive better recoveries than for a going concern,
given pledges over the other assets of the company.
Fitch has applied customary advance rates for the main assets in
Trans-Oil, such as 80% for trade receivables, 30% for non-RMI
inventories and 30% for property plant and equipment.
Fitch-adjusted RMI is used to repay outstanding WC credit lines
first (USD250 million in FY23), as such creditors have direct
recourse to these assets.
Its assumptions result in a ranked recovery in the 'RR4' band for
the senior secured eurobond, indicating a 'B+' rating. The
waterfall analysis output percentage on metrics and assumptions was
58%. However, the eurobond is rated in line with Trans-Oil's 'B+'
IDR, capped by the Moldovan jurisdiction in accordance with Fitch's
Country Specific Treatment of Recovery Ratings Criteria. Therefore,
the waterfall analysis output percentage remains capped at 50%.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
LC IDR
- Increased scale toward USD250 million and further diversification
leading to resilient EBITDA margins and positive FCF margins on a
sustained basis
- Maintaining a conservative capital structure with RMI-adjusted
EBITDA net leverage at or below 2.5x and strengthening of
risk-management practices
- Maintenance of strong internal liquidity with sufficient
availability of trade-financing lines to secure trading and
processing volumes and to cope with price volatility
- Stable geopolitical environment in Trans-Oil's core countries of
operation
FC IDR:
- Upgrade of the LC IDR
- Strengthening of hard-currency debt service ratio to above 1.5x
over more than 18 months or increasing EBITDA generated from
higher-rated countries, in particular Serbia and Romania,
sufficient to fully cover annual hard-currency interest expense
over the next three years, which would lead to a change in the
Applicable Country Ceiling
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Weakening of operations with consolidated EBITDA declining to
below USD150 million
- RMI-adjusted EBITDA net leverage above 3.0x and RMI-adjusted
EBITDA interest cover below 1.5x
- More aggressive risk management or financial policy, as reflected
by increased profit volatility and higher-than-expected investments
in WC, capex, M&A or dividend payment
- Weakening of liquidity position or risk of insufficient
availability of trade-finance lines to fund trading and processing
operations with its internal liquidity score falling below 1.0x
- Deteriorating operating environment in Moldova
- Absence of visibility of refinancing options for the eurobond
within the next 12 to 18 months
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: At FYE23, Trans-Oil had Fitch-adjusted
available cash of USD28 million, Fitch-estimated RMI of USD250
million and accounts receivables of USD229 million, which were
sufficient to cover current liabilities of USD304 million. Fitch
expects Trans-Oil to be able to maintain adequate internal
liquidity over the next two years.
Trans-Oil has extended its USD150 million pre-export financing
facility to June 2025. Refinancing risks remain high given
geopolitical instability in the region and overall weakened access
to capital for companies operating in the region. However, Fitch
assumes that Trans-Oil's conservative financial profile and
reinforced scale and diversification will allow a timely refinance
of its USD500 million bond maturing in April 2026.
ISSUER PROFILE
Trans-Oil is a vertically integrated agro-industrial business based
in Moldova with its core activities focused on origination and
wholesale trade of grain and sunflower seeds, storage and
trans-shipment operations and the production of vegetable oils
(bottled and in bulk).
SUMMARY OF FINANCIAL ADJUSTMENTS
RMI Adjustments: Fitch applied RMI adjustments in evaluating
Trans-Oil's leverage and interest coverage ratios and liquidity.
Certain commodities traded by Trans-Oil fulfil Fitch's eligibility
criteria for RMI adjustments as around 90% of its international
oilseeds and grain sales volumes are made on the basis of forward
contracts. The differential between RMI-adjusted and RMI-unadjusted
EBITDA net leverage is around 1.0x.
For the purpose of RMI calculations, Fitch discounted eligible
reported inventory by 40% to reflect basis and counterparty risks.
In its calculation of leverage and interest cover metrics, Fitch
excluded debt associated with financing RMI and reclassified the
related interest costs as cost of goods sold.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
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Aragvi Finance
International DAC
senior secured LT B+ Upgrade RR4 B
Aragvi Holding
International
Limited LT IDR B+ Upgrade B
LC LT IDR B+ Upgrade B
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F I N L A N D
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MULTITUDE SE: Fitch Alters Outlook on 'B+' LongTerm IDR to Positive
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Fitch Ratings has revised Multitude SE's and its fully-owned
operating bank Multitude Bank plc's Outlooks to Positive from
Stable, while affirming their Long-Term Issuer Default Ratings
(IDRs) at 'B+'. Multitude's senior unsecured notes have been
affirmed at 'B+' with a Recovery Rating of 'RR4' and its
subordinated hybrid perpetual capital notes at 'B-' with 'RR6'.
The Outlook change reflects Multitude's improving business volumes,
diversification and profitability since the pandemic, adequate
capitalisation, supported by prudential requirements at Multitude
Bank, and access to granular, albeit price-sensitive, retail
deposits for funding.
The ratings also consider Multitude's niche franchise in high-yield
unsecured consumer and SME lending, pressure on its net interest
margin due to an increase in lending to lower-yielding clients, and
improving - but still high - loan impairment charges.
Multitude's Shareholder Support Rating of 'No Support' has been
affirmed and withdrawn as it is no longer considered to be relevant
for the agency's coverage.
KEY RATING DRIVERS
Group Ratings: Multitude Bank's ratings reflect Fitch's 'group
ratings' approach and are based on the analysis of Multitude, as a
group of companies, on a consolidated basis. Multitude Bank is a
Malta-based 100%-owned subsidiary of Multitude and the core
operating entity of the Multitude group, accounting for about 80%
of the group's assets. Fitch views the bank as operationally
integrated into the group with a mostly similar geographic
footprint and shared branding.
Multitude's ratings are equalised with the consolidated group's
'b+' Standalone Credit Profile (SCP) given adequate liquidity
management, supported by revenues from intra-group services at the
holding company level and material unencumbered cash held outside
Multitude Bank.
Niche Franchise: Despite an increased focus on lower-risk consumer
and SME lending in recent years, Multitude mainly operates in
non-prime lending, which can lead to asset quality volatility
through the credit cycle. Risks are mitigated by high margins and
adequate underwriting standards, including small-ticket loans and
generally short loan tenors. Recent expansion into wholesale
lending adds diversification to the business model, but also poses
risks of increased concentration in the loan book.
High Loan Impairments; Adequate Coverage: High loan impairment
charges are inherent to Multitude's business model, with asset
quality improving from diversification into SME and lower-risk
retail clients. Its impaired loans ratio (18% at end-3Q23) has
improved largely due to write-offs and sales of problem loans.
Impaired loans are adequately reserved. Impaired loan origination
(increase in impaired loans plus write-offs and sales of problem
loans) has been broadly stable since 2021.
Improving Efficiency; Margin Pressures: Profitability continues to
improve with Multitude's pre-tax income/average assets at 2.5% in
9M23, mainly helped by contained operating expenses. Multitude's
niche franchise and labour-intensive consumer lending business
model with high marketing and client acquisition costs constrain
efficiency.
Multitude's net interest margin is strong, largely as a function of
its business model, but has continued to decline due to pressures
on the gross interest yield from regulatory caps, a gradual shift
to lower-yielding client segments and increased funding costs. Loan
impairment charges were 13%-14% of average gross loans since 2021,
consuming 80% of pre-impairment profit in 9M23.
Capitalisation Benefits from Bank Regulation: Multitude's leverage
(gross debt and deposits/ tangible equity) was a high 6.2x at
end-3Q23. Prudential capitalisation of subsidiary Multitude Bank
(common equity Tier 1 ratio of 17.8% at end-1H23; above its
regulatory requirement of 13.8%) underpins the group's overall
capitalisation.
Deposit-Funded; Moderate Refinancing Risk: The group is
predominately funded by retail deposits (80% of liabilities at
end-3Q23), which are price-sensitive but granular and 99% covered
by deposit insurance. Non-deposit funding was mainly made up of a
EUR46 million senior unsecured bond with maturity in 2025 and EUR48
million perpetual debt, both issued at the holding company level.
The group's liquidity position is adequate, supported by the short
tenor of its loan book and a sound liquidity buffer.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Inability to recover business volumes or profitability in line with
management projections could lead to a revision of the Outlook to
Stable.
Significant asset-quality deterioration, with loan impairment
charges sustained above 15% of average gross loans and pressuring
profitability, or a notable increase in unreserved impaired loans
relative to tangible equity, could result in a rating downgrade.
Pressure on profitability, eg. from a tightening of regulatory
requirements in key markets or losses from expansion into new
business segments, could result in a downgrade.
Significantly higher leverage with a debt and deposits/tangible
equity above 8x on a sustained basis, together with a significant
decline in Multitude Bank's headroom above the regulatory capital
requirement could also be credit-negative.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A more diversified asset and revenue base, with all business
segments contributing to overall group profitability in line with
management's objectives, could result in an upgrade of the
Long-Term IDR to 'BB-'.
Improved profitability, with a pre-tax income/average assets
approaching 3.5% on a sustained basis, without a significant
increase in risk appetite, asset-quality risks or leverage could
also be credit-positive.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
Multitude's senior unsecured bond is rated in line with its
Long-Term IDR. The rating alignment reflects Fitch's expectation of
average recovery prospects. Its subordinated perpetual hybrid
callable notes are notched down twice from Multitude's Long-Term
IDR in line with Fitch's corporate notching criteria
('Non-Financial Corporates Hybrids Treatment and Notching
Criteria', November 2020).
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
Multitude's senior unsecured notes' rating is sensitive to changes
in Multitude's Long-Term IDR. Changes to Fitch's assessment of
recovery prospects for senior unsecured debt in default would
result in the senior unsecured notes' rating being notched down
from the IDR.
The subordinated notes' rating will mirror changes in Multitude's
Long-Term IDR. Changes to Fitch's assessment of going-concern loss
absorption or recovery prospects for subordinated debt in a default
(eg. the introduction of features resulting in easily activated
going-concern loss absorption or a permanent write-down of the
principal in wind-down) could also result in a widening of the
notching for the subordinated notes' rating to more than two
notches below Multitude's Long-Term IDR.
ADJUSTMENTS
The 'b+' business profile score is below the 'bbb' category implied
score due to the following adjustment reason(s): business model
(negative) and market position (negative).
The 'b+' asset-quality score is above the 'ccc and below' category
implied score due to the following adjustment reason: collateral
and reserves (positive).
The 'b+' capitalisation & leverage score is below the 'bb' category
implied score due to the following adjustment reason(s): risk
profile and business model (negative), and size of capital base
(negative).
ESG CONSIDERATIONS
Multitude has an ESG Relevance Score of '4' for Exposure to Social
Impacts as a result of its exposure to the high-cost consumer
lending sector. As the regulatory environment evolves (including a
tightening of rate caps), this has a moderately negative influence
on the credit profile via its assessment of its business model and
is relevant to the rating in conjunction with other factors.
Multitude has an ESG Relevance Score of '4' for customer welfare,
in particular in the context of fair lending practices, pricing
transparency and the potential involvement of foreclosure
procedures, given its focus on the high-cost consumer credit
segment. This has a moderately negative influence on the credit
profile via its assessment of risk appetite and asset quality and
is relevant to the rating in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity. Fitch's ESG Relevance Scores are not inputs
in the rating process; they are an observation of the materiality
and relevance of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
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Multitude SE LT IDR B+ Affirmed B+
Shareholder Support ns Affirmed ns
Shareholder Support WD Withdrawn ns
Subordinated LT B- Affirmed RR6 B-
senior
unsecured LT B+ Affirmed RR4 B+
Multitude Bank plc LT IDR B+ Affirmed B+
ST IDR B Affirmed B
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F R A N C E
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FORVIA SE: S&P Rates New EUR800MM Senior Unsecured Notes 'BB'
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S&P Global Ratings assigned its 'BB' issue rating and '3' recovery
rating to auto parts manufacturer Forvia SE's (BB/Stable/--)
proposed EUR800 million senior unsecured notes, that it assumes
will be split into two equal tranches of EUR400 million due 2029
and 2031. The '3' recovery rating indicates its expectation of
meaningful recovery (50%-70%; rounded estimate: 50%) in the event
of a default. The proposed notes will rank pari passu with the
company's existing unsecured debt.
S&P said, "We view the transaction as leverage neutral because
Forvia will use the proceeds to repay existing debt, including part
of its EUR1 billion senior unsecured notes due 2025 and part of the
EUR800 million outstanding under its unsecured
sustainability-linked bonds due 2026. For 2024, we anticipate that
Forvia will continue to gradually improve its profitability and
leverage, although more slowly than previously expected, due to
flat auto production growth, volatility in battery electric vehicle
platform ramp-ups, elevated capitalized development costs, labor
cost inflation, and the overall weak operating margins of its
European operations."
Issue Ratings -- Recovery Analysis
Key analytical factors
-- S&P's issue and recovery ratings on Forvia's senior unsecured
notes and EUR1.5 billion revolving credit facility (RCF) are 'BB'
and '3', respectively. S&P does not rate the unsecured notes issued
by Hella, which Forvia acquired in 2022.
-- The '3' recovery rating reflects S&P's expectation of
meaningful recovery prospects (50%-70%; rounded estimate: 50%) in
the event of a default.
-- S&P said, "Our recovery analysis assumes that Forvia's and
Hella's capital structures will remain independent from each other
in the near term, because we expect the two companies to continue
operating as separate legal entities for now. The companies' debt
documentation does not include any cross-default clauses or
upstream guarantees, and we do not expect this to change. Our
emergence valuation is, however, based on the combined group given
Forvia's 81.6% ownership of Hella."
-- S&P said, "Indicative recovery prospects are supported by about
EUR832 million of net residual value coming from Forvia's 81.6%
stake in Hella after Hella's unsecured creditors are fully repaid.
It remains constrained by our assumption for factoring liabilities
of about EUR1.06 billion in our hypothetical default scenario and
about EUR660 million of debt at Forvia's operating companies, which
we consider priority liabilities in our payment waterfall."
-- In S&P's hypothetical default scenario, it assumes a cyclical
downturn in the industry and intensified competition, which hamper
production volumes and prices and cause the company's EBITDA and
cash flow to sharply decline.
-- S&P values Forvia as a going concern, given its global
industrial footprint and long-standing relationships with auto
OEMs.
Simulated default assumptions
-- Simulated year of default: 2029
-- Pro forma EBITDA at emergence: EUR1.7 billion
-- EBITDA multiple: 5x (in line with the sector average)
-- Forvia's EUR1.5 billion RCF and Hella's EUR450 million RCF: 85%
drawn at default
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): EUR8.06
billion
-- Valuation split (Forvia/Hella): 70%/30%
-- Net Forvia valuation: EUR5.64 billion
-- Net Hella valuation: EUR2.42 billion
-- Forvia's priority claims: EUR1.72 billion
-- Forvia's value available to unsecured claims: EUR3.92 billion
-- Net residual value from Forvia's 81.6% stake in Hella, net of
EUR1.4 billion of unsecured claims to Hella's debtholders: EUR830
million
-- Total value available to unsecured claims: EUR4.75 billion
-- Senior unsecured debt claims: EUR9.29 billion
--Recovery expectations: 50%-70% (rounded estimate: 50%)
All debt amounts include six months of pre-petition interest and
85% of RCF drawings at default.
PLASTIC OMNIUM: S&P Assigns 'BB+' ICR, Outlook Stable
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S&P Global Ratings assigned its 'BB+' long-term issuer rating to
France-based Plastic Omnium.
The stable outlook indicates S&P's expectations that Plastic
Omnium's lighting operations will reach operating breakeven by
2025, supporting an improvement in its earnings and FOCF, leading
to its funds from operations (FFO) to debt comfortably exceeding
20% and its FOCF to debt increasing to more than 10% by 2025.
Plastic Omnium's leading market position in bumpers, fuel tanks,
and front-end modules supports our 'BB+' rating. The company's
solid order intake in 2023 suggests that Plastic Omnium is
consolidating its leading market position in these segments. One of
Plastic Omnium's barriers to entry resides in the management of its
complex supply chain and logistics. This enables the company to
deliver a wide variety of products customized to customers' needs
on a just-in-sequence basis. Plastic Omnium's historical contract
renewal rate of 95% leads S&P to believe that the company is well
positioned to maintain its market-leading position as a provider of
bumpers, fuel tanks, and front-end modules.
In 2023, Plastic Omnium's consolidated revenue increased
organically by 13.4% but its S&P Global Ratings-adjusted EBITDA
margin slid to about 6.4% from 7.6% in 2022. This was partly due to
delays in battery electric vehicle (BEV) launches in the second
half of 2023 as demand for electric cars softened in Europe,
combined with increased capitalized development costs of about
EUR194 million, up from EUR142 million in 2022, which we treat as
an expense. In addition, Plastic Omnium's lighting division is
still making losses, and S&P expects it will not reach breakeven
before 2025. Although the company has progressed on recovering
prices, reducing headcount, and improving scrap rates, it suffers
from insufficient volumes booked under its previous ownership.
Order intake was robust in 2023 at EUR1.6 billion, but because it
usually takes about two years from order intake to actual delivery
of the products, last year's orders will likely bear fruit only
from 2025.
Plastic Omnium is facing increased upfront investments to serve its
large order book, which will weigh on its credit metrics in 2024.
Its order intake reached a record high in 2023, corresponding to
about two years of revenue, reflecting the commercial success of
the company's product portfolio. Outperformance was particularly
strong in the Modules division, where the order intake was double
the target. However, the large number of orders will require
increased investments, both in the form of capitalized development
costs and tangible capex. Upfront costs, combined with losses in
the lighting and hydrogen businesses, lead us to forecast a further
dilution of the EBITDA margin in 2024 toward 5.6% from 6.4% in
2023. Although these required investments should ensure prospects
for earnings growth in the future, they will temporarily delay the
company's ability to reduce its debt-to-EBITDA ratio following the
2022 debt-financed acquisitions of Varroc Lighting Systems, AMLS
(the automotive lighting operations of OSRAM), and the remaining
33% stake in HBPO from HELLA. Given higher capex and margin
challenges, S&P forecasts that Plastic Omnium will generate about
EUR130 million-EUR135 million of FOCF in 2024, leading to FOCF to
debt of 5.0%-6.0%, which we consider weak for the 'BB+' rating.
S&P said, "We forecast improved recovery prospects by 2025, and we
expect FFO to debt higher than 25% and FOCF to debt exceeding 10%.
The normalization of capital development costs toward 2% of sales,
combined with the gradual increase in lighting revenue, should lead
to stronger credit metrics in 2025. Additional support should come
from gradually improving margins in the Modules division, helped by
the higher top line, and modest margin expansion in the exterior
parts (excluding lighting) and fuel tank businesses. We see very
limited headroom for a delay in reaching these levels due to more
difficult market conditions or operating setbacks, since this would
place Plastic Omnium unfavorably in comparison with auto suppliers
that we rate at the same level, such as Valeo or ZF
Friedrichshafen.
"We think Plastic Omnium will gradually reduce its leverage through
FOCF generation. We also assume that Plastic Omnium will adjust its
dividend payout ratio to its underlying operating performance. We
understand Plastic Omnium will propose a dividend of EUR0.39 per
share at the annual general meeting in April 2024, which is flat
versus the previous year and corresponds to a payout ratio of
34.5%. The company's reported net leverage declined to 1.7x in 2023
from 1.9x in 2022, corresponding to S&P Global Ratings-adjusted
debt to EBITDA of 3.6x. Our main adjustments to Plastic Omnium's
reported net debt include pension liabilities (about EUR54 million
in 2023), trade receivables sold (about EUR500 million), and the
exclusion of trapped cash.
"Plastic Omnium's clean energy systems (about 26% of 2023 sales)
are exposed to the transition to e-mobility because fuel tanks and
exhaust systems are not included in BEVs. BEV penetration is
increasing, pushed by regulatory measures to curb carbon dioxide
(CO2) emissions, especially in Europe. We therefore expect the
demand for Plastic Omnium's clean energy systems will decline. We
will monitor how the company manages this transition through its
"last man standing" strategy." In parallel, Plastic Omnium is
developing new products involving hydrogen technologies for heavy
mobility, such as fuel cell stacks, as part of a joint venture with
Elringklinger; it is also developing high pressure storage systems,
targeting EUR3 billion of revenue by 2030. The order book is
progressively increasing, but at this point there is still limited
visibility on Plastic Omnium's ability to achieve the same level of
operating profitability as for its traditional activities.
With 150 plants in 25 countries, Plastic Omnium is a global player
but has a relatively small presence in China relative to peers like
Faurecia, Valeo, or Autoliv. In 2023, about 51% of its economic
sales stemmed from Europe, 28% from North America, and only 9% from
China (including sales from joint ventures). S&P typically
considers auto suppliers with a meaningful exposure to China as
better placed to benefit from growth opportunities because of the
size and dynamism of China's auto market.
S&P said, "The stable outlook indicates our expectations that
Plastic Omnium's lighting operations will reach operating breakeven
by 2025, losses in other new product areas like the hydrogen
business will gradually shrink, and profitability in the company's
other businesses will modestly improve. This should support an
improvement in its overall earnings and FOCF, leading to FFO to
debt comfortably exceeding 20% and FOCF to debt increasing to more
than 10% by 2025."
S&P could lower its rating on Plastic Omnium if it faced material
operating setbacks or if it initiated a more aggressive financial
policy, leading to a sustained deterioration of credit metrics,
such as:
-- FFO to debt not improving to well above 20% by 2025; or
-- FOCF to debt not converging toward 10% by 2025.
S&P could raise its rating on Plastic Omnium if it sustainably
posts FOCF to debt of at least 15% while maintaining FFO to debt
comfortably above 30%. An upgrade would also hinge on management's
commitment to operating at these levels on a sustainable basis.
S&P sees Plastic Omnium's position on environmental, social, and
governance factors as largely in line with that of industry peers.
The company faces displacement from electrification. A
faster-than-expected transition to BEVs, coupled with
slower-than-expected adoption of the company's fuel cell
technology, represents a risk. However, this is mitigated by the
shift from metal to plastic that helps curb CO2 emissions, thanks
to the lower weight of plastic.
Since the appointment of Laurent Favre as CEO in January 2020,
Plastic Omnium has separated the roles of chairman and CEO, which
we view as positive. The meaningful free float of 38% reduces the
incentives of the controlling Burelle family to upstream large
dividends due to the risk of cash leakage to minority shareholders.
In addition, Burelle SA, Plastic Omnium's parent, holds no
third-party debt and reports a positive net cash position.
=============
G E R M A N Y
=============
CIDRON ATRIUM: EUR125MM Bank Debt Trades at 33% Discount
--------------------------------------------------------
Participations in a syndicated loan under which Cidron Atrium SE is
a borrower were trading in the secondary market around 67.1
cents-on-the-dollar during the week ended Friday, March 1, 2024,
according to Bloomberg's Evaluated Pricing service data.
The loans traded in the secondary market around 66.8
cents-on-the-dollar the previous week ended Feb. 23.
The EUR125 million facility is a Term loan that is scheduled to
mature on February 26, 2026. The amount is fully drawn and
outstanding.
Cidron Atrium SE operates as a special purpose entity. The Company
was formed for the purpose of issuing debt securities to repay
existing credit facilities, refinance indebtedness, and for
acquisition purposes. The Company's country of domicile is
Germany.
SUSE SA: S&P Affirms 'B+' LongTerm ICR & Alters Outlook to Stable
-----------------------------------------------------------------
S&P Global Ratings revised its outlook on Germany-based SUSE S.A.,
parent of SUSE Linux, to negative from stable, and affirmed its
'B+' long-term issuer credit rating.
The negative outlook indicates that S&P could lower its ratings on
SUSE if the company fails to successfully execute its top-line
growth and margin expansion plan, leading to sluggish EBITDA and
persistently weak FOCF.
SUSE's credit metrics will remain under pressure in fiscal 2024
before a potential rebound in fiscal 2025. S&P forecasts SUSE's
adjusted EBITDA will remain largely flat in fiscal 2024 due to the
company's continued investment in sales and marketing to support
the recovery of top-line growth, somewhat offset by lower
nonrecurring costs. This will result in the company's S&P Global
Ratings-adjusted debt to EBITDA remaining higher than 6.0x, which
is our downside rating trigger. Additionally, S&P forecasts higher
interest costs and working capital than in fiscal 2023 to support
growth, which will further depress cash flow. S&P therefore expects
FOCF will be less than $40 million (with FOCF to debt at about 3%)
in fiscal 2024, compared with about $78 million in fiscal 2023
(FOCF to debt of 6.2%). That said, it thinks the company's
increasing investment in sales and marketing, research and
development, and stabilizing the management team will likely help
accelerate top-line growth in fiscal 2025, leading to an
improvement in EBITDA and credit metrics.
Weak macroeconomic conditions and strong competition could derail
the company's rebound plan. Although S&P thinks the company's
software solutions play a vital role in supporting enterprises'
core applications and cloud platforms, the open-source nature of
the product makes it possible for customers to use a free version
for longer under a tight budget. Additionally, SUSE is trailing in
the paid Linux software and services market after the market leader
Redhat, which enjoys the vast resources of its parent IBM. In our
view, weak global economic growth could lead to increasing
competition and pricing pressure and make it harder for the company
to bring its top-line growth rate back into double-digit territory.
Additionally, the company's increased investment and reorganization
of the sales team in fiscal 2023 have not yet achieved the expected
results. Although the company is committed to further investment,
particularly in sales in fiscal 2024, it's unclear whether it can
build a track record of success.
Relatively prudent financial policy supports deleveraging in the
medium term. SUSE is still committed to reducing reported net debt
to adjusted cash EBITDA to 3.5x (equivalent to S&P Global
Ratings-adjusted 4.5x-5.0x) in the medium term from 5.3x in fiscal
2023, following its debt-funded delisting. This reduces the risk of
debt-funded acquisitions or shareholder returns in the next two to
three years, supporting prospects for deleveraging.
The negative outlook indicates that S&P could lower its ratings on
SUSE if the company fails to successfully execute its top-line
growth and margin expansion plan, leading to sluggish EBITDA and
persistently weak FOCF.
Downside scenario
S&P could lower its rating if significantly lower-than-expected
revenue growth or EBITDA margins, higher-than-expected nonrecurring
costs, or a more aggressive financial policy were to lead to
adjusted leverage staying above 6x, or if adjusted FOCF to debt
remained below 5%.
Upside scenario
S&P could revise the outlook to stable if adjusted leverage reduces
below 6x and FOCF to debt improves toward 5%, supported by sound
sales execution and lower exceptional costs.
TIEFDRUCK SCHWANN-BAGEL: Files for Insolvency Following Takeover
----------------------------------------------------------------
Jo Francis at Printweek reports that the European gravure printing
market has been dealt a further blow after Germany's Tiefdruck
Schwann-Bagel (TSB) filed for insolvency just five months after
being acquired by another continental group.
France-headquartered Riccobono Group became Europe's biggest
gravure printer when it took over TSB last autumn, Printweek
recounts.
The deal involved reducing the number of gravure presses from six
to four and a restructure that cut 78 jobs, Printweek states.
Despite the downsizing, TSB filed an application to open insolvency
proceedings with the district court in Monchengladbach last week,
Printweek relates.
The court then appointed lawyer Dr Markus Kier from the Piepenburg
Rechtsanwälte law firm the company's provisional insolvency
administrator, Printweek discloses.
According to TSB, the bankruptcy filing was necessary because a
loss in sales recorded last year due to ongoing restructuring
efforts could not be compensated for due to rising energy, material
and labour costs, Printweek notes.
However, a source at Riccobono Group told Printweek that Riccobono
had been misinformed about TSB's financial situation. The source
said TSB had made "serious losses" at the end of last year, and
Riccobono would be taking action against the former owners for
prejudice and false information.
TSB, which employs 183 staff, will continue to trade during the
insolvency proceedings, according to Printweek.
"We will now take a close look at everything in the next few days
and weeks," Printweek quotes Dr. Kier as saying.
"Based on this, we then examine all the restructuring options
available to us."
TK ELEVATOR: Moody's Affirms 'B2' CFR, Outlook Remains Negative
---------------------------------------------------------------
Moody's Investors Service affirmed the long-term B2 corporate
family rating and B2-PD probability of default rating of German
elevator and escalator company TK Elevator Holdco GmbH (TKE, TK
Elevator or the group). Moody's also affirmed the Caa1 ratings on
the guaranteed senior unsecured notes due 2028 issued by TKE, but
downgraded to B2 from B1 the senior secured instrument and senior
secured bank credit facility ratings of TK Elevator Midco GmbH and
TK Elevator U.S. Newco, Inc. Concurrently, Moody's assigned new B2
senior secured term loan B2 ratings issued by TK Elevator Midco
GmbH and TK Elevator U.S. Newco, Inc. The outlook on the three
entities remains negative.
RATINGS RATIONALE
Moody's downgraded TK Elevator Midco GmbH's and TK Elevator U.S.
Newco, Inc.'s ratings for the senior secured debt and senior
secured bank credit facility instruments to B2 from B1 as TKE
intends to increase its secured term loan debt and use proceeds
from the new senior secured term loan B2 to repay its senior
unsecured notes (SUNs). This results in an increasing share of
senior secured relative to senior unsecured debt, which reduces the
cushion of loss absorption for secured lenders and is reflected in
the B2 senior secured ratings, now at the same level as the CFR.
The proposed transaction is moderately credit positive. Firstly, it
extends the maturity profile out to 2030, and maturities will no
longer be clustered around 2027 and to some extent 2028. Secondly,
management expects some annual interest savings. The effect on net
leverage is neutral. Moody's expects slightly elevated gross
leverage for a temporary period if TKE calls the SUNs after the
call protection in July 2024. The rating agency will offset any
excess cash earmarked for the redemption of the SUNs from its
metrics.
The affirmation of TKE's CFR and PDR takes into account the
positive benefits from TKE's restructuring, operational excellence
programmes, structural cuts to its overhead costs with expected
incremental EBITDA improvements of around EUR100 million annually
(Moody's estimates); the high share of recurring modernization and
services revenues that have a higher profitability compared to new
installations and are less correlated to economic cycles; and low
asset intensity with maintenance capital investment of around EUR80
million annually.
The B2 rating also reflects cash costs for ongoing restructuring
that constrain more meaningful EBITDA and FCF generation; the
expectation that as the benefits of existing interest rate hedges
wane and the capital structure gets refinanced at higher rates, the
increase in higher interest will constrain FCF generation; low FCF
relative to debt and still high leverage of well above 7.0x
Moody's-adjusted debt/EBITDA (as of FY22/23) compared to the
initial de-leveraging trajectory that the company presented in
2020. The substantial amount of PIK notes at an entity above the
restricted financing group, which the company may over time address
as part of a refinancing of TKE's capital structure, also weighs
negatively on credit quality.
OUTLOOK
The negative outlook reflects that TKE is weakly positioned in the
B2 rating category and further performance improvements are
required in light of the highly leveraged capital structure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could downgrade ratings, if TKE (1) failed to progressively
reduce debt to EBITDA towards 7.0x by FYE23/24 and well below 7.0x
by FYE24/25, (2) free cash flow turned negative, (3) EBITA/interest
expense fell below 1.5x, (4) liquidity started to deteriorate.
Upward pressure on the ratings appears currently unlikely,
considering TKE's still high leverage and the existence of a
substantial amount of PIK notes above the restricted financing
group, reflecting some risk of associated cash leakage over time.
However, TKE's ratings could be upgraded, if (1) debt to EBITDA
fell towards 5.5x , (2) FCF/debt improved to at least 5%, (3) EBITA
to interest expense sustainably exceeds 2.0x, (4) TKE established a
prudent financial policy, as shown by excess cash flow being
applied to debt reduction and no material shareholder
distributions. An upgrade is also unlikely prior to clarity on the
proposed refinancing of the capital structure.
All metric reference is Moody's-adjusted.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
TK Elevator Holdco GmbH, headquartered in Düsseldorf/Germany, is
an intermediate holding company of the group, a leading
manufacturer of elevators and escalators with a global presence in
more than 60 countries and more than 50,000 employees. In fiscal
2023, the group generated 42% of total revenue in the Americas,
Asia-Pacific (27%) and Europe-Africa (26%). The group derived 40%
of its fiscal 2023 revenue of around EUR8.9 billion from new
installations, while its services and modernisation segments
accounted for 46% and 14% of revenue, respectively.
Company-adjusted EBITDA amounted to EUR1.3 billion (14.6% margin).
TK ELEVATOR: S&P Affirms 'B' LongTerm ICR, Outlook Negative
-----------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term issuer credit rating
on Germany-based TK Elevator Topco GmbH, TK Elevator Group's (TK
Elevator) holding company. S&P lowered its issue rating on TK
Elevator's first-lien senior secured debt to 'B', and recovery
rating to '3' with rounded recovery prospects of 65%, based on a
lower junior debt cushion for the senior secured debt.
The 'CCC+' issue rating on the second-lien senior unsecured debt
remains unchanged. The recovery rating remains '6'.
The negative outlook reflects a likely downgrade if the company
does not improve its operating performance, the EBITDA margin
increases to 14%, and debt to EBITDA (excluding payment-in-kind
[PIK] notes) remains above 8x.
The proposed transaction has a limited effect on the company's
credit metrics, however it reduces the quantum of high-interest
second-lien debt.TK Elevator proactively manages its capital
structure, and as a part of the proposed transaction the company
aims to:
-- Amend and upsize its dollar-denominated TLB of EUR2,571
million-EUR2,660 million;
-- Extend the TLB maturity to April 2030 from July 2027, or three
months before any senior secured notes' maturity if the outstanding
notes maturing before April 2030 amount to at least EUR500
million;
-- Raise an additional euro-denominated TLB tranche of EUR500
million with maturity in April 2030;
-- Repay existing second-lien dollar- and euro-denominated private
senior unsecured notes equivalent to EUR588 million.
S&P said, "The proposed transaction will have an overall neutral
effect on TK Elevator's leverage. We think that the company will
refinance its more expensive debt and achieve some interest savings
annually. We forecast S&P Global Ratings-adjusted debt to EBITDA
(excluding PIKs) of about 7.5x-7.7x in 2024 and funds from
operations (FFO) cash interest of approximately 1.5x-1.7x in
2024."
Prolonged high interest rates will likely delay new construction
and moderate order intakes for new installations globally. The new
installation order intake declined 10% in the first quarter of 2024
year over year due to softer markets in the Americas and
Asia-Pacific. Conditions in China's real estate market are
particularly challenging. TK Elevator has a strong foothold in
China's infrastructure sector (No. 2 market position), which is
exposed and less volatile and could provide some support. However,
a dampened real estate market in China will likely weigh on the new
installation business in the short term.
New installations account for only 40% of revenues and carry a
notably lower margin compared with the company's modernization and
services business which accounts for about 60% of total revenues.
In the first quarter of 2024, order intake has increased by 9% for
modernization and 10% for services. Growth mainly stems from Europe
and Africa. Over the past two years the company's service and
modernization business increased by 7%-9% annually, supporting the
stability of profitability and cash flows.
A substantial order backlog with an improving margin profile will
support TK Elevator's expansion in the next 12-18 months. Despite
some softer new installation orders, book-to-bill ratio remained
just above 1x in the first quarter of 2024. Order backlog remains
solid with EUR6.3 billion orders available, 2% higher year over
year. The solid order backlog and the stable-to-slightly growing
order intake should translate to revenue growth of 5%-6% in 2024.
We expect the adjusted EBITDA margin to improve to about
13.0%-13.5%, from 12.1% in fiscal year 2023. Gradually reducing
restructuring costs and other one-off costs support profitability.
Pricing and procurement measures are also gaining momentum across
the business. Measures to reduce costs--including reducing a legacy
overhead cost structure, actions to improve its manufacturing
footprint, and service growth driven by high new installation
conversion, improved retention, and recaptures--should support
margin improvement. Finally, better pricing and resultant better
margins in the order intake and order backlog should also support
profits when converted to revenues.
S&P said, "In the next 12-18 months, we anticipate that the
company's free operating cash flow (FOCF) will gradually increase
in line with earnings. We forecast positive FOCF of about EUR150
million-EUR200 million in fiscal 2024 and about EUR300
million-EUR350 million in fiscal 2025. Margin appreciation,
positive working capital of about EUR30 million-EUR40 million, and
low capital expenditure (capex) requirements will support FOCF. We
expect TK Elevator will use its revolving credit facility (RCF)
less often, which will improve its liquidity and support
deleveraging. Low intra-year working capital swings and a
long-dated debt maturity profile (no material maturity before 2027)
with sufficient covenant headroom also underpin the company's
liquidity profile.
"The negative outlook reflects a likely downgrade if the company
does not improve its operating performance with the EBITDA margin
increasing toward 14%, debt to EBITDA (excluding PIK notes)
remaining above 8x, and FOCF generation developing slower than we
forecast."
Such a scenario could occur if cost measures are less effective
than anticipated, and lower order intake and price pressure in its
new installation segment persist.
S&P could lower the rating if the company does not increase its
revenue or absolute EBITDA as expected, resulting in debt to EBITDA
(excluding PIK notes) of more than 8x or an FFO cash interest ratio
of less than 2x by Sept. 30, 2024. These scenarios could
materialize following a contraction in EBITDA amid tough industry
and weakening macroeconomic conditions.
S&P could also lower the rating if:
-- The EBITDA margin does not improve toward 14%;
-- The company cannot generate sustainable positive FOCF of more
than EUR200 million;
-- Liquidity deteriorates; or
-- The company undertakes significant debt-financed acquisitions.
S&P could revise the outlook to stable if TK Elevator's operating
performance significantly recovers over the next 12-18 months--such
that EBITDA margins reach 14%. This will enable the company to
continue its deleveraging path with debt to EBITDA (excluding PIK
notes) of below 8.0x and an FFO cash interest coverage of about
2.0x. A stable outlook would also hinge on significantly positive,
sustainable FOCF generation.
S&P said, "Governance factors are a moderately negative
consideration in our credit rating analysis of TK Elevator. Our
assessment of the company's financial risk profile as highly
leveraged reflects corporate decision-making that prioritizes the
interests of the controlling owners, as is the case for most rated
entities owned by private-equity sponsors. Our assessment also
reflects their generally finite holding periods and a focus on
maximizing shareholder returns. Environmental and social factors
are an overall neutral consideration in our credit rating analysis
to date. As a result of the more stringent carbon dioxide emissions
regulation, steel prices could increase--which could increase costs
and pressure margins if the group is not able to pass those costs
on to its clients in full."
WITTUR HOLDING: EUR565MM Bank Debt Trades at 32% Discount
---------------------------------------------------------
Participations in a syndicated loan under which Wittur Holding GmbH
is a borrower were trading in the secondary market around 68.2
cents-on-the-dollar during the week ended Friday, March 1, 2024,
according to Bloomberg's Evaluated Pricing service data.
The loans traded in the secondary market around 66.2
cents-on-the-dollar the previous week ended Feb. 23.
The EUR565 million facility is a Term loan that is scheduled to
mature on September 23, 2026. The amount is fully drawn and
outstanding.
Wittur Holding GmbH is the operating entity of The Wittur Group.
The Company is a worldwide producer and supplier of elevator
components. Founded 1968 in Germany, the group is today present
with various subsidiaries in Europe, Asia and Latin America. The
Company's country of domicile is Germany.
=============
I R E L A N D
=============
ALKERMES PLC: Upgrades ICR to 'BB' on Oncology Business Spin-off
----------------------------------------------------------------
S&P Global Ratings raised its issuer rating to 'BB' from 'BB-', and
its issue-level rating on the term loan to 'BB+' from 'BB' on
Ireland-based biopharmaceutical company Alkermes PLC.
The recovery rating on the term loan remains '2', indicating S&P's
expectation of substantial (70%-90%; rounded estimate: 85%)
recovery in the event of a payment default.
The stable outlook reflects S&P's expectation that the company will
pursue acquisitions to augment its pipeline, but that leverage will
remain below 3x.
Alkermes spun off its oncology business and is now a pure-play
neuroscience specialty drug manufacturer.
The reduction in costs related to the oncology business, the
continuation of royalty payments from the Invega franchise, and
growth in its priority products have enabled leverage to decline.
The separation of the oncology business improves Alkermes' margins
and cash flow. In the fourth quarter of 2023, Alkermes successfully
spun off its oncology business, which became an independent,
publicly traded company (Mural). As part of the separation,
Alkermes provided $275 million in funding to Mural as initial seed
capital. The oncology business was pre-revenue and was incurring
about $160 million in expenses per year related to the research and
development of nemvaleukin and other cancer therapies. After the
separation, Alkermes' S&P Global Ratings-adjusted EBITDA margins
will materially improve to about 36% from our previous expectation
of between 18% and 20%.
S&P said, "We expect Lybalvi to grow at a brisk pace for the next
few years and could become the company's largest product. While
only accounting for about 12% of sales at the end of 2023, we see a
path for Lybalvi to become the largest revenue source for Alkermes
by 2026. After only two years in the market, Lybalvi has about
46,700 prescriptions and sales doubled in 2023. We expect about
$280 million in revenue in 2024, representing growth in the mid-40%
area. While we believe Lybalvi remains a source of growth for the
company, its growth and the reduction in Invega royalty revenue and
Teva's potential entrance in the Vivitrol market in 2027 may
increase the company's product concentration over time.
"The stable outlook reflects our expectation that the company will
pursue acquisitions to augment its pipeline, but that leverage will
remain below 3x.
"We could lower our rating on Alkermes if adjusted debt to EBITDA
increases above 3x or if its cash balance were significantly
depleted."
This could occur if the company:
-- Pursues significant debt-financed acquisitions or shareholder
rewards that increase leverage materially; or
-- Underperforms our expectations; for example, if Lybalvi does
not grow as quickly as S&P anticipates and/or Vivitrol revenue
declines faster than it anticipates.
S&P said, "Although unlikely within the next year or two, we could
raise the rating on the Alkermes if the company significantly
diversifies its portfolio without leverage straying from our
expectations. We could also raise the rating if the company
articulates a convincing financial policy where leverage would be
sustained under 2x. However, we also view this as unlikely because
we expect the company will acquire assets to strengthen its
pipeline.
"ESG factors have an overall neutral influence on our credit rating
analysis of Alkermes. The Inflation Reduction Act will increase
industry pricing pressure in the U.S., where the company generates
more than 80% of its revenue, but we currently do not expect a
material impact on Alkermes from this new law. In addition, we
believe these social risks are offset by our view that Alkermes is
an innovative pharmaceutical company in neuroscience."
CAIRN CLO XI: Fitch Affirms 'B-sf' Rating on Class F Notes
----------------------------------------------------------
Fitch Ratings has upgraded Cairn CLO XI DAC's class B and D notes
and affirmed the others.
Entity/Debt Rating Prior
----------- ------ -----
Cairn CLO XI DAC
A XS2076107718 LT AAAsf Affirmed AAAsf
B XS2076108369 LT AA+sf Upgrade AAsf
C XS2076108526 LT Asf Affirmed Asf
D XS2076109250 LT BBBsf Upgrade BBB-sf
E XS2076109920 LT BB-sf Affirmed BB-sf
F XS2076109847 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
Cairn CLO XI DAC is a cash flow CLO comprising senior secured
obligations. The transaction is in its reinvestment period and the
portfolio is actively managed by Cairn Loan Investments II LLP.
KEY RATING DRIVERS
Better Asset Performance: The transaction is passing all collateral
quality, portfolio profile and coverage tests, as per the last
trustee report dated 3 January 2024. The total par loss at 0.22% of
target par, mainly due to defaulted assets or the manager making
some trading losses on selling weaker assets, is well below its
rating case assumptions.
The rating actions reflect the transaction's resilient performance
with portfolio losses below rating cases, combined with manageable
near- and medium-term refinancing risk, with only 1.1% of the
assets in the portfolio maturing before 2024, and 3.1% in 2025.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the underlying obligors at 'B'/'B-'. The Fitch-calculated weighted
average rating factor (WARF) of the current portfolio is 26.1 as
reported by the trustee. The WARF of the current portfolio, for
which Fitch has notched down entities on Negative Outlook by one
rating notch, was 27.5.
High Recovery Expectations: Senior secured obligations comprise
100% of the portfolio as calculated by the trustee. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch-calculated
weighted average recovery rate of the current portfolio as reported
by the trustee was 62.2%.
Diversified Portfolio: The portfolio is well-diversified across
obligors, countries and industries. The top 10 obligor
concentration is 12.1%, and no obligor represents more than 1.26%
of the portfolio balance, as calculated by Fitch.
Transaction Inside Reinvestment Period: The transaction is within
its reinvestment period until June 2024, and the manager can
reinvest unscheduled principal proceeds and sale proceeds from
credit-risk obligations after the reinvestment period, subject to
compliance with the reinvestment criteria.
Given the manager's ability to reinvest, Fitch's analysis is based
on a stressed portfolio and tested the notes' achievable ratings
across the Fitch matrix, since the portfolio can still migrate to
different collateral quality tests.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
An increase of the default rate (RDR) at all rating levels in the
current portfolio by 25% of the mean RDR and a decrease of the
recovery rate (RRR) by 25% at all rating levels would have no
impact on the class A notes and lead to downgrades of no more than
one notch for the class B to E notes, while the class F notes would
be downgraded to below 'B-sf'.
Downgrades may occur if the build-up of the notes' credit
enhancement following amortisation does not compensate for a larger
loss expectation than initially assumed, due to unexpectedly high
levels of defaults and portfolio deterioration. Due to the better
metrics and shorter life of the current portfolio than the
Fitch-stressed portfolio, the class B, C and D notes display a
rating cushion of one notch, the class E notes of two notches and
the class F notes of three notches. The class A notes have no
rating cushion.
Should the cushion between the current portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the stressed
portfolio would lead to downgrades of up to three notches for the
class A, B, C and D notes and to below 'B-sf' for the class E and F
notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A reduction of the RDR at all rating levels by 25% of the mean RDR
and an increase in the RRR by 25% at all rating levels in the
Fitch-stressed portfolio would result in upgrades of up to five
notches, except for the 'AAAsf' notes, which are already at the
highest rating on Fitch's scale and cannot be upgraded. Upgrades
may also occur if the portfolio quality remains stable and the
notes continue to amortise, leading to higher credit enhancement
across the structure.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Cairn CLO XI DAC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. 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.
The majority of the underlying assets or risk presenting entities
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 or information on the risk presenting entities.
Overall, and together with any assumptions referred to above,
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.
EUROMAX V ABS: S&P Affirms 'CC' Rating on Class A4 Notes
--------------------------------------------------------
S&P Global Ratings affirmed its 'BB- (sf)', 'CCC- (sf)', and 'CC
(sf)' credit ratings on EUROMAX V ABS PLC's class A2, A3, and A4
notes, respectively.
The rating actions follow its assessment of the transaction's
performance and the application of S&P's relevant criteria.
The EUROMAX V ABS portfolio continues to amortize and is now left
with nine structured finance assets, issued by seven different
issuers. The largest obligor (rated 'BB') accounts for
approximately 35% of the performing pool.
The concentration risk in the portfolio is high and has increased
further since our previous review. S&P believes that the class A2
notes are vulnerable to certain event risks that could arise due to
the following factors:
-- Almost 19.65% of the portfolio is rated in the 'CCC' category;
-- Of the total assets in the portfolio, 60% are defaulted; and
-- All of the assets in the portfolio are exposed to one single
industry (RMBS).
S&P said, "Since our previous review in September 2022, the class
A2 notes have continued to amortize, with only 26% of their initial
balance now outstanding. Since our previous review, these notes
paid down by more than EUR11 million.
"Although credit enhancement has increase for the class A2 notes,
we have considered the concentrated nature of the portfolio and we
continue to apply an analytical judgement to our cash flow results,
which indicate a higher rating than that assigned to the class A2
notes.
"Given the current macroeconomic environment and concentrated
nature of the portfolio, we applied an analytical judgement to our
cash flow results through a larger cushion to capture future
downgrades of the portfolio and the increased concentration risk.
Considering these factors, we have affirmed our rating on the class
A2 notes.
"In our opinion, the repayment of the class A3 notes largely
depends on the amount that will be recovered on currently defaulted
assets. Therefore, in applying our "Criteria For Assigning 'CCC+',
'CCC', 'CCC-', And 'CC' Ratings," and taking into account the
timely payment of interest on these notes, we have affirmed our
'CCC- (sf)' rating on the class A3 notes.
"The class A4 notes have continued to defer their interest payment
and have capitalized EUR3.78 million of interest since our previous
review. As a result, we believe that a default of the class A4
notes in the full repayment of their initial principal and
capitalized interest by their legal maturity has become a virtual
certainty. Therefore, in applying our criteria, we affirmed our 'CC
(sf)' rating on the class A4 notes.
"The transaction's counterparty, operational and legal risks are
adequately mitigated in line with our criteria."
EUROMAX V ABS is a cash flow CDO of structured finance securities,
mostly RMBS. The transaction closed in November 2006 and is managed
by Collineo Asset Management GmbH. S&P's ratings on the class A2
and A3 notes address the timely interest and ultimate principal,
and its rating on the class A4 notes addresses the ultimate payment
of principal and interest.
SIGNAL HARMONIC II: S&P Assigns Prelim. B-(sf) Rating on F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to
Signal Harmonic CLO II DAC's class A, B-1, B-2, C, D, E, and F
notes. At closing, the issuer will also issue unrated subordinated
notes.
The reinvestment period will be 4.53 years, while the non-call
period will be 2.00 years after closing.
Under the transaction documents, the rated loans and notes will pay
quarterly interest unless there is a frequency switch event.
Following this, the notes will switch to semiannual payment.
The preliminary ratings assigned to the notes reflect S&P's
assessment of:
-- The diversified collateral pool, which primarily comprises
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.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,838.96
Default rate dispersion 491.94
Weighted-average life (years) 4.89
Obligor diversity measure 99.43
Industry diversity measure 25.39
Regional diversity measure 1.21
Transaction key metrics
CURRENT
Total par amount (mil. EUR) 440.00
Defaulted assets (mil. EUR) 0.00
Number of performing obligors 110
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.91
Actual 'AAA' weighted-average recovery (%) 37.90
Actual weighted-average spread (%) 4.38
Actual weighted-average coupon (%) N/A
N/A--Not applicable.
S&P said, "Our preliminary ratings reflect our assessment of the
preliminary collateral portfolio's credit quality, which has a
weighted-average rating of 'B'. We consider that the portfolio will
be well-diversified on the closing date, primarily comprising
broadly syndicated speculative-grade senior secured term loans and
senior secured bonds. Therefore, we conducted our credit and cash
flow analysis by applying our criteria for corporate cash flow
CDOs.
"In our cash flow analysis, we also modeled the covenanted
weighted-average spread of 4.25%, and the covenanted
weighted-average recovery rates as indicated by the collateral
manager. We applied various cash flow stress scenarios, using four
different default patterns, in conjunction with different interest
rate stress scenarios for each liability rating category.
"We expect the transaction's documented counterparty replacement
and remedy mechanisms to 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.
"We expect the transaction's legal structure and framework to be
bankruptcy remote. The issuer is expected to be a special-purpose
entity that meets our criteria for bankruptcy remoteness.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B-1 to F notes could withstand
stresses commensurate with higher ratings than those we have
assigned. However, as the CLO will be in its reinvestment phase
starting from the effective date, during which the transaction's
credit risk profile could deteriorate, we have capped our
preliminary ratings assigned to the notes. The class A notes can
withstand stresses commensurate with the assigned preliminary
ratings.
"In our view, the portfolio is granular in nature, and
well-diversified across obligors, industries, and asset
characteristics when compared with other CLO transactions we have
rated recently. As such, we have not applied any additional
scenario and sensitivity analysis when assigning our preliminary
ratings to any classes of notes in this transaction.
"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 to F notes.
"In addition to our standard analysis, we have also included the
sensitivity of the ratings on the class A to E notes, based on four
hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Signal Harmonic CLO II DAC is a European cash flow CLO
securitization of a revolving pool, comprising euro-denominated
senior secured loans and bonds issued mainly by speculative-grade
borrowers. Signal Harmonic Ltd. will manage the transaction.
Ratings
PRELIM
PRELIM AMOUNT
CLASS RATING* (MIL. EUR) SUB (%) INTEREST RATE§
A AAA (sf) 272.80 38.00 Three/six-month EURIBOR
plus 1.70%
B-1 AA (sf) 43.56 27.00 Three/six-month EURIBOR
plus 2.60%
B-2 AA (sf) 4.84 27.00 5.75%
C A (sf) 26.40 21.00 Three/six-month EURIBOR
plus 3.40%
D BBB- (sf) 28.60 14.50 Three/six-month EURIBOR
plus 4.70%
E BB- (sf) 19.80 10.00 Three/six-month EURIBOR
plus 6.93%
F B- (sf) 13.20 7.00 Three/six-month EURIBOR
plus 8.39%
Sub NR 40.80 N/A N/A
*The preliminary ratings assigned to the class A, B-1, and B-2
notes address timely interest and ultimate principal payments. The
preliminary ratings assigned to the class C, D, E, and F notes
address ultimate interest and principal payments. §The payment
frequency switches to semiannual and the index switches to
six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
TRINITAS EURO VI: S&P Assigns B-(sf) Rating in Class F Notes
------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Trinitas Euro CLO
VI DAC's class A to F European cash flow CLO notes. At closing, the
issuer also issued unrated subordinated notes.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
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.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
CURRENT
S&P weighted-average rating factor 2,645.96
Default rate dispersion 591.38
Weighted-average life (years) 4.51
Obligor diversity measure 164.15
Industry diversity measure 24.23
Regional diversity measure 1.29
Transaction key metrics
CURRENT
Portfolio weighted-average rating
derived from our CDO evaluator B
'CCC' category rated assets (%) 0
Actual 'AAA' weighted-average recovery (%) 37.14
Actual weighted-average spread (net of floors; %) 4.15
Actual weighted-average coupon (%) 5.23
Under the transaction documents, the rated notes pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments.
Asset Priming Obligations And Uptier Priming Debt
Under the transaction documents, the issuer can purchase asset
priming (drop down) obligations and/or uptier priming debt to
address the risk, where a distressed obligor could either move
collateral outside the existing creditors' covenant group or incur
new money debt senior to the existing creditors.
Rationale
S&P said, "On the effective date, we expect that the portfolio will
be well-diversified, primarily comprising broadly syndicated
speculative-grade senior-secured term loans, senior-secured bonds,
unsecured loans, and cov-lite loans. Therefore, we have conducted
our credit and cash flow analysis by applying our criteria for
corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR500 million target par
amount, the covenanted weighted-average spread (4.15%), the
reference weighted-average coupon (4.50%), the covenanted
weighted-average recovery rates at the 'AAA' rating level, and
actual recovery rates for the rest of the notes. We applied various
cash flow stress scenarios, using four different default patterns,
in conjunction with different interest rate stress scenarios for
each liability rating category.
"Until the end of the reinvestment period on Aug. 28, 2028, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"The transaction's legal structure and framework is bankruptcy
remote, in line with our legal criteria.
"The CLO is managed by Trinitas Capital Management LLC. Under our
"Global Framework For Assessing Operational Risk In Structured
Finance Transactions," published on Oct. 9, 2014, the maximum
potential rating on the liabilities is 'AAA'.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe the assigned rating is
commensurate with the available credit enhancement for the class A
notes. Our credit and cash flow analysis indicates that the
available credit enhancement for the class B to F notes could
withstand stresses commensurate with higher ratings than those we
have assigned. However, as the CLO will be in its reinvestment
phase starting from closing, during which the transaction's credit
risk profile could deteriorate, we have capped our ratings assigned
to the notes.
"Taking the above factors into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that our ratings are commensurate with the
available credit enhancement for all the rated classes of notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance factors
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit assets from being related
to the following industries: weapons of mass destruction, illegal
drugs or narcotics, opioids, pornographic or prostitution, child or
forced labor, payday lending, electrical utility limitations, oil
and gas limitations, oil life cycle, tobacco, adversely affect
animal welfare, genetic engineering or modification, beaching or
breaking of ships, illegal logging operations, civilian firearms
limitations, hazardous chemicals limitations, oil extraction
limitations, private prisons limitations, soft commodities
limitations, and trading coal limitations. Accordingly, since the
exclusion of assets from these industries does not result in
material differences between the transaction and our ESG benchmark
for the sector, no specific adjustments have been made in our
rating analysis to account for any ESG-related risks or
opportunities."
Ratings
AMOUNT CREDIT
CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT (%)
A AAA (sf) 300.00 3mE +1.60% 40.00
B AA (sf) 60.00 3mE +2.45% 28.00
C A (sf) 34.10 3mE +2.95% 21.18
D BBB- (sf) 33.40 3mE +4.40% 14.50
E BB- (sf) 20.00 3mE +6.38% 10.50
F B- (sf) 15.00 3mE +8.31% 7.50
Sub NR 44.04 N/A N/A
*The ratings assigned to the class A and B notes address timely
interest and ultimate principal payments. The ratings assigned to
the class C, D, E, and F notes address ultimate interest and
principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month Euro Interbank Offered Rate when a frequency
switch event occurs.
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
===================
K A Z A K H S T A N
===================
NOMAD LIFE: S&P Affirms 'BB+' ICR & Alters Outlook to Positive
--------------------------------------------------------------
S&P Global Ratings revised to positive from stable its outlook on
Kazakhstan-based Nomad Life Insurance JSC. At the same time, S&P
affirmed its 'BB+' long-term issuer credit and financial strength
ratings on the insurer. S&P also raised the Kazakhstan national
scale rating to 'kzAA+' from 'kzAA'.
Impact of Revised Capital Model Criteria
Nomad Life's capital adequacy primarily improved because the
removal of haircuts and absence of capital charges on the
contractual service margin (CSM) caused total adjusted capital
(TAC) to increase. S&P considers CSM to be an equity-like life
reserve.
Capitalization was supported by the lower risk charges on annuity
insurance.
S&P said, "In addition, we capture the benefits of risk
diversification more explicitly in our analysis, which supports
capital adequacy.
"This is somewhat offset by our revised approach to interest rate
risk charges and the company's relatively high dividend payouts and
rapid business growth."
Credit Highlights
S&P said, "The positive outlook indicates that we could raise the
ratings within the next 12 months if the company sustains its
capital and earnings at least at a satisfactory level. It also
factors in our expectation that Nomad Life will maintains its
well-established position in the Kazakhstan life insurance market,
while maintaining robust profitability metrics."
S&P could revise the outlook back to stable over the next 12 months
if:
-- Weaker-than-expected operating performance causes a material
deterioration in earnings; or the capital position becomes
volatile, contrary to our expectations, and capital weakens to
below the satisfactory level.
-- Capital adequacy declines below the 99.95% benchmark, for a
prolonged period.
S&P said, "We could raise our ratings over the next 12 months if
Nomad Life's capital adequacy remained at the current 99.95% level
thanks to moderate growth and dividend payouts, coupled with a
stable competitive position and conservative investment policy that
focuses on higher-quality investments.
"We revised the outlook and raised the national scale rating
because we consider capital adequacy buffers to be stronger under
our revised capital model. Not only have our risk charges on life
annuity reserves decreased but also Nomad Life has implemented
International Financial Reporting Standard (IFRS) 17, which gives
us greater visibility regarding future profits for the insurance
sector through the CSM. Nomad Life disclosed a CSM of Kazakhstani
tenge (KZT) 18.3 billion at the end of 2022, rising to KZT 27.3
billion by Sept. 30, 2023. Under our revised capital model, we no
longer apply haircuts or capital charges to equity-like life
reserves such as the CSM. As a result, Nomad Life's capital
adequacy improved to the 99.95% confidence level under our model.
"Despite this improvement, we affirmed our 'BB+' long-term ratings
on Nomad Life. Given how fast the company has been growing, and the
investment trends and macroeconomic environment, an upgrade would
depend on it demonstrating greater seasoning and capital stability.
Absolute capital is still modest at KZT38.6 billion ($83.4
million), although we estimate it will increase by 10%-12% a year
in 2023 and 2024. In addition, the insurer has a limited track
record of capital planning and the treatment of CSM under IFRS 17.
This limits our view of Nomad Life's overall capital and earnings
to satisfactory."
Nomad Life boasts a sound market position, solid distribution ties,
and a well-known brand name. It is Kazakhstan's second-largest life
insurer, and had a 25% market share based on gross premium written
(including unit-linked products) on Jan. 1, 2024. Over the past
five years, the company has expanded its book of business by an
average of 19% a year. Most of its premium comes from annuities and
voluntary life insurance products. We expect these will continue to
comprise slightly more than 80% of its book of business over the
next 12 months.
S&P said, "In our base-case scenario for 2023-2024, we predict that
Nomad Life will report average annual net profit of KZT10
billion-KZT15 billion, a return on equity (ROE) of 20%-35%, and a
return on assets (ROA) of 3%-5%. In this scenario, Nomad Life could
pay a dividend of up to 80% of net income in 2023-2024 without
undermining its capital adequacy under our criteria and under the
statutory criteria. We expect Nomad Life to report an investment
yield of close to 8%, which is sufficient to meet its guaranteed
obligations under the insurance policies it has written.
"We also view as positive that the company has maintained a prudent
investment strategy by placing its assets in highly liquid cash
deposits and fixed income securities. The average credit quality of
its portfolio was in the 'BBB' category as of year-end 2023, and we
expect average credit quality to remain at this level over the next
12 months."
===================
M O N T E N E G R O
===================
MONTENEGRO: S&P Affirms 'B/B' Sovereign Credit Ratings, Outlook Pos
-------------------------------------------------------------------
S&P Global Ratings, on March 1, 2024, revised its outlook on the
long-term sovereign credit ratings on Montenegro to positive from
stable. At the same time, S&P affirmed the 'B/B' long- and
short-term foreign and local currency sovereign credit ratings on
Montenegro. The Transfer & Convertibility Assessment is 'AAA'.
Outlook
The positive outlook primarily reflects the potential for
Montenegro's fiscal and balance-of-payments performance to prove
stronger than S&P currently forecasts over the next year, further
reducing the level of net general government debt as a share of the
economy following an already consistent decline over 2021-2023.
Upside scenario
S&P said, "We could raise our ratings on Montenegro in the next 12
months if its fiscal performance proves stronger than we currently
forecast, continuing the downward trend in net general government
debt. This could be the case as a result of stronger economic
growth or fiscal consolidation measures adopted by the authorities.
We could also raise the ratings if Montenegro's external position
strengthens beyond our current base-case forecast."
Downside scenario
S&P may revise the outlook to stable or lower the ratings in the
next 12 months if Montenegro's fiscal performance proves materially
weaker than it expects. For instance, this could happen if
additional debt-financed infrastructure projects led to a sharp
increase in public debt, eroding Montenegro's fiscal headroom.
Rationale
The outlook revision to positive primarily reflects the potential
for Montenegro's fiscal performance to strengthen further over
2024-2025. S&P said, "Although we currently forecast an average
general government budget deficit of 3% of GDP over the next two
years, Montenegro ran a balanced budget in 2023, largely supported
by stronger revenue outturns, but also some one-off factors such as
revenue from the now-terminated citizenship-by-investment program
and EU grants. In our view, further growth in tourism and domestic
consumption, improvements in tax administration, and additional
revenue-accruing measures could underpin a stronger budgetary
performance for Montenegro."
S&P notes that Montenegro's fiscal position has already improved
significantly since its small and tourism-dependent and open
economy took a severe hit from the COVID-19 pandemic shock in 2020.
A combination of resilient nominal growth averaging 17% over
2021-2023 and stronger budgetary performance underpinned a steady
reduction in net general government debt. At an estimated 54% of
GDP at end-2023, Montenegro's net general government debt was below
the end-2019 pre-pandemic level of 58%.
Nevertheless, despite the mentioned improvements, risks to the
fiscal outlook remain. These primarily stem from the government
potentially deciding to fund the completion of the remaining
sections of a major highway project through public debt. The first
section of the highway, Bar-Boljare, has already been completed.
S&P said, "Our current projections do not incorporate additional
funding for highway construction because the government has not yet
taken the final decision on further phases for the project, while
the full cost remains unclear. There is an ongoing EU-sponsored
feasibility study to determine the cost, but uncertainties persist
regarding the ultimate funding mechanism if the project were to go
ahead. We understand Montenegro has the potential to secure some
financing from international financial institutions on favorable
terms and access small grants through the Western Balkans
Investment Framework.
"Our ratings on Montenegro are underpinned by the country's strong
growth prospects, long-term benefits from structural reforms tied
to the EU accession process, and modest costs of servicing general
government debt (we expect interest spending to average about 6% of
revenue through 2027).
"Our ratings on Montenegro are constrained by the moderate stock of
general government debt, a lack of independent monetary policy, and
a still weak external balance sheet, despite recent improvements."
Institutional and economic profile: S&P expects growth to moderate
following brisk tourism-driven growth of about 6.1% in 2023
Growth will moderate to 3.6% in 2024, mainly due to a slowdown in
consumption.
Montenegro continues its negotiations on EU membership, but the
progress is slow, with only three out of 33 chapters provisionally
closed since negotiations began in 2012.
Risks to the stability of the coalition government centered around
Europe Now party (PES) have increased in the aftermath of the
resignation at the end of February of Montenegro's president Jakov
Milatovic, founding member of PES.
S&P said, "After achieving an estimated growth rate of 6.1% in
2023, we expect that growth will moderate to 3.6% in 2024. This
deceleration is primarily driven by a moderation in consumption,
stemming from reduced tourism activity and a decline in consumption
associated with the decline in foreign visitors from Ukraine and
Russia. However, we anticipate that investments will remain a key
driver of growth, supported by ongoing projects in the real estate,
energy, and hospitality sectors. Additionally, we expect net
exports to have a slight negative impact on growth, due to an
increase in investment-related imports.
"Beyond 2024, we anticipate growth will average about 3% annually
through 2027. We expect that Montenegro's growth prospects will
remain closely tied to developments in the country's tourism
sector, which accounted for an estimated 27% of nominal GDP as of
2022 (this ratio increases when factoring in indirect economic
effects). Heavy reliance on tourism renders the Montenegrin economy
particularly susceptible to external shocks, exemplified by the
sharp decline in tourism levels in 2020 due to the COVID-19
pandemic. Nevertheless, the government is actively pursuing efforts
to diversify the economy, with a specific emphasis on renewable
energy sources such as wind, solar, and hydroelectric.
In the past, Montenegro experienced several episodes of political
instability. Specifically, two governments lost no-confidence votes
in 2022 and the country has been overseen by a technical
administration. In a significant political shift during the April
2023 presidential elections, Jakov Milatovic from the PES party
emerged as the winner, marking the end of Milo Djukanovic's long
tenure. Following this, the June 2023 parliamentary elections also
saw PES, led by Milojko Spajic, capture the largest portion of the
vote, pushing Djukanovic's traditionally influential Democratic
Party of Socialists into second place. The subsequently formed
PES-centered government represents a diverse political spectrum.
Despite internal disagreements, the coalition successfully adopted
the 2024 budget and a new supreme state prosecutor has been
appointed, following two years during which the role remained
unfilled. Nevertheless, Jakov Milatovic's resignation in the latter
part of February has introduced a degree of political uncertainty,
leaving the impact on the current governing coalition's stability
and future direction unclear.
Beyond recent political developments, Montenegro's institutional
framework has a number of shortcomings, including reduced
predictability of policy responses due to frequent changes in
government and a comparatively high perception of corruption, both
of which weigh on the country's business environment. As an EU
candidate country, Montenegro is actively engaged in reforms as
part of its accession negotiations, aiming to strengthen its policy
frameworks and align it with the EU acquis (EU law). Nevertheless,
progress on membership negotiations has been slow since beginning
more than 10 years ago in 2012 with only three out of 33 accession
chapters closed to date. Although achieving EU membership by 2030
appears unlikely, the government coalition has made joining the EU
a top priority, signaling its continued commitment to the process.
Flexibility and performance profile: Moderate public debt levels
and no monetary policy flexibility, given the unilateral adoption
of the euro
-- Montenegro's net general government debt steadily trended
downward over 2021-2023 and reached an estimated 54% of GDP at
end-2023, which was below the 58% of GDP pre-pandemic level.
-- S&P forecasts an average fiscal deficit of 3.0% of GDP over
2024-2027, following a 0.5% surplus in 2023, bolstered by one-off
revenue.
-- Montenegro has no independent monetary policy, due to its
unilateral adoption of the euro.
In 2023, Montenegro achieved a budget surplus of 0.5% of GDP,
largely due to one-off revenue items, including grants and fees
from the now-phased-out golden visa scheme whereby citizenship
could be obtained through investments of EUR250,000-EUR450,000. For
2024, the budget approved by parliament projects a deficit of 3.1%
of GDP (in line with our forecasts). Revenue is forecast to rise to
EUR2.7 billion (38.7% of GDP), marking a roughly 15% increase
versus previous years. The government has introduced increased
excise duties, including on tobacco and gasoline products, having
not extended the reduction for the latter. Current expenditure is
projected to grow by 12% to EUR2.96 billion (42% of GDP). Notable
increases include transfers for social protection. Additionally,
EUR240 million (3.4% of GDP) will be allocated for capital
expenditure. Depending on costs, S&P expects the budget to be
funded through a combination of deposits, international or domestic
bond markets, international financial institutions, or bilateral
lending channels.
Beyond 2024, S&P anticipates an average general government budget
deficit of 3% of GDP over 2025-2027, in line with the current
fiscal framework and our growth projections. However, fiscal
performance could surpass our expectations, bolstered by factors
like potential overperformance in tourism revenue, EU grants
accompanying Montenegro's accession process, and initiatives to
broaden the tax base by reducing the informal economy, which
constitutes approximately 30% of Montenegro's GDP.
S&P said, "Despite the potential for the underlying budgetary
performance to prove stronger than we currently project, there are
also fiscal risks. In particular, we understand that the government
is exploring options to complete construction of a large highway
project, following the recent completion of the first phase (the
Bar-Boljare section of the motorway). The cost of constructing
additional sections is currently unconfirmed, but they could weaken
Montenegro's fiscal profile if the government decides to finance
them with debt. We understand that the government is exploring
using loans and grants through the EU's Western Balkans Investment
Framework to cover a portion of the construction costs. Our fiscal
forecasts for Montenegro currently do not include additional debt
for constructing further sections of the highway."
Other risks to the country's debt profile include the fact that
approximately 90% of its debt is owed to foreign creditors, making
the country heavily reliant on external financing. Moreover, state
guarantees contribute to fiscal risks, totaling approximately
EUR769 million (10.6% of GDP). Notably, in the 2024 budget, the
government has issued guarantees to projects it deems necessary,
particularly those related to infrastructure. However, fiscal risks
are somewhat offset by the fact that approximately 40% of the
government's external debt is to official lenders under generally
favorable terms.
Montenegro's economy depends significantly on tourism, which
accounts for an estimated 43.5% of total goods and services
exports. Tourist numbers hit a new high in 2023, with 1.4 million
arrivals, which is an 11% increase over 2019 pre-pandemic figures.
S&P said, "We expect growth in tourism arrivals to moderate over
the next two to three years following very rapid post-pandemic
recovery. The 25% of GDP services surplus in 2023 was more than
offset by a large 44% of GDP trade deficit, underpinning a large
full-year 2023 current account deficit of 11.6% of GDP. We expect
the current account deficit will average a similar 12% of GDP
annually over the medium term."
S&P said, "In our view, headline current account deficits somewhat
overstate Montenegro's balance-of-payments vulnerabilities as they
are predominantly financed by net inflows of foreign direct
investment (FDI) rather than debt. For instance, over the last
three years FDI funded over 90% of the cumulative current account
deficit and we expect a similar funding mix to remain in place over
the next few years. FDI primarily flows into tourism, real estate,
and energy. We also note that Montenegro persistently posts large
positive net errors and omissions in its reporting. These averaged
9% of GDP over 2021-2023, likely reflecting unrecorded tourism
receipts and inflows from Russian and Ukrainian immigrants."
Inflationary pressures in Montenegro have begun to subside.
Inflation decreased to 4.4% in January 2024, down from 16.2% a year
earlier. This decrease in inflation is mainly due to falling food
and utility prices. For 2024, S&P projects inflation to stabilize
at an average of 4.3%, supported by base effects and further
reductions in food prices. Nonetheless, upward pressure on
inflation could emerge, particularly from the tight labor market.
Montenegro's decision to unilaterally adopt the euro limits the
Central Bank of Montenegro's ability to set interest rates or
control the money supply, thereby also hampering its ability to act
as a lender of last resort for the domestic financial sector. The
banking sector in Montenegro currently demonstrates strong capital
adequacy and liquidity. Nonperforming loans stood at under 5.9% as
of third-quarter 2023, reflecting a declining trend, with the ratio
of Tier 1 capital to risk-weighted assets close to 20%.
Montenegro's banking landscape is predominantly characterized by
branches of international banking groups.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED; OUTLOOK ACTION
TO FROM
MONTENEGRO
Sovereign Credit Rating B/Positive/B B/Stable/B
RATINGS AFFIRMED
MONTENEGRO
Transfer & Convertibility Assessment AAA
Senior Unsecured B
=====================
N E T H E R L A N D S
=====================
SPRINT BIDCO: EUR700MM Bank Debt Trades at 60% Discount
-------------------------------------------------------
Participations in a syndicated loan under which Sprint Bidco BV is
a borrower were trading in the secondary market around 39.6
cents-on-the-dollar during the week ended Friday, March 1, 2024,
according to Bloomberg's Evaluated Pricing service data.
The loans traded in the secondary market around 47.4
cents-on-the-dollar the previous week ended Feb. 23.
The EUR700 million facility is a Term loan that is scheduled to
mature on September 16, 2029. The amount is fully drawn and
outstanding.
Sprint Bidco B.V. is a special purpose vehicle that owns the
Dutch-based bicycle company Accell. The Company’s country of
domicile is the Netherlands.
[*] NETHERLANDS: Company Bankruptcies Likely to Rise This Year
--------------------------------------------------------------
NL Times reports that the number of bankruptcies to occur in the
Netherlands this year will probably rise, credit insurer Allianz
Trade predicts.
"No other European country has experienced an increase so quickly,"
NL Times quotes Johan Geeroms, the risk director for the Benelux
region.
"The increase in bankruptcies is a serious warning sign. Last year,
we called the 52% increase a catch-up from coronavirus, but an
addition of 31% will join them this year," NL Times quotes Mr.
Geeroms as saying. A relatively high number of companies are
failing in sectors like hospitality, transport, retail, and
especially in the Dutch construction sector.
"After Spain, the urgency in Europe is the highest here," Mr.
Geeroms said about the situation in the Netherlands. "We expect it
to stabilize before 2025, but for all we know, it could be another
layer on top. I look at, for example, the recovery in Germany,
which really needs to get off the ground. That is very important
for our country."
Mr. Geeroms says that small and midsized companies have become very
vulnerable in recent years, NL Times notes.
"Costs have risen on the purchasing side, but for competitive
reasons, these are not passed on to the customer. This comes at
the expense of the profit margin."
According to NL Times, he also noted that the amount of
bankruptcies in the Netherlands is, on average, higher than in
other countries due to the relatively high number of new companies
that started after the coronavirus pandemic. "The group of
starters is usually good for a certain amount of bankruptcies.
They have it particularly hard in the current tough economic
climate. They are being tested for the first time. Which is then
responsible for the rise in Dutch bankruptcies."
===========================
U N I T E D K I N G D O M
===========================
BODY SHOP: Administrators Look Into Claims of Unaccounted Funds
---------------------------------------------------------------
Amanda Pauley at Cosmetics Business reports that administrators for
The Body Shop are allegedly investigating claims that millions of
pounds were taken out of the business before its collapse.
Restructuring firm FRP Advisory is reportedly looking into claims
of unaccounted for funds that pre-date the cosmetics retailer's
sale to Aurelius Group last year, Cosmetics Business relays, citing
The Telegraph.
The investigation is said to be in its early stages, Cosmetics
Business notes.
Questions surrounding the circumstances of The Body Shop's UK
business falling into administration are also growing after leaked
documents revealed the business was profitable last year, Cosmetics
Business discloses.
The company's UK retail arm saw GBP19 million of profits on sales
of GBP163 million during the run-up to its collapse, according to
figures seen by The Telegraph, Cosmetics Business relates.
However, these figures are for the chain's UK stores and do not
cover costs from its global operations, Cosmetics Business says.
The documents also revealed that just eight of The Body Shop's UK
stores were loss-making, according to reports by City AM, Cosmetics
Business notes.
Two shops earmarked for closure -- Ipswich and Hempstead Valley --
made nearly GBP100,000 in underlying profit each, according to
Cosmetics Business.
FRP Advisory has reported that 75 of The Body Shop's UK stores will
be shuttered, with 116 remaining open as part of its restructuring
plans, Cosmetics Business relates.
Calls for a more thorough review of The Body Shop's failure have
also come from UK MPs after it was revealed that approximately 489
staff will be made redundant, Cosmetics Business states.
The cosmetics retailer's redundancy bills could potentially be
footed by UK taxpayers via a government-backed scheme that is
funded by national insurance contributions, according to Cosmetics
Business.
CARTON EDGE: Goes Into Liquidation, 31 Jobs Affected
----------------------------------------------------
Business Sale reports that Carton Edge Limited, a manufacturer of
paper and cardboard containers based in Coventry, has fallen into
liquidation.
The company had been trading for 32 years, but collapsed in the
face of challenging market conditions, Business Sale relates.
The firm ceased trading on February 1 2024, with all 31 staff made
redundant, Business Sale discloses. The company was best known for
operating in the cling film and tin foil dispenser carton market,
supporting packaging, printing and carton manufacturing firms.
According to Business Sale, speaking to TheBusinessDesk.com, the
company stated: "Carton Edge Packaging Limited traded as Carton
Finishers for over three decades. Despite the team's best efforts
to increase sales, reduce costs and improve efficiencies the
company was unable to sufficiently compensate for the very tough
trading conditions."
"Accordingly, the board took the difficult decision to cease
trading on February 1, 2024, with all 31 of its staff made
redundant on the same day. It subsequently entered creditors'
voluntary liquidation on February 21, 2024. BRI Business Recovery
and Insolvency consulted with the board throughout their
decision-making and ultimately assisted following their decision to
close."
In the company's unabridged financial statements for the year
ending December 31 2022, its fixed assets were valued at GBP184,820
and current assets at GBP761,512, Business Sale states. At the
time, the company owed in excess of GBP675,000 to creditors, with
its net assets amounting to GBP219,160, Business Sale notes.
HIRETEST LIMITED: Set to Go Into Administration
-----------------------------------------------
Grant Prior at Construction Enquirer reports that Watford-based
groundworks contractor Hiretest Limited has filed a notice of
intention to appoint an administrator.
The family-run firm has been in business for more than 30 years
specialising in groundworks and reinforced concrete frame
construction.
Latest results filed for Hirestest for the 18 months to May 31,
2022, show the firm had a turnover of GBP28 million generating a
pre-tax loss of GBP77,283 while employing 27 people, Construction
Enquirer discloses.
INEOS QUATTRO: S&P Rates EUR700MM Fungible Term Loan B Add-On 'BB'
------------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue rating to INEOS Quattro
Holdings UK Ltd.'s (Quattro's) proposed minimum EUR700 million
fungible add-on to its term loan B (TLB) due in January 2026. The
recovery rating on this add-on is '3', indicating its expectation
of 65% recovery in the event of a payment default. The add-on is
issued by Quattro and by its U.S.-based subsidiary INEOS US
Petrochem LLC to extend part of the existing euro/U.S. dollar TLB
maturing in January 2026, and otherwise refinance certain 2026
maturities.
On Jan. 22, 2024, S&P affirmed its 'BB' long-term issuer credit
rating on Quattro with a negative outlook.
The transaction reflects Quattro's proactive maturity management.
It will be broadly credit neutral as the new debt will be used to
refinance the existing one.
The loan documentation allows Quattro to incur additional debt,
subject to a minimum fixed-charge coverage ratio of 2x. There is
also a restricted-payment covenant, as well as limitation on the
sale of assets and transactions with affiliates.
Recovery Analysis
Key analytical factors
-- The '3' recovery rating reflects S&P's view of the group's
substantial asset base and its fairly comprehensive security and
guarantee package.
-- However, this is balanced by the absence of maintenance
financial covenants and a substantial proportion of the group's
working capital assets being pledged in favor of a receivables
securitization facility.
-- The security package for the senior secured facilities
comprises pledges over all assets, shares, and guarantors that
represent at least 85% of EBITDA and assets.
-- S&P values Quattro as a going concern, given the group's solid
market position, large-scale integrated petrochemicals sites across
the U.S. and Europe, and diversified end markets.
Simulated default assumptions
-- Year of default: 2029
-- Jurisdiction: U.K.
Simplified waterfall
-- Emergence EBITDA: About EUR1.0 billion
-- Capex represents 2% of three-year annual average sales
(2021-2023)
-- Cyclicality adjustment is 10%, in line with the specific
industry subsegment
-- Multiple: 5.5x
-- Operational adjustment of +30% to reflect the company's solid
market share, large scale, and broad product portfolio.
-- Gross recovery value: EUR5.7 billion
-- Net recovery value for waterfall after administrative expenses
(5%): EUR5.4 billion
-- Estimated priority claims (mainly securitization program
outstanding): Around EUR513 million
-- Remaining recovery value: EUR4.9 billion
-- Estimated first-lien debt claim: EUR7.3 billion
--Recovery range: 50%-70% (rounded estimate: 65%)
--Recovery rating: 3
*All debt amounts include six months of prepetition interest.
Securitization facility assumed 60% drawn at default.
LANEBROOK MORTGAGE 2022-1: S&P Raises F Notes Rating to 'BB+'
-------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Lanebrook Mortgage
Transaction 2022-1 PLC's class B-Dfrd notes to 'AA+ (sf)' from 'AA
(sf)', C-Dfrd notes to 'A+ (sf)' from 'A (sf)', D-Dfrd notes to 'A
(sf)' from 'A- (sf)', E-Dfrd notes to 'BBB (sf)' from 'BBB- (sf)',
and F-Dfrd notes to 'BB+ (sf)' from 'BB (sf)'. At the same time,
S&P affirmed its 'AAA (sf)' rating on the class A notes.
The rating actions follow S&P's full analysis of the most recent
transaction information it has received and the transactions'
structural features.
As of December 2023, total arrears remain low at 0.65%, below than
S&P's buy-to-let (BTL) index. The sequential priority of payments
and the notes' amortization has slightly increased the level of
credit enhancement. The liquidity reserve fund and the general
reserve fund are undrawn.
S&P said, "We applied our global RMBS criteria to our analysis of
this transaction. Since closing, our WAFF assumptions decreased at
all rating levels. This is mainly due to the lower effective
loan-to-value (LTV) ratio we used for our foreclosure frequency
analysis--which reflects 80% of the original LTV ratio and 20% of
the current LTV ratio.
"Our weighted-average loss severity (WALS) assumptions decreased at
all rating levels, reflecting the updated house price index
assumptions used in our analysis."
Credit analysis results
WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 24.28 46.91 11.39
AA 16.39 39.65 6.50
A 12.34 27.78 3.43
BBB 8.50 20.36 1.73
BB 4.45 14.82 0.66
B 3.54 9.66 0.34
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity
The overall effect of S&P's credit analysis results is a decrease
in the required credit coverage for all rating levels since
closing, reflected in its upgrades of the class B-Dfrd, C-Dfrd,
D-Dfrd, and E-Dfrd notes.
S&P said, "The affirmation of our rating on the class A notes
reflects our cash flow results, which are unchanged based on the
slightly higher credit enhancement and lower credit results.
"Under our credit and cash flow analysis, the class B-Dfrd, C-Dfrd,
D-Dfrd, E-Dfrd, and F-Dfrd notes can withstand our stresses at
higher rating levels than those currently assigned as they benefit
from a high level of excess spread and the presence of a turbo
mechanism. However, these ratings also reflect the uncertain
macroeconomic outlook amid a cost of living crisis, the challenging
BTL market environment, and the benefits of the current interest
rate environment compared with at closing. Considering all of these
factors, we raised our ratings on the class B-Dfrd, C-Dfrd, D-Dfrd,
E-Dfrd, and F-Dfrd notes."
The transaction is backed by a BTL mortgage pool of first-ranking
residential mortgages in England, Wales, and Scotland.
SAIETTA GROUP: Set to Fall Into Administration
----------------------------------------------
Sam Metcalf at TheBusinessDesk.com reports that global a
engineering firm which specialises in the design, developments and
supply of powertrains for electric vehicles is set to fall into
administration.
TheBusinessDesk.com understands that Saietta Group, which has its
global technical centre at Silverstone Park in Northamptonshire,
has posted a notice of appointment to appoint administrators via
law firm Fieldfisher.
In February, Saietta told investors it was to undertake a strategic
review, including a formal sale process, as cash started to run
out, TheBusinessDesk.com relates.
According to TheBusinessDesk.com, a statement from the firm said:
"While the company's cashflow model shows positive cash balances to
the end of March, the company's directors are becoming increasingly
aware that certain contracted cash receipts may be withheld,
therefore bringing forward the date, absent any further funding, on
which the company can no longer solvently trade."
"The board continues to believe in the quality of Saietta's
products and the compelling market opportunity and accordingly
remains hopeful that a solvent solution for the company can be
found.
"The company will continue to look at all financing and other
strategic options available and has a number of discussions
ongoing."
The firm added: "Should the company not have made material progress
with its formal sale process or with any other financing
initiatives by the end of next week, the company may need to
commence planning for an administration."
In its latest accounts, made up to the end of March 2023, Saietta
posted an adjusted EBITDA loss of GBP14 million -- up from GBP4.4
million in 2022, TheBusinessDesk.com discloses.
TSM SPORTS: Goes Into Voluntary Liquidation
-------------------------------------------
Martyn Ziegler at The Times reports that Mason Greenwood's image
rights company has gone into voluntary liquidation just over two
years since the striker was suspended by Manchester United after
accusations against him surfaced on social media.
The 22-year-old has been playing for Getafe this season after
joining the Spanish club on loan in September, The Times notes.
According to The Times, a filing at Companies House shows that TSM
Sports Ltd, of which Greenwood is the only director, has filed for
voluntary liquidation less than a year after accounts showed the
company's cash in the bank had risen to GBP1.03 million.
The company is now being wound up voluntarily and a liquidator has
been appointed, The Times discloses. The most recent accounts,
filed in December, showed that as recently as September 30, cash in
the bank had dropped to GBP401,000, according to The Times.
*********
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,
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2024. All rights reserved. ISSN 1529-2754.
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