/raid1/www/Hosts/bankrupt/TCREUR_Public/240326.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 26, 2024, Vol. 25, No. 62
Headlines
D E N M A R K
SGL GROUP: S&P Alters Outlook to Positive, Affirms 'B' ICR
F R A N C E
ALTICE FRANCE: In Debt Restructuring Talks with Creditors
G E R M A N Y
ROHM HOLDCO II: S&P Affirms 'B-' ICR, Outlook Negative
I R E L A N D
BAIN CAPITAL 2024-1: Fitch Assigns B-(EXP)sf Rating to Cl. F Notes
BOSPHORUS CLO VI: S&P Lowers Class F Notes Rating to 'B- (sf)'
CAPITAL FOUR VII: S&P Assigns B- (sf) Rating to Class F Notes
CIFC EUROPEAN IV: Fitch Hikes Rating on Class F Notes to 'Bsf'
CIMPRESS PLC: Moody's Ups CFR to B1 & Sr. Sec. 1st Lien Debt to Ba3
JUBILEE CLO 2022-XXVI: Fitch Assigns 'B-sf' Rating on Cl. F-R Notes
MADISON PARK XX: S&P Puts Prelim B- (sf) Rating to Class F-R Notes
ROUNDSTONE SECURITIES 2: S&P Put Prelim. BB (sf) Rating to F Notes
I T A L Y
LA PERLA: Set to Go Into Administration
SUNRISE SPV 95: DBRS Gives Prov. BB(high) Rating to Class E Notes
K A Z A K H S T A N
FREEDOM HOLDING: S&P Affirms 'B-' Long-Term Issuer Credit Rating
N E T H E R L A N D S
ARUBA: Fitch Alters Outlook on 'BB+' LongTerm IDR to Positive
LOPAREX MIDCO: $370MM Bank Debt Trades at 29% Discount
R U S S I A
REGISTERED PAYMENT: Bank of Russia Provides Update on Liquidation
S P A I N
BAHIA DE LAS ISLETAS: Moody's Assigns 'Caa2' CFR, Outlook Stable
LSF11 BOSON: DBRS Cuts Class C Notes Rating to BB(low)
MADRID RMBS II: Fitch Hikes Rating on Class D Notes to 'BBsf'
PEPPER IBERIA 2022: DBRS Confirms BB(high) Rating on Class E Notes
S W I T Z E R L A N D
FERREXPO PLC: Moody's Affirms 'Caa3' CFR, Outlook Remains Negative
U N I T E D K I N G D O M
LOGISTICS GROUP: Goes Into Administration
MARKET HOLDCO: S&P Affirms 'B' Long-Term ICR, Outlook Stable
NEWDAY FUNDING: Fitch Hikes Rating on 2022-3 Cl. F Notes to 'B+sf'
ROBINSONS CARAVANS: Ex-Director Issues Statement After Collapse
UNIVERSAL SUPPLY: Bought Out of Administration
- - - - -
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D E N M A R K
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SGL GROUP: S&P Alters Outlook to Positive, Affirms 'B' ICR
----------------------------------------------------------
S&P Global Ratings revised the outlook to positive from stable and
affirmed its 'B' issuer credit and issue level ratings on
Denmark-based freight forwarder and logistics services company SGL
Group and its existing notes. The recovery rating on the debt is
'4' (30%-50%, rounded estimate: 40%).
In addition, S&P assigned a 'B' issue-level rating and '4' recovery
rating (30%-50%, rounded estimate: 40%) to the new proposed bonds
due in 2030.
The positive outlook on the issuer credit rating reflects the
possibility of an upgrade over the next 12 months if SGL appears on
track to achieve its ratings-commensurate credit measures,
incorporating potential operating volatility and its growth
strategy through mergers and acquisitions (M&A).
The planned transaction aims to better distribute SGL's debt
maturity profile and enhance its financial flexibility for
opportunistic external growth.
SGL is raising new six-year notes, which S&P anticipates will be up
to EUR500 million. The group intends to use the majority to tender
and repay part of its 2028 floating rate notes. The remainder
(about EUR100 million) will be earmarked for future acquisitions,
supplementing the EUR136 million of cash on hand at year-end 2023.
The transaction will result in an approximately 12% increase in
absolute debt to about EUR935 million at year-end 2024 (pro forma
the transaction), consisting mainly of the remainder of the 2028
notes, the new notes, and leases.
SGL will pursue its growth strategy via acquisitions in 2024 funded
by the new capital.
S&P said, "We believe that growth through M&A remains a key
strategic priority for SGL. The company typically targets
geographic diversification, as well as larger market share,
contracted revenue base, and absolute scale. SGL also aims to
enhance its entrenchment with existing international clients that
value its ability to deliver complex multistage logistics solutions
globally. We understand that SGL's acquisition targets are
typically relatively small but well-established and profitable
players, resulting in low integration costs and quick onboarding.
Our base case incorporates EUR30 million-EUR40 million EBITDA
contribution from the M&A pipeline, funded with about EUR100
million raised as part of the new notes. We expect the company will
fund sizable transformational M&A through a combination of internal
cash, equity, and debt, as was the case in the past. SGL has kept
annual M&A-related special items low (EUR10 million-EUR20 million)
and has been able to integrate the acquired companies quickly and
profitably."
Free operating cash flow (FOCF) will likely stay positive and
adjusted debt to EBITDA could fall below 4.5x if earnings continue
to grow.
The main drivers behind the strong financial results in 2022-2023
were robust trade volumes and a diverse customer base, with limited
correlation between individual customers and end industries, along
with new contracts in aid and humanitarian logistics projects, and
government and defense. Factoring in contributions from the
acquired companies, SGL's EBITDA (after special items) neared a
EUR200 million mark in 2022-2023, from about EUR110 million in
2021. S&P said, "In our view, SGL's enlarged business scale should
normally enhance its bargaining power and operating efficiency in
the fragmented and price-competitive underlying logistics industry,
which features relatively low inherent profitability. Our forecasts
indicate that this will translate into robust organic top-line
growth, supplemented by the contribution from planned acquisitions.
This, underpinned by the relatively stable profitability margins,
could offset the incremental debt increase and result in adjusted
leverage falling below 4.5x in the next 12 months (from 4.6x in our
2023 base case and about 3.2x in 2022). We also expect SGL will
generate positive FOCF over the forecast period. Under our base
case, annual FOCF will be EUR20 million-EUR30 million in 2024
(similar to 2023) despite the elevated interest expense and
slightly higher annual capex of about EUR25 million in 2023-2024
compared with EUR14 million in 2022."
The rating on SGL reflects its position as a midsize, asset-light
freight forwarder and logistics services provider in the highly
fragmented and price-competitive logistics industry.
The business risk profile assessment reflects SGL's large
geographic footprint in Europe, North and South America, and
Asia-Pacific. It enables the group to benefit from broad reach,
demand diversity, and value propositions, resulting in good new
customer wins and cross-selling opportunities. The logistics
industry is price competitive and fragmented, with the top three
players accounting for just about 12% of the total market. SGL,
with an adjusted EBITDA of about EUR190 million in 2022, remains a
small player, compared with, for example, DSV A/S or C.H. Robinson
Worldwide Inc., which we rate in the same peer group, with 2023
EBITDA of about EUR3.1 billion and EUR0.6 billion, respectively.
However, acquisitions have helped SGL increase its global
footprint, win market shares, and expand its absolute EBITDA base,
improving its pricing power somewhat vis-à-vis customers and
negotiating power with cargo capacity providers. Furthermore, it
has a solid track record of customer retention because of its
expertise in niche markets and provision of tailor-made multi-modal
logistic solutions. As of Dec. 31, 2023, SGL was present in 53
countries, including the Americas, Europe, the Middle East, and
Africa, Southeast Asia, and Asia-Pacific with a network of 160
offices worldwide. The group has also been able to reap benefits
from its collaboration with nongovernmental and humanitarian
organizations, such as the UN and UNICEF. Accounting for 10%-15% of
SGL's revenue, these operations are not the largest contributors,
but they are recurring, and we understand that they generate
above-average returns.
The positive outlook reflects the possibility of an upgrade over
the next 12 months if SGL appears on track to achieve its
ratings-commensurate credit measures.
S&P said, "We could upgrade SGL if we expect that the company will
sustain EBITDA growth while integrating the planned acquisitions
profitably, such that its adjusted debt to EBITDA falls to below
4.5x and adjusted FFO cash interest coverage improves to about 2.5x
on a sustainable basis, and that it had enough cushion to absorb
potential operating volatility and its debt-funded M&A growth
strategy."
S&P could revise its outlook to stable if it expects SGL's adjusted
leverage will remain above 4.5x. This could occur if:
-- Operating performance materially underperforms S&P's base case
because of macroeconomic headwinds constraining trade volumes or
inability to integrate acquisitions in an EBITDA-accretive manner;
or
-- If the company adopts a more aggressive financial policy. This
could be the consequence of transformative debt-funded
acquisitions, or shareholder returns such that we believe
sustainably increases leverage.
S&P said, "Governance factors are a moderately negative
consideration in our credit analysis of SGL. Our assessment of the
group's financial risk as highly leveraged reflects corporate
decision-making that prioritizes the interests of the controlling
owners, in line with our view of the majority of entities owned by
private equity sponsors. Our assessment also reflects generally
finite holding periods and a focus on maximizing shareholder
returns."
As an asset-light freight forwarder and logistics services
provider, the group is only indirectly exposed to environmental
risks relevant to the transportation sector.
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F R A N C E
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ALTICE FRANCE: In Debt Restructuring Talks with Creditors
---------------------------------------------------------
Irene Garcia Perez and Benoit Berthelot at Bloomberg News report
that both Altice France and a group of its creditors have started
working with financial and legal advisers, amid a deepening
stand-off between the telecoms firm and its lenders over the fate
of the company's debt load.
On the company side, Altice is talking to Lazard Inc., while some
bondholders -- including Attestor Capital and Arini -- are in
discussions with advisers Houlihan Lokey Inc. and law firm Milbank
LLP ahead of debt talks with the company, Bloomberg relays, citing
people familiar with the matter.
The people said a mix of alternative and long-only credit funds
that hold about EUR1.5 billion (US$1.6 billion) of Altice France's
debt has been coalescing over the past few weeks, Bloomberg notes.
They've been casually discussing a liability management exercise
for the company, but the talks to form a formal group picked up
pace after the French telecommunications company told investors
they'll suffer haircuts, they said, Bloomberg relates.
On March 20, management announced a plan to speed up the company's
deleveraging after agreeing to sell the media division, Bloomberg
recounts.
The company reported a debt ratio of 6.2 times its earnings at the
end of 2023, Bloomberg states. It will need creditors to
participate in "discounted transactions" to bring leverage down to
4 times, Bloomberg notes. In November, management said they were
seeking to bring debt down to 4.5 times earnings, Bloomberg
relates.
Bondholders in the group talking to advisers have cross-holdings of
secured and unsecured debt, with maturities concentrated in the
notes due in 2027 and 2028, Bloomberg discloses.
Altice France, Bloomberg says, is now looking to sell assets as it
faces mounting pressure to reduce a debt pile of almost EUR25
billion.
Altice's executives are also involved in a probe into potential
corruption and money laundering in Portugal and France, Bloomberg
states. Altice has said it's a victim of the alleged wrongdoings
and that it would collaborate with the judicial authorities,
according to Bloomberg.
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G E R M A N Y
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ROHM HOLDCO II: S&P Affirms 'B-' ICR, Outlook Negative
------------------------------------------------------
S&P Global Ratings affirmed the 'B-' issuer credit and issue
ratings on Germany-based methyl methacrylate (MMA) company Rohm
HoldCo II GmbH and the group's senior secured debt.
S&P said, "The negative outlook on the 'B-' long-term rating on
Rohm continues to reflect very high leverage and the uncertainty
around an improvement, which hinges on favorable market conditions
in 2024, the acquisition and integration of SABIC FF, and the
successful ramp-up of the LiMA plant. We continue to factor in peak
investments in 2024, leading to significantly negative free cash
flow, before a potentially strong recovery in 2025.
"We view as credit positive the equity support of EUR350 million
Rohm is set to receive from financial sponsor Advent. Rohm is
currently considering an amend and extend (A&E) transaction of its
euro- and U.S. dollar-denominated term loans and its revolving
credit facility (RCF) that would extend the maturities by 2.5
years. As part of the transaction, Advent is injecting EUR180
million new equity to total EUR350 million equity contribution in
2024. This includes EUR150 million equity for the SABIC FF
acquisition, adding a new EUR60 million to the $100 million already
committed in December 2022, to be paid in second-quarter 2024, at
the closing. This 2024 sponsor support also captures EUR200million
equity for the LiMA completion, adding a new EUR120 million to the
EUR80 million already committed equity announced in May 2023 that
has not yet been paid. This follows EUR100 million support provided
in 2023 by Advent in the form of shareholder loans, treated as
equity.
"We expect this fresh capital will support liquidity in 2024, a
peak investment year for the new LiMA MMA plant, ensuring adequate
funding for the project completion by year-end, as per our base
case. We now factor in total capex of EUR380 million-EUR400 million
in 2024, from EUR320 million-EUR350 million in our previous base
case (December 2023), and up from about EUR340 million in 2023.
This largely falls down to the final year of construction of the
low-cost ethylene-based MMA plant LiMA in the US, which is expected
to start in third-quarter 2024. Also, the group expects the LiMA
plant to result in a net EBITDA increase in excess of EUR150
million (after the closure of the Fortier plant), under mid-cycle
industry conditions. We understand that the risk of capex overruns
is fairly limited given that most of the project's spending has
been allocated through the remainder of 2024. We also factor in the
expected strong cost position of the plant and that a portion of
capacity is being already contracted. Because we expect the plant
to ramp-up in fourth-quarter 2024, we account for only marginal
EBITDA from the asset this year of about EUR25 million, and a
significant negative free cash flow of EUR280 million-EUR290
million for Rohm. Yet, we expect the plant could contribute 80%-90%
of total capacity in 2025 and capex to moderate substantially.
"Also, the equity support should comfortably cover the SABIC FF
acquisition, enabling the Polyvantis division of Rohm to become a
global industry leader in films and sheets. The $230 million
acquisition of SABIC's functional forms business, SABIC FF, is
expected to close in second-quarter 2024. We continue to factor in
a $100 million vendor loan from SABIC for the two years following
the closing, which we will treat as subordinated debt during that
time. Advent had also committed to $100 million equity support,
with a new EUR60 million equity funding to be received at closing
of the acquisition. We expect the equity overfunding to contribute
setting-up Polyvantis as the merger of SABIC FF' polycarbonates
business (under Lexan brand) with Rohm's acrylic sheets and films
business (under Plexiglass brand), as a legally separated,
stand-alone division within Rohm. The integration of the two
businesses implies costs for transaction fees and synergies
realizations, which the company expects to reach $17 million-$34
million, targeting a full-year EBITDA from the acquisition in the
order of $50 million-$60 million under mid-cycle conditions. While
we do not take a pro-forma approach in our base case, we estimate
SABIC FF could contribute EUR15 million-EUR20 million in EBITDA for
2024.
"The A&E transaction should materially improve the company's debt
maturity profile. The transaction would extend the maturities of
Rohm's senior secured first-lien euro and U.S. dollar term loans to
January 2029, and of its EUR300 million RCF to July 2028, thereby
pushing the group's maturity profile out by 2.5 years. The term
loan extension captures various add-ons made by the company in
2023, and the EUR52 million add-on executed in February 2024. At
the same time, we anticipate revised margins on these instruments,
while we understand the existing leverage-based margin ratchet
mechanism is expected to be deleted. The repricing is expected to
involve a margin uplift for the cash-pay portion on the term loans,
as well as a PIK margin uplift through the remaining of 2024,
subject to the issuer credit rating on the group. Lastly, the
company expects to loosen its springing senior secured net leverage
covenant to 8.25x for the 12 months following the closing of the
transaction, from 7.21x previously. This covenant is only tested if
the RCF is 40% utilized. We also take into account the utilization
headroom before hitting the 40% threshold, and the documentation
mechanisms that could avoid a covenant breach, should the covenant
be tested.
"Although market conditions may ease after a period of destocking,
price and demand weakness, and elevated energy prices, this may not
ensure a sustained recovery over the coming quarters. Following
several plant closures in recent years, including Rohm's planned
Fortier plant closure once LiMA is ramped up, we estimate MMA
market conditions may improve. However, we have yet to confirm
signs of a sustainable recovery. We also note the recent prices
trend reflect supply and demand conditions, capturing recent trade
disruptions. According the ICIS market data, MMA prices on spot in
Europe or South East Asia have improved year-to-date 2024, reaching
its highest level since mid-2022. Our operational base case for
Rohm remains prudent, given our still soft macroeconomic growth
scenario in mature economies for 2024, which are key markets for
Rohm. As such, our base case still points to 9x-10x adjusted debt
to EBITDA in 2024, which we view as high. Furthermore, we think
recovery will remain dependent on market conditions and on the
successful execution of the company's key projects.
"The negative outlook reflects our expectation that Rohm's leverage
will remain elevated at 9x-10x in 2024. We estimate free cash flow
will remain strongly negative, burdened by a peak investment year
for LiMA. Nevertheless the progressive contribution of LiMA and
SABIC FF, alongside potential for market improvement through 2024,
could support a swift recovery in leverage and a return to positive
free cash flows in 2025. Absent a market recovery in the coming
quarters, or a forecast return of free operating cash flow (FOCF)
to positive territory in 2025, we could lower the rating. That
said, we estimate rating leeway has improved following the equity
contribution ensuring adequate liquidity over the forecast
horizon.
"We could lower the rating on abrupt deterioration of industry
conditions, despite mild signs of potential recovery, leading to
further depressed MMA prices and volumes sold. A faster cash burn
than currently anticipated through 2024, combining a lower EBITDA
trend and continued peak capex or overruns, could put further
pressure on the rating. Similarly, unanticipated delays on LiMA's
contribution could also constrain the rating.
"We could revise the outlook to stable if there is a marked
improvement in S&P Global Ratings-adjusted debt to EBITDA and
limited free cash flow burn in 2024 on the back of a sustained
improvement of market conditions. This would also improve comfort
regarding the EBITDA contribution from Rohm's key projects in 2025
and solidify the credit metrics' recovery path. Rating upside would
also hinge on continued adequate liquidity, a return to positive
FOCF, and a deleveraging toward 6.5x on a sustainable basis."
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I R E L A N D
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BAIN CAPITAL 2024-1: Fitch Assigns B-(EXP)sf Rating to Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned Bain Capital Euro CLO 2024-1 DAC 's
expected ratings.
The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.
Entity/Debt Rating
----------- ------
Bain Capital Euro
CLO 2024-1 DAC
Class X LT AAA(EXP)sf Expected Rating
Class A LT AAA(EXP)sf Expected Rating
Class B-1 LT AA(EXP)sf Expected Rating
Class B-2 LT AA(EXP)sf Expected Rating
Class C LT A(EXP)sf Expected Rating
Class D LT BBB-(EXP)sf Expected Rating
Class E LT BB-(EXP)sf Expected Rating
Class F LT B-(EXP)sf Expected Rating
Class M LT NR(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Bain Capital Euro CLO 2024-1 DAC is a securitisation of mainly
senior secured loans and secured senior bonds (at least 90%) with a
component of senior unsecured, mezzanine, and second-lien loans.
Note proceeds are being used to fund a portfolio with a target par
of EUR400 million. The portfolio is actively managed by Bain
Capital Credit U.S. CLO Manager II, LP. The collateralised loan
obligation (CLO) will have an approximately 4.5-year reinvestment
period and an 8.5-year weighted average life (WAL) test.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/ 'B-'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 25.1.
High Recovery Expectations (Positive): At least 90% of the
portfolio will comprise senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is 62.4%.
Diversified Portfolio (Positive): Exposure to the 10-largest
obligors and fixed-rate assets is limited to 26.5% and 12.5%,
respectively, of the portfolio balance. The transaction also
includes various concentration limits, including the maximum
exposure to the three-largest Fitch-defined industries in the
portfolio at 40.0%. These covenants are intended to ensure the
asset portfolio will not be exposed to excessive concentration.
Portfolio Management (Neutral): The transaction will have an
approximately 4.5-year reinvestment period and include reinvestment
criteria similar to those of other European transactions. Fitch's
analysis is based on a stressed-case portfolio with the aim of
testing the robustness of the transaction structure against its
covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL used for the transaction's
Fitch-stressed portfolio analysis is 12 months less than the WAL
covenant at the issue date. This accounts for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period. These include, among others, passing both the
over-collateralisation (OC) and Fitch 'CCC' limitation tests, among
other things. Combined with Fitch's loan pre-payment expectations,
this ultimately reduces the maximum possible risk horizon of the
portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no impact on the class X and A
notes, and would lead to downgrades of no more than one notch each
for the class B to E notes and to below 'B-sf' for the class F
notes.
Downgrades based on the identified portfolio may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of defaults and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B to F notes have a cushion
of two notches each, and the class X and A notes have no cushion,
as they are at the highest achievable rating.
Should the cushion between the identified 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
Fitch-stressed portfolio would lead to downgrades of three notches
for the class A, B and D notes, of four notches for the class C
notes, to below 'B-sf' for the class E and F notes, and would have
no impact on the class X notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of the Fitch-stressed
portfolio would lead to upgrades of up to three notches for the
rated notes, except for the 'AAAsf' rated notes.
During the reinvestment period, based on the Fitch-stressed
portfolio, upgrades may occur on better-than-expected portfolio
credit quality and a shorter remaining WAL test, leading to the
ability of the notes to withstand larger-than-expected losses for
the remaining life of the transaction.
After the end of the reinvestment period, upgrades may occur on
stable portfolio credit quality and deleveraging, leading to higher
credit enhancement and excess spread being available to cover
losses in the remaining portfolio.
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
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations 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.
BOSPHORUS CLO VI: S&P Lowers Class F Notes Rating to 'B- (sf)'
--------------------------------------------------------------
S&P Global Ratings lowered its credit rating to 'B- (sf)' from 'B
(sf)' on Bosphorus CLO VI DAC's class F notes. At the same time,
S&P affirmed its 'AAA (sf)' rating on the class A notes, 'AA (sf)'
ratings on the class B-1 and B-2 notes, 'A (sf)' rating on the
class C notes, 'BBB (sf)' rating on the class D notes, and 'BB
(sf)' rating on the class E notes.
The transaction securitizes a portfolio of primarily senior secured
leveraged loans and bonds. It is managed by Cross Ocean Adviser
LLP. Its reinvestment period will end in May 2025.
The rating actions follow the application of S&P's relevant
criteria and its credit and cash flow analysis of the transaction,
based on the February 2024 trustee report.
Since closing, S&P estimates of the total collateral balance
(performing assets, principal cash, and expected recovery on
defaulted assets) held by the CLO has reduced slightly, resulting
in a small decrease in credit enhancement for all rated notes.
Table 1
Liabilities key metrics
CURRENT CREDIT CREDIT
CLASS AMOUNT ENHANCEMENT AS OF ENHANCEMENT
(MIL. EUR) MARCH 2024 (%)* AT CLOSING (%)
A 217.00 37.64 38.00
B-1 26.75 27.08 27.50
B-2 10.00 27.08 27.50
C 24.50 20.03 20.50
D 19.60 14.40 14.90
E 17.15 9.47 10.00
F 10.50 6.46 7.00
Credit enhancement = [Performing balance + cash balance + recovery
on defaulted obligations (if any) – tranche balance (including
tranche balance of all senior tranches)] / [Performing balance +
cash balance + recovery on defaulted obligations (if any)].
*Based on the portfolio composition as reported by the trustee in
February 2024.
Since closing, S&P's scenario default rates (SDRs) have decreased
at each rating level, due to a reduction in the portfolio's
weighted-average life (WAL) to 4.10 years from 5.60 years.
Table 2
Assets key metrics
AS OF MARCH 2024* AT CLOSING
Portfolio weighted-average rating B B
'CCC' assets (%) 1.67 0.00
SPWARF 2,813.98 2,649.68
Default rate dispersion (%) 561.99 474.72
Weighted-average life (years) 4.10 5.60
Obligor diversity measure 93.02 81.23
Industry diversity measure 18.50 14.68
Regional diversity measure 1.29 1.15
Total collateral amount (mil. EUR)§ 347.96 350.00
Defaulted assets (mil. EUR) 0.00 0.00
Number of performing obligors 125 96
'AAA' SDR (%) 61.13 66.84
'AAA' WARR (%) 37.06 36.99
*Based on the portfolio composition in the February 2024 trustee
report.
§Performing assets plus cash and expected recoveries on defaulted
assets.
SPWARF--S&P Global Ratings' weighted-average rating factor.
SDR--Scenario default rate.
WARR--Weighted-average recovery rate.
According to the February 2024 trustee report, all of the notes are
paying current interest and all the coverage tests are passing.
S&P said, "Our credit and cash flow analysis shows that the class A
to E notes can still withstand the stresses we apply at the
assigned ratings, based on their available credit enhancement
levels. We therefore affirmed our ratings on these notes.
"Further, our credit and cash flow analysis indicates that the
available credit enhancement for the class B-1 to E notes could
withstand stresses commensurate with higher ratings than those
assigned. However, considering the CLO is still in its reinvestment
phase, during which the transaction's credit risk profile could
deteriorate, we view the ratings as commensurate with their current
levels.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class F notes is commensurate with a
lower rating level. Though the collateral portfolio's credit
quality has improved since closing, specifically in terms of
weighted average rating and diversification, the portfolio's WAL
has reduced. This, combined with the lower collateral balance, has
had a negative effect on the class F notes and as a result, lowered
their break-even default rates (BDRs). The BDRs represent the gross
default levels that the transaction may withstand at each rating
level.
"The class F notes are currently failing at the 'B-' rating level.
Based on the portfolio's actual characteristics and additional
overlaying factors, including our long-term corporate default rates
and the class F notes' credit enhancement, this class is able to
sustain a steady-state scenario, in accordance with our criteria."
S&P's analysis further reflects several factors, including:
-- The class F notes' available credit enhancement is in the same
range as that of other CLOs we have rated and that have recently
been issued in Europe.
-- S&P's model generated BDR at the 'B-' rating level of 17.81%
(for a portfolio with a WAL of 4.10 years) versus if it was to
consider a long-term sustainable default rate of 3.1% for 4.10
years, which would result in a target default rate of 12.71%.
-- Whether the tranche is vulnerable to nonpayment in the near
future.
-- If there is a one-in-two chance of this tranche defaulting.
-- If S&P envisions this tranche defaulting in the next 12-18
months.
-- Following this analysis, S&P considers that the available
credit enhancement for the class F notes is commensurate with a 'B-
(sf)' rating. S&P therefore lowered its rating to 'B- (sf)' from 'B
(sf)'.
S&P said, "Following the application of our structured finance
sovereign risk criteria, we consider the transaction's exposure to
country risk to be limited at the current rating levels, as the
exposure to individual sovereigns does not exceed the
diversification thresholds outlined in our criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, and considering other qualitative
factors, we believe that the ratings are commensurate with the
available credit enhancement for each class of notes."
CAPITAL FOUR VII: S&P Assigns B- (sf) Rating to Class F Notes
-------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Capital Four CLO
VII DAC's class A notes, A loan, B-1, B-2, C, D, E, and F notes. At
closing, the issuer also issued unrated subordinated notes.
The reinvestment period is 4.6 years, while the non-call period
will be 1.5 years after closing.
Under the transaction documents, the rated debt pays quarterly
interest unless there is a frequency switch event. Following this,
the debt will switch to semiannual payment.
The ratings assigned to the debt 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 debt 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 Global Ratings weighted-average rating factor 2,779.62
Default rate dispersion 495.45
Weighted-average life (years) 4.83
Obligor diversity measure 104.15
Industry diversity measure 19.44
Regional diversity measure 1.32
Transaction key metrics
CURRENT
Total par amount (mil. EUR) 350.00
Defaulted assets (mil. EUR) 0.00
Number of performing obligors 122
Portfolio weighted-average rating
derived from our CDO evaluator B
'CCC' category rated assets (%) 0.00
Actual 'AAA' weighted-average recovery (%) 36.62
Actual weighted-average spread (%) 4.12
Actual weighted-average coupon (%) 3.10
S&P said, "Our ratings reflect our assessment of the collateral
portfolio's credit quality, which has a weighted-average rating of
'B'. We consider that the portfolio is well-diversified, 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 actual
weighted-average spread of 4.12%, the actual weighted-average
coupon of 3.10%, and the actual 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.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate the exposure to counterparty risk
under our current counterparty criteria.
"Following the application of our structured finance sovereign risk
criteria, we consider that the transaction's exposure to country
risk is limited at the assigned ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria."
The transaction's legal structure and framework is bankruptcy
remote. The issuer is a special-purpose entity that meets our
criteria for bankruptcy remoteness.
S&P said, "Our credit and cash flow analysis indicates that the
available credit enhancement for the class B, C, D, E, and 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 ratings assigned to the notes.
"The class A notes and A loan can withstand stresses commensurate
with the assigned 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 ratings to any
classes of debt in this transaction.
"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 the class A
notes, A loan, B-1, B-2, C, D, E, and F notes.
"In addition to our standard analysis, we have also included the
sensitivity of the ratings on the class A notes, A loan, and B-1 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."
Ratings list
AMOUNT
CLASS RATING (MIL. EUR) SUB (%) INTEREST RATE*
A AAA (sf) 162.75 38.00 Three/six-month EURIBOR
plus 1.50%
A loan AAA (sf) 54.25 38.00 Three/six-month EURIBOR
plus 1.50%
B-1 AA (sf) 21.20 27.66 Three/six-month EURIBOR
plus 2.15%
B-2 AA (sf) 15.00 27.66 5.45%
C A (sf) 20.50 21.80 Three/six-month EURIBOR
plus 2.55%
D BBB- (sf) 24.55 14.79 Three/six-month EURIBOR
plus 4.00%
E BB- (sf) 15.00 10.50 Three/six-month EURIBOR
plus 6.79%
F B- (sf) 12.25 7.00 Three/six-month EURIBOR
plus 8.22%
Sub NR 29.65 N/A N/A
*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.
CIFC EUROPEAN IV: Fitch Hikes Rating on Class F Notes to 'Bsf'
--------------------------------------------------------------
Fitch Ratings has upgraded CIFC European Funding CLO IV DAC's class
E and F notes and affirmed the class A through D notes. The
Outlooks are Stable.
Entity/Debt Rating Prior
----------- ------ -----
CIFC European Funding
CLO IV DAC
Class A XS2354686979 LT AAAsf Affirmed AAAsf
Class B-1 XS2354687605 LT AAsf Affirmed AAsf
Class B-2 XS2354688322 LT AAsf Affirmed AAsf
Class C XS2354689056 LT Asf Affirmed Asf
Class D XS2354689643 LT BBB-sf Affirmed BBB-sf
Class E XS2354690492 LT BBsf Upgrade BB-sf
Class F XS2354689999 LT Bsf Upgrade B-sf
TRANSACTION SUMMARY
CIFC European Funding CLO IV DAC is a cash flow CLO actively
managed by CIFC Asset Management Europe Ltd. It closed on 19 August
2021 and the reinvestment period will end on 18 July 2026.
KEY RATING DRIVERS
Resilient Performance; Low Refinancing Risk: The rating actions
reflect the transaction's resilient performance as well as low
refinancing risk. As per the last trustee report dated 31 January
2024, the transaction is passing all of its collateral quality and
portfolio profile tests. The transaction is currently above target
par. The transaction has 1.10% of assets with a Fitch-derived
rating of 'CCC+' and below, versus a limit of 7.50%. There are no
defaulted assets in the portfolio. Near- and medium-term
refinancing risk are also low, with 2.1% of the assets in the
portfolio maturing before the end of 2025, as calculated by Fitch.
'B' Portfolio: Fitch assesses the average credit quality of the
underlying obligors at 'B'. The Fitch-calculated weighted average
rating factor of the current portfolio is 24.50 using Fitch's
latest criteria
High Recovery Expectations: Senior secured obligations comprise
97.50% of the portfolio. 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
62.10%.
Diversified Portfolio: The portfolio is well-diversified across
obligors, countries and industries. The top 10 obligor
concentration, as calculated by Fitch, is 12.67%, and no obligor
represents more than 1.70% of the portfolio balance. The exposure
to the three largest Fitch-defined industries is 33.20% as
calculated by the trustee. Fixed-rate assets currently are reported
by the trustee at 6.60% of the portfolio balance, which compares
favourably with the current maximum of 10.00%.
Cash Flow Analysis: Fitch's analysis of the matrices is based on a
stressed-case portfolio with a 6.75-year weighted average life
(WAL). The transaction does not qualify for an analysis with a
one-year reduction in the WAL since the transaction's
post-reinvestment criteria do not have strict conditions such as
the satisfaction of the 'CCC' test.
MIR Deviation: The class E notes' 'BBsf' rating is a deviation from
its model-implied rating (MIR) of 'BB+sf'. The deviation reflects
the limited cushion at the MIR and uncertain macro-economic
conditions.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no negative impact on the class
A through E notes' ratings and would lead to a downgrade of one
notch for the class F notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio, the
class C, D and F notes have a four-notch cushion, class B notes two
notches, and class E notes one notch. There is no rating cushion
for the class A notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of Fitch's stress portfolio
would lead to upgrades of up to four notches, except for the
'AAAsf' rated notes, which are at the highest level on Fitch's
scale and cannot be upgraded.
Upgrades may occur in case of stable portfolio credit quality and
deleveraging, leading to higher credit enhancement and excess
spread available to cover losses on the remaining portfolio.
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
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.
CIMPRESS PLC: Moody's Ups CFR to B1 & Sr. Sec. 1st Lien Debt to Ba3
-------------------------------------------------------------------
Moody's Ratings upgraded all credit ratings of Cimpress plc
(Cimpress), including its corporate family rating to B1 from B2,
the Probability of Default Rating to B1-PD from B2-PD, the Senior
Secured First Lien Credit Facility rating to Ba3 from B1 and the
Senior Unsecured Regular Bond/Debenture rating to B3 from Caa1.
Moody's also upgraded the Senior Secured First Lien Credit Facility
rating at Cimpress USA Incorporated to Ba3 from B1. The rating
outlooks at Cimpress plc and Cimpress USA Incorporated remain
positive. The company's speculative grade liquidity (SGL) rating is
unchanged at SGL-1 reflecting very good liquidity.
The ratings upgrade reflects Cimpress' continued progress in
reducing financial leverage and strengthening its balance sheet as
well as maintaining very good liquidity. Moody's believes
operational improvements Cimpress has made will better position the
company for profitable growth and to better withstand periods of
end market volatility. Moody's expects that Cimpress will generate
annual free cash flow in excess of $200 million over the next two
years, which will provide the opportunity to continue to reduce
debt and boost liquidity. Moody's projects Debt/EBITDA (Moody's
adjusted) to improve closer to 3.5x over the next 12-18 months,
down from 4x and 5.3x as of LTM December 2023 and FYE June 2023,
respectively.
RATINGS RATIONALE
Cimpress' B1 CFR reflects the company's moderately high though
improving leverage, pronounced cash flow seasonality and pressure
on demand for certain of Cimpress' print marketing and consumer
products across several business lines. Over a longer time-horizon,
there are risks of digital substitutions for certain key products.
Cimpress generates its revenue from a large number of customized
orders that are not contractually recurring and its earnings are
vulnerable to business and consumer sentiment in a challenging
macroeconomic environment. Nevertheless, the rating garners support
from the company's entrenched position and well-known brand. It
also factors in the company's very good liquidity, including lack
of debt maturities through 2026 and Moody's expectation of good
free cash flow.
The company's SGL-1 speculative grade liquidity rating reflects
very good liquidity supported by a large cash balance and positive
free cash flow. With about $291 million in cash and marketable
securities, full availability on the $250 million revolver and
projected free cash flow in excess of $200 million over the next 12
months, Cimpress has very good liquidity to cover an estimated $130
million in annual capex and software development costs and $11.5
million in mandatory term loan amortization. Cimpress has a
favorable debt maturity ladder with no funded debt coming due until
June 2026 when the $600 million ($522 million outstanding as of
December 31, 2023) unsecured note comes due. The company's earnings
and cash flows have historically been and Moody's expect will
continue to be highly seasonal. Its second fiscal quarter (ending
December 31) includes most of the holiday shopping season and
accounts for a significant portion of its earnings for the fiscal
year, primarily due to higher sales of products like holiday cards,
calendars, photo books, and personalized gifts.
Cimpress maintains a $250 million revolver due May 2026. The
revolver has a springing maximum first lien net leverage ratio of
3.25x that is tested if there is any revolver drawing outstanding
at the end of a quarter. Moody's does not expect Cimpress to rely
on the revolver and expects the company to maintain adequate
cushion under the covenant requirement over the next 12 months. The
first lien net leverage ratio was 1.78x as of LTM December 31,
2023, which represents a roughly 45% cushion under the
requirement.
Cimpress' ESG credit impact score of CIS-4 indicates the rating is
lower than it would have been if ESG risk exposures did not exist.
Some of the company's key products are exposed to demand
disruptions from consumer shift to digital services. The company's
governance risks reflect its financial policies and concentrated
ownership and voting control. Cimpress expects to maintain net
leverage of under 3x (based on company's definition, before Moody's
adjustments) as it executes its share repurchase program.
The instrument level ratings reflect the probability of default of
the company, as reflected in the B1-PD Probability of Default
Rating, an average expected family recovery rate of 50% at default
given the mix of secured and unsecured debt in the capital
structure, and the particular instruments' ranking in the capital
structure. The company's senior secured credit facility (revolver,
USD and Euro term loans) is rated Ba3, one notch above the CFR,
reflecting its senior ranking with respect to the $600 million
($522 million outstanding as of December 31, 2023) senior unsecured
note, which is rated B3.
The positive outlook reflects Moody's expectation that Cimpress
will continue to generate strong earnings, reduce debt and address
its 2026 debt obligations well before their maturities, further
improving its credit profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Debt/EBITDA is sustained below 4x
(Moody's adjusted) with financial policies supportive of leverage
remaining at such levels. In addition, an upgrade will be based on
the company's ability to sustain its organic revenue growth rates
in the mid-single digit percent range and maintain very good
liquidity, with Moody's adjusted FCF/debt at 10% or better.
The ratings could be downgraded if liquidity deteriorates, if the
company pursues material debt funded acquisitions or shareholder
distributions, or if Moody's expects Debt/EBITDA to be sustained
above 5x along with a material decline in cash from the current
cash position. Deterioration in free cash flow such that FCF/Debt
is maintained in the mid-single digit percent range or below, could
also lead to a downgrade.
Headquartered in Dundalk, Ireland, Cimpress plc is a provider of
customized marketing products and services to small businesses and
consumers worldwide, largely comprised of printed and other
physical products. Revenue for the fiscal year ended June 2023 was
approximately $3.1 billion.
The principal methodology used in these ratings was Media published
in June 2021.
JUBILEE CLO 2022-XXVI: Fitch Assigns 'B-sf' Rating on Cl. F-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Jubilee CLO 2022-XXVI DAC's reset final
ratings, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Jubilee CLO 2022-XXVI DAC
Class A XS2494464915 LT PIFsf Paid In Full AAAsf
Class A-R XS2762950983 LT AAAsf New Rating
Class B-1 XS2494465136 LT PIFsf Paid In Full AAsf
Class B-1-R XS2762951015 LT AAsf New Rating
Class B-2 XS2494465300 LT PIFsf Paid In Full AAsf
Class B-2-R XS2762951288 LT AAsf New Rating
Class C XS2494465565 LT PIFsf Paid In Full Asf
Class C-R XS2762951445 LT Asf New Rating
Class D XS2494465722 LT PIFsf Paid In Full BBB-sf
Class D-R XS2762951791 LT BBB-sf New Rating
Class E XS2494466027 LT PIFsf Paid In Full BB-sf
Class E-R XS2762951957 LT BB-sf New Rating
Class F XS2494466373 LT PIFsf Paid In Full B-sf
Class F-R XS2762952179 LT B-sf New Rating
Subordinated-R Notes
XS2776643483 LT NRsf New Rating
TRANSACTION SUMMARY
Jubilee CLO 2022-XXVI DAC is a securitisation of mainly senior
secured obligations (at least 92.5%) with a component of senior
unsecured, mezzanine, second-lien loans, first-lien last-out loans
and high-yield bonds. Note proceeds have been used to redeem the
existing notes (except the subordinated notes) and to fund the
existing portfolio and top-up the portfolio using excess cash to
reach a target par of EUR400 million. The portfolio is actively
managed by Alcentra Limited. The transaction has a 4.6-year
reinvestment period and a 7.6-year weighted average life (WAL).
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors to be in the 'B'/'B-' category.
The Fitch weighted average rating factor of the identified
portfolio is 24.8.
High Recovery Expectations (Positive): At least 92.5% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 61.8%.
Diversified Portfolio (Positive): The transaction includes various
concentration limits in the portfolio, including a fixed-rate
obligation limit at 12.5%, a top 10 obligor concentration limit at
20% and maximum exposure to the three-largest Fitch-defined
industries at 40%. These covenants ensure the asset portfolio will
not be exposed to excessive concentration.
WAL Step-Up Feature (Neutral): The transaction can extend the WAL
by one year, to 8.6 years, on the step-up date, which can be one
year after closing at the earliest. The WAL extension is at the
option of the manager, but subject to conditions including meeting
the collateral-quality tests and the adjusted collateral principal
amount at least equal to the reinvestment target par, with
defaulted assets at their collateral value.
Portfolio Management (Neutral): The transaction has a 4.6-year
reinvestment period, which is governed by reinvestment criteria
that are similar to those of other European transactions. Fitch's
analysis is based on a stressed-case portfolio with the aim of
testing the robustness of the transaction structure against its
covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL Fitch modelled is 12 months
less than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period. These include passing both the coverage tests
and the Fitch 'CCC' maximum limit, as well as a WAL covenant that
gradually steps down over time, both before and after the end of
the reinvestment period. Fitch believes these conditions would
reduce the effective risk horizon of the portfolio during the
stress period.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean RDR across all ratings and a 25%
decrease of the RRR across all ratings of the identified portfolio
would lead to downgrades of one notch for the class C-R and D-R
notes, to below 'B-sf' for the class F notes and have no impact on
all the other notes.
Based on the actual portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration.
Due to the better metrics and shorter life of the identified
portfolio, the class B-1-R, B-2-R, C-R, D-R and E-R notes display a
rating cushion of two notches and the class F-R notes three
notches. Should the cushion between the identified portfolio and
the stress portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
across all ratings and a 25% decrease of the RRR across all ratings
of the stressed portfolio would lead to downgrades of up to four
notches for the notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of the Fitch stressed
portfolio would result in upgrades of no more than four notches
across the structure, apart from the 'AAAsf' rated notes, which are
at the highest level on Fitch's scale and cannot be upgraded.
During the reinvestment period, based on Fitch's stress portfolio,
upgrades may occur on better-than-expected portfolio credit quality
and a shorter remaining WAL test, leading to the ability of the
notes to withstand larger than expected losses for the remaining
life of the transaction. After the end of the reinvestment period,
upgrades may occur in case of stable portfolio credit quality and
deleveraging, leading to higher credit enhancement and excess
spread available to cover for losses on the remaining portfolio.
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
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.
MADISON PARK XX: S&P Puts Prelim B- (sf) Rating to Class F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Madison Park Euro
Funding XX DAC's class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R
notes and class A-R loan. The unrated subordinated notes are still
outstanding since the original issuance.
The ratings assigned to the notes and loan 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 and loan through collateral
selection, ongoing portfolio management, and trading.
-- The issuer's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
our counterparty rating framework.
Portfolio benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,840.33
Weighted-average life (years) 4.20
Weighted-average life (years)
extended to match reinvestment period 4.57
Obligor diversity measure 140.13
Industry diversity measure 21.55
Regional diversity measure 1.18
Weighted-average rating B
'CCC' category rated assets (%) 1.46
Actual 'AAA' weighted-average recovery rate 36.40
Covenanted Weighted-average spread (net of floors; %) 4.10
S&P said, "We consider that the target portfolio is
well-diversified, primarily comprising broadly syndicated
speculative-grade senior secured term 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 modelled the EUR400 million target
par amount, the covenanted weighted-average spread of 4.10%, and
the covenanted weighted-average coupon of 4.75%. We have assumed
actual weighted-average recovery rates, at all rating levels, in
line with the recovery rates of the actual portfolio presented to
us. 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.
"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. The issuer is a special-purpose entity that meets our
criteria for bankruptcy remoteness.
"The CLO is managed by Credit Suisse Asset Management Ltd. 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'.
"Until the end of the reinvestment period on Oct. 15, 2028, the
collateral manager can 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 and loan. 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 compares
that with the default potential of the current portfolio 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.
"Our credit and cash flow analysis shows that the class B-1-R,
B-2-R, C-R, D-R, E-R, and F-R notes benefit from break-even default
rate and scenario default rate cushions that we would typically
consider to be in line with higher ratings than those assigned.
However, as the CLO will have a reinvestment phase, during which
the transaction's credit risk profile could deteriorate, we have
capped our ratings on the notes. The class A-R notes and A-R loan
can withstand stresses commensurate with the assigned ratings.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for the A-R loan
and each class of notes.
"The class A-R and F-R notes can withstand stresses commensurate
with the assigned ratings. Our ratings on the A-R loan, class A-R,
B-1-R, and B-2-R notes address timely payment of interest and
ultimate payment of principal, while our ratings on the class C-R
to F-R notes address the ultimate payment of interest and
principal.
"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-R to E-R
notes and A-R loan, 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-R 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 activities that are identified as not compliant with
international treaties on controversial weapons; to activities that
evidence severe weaknesses in business conduct and governance in
relation to the United Nations Global Compact Principles;
production or trade of illegal drugs or narcotics; or trades in
endangered or protected wildlife."
Ratings list
AMOUNT CREDIT
CLASS RATING (MIL. EUR) INTEREST RATE* ENHANCEMENT (%)
A-R AAA (sf) 182.40 3M EURIBOR + 1.47% 38.00
A-R loan AAA (sf) 65.60 3M EURIBOR + 1.47% 38.00
B-1-R AA (sf) 34.00 3M EURIBOR + 2.25% 27.00
B-2-R AA (sf) 10.00 5.65% 27.00
C-R A (sf) 24.00 3M EURIBOR + 2.85% 21.00
D-R BBB- (sf) 26.00 3M EURIBOR + 4.20% 14.50
E-R BB- (sf) 18.00 3M EURIBOR + 6.78% 10.00
F-R B- (sf) 12.00 3M EURIBOR + 8.14% 7.00
Sub notes NR 36.50 N/A N/A
*The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
3M--Three month.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
ROUNDSTONE SECURITIES 2: S&P Put Prelim. BB (sf) Rating to F Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to
Roundstone Securities No. 2 DAC's (Roundstone) class A, B-Dfrd,
C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd notes. At closing, Roundstone
will also issue unrated class Z, R, X1, and X2 notes.
S&P's preliminary ratings address the timely payment of interest
and the ultimate payment of principal on the class A notes. Its
ratings on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd
notes address the ultimate payment of interest and principal on
these notes.
Roundstone is a securitization of a pool of first-ranking owner
occupied and buy-to-let mortgage loans, secured on properties in
Ireland originated by the Bank of Scotland. Pepper Finance
Corporation (Ireland) DAC will be the servicer for all of the loans
in the transaction from closing.
The loans in the pool were originated as prime mortgages before the
Central Bank's macroprudential rules came into effect. Of the loans
in the pool, 99.4% pay floating rates of interest and 61.2% are
interest-only or have part and part repayments. Arrears in the
portfolio are increasing, with arrears exceeding three months at
16.8%. Higher repayments due to rising interest rates is one of the
main contributing factors behind this increase.
The sponsor as retention holder is retaining an economic interest
in the transaction, by acquiring and maintaining vertical interest
of at least 5% of the notes issued subject to U.S. credit risk
retention requirements. The remaining 95% of the pool will be
funded through the proceeds of the mortgage-backed rated notes.
S&P said, "Our preliminary ratings reflect our assessment of the
transaction's payment structure, cash flow mechanics, and the
results of our cash flow analysis to assess whether the notes would
be repaid under stress test scenarios. The transaction's structure
relies on a combination of subordination, a liquidity reserve fund,
and a general reserve fund to cover credit losses and income
shortfalls. Taking these factors into account, we consider the
credit enhancement available to the rated notes to be commensurate
with the preliminary ratings that we have assigned."
Preliminary ratings
Class Prelim. rating* Class size (%)
A AAA (sf) 74.5
B-Dfrd AA+ (sf) 5.3
C-Dfrd AA (sf) 4.5
D-Dfrd A (sf) 3.75
E-Dfrd BBB (sf) 2.25
F-Dfrd BB (sf) 1.20
Z NR 8.5
R NR TBD
X1 NR N/A
X2 NR N/A
*S&P's preliminary ratings address timely receipt of interest and
ultimate repayment of principal on the class A notes and the
ultimate payment of interest and principal on the other rated
notes.
NR--Not rated.
TBD--To be determined.
N/A--Not applicable.
=========
I T A L Y
=========
LA PERLA: Set to Go Into Administration
---------------------------------------
Matthieu Guinebault at Fashion Network reports that La Perla
Manufacturing, the Bologna-based company that acts as luxury
lingerie group La Perla's main producer, is reportedly about to go
into administration.
Administrators Francesco Paolo Bello, Francesca Pace and Gianluca
Giorgi have filed a report on the company, which was declared
bankrupt in early February, with the Bologna court.
While Mimit, the Italian ministry for business and manufacturing,
has said it is favourable to the administration procedure, Fashion
Network notes.
According to Fashion Network, Mimit is hoping that the La Perla
group's two other entities, La Perla Global Management UK and La
Perla Italia, will also go into administration. The former, a
UK-registered company that owns the La Perla brand name and all its
assets, including La Perla Manufacturing, has gone into liquidation
both in Bologna and in London. La Perla Italia instead operates
the brand's stores.
"I think we will first have to wait for the Bologna court's
decision as to whether it is possible to extend the administration
procedure to the group's two other entities," Fashion Network
quotes Minister Adolfo Urso as saying. "We will of course abide by
the court's decision. [Mimit] has quickly expressed its favourable
opinion about the administrators' indication. We have discussed
the matter, and it is now up to the court to make its assessment.
I am hoping they will be of a similar opinion, but it is of course
their decision," added Urso.
The possibility of La Perla being sold is more remote, given that
both the Bologna court and the Italian government are against it,
Fashion Network notes.
"Conditions aren't yet ripe [for a sale]," Mr. Urso, as cited by
Fashion Network, said, adding that it would be preferable if the
court-appointed administrators "were able to reach an agreement
with the British company." It would be "a quicker solution than
one involving a court case in two different justice systems."
Meanwhile, stated Urso, "the administrators have said they have
already received expressions of interest."
Mr. Urso said the sale will be discussed at a later date, Fashion
Network relays.
SUNRISE SPV 95: DBRS Gives Prov. BB(high) Rating to Class E Notes
-----------------------------------------------------------------
DBRS Ratings GmbH assigned provisional credit ratings to the
following classes of notes (collectively, the Rated Notes) to be
issued by Sunrise SPV 95 S.r.l. - Sunrise 2024-1 (the Issuer):
-- Class A1 Notes at AA (high) (sf)
-- Class A2 Notes at AA (high) (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BB (high) (sf)
Morningstar DBRS did not rate the Class M Notes (together with the
Rated Notes, the Notes) also expected to be issued in the
transaction.
The credit ratings of the Class A1, Class A2 (collectively, the
Class A Notes), and Class B Notes address the timely payment of
scheduled interest and the ultimate repayment of principal on or
before the legal final maturity date. The credit ratings of the
Class C, Class D, and Class E Notes address the ultimate payment of
interest but the timely payment of scheduled interest when they
become the senior-most tranche and the ultimate repayment of
principal on or before the legal final maturity date.
The transaction is a securitization of fixed-rate consumer, auto,
and other-purpose loans granted by Agos Ducato S.p.A. (the
originator and servicer) to private individuals residing in Italy.
CREDIT RATING RATIONALE
Morningstar DBRS' credit ratings are based on the following
analytical considerations:
-- The transaction's structure, including the form and sufficiency
of available credit enhancement to withstand stressed cash flow
assumptions and repay the Issuer's financial obligations according
to the terms under which the Rated Notes are issued.
-- The credit quality and the diversification of the collateral
portfolio, its historical performance, and the projected
performance under various stress scenarios.
-- The operational risk review of Agos Ducato S.p.A.'s
capabilities with regard to originations, underwriting, and
servicing;
-- The transaction parties' financial strength with regard to
their respective roles.
-- The expected consistency of the transaction's structure with
Morningstar DBRS' "Legal Criteria for European Structured Finance
Transactions" and "Derivative Criteria for European Structured
Finance Transactions" methodologies.
-- The Morningstar DBRS sovereign credit ratings on the Republic
of Italy, currently at BBB (high) with a Stable trend.
TRANSACTION STRUCTURE
The transaction includes a 13-month scheduled revolving period.
During the revolving period, the originator may offer additional
receivables that the Issuer will purchase, provided that the
eligibility criteria and concentration limits set out in the
transaction documents are satisfied. The revolving period may end
earlier than scheduled if certain events occur such as the
originator's insolvency, the servicer's replacement, or the breach
of performance triggers.
The transaction allocates collections in separate interest and
principal priorities of payments and benefits from non-amortizing
EUR payment interruption risk reserve (equal to 1.25% of initial
loan principal balances) and EUR cash reserve (equal to 0.5% of
initial loan principal balances) at closing. Both reserves will be
initially funded with the notes issuance proceeds and can be used
to cover senior expenses and interest payments on the Rated Notes.
The cash reserve can also be used to replenish the payment
interruption risk reserve and offset defaulted receivables.
Principal funds can also be reallocated to cover senior expenses
and interest payments on the Rated Notes if the interest
collections and both reserves are not sufficient.
The transaction also benefits from a non-amortizing rata
posticipata reserve to supplement interest amounts that borrowers
do not make during payment holidays. This reserve will be funded
through the transaction interest waterfalls if specific thresholds
are breached and will be released when the threshold breach is
cured.
At the end of the revolving period, the Notes will be repaid on a
fully sequential basis.
The interest rate risk for the transaction is considered limited as
an interest rate swap is in place to reduce the mismatch between
the fixed-rate collateral and the Class A Notes.
TRANSACTION COUNTERPARTIES
Crédit Agricole Corporate and Investment Bank (CA-CIB) is the
account bank for the transaction. Morningstar DBRS has a private
credit rating on CA-CIB, which meets the criteria to act in such
capacity. The transaction documents contain downgrade provisions
consistent with Morningstar DBRS' criteria.
CA-CIB is the initial swap counterparty for the transaction.
Morningstar DBRS' private rating on CA-CIB meets the criteria to
act in such capacity. The transaction documents contain downgrade
provisions consistent with Morningstar DBRS' criteria.
PORTFOLIO ASSUMPTIONS
As the originator has a long operating history of consumer and auto
loan lending in Italy, Morningstar DBRS considers the performance
data to be meaningful for detailed, vintage analysis. Morningstar
DBRS elected to maintain its assumption of a lifetime expected
gross default at 5.0%. Morningstar DBRS also maintained its
expected recovery at 10.8%.
Morningstar DBRS' credit ratings on the Rated Notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the Rated Notes are the related
Interest Amounts and the Initial Principal Amount Outstanding.
Morningstar DBRS' credit ratings do not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued.
Notes: All figures are in euros unless otherwise noted.
===================
K A Z A K H S T A N
===================
FREEDOM HOLDING: S&P Affirms 'B-' Long-Term Issuer Credit Rating
----------------------------------------------------------------
S&P Global Ratings affirmed its:
-- 'B-' long-term issuer credit rating on Freedom Holding Corp.;
-- 'B/B' long- and short-term issuer credit ratings on Freedom
Finance JSC, Freedom Finance Europe Ltd., Freedom Finance Global
PLC, and Bank Freedom Finance Kazakhstan; and
-- 'kzBB+' Kazakh national scale ratings on Freedom Finance JSC
and Bank Freedom Finance Kazakhstan.
The outlooks on all global scale ratings are negative. S&P's
national scale ratings do not carry outlooks.
S&P does not rate any debt issued by these entities.
S&P said, "We see lower economic risk in Kazakhstan and improving
banking supervision. Over the next four years, we expect GDP growth
in Kazakhstan will average 3.6% annually. A key factor will be the
expansion of the Tengiz oil field, which has been delayed to
midyear 2025, but should considerably increase oil production once
completed. We also expect slower growth in government spending and
ongoing economic reforms will moderate the twin deficits over
2024-2027 compared to 2023."
Securities firms, banks, and insurance companies in Kazakhstan are
regulated and supervised by the National Bank of Kazakhstan.
However, securities firms have less stringent standards of
regulatory oversight than banks and need to comply with minimum
capital and liquidity requirements. Although S&P observes an
enhancement in financial oversight, it still considers that
Kazakhstan's banking regulator lacks independence and can be
subject to political interference.
A supportive environment is helping Freedom Holding Corp. expand at
the expense of its capitalization and risk profile. S&P believes
the Freedom group's rapid expansion across business lines and
geographies is taking place against the backdrop of a
still-evolving consolidated risk management framework. The group's
balance sheet increased by 47% in the nine months ended Dec. 31,
2023. This was fueled by growth of its proprietary securities
portfolio, mainly bonds issued by the Kazakh government and
government-related entities, and by rapid expansion of loans at its
bank subsidiary from a low base.
Freedom group's rapid growth and potential further acquisitions
pose risks to its capitalization, as measured by our risk-adjusted
capital (RAC) ratio of 9.7% on Dec. 31, 2023. The pressure is
somewhat mitigated by reduced economic risk in Kazakhstan and the
group's strong profitability. Freedom Finance group posted net
income of $280 million and a return on assets of 6.0% for the nine
months ended Dec. 31, 2023, on the back of higher net interest
income from increased lending and income on securities.
S&P said, "Findings from an external review appear broadly in line
with our expectations. The review of Freedom was initiated after
allegations made by a short-selling firm in August 2023. Freedom
has published the findings of the review but not the full report.
We believe the findings will likely reduce reputational and
regulatory risks for Freedom in the near term. Nevertheless, S&P
will continue to monitor Freedom's enhancements to its risk
management framework, as well as its corporate governance and
compliance with anti-money laundering procedures and global
sanctions."
Outlook
The negative outlook on Freedom Holding Corp. and its core
subsidiaries over the next 12 months reflects pressures on the
group's capitalization and risk profiles from rapid growth and
possible longer-term market risks stemming from adverse media
coverage of short-seller activity.
Downside scenario
S&P aid, "We could lower our ratings on the holding company and
operating subsidiaries over the next 12 months if Freedom group
does not demonstrate an adequate track record of effectively
managing legal, compliance, and governance risks across all its
subsidiaries.
"We could also lower the ratings if Freedom Holding Corp. does not
maintain at least adequate capitalization, as measured by a RAC
ratio of at 8.0%-9.0%, and strong earnings capacity. This could
result from further acquisitions, continued growth of the
proprietary securities portfolio, or a faster-than-expected
expansion of client operations on Freedom Holding Corp.'s balance
sheet and less robust earnings.
"In addition, we could downgrade an operating subsidiary if it
became materially less important to the group's strategy, or if we
were less confident that it would receive group support."
Upside scenario
S&P said, "We could revise the outlook on the holding company and
operating subsidiaries to stable over the next 12 months if we were
to conclude that steps to strengthen the group's governance and
risk management would endure, while our RAC ratio stabilizes at the
current level, supported by strong earnings and limited external
growth."
At the same time, the group can benefit from strengthened
regulation and supervision of securities companies in Kazakhstan,
leading to a reduction of industry risks for securities companies.
=====================
N E T H E R L A N D S
=====================
ARUBA: Fitch Alters Outlook on 'BB+' LongTerm IDR to Positive
-------------------------------------------------------------
Fitch Ratings has affirmed Aruba's Long-Term Foreign-Currency
Issuer Default Rating (IDR) at 'BB+' and revised the Rating Outlook
to Positive from Stable.
KEY RATING DRIVERS
Positive Outlook: The revision of the Outlook to Positive reflects
the greater institutionalization of Aruba's fiscal framework that
includes overall fiscal surplus targets and a debt anchor albeit
with a short track record, a rapidly declining debt trajectory, and
continued growth driven by the tourism sector. Aruba's rating
continues to benefit from strong Dutch institutional and financial
support as a member of the Kingdom of the Netherlands with 'status
aparte', demonstrated by the emergency liquidity support provided
during the pandemic that was recently refinanced into long-term
debt, as well as strong governance metrics and high per-capita
income. The ratings are constrained by still high public debt and
interest burdens and the vulnerability of the single-pillar economy
to external shocks.
Tourism Supports Growth: Aruba's economy continues to grow, driven
by the strong performance of the tourism sector, but has moderated
after the initial rebound from the pandemic. Fitch estimates growth
of 3% in 2023, down from 10.5% in 2022. Tourist arrivals continue
to reach new records, with estimated arrivals in 2023 reaching 111%
of 2019 levels, and tourism receipts and revenue per available room
reaching 137% and 114% respectively of 2019 levels. Fitch forecasts
growth to slow in 2024-2025 (average 2.3%) but remain above
potential growth as several large new hotels open, expanding room
capacity by 10%. A tight labor market could be a drag on growth and
has resulted in upward pressure on wages.
Fiscal Targets Embedded in Law: The legal framework was updated in
December 2023 to make overall fiscal surplus and debt anchor
targets legally binding. These changes were approved unanimously,
providing evidence of bipartisan commitment to fiscal consolidation
and greater confidence in the institutionalization of the new
fiscal framework. The embedded targets require a 1% of GDP overall
budget surplus and debt to GDP anchors of 70% by 2031 and 50% by
2040. Fiscal oversight continues to be provided under the Aruba
Board of Financial Supervision (CAft).
Revenue Outperformance: Fitch forecasts the fiscal balance improved
2.8pp in 2023 to a surplus of 2% of GDP, exceeding the 1% target,
driven in large part by revenue outperformance from the BBO
(turnover tax) at the border, effective from August 2023, and the
increase in the tax rate. BBO at the border has also led to better
tax compliance, generating additional data and creating a link
between the customs unit and the tax department. Growth in the
public sector wage bill remained relatively contained and continues
to comply with a 10% of GDP ceiling. The government plans to
distribute additional windfall revenue above the 1% of GDP fiscal
target equally between debt reduction and higher capital
expenditure.
Fitch forecasts a slight fall in the fiscal surplus in 2024 to 1.6%
of GDP and 1.1% in 2025, reflecting higher interest costs after the
renegotiation of the Netherlands liquidity support loan. However,
Fitch expects the impact to be mitigated by continued strong
revenue performance and expenditure restraint.
Dutch Financing Support: Aruba reached an agreement with the
Netherlands on refinancing of the pandemic liquidity support loans
(15% of GDP) in October 2023. Aruba did not pass a Kingdom Act on
financial supervision, one of the conditions for refinancing the
loan at a more favorable interest rate. Despite this, the debt was
converted into a 20-year, equally amortizing loan, with an interest
rate of 6.9%, highlighting the Netherlands considerable support for
Aruba. The agreement leaves the option to lower the interest rate
open should the government agree to a Kingdom Act. The local
financial supervision legislation is not materially different from
the Kingdom Act. A Kingdom Act is a binding agreement between
Parliaments that one party cannot unilaterally change.
Financing Needs: All financing needs in 2023 were met in the
domestic market (5% of GDP). The cost of domestic issuance has been
in the 5%-6% range, and there has been strong local demand for
government securities, including from higher net worth individuals.
Financing needs are relatively large in 2024 (6.4% of GDP), with an
external bond maturing in March, and are expected to be met through
a combination of domestic and external financing.
Declining Debt Trajectory: Fitch estimates government debt fell to
73.2% of GDP in 2023 on a Fitch-consolidated basis (83% on an
unconsolidated basis including APFA holdings of government debt),
down from 80.2% of GDP in 2022 and a pandemic peak of 99% in 2020
but still above the 'BB' median of 52%. The rapid decline in debt
has been driven by revenue recovery, expenditure reduction and the
continued rebound in nominal GDP. Sustained fiscal surpluses helped
by strong revenue performance from the BBO at the border and better
tax compliance underpin Fitch forecasts for debt to fall to 64.4%
at end-2025, in line with its pre-pandemic peak in 2017. Interest
to revenue remains high at 17.1% in 2023, compared to the 'BB'
median of 9.6%, and is expected to rise to 19.2% in 2024.
Current Account Surpluses: Fitch forecasts a current account
surplus of 5.5% in 2023, down from 6.5% in 2022. Tourism receipts
are the key driver of improvement in the external position,
reaching a new record in 2022 and growing 15% through 3Q23. There
was a large net FDI outflow in 2023 due to the domestic refinancing
of the hotel sector's foreign loans but this is expected to be a
one-off. Fitch forecasts international reserves to fall modestly in
2023 owing to this refinancing, ending 2023 at USD1.3 billion (five
months CXP), down from USD1.46 billion (6.2 months CXP) in 2022.
Fitch forecasts reserves to rise modestly through 2025 to 5.2
months of CXP coverage.
Inflation Cools: Fitch forecasts average inflation fell from 5.5%
in 2022 to 3.5% in 2023, as the price of imported goods and global
food and fuel prices eased, and to fall further to 2% in 2025. The
central bank has begun to loosen tight reserve requirements from a
peak of 25.5% to 22%. The tight monetary stance, however, has had
limited impact on domestic interest rates (relatively flat at
around 6%) given the poor monetary transmission mechanism with a
small number of liquid banks competing for customers largely on
rates. The fixed exchange rate is Aruba's key policy anchor.
Elections in 2025: Elections must be held by June 2025, but in
Fitch's view the fact that the fiscal targets have been enshrined
in legislation and were adopted unanimously helps support fiscal
policy continuity regardless of the outcome.
Governance: Aruba has an ESG Relevance Score (RS) of '5[+]' &
5[+]', respectively for both Political Stability and Rights and for
the Rule of Law, Institutional and Regulatory Quality and Control
of Corruption. Theses scores reflect the high weight that the World
Bank Governance Indicators (WBGI) have in its proprietary Sovereign
Rating Model (SRM). Aruba has a high WBGI ranking at the 84th
percentile, reflecting its long track record of stable and peaceful
political transitions, well established rights for participation in
the political process, strong institutional capacity, effective
rule of law and a low level of corruption.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Public Finances: Failure to comply with the fiscal framework that
weakens confidence in the pace of debt reduction;
- External Finances: Deterioration in external liquidity that
brings credibility risks for the exchange rate peg;
- Macro: Severe economic shock, for example emanating from the
tourism sector.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Public Finances: Sustained adherence to the fiscal framework
underpinning a reduction in debt to GDP and interest to revenue
levels.
- Macro: Higher growth prospects potentially supported by economic
diversification outside of the tourism sector.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Aruba a score equivalent to a
rating of 'BBB-' on the Long-Term Foreign-Currency (LT FC) IDR
scale.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final Long-Term Foreign Currency IDR by applying
its QO, relative to SRM data and output, as follows:
Public Finances: -1 notch, to reflect a high government debt burden
and a short track record of a fiscal framework that is expected to
lead to sustained debt reduction. The SRM is estimated on the basis
of a linear approach to government debt/GDP and does not fully
capture the risks and constraints to policy flexibility posed by
high debt levels.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within its
criteria that are not fully quantifiable and/or not fully reflected
in the SRM.
COUNTRY CEILING
The Country Ceiling for Aruba is 'BBB-': 1 notch above the LT FC
IDR. This reflects moderate constraints and incentives, relative to
the IDR, against capital or exchange controls being imposed that
would prevent or significantly impede the private sector from
converting local currency into foreign currency and transferring
the proceeds to non-resident creditors to service debt payments.
Fitch's Country Ceiling Model produced a starting point uplift of
+1 notch above the IDR. Fitch's rating committee did not apply a
qualitative adjustment to the model result.
ESG CONSIDERATIONS
Aruba has an ESG Relevance Score of '5[+]' for Political Stability
and Rights as WBGIs have the highest weight in Fitch's SRM and are
therefore highly relevant to the rating and a key rating driver
with a high weight. As Aruba has a percentile rank above 50 for the
respective Governance Indicator, this has a positive impact on the
credit profile.
Aruba has an ESG Relevance Score of '5[+]' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGIs have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and are a key rating driver with a
high weight. As Aruba has a percentile rank above 50 for the
respective Governance Indicators, this has a positive impact on the
credit profile.
Aruba has an ESG Relevance Score of '4[+]' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
WBGIs is relevant to the rating and a rating driver. As Aruba has a
percentile rank above 50 for the respective Governance Indicator,
this has a positive/negative impact on the credit profile.
Aruba has an ESG Relevance Score of '4[+]' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Aruba, as for all sovereigns. As Aruba has a
track record of 20+ years without a restructuring of public debt
and captured in its SRM variable, this has a positive impact on the
credit profile.
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 Prior
----------- ------ -----
Aruba LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Country Ceiling BBB- Affirmed BBB-
senior
unsecured LT BB+ Affirmed BB+
LOPAREX MIDCO: $370MM Bank Debt Trades at 29% Discount
------------------------------------------------------
Participations in a syndicated loan under which Loparex Midco BV is
a borrower were trading in the secondary market around 71.5
cents-on-the-dollar during the week ended Friday, March 22, 2024,
according to Bloomberg's Evaluated Pricing service data.
The $370 million facility is a Term loan that is scheduled to
mature on August 3, 2026. The amount is fully drawn and
outstanding.
Loparex is a provider of release liners. The majority of end market
sales come from graphic arts, tapes, industrial, and medical.
Labelstock, hygiene, and composites accounts for a smaller portion
of end market sales.
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R U S S I A
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REGISTERED PAYMENT: Bank of Russia Provides Update on Liquidation
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The Bank of Russia submitted information on the actions of the
liquidator of Registered Payment Institution EPS, LLC, constituting
a criminal offence, to the law enforcement agencies of the Russian
Federation for consideration and appropriate procedural
decision-making.
The Company's banking licence was cancelled by the Bank of Russia
on April 9, 2021. Aleksandr Mikhailovich Vinitskovsky was
appointed as a liquidator of the Company.
By its decision, dated November 2, 2023, the Court of Arbitration
of the City of Moscow recognised the Company as insolvent
(bankrupt) and initiated bankruptcy proceedings against it.
The Bank of Russia found out that the liquidator carried out
transactions showing a withdrawal of the Company's assets, while
failing to meet obligations to third parties.
In addition, the liquidator obstructed the work of the official
receiver, evading the handover of a significant part of the
Company's documents, which complicates the assessment of the
Company's assets by the official receiver and other bankruptcy
proceedings.
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S P A I N
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BAHIA DE LAS ISLETAS: Moody's Assigns 'Caa2' CFR, Outlook Stable
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Moody's Ratings has assigned a Caa2 Corporate Family Rating and
Caa2-PD Probability of Default Rating to Bahia De Las Isletas, S.L.
("the company") a holding company owning 100% of Spanish maritime
transportation services company Naviera Armas, S.A. ("Naviera
Armas"). Concurrently, Moody's has assigned a Caa3 rating to the
EUR194 million senior secured notes, issued by ANARAFE, S.L.U.
("the issuer"), due December 2026. The outlook on both issuers is
stable.
"The rating action balances the significantly de risked capital
structure with still high uncertainty around the probability of a
successful second corporate restructuring" says Daniel Harlid, lead
analyst for Naviera Armas. "Although Moody's recognizes that the
company's new management have a comprehensive turnaround plan for
the company, the company has limited financial resources to adjust
to adverse effects such as increased fuels costs or weak operating
performance over the next 12-18 months", Mr. Harlid continues.
RATINGS RATIONALE
Following two distressed exchanges over the last three years,
senior secured bondholders have in total taken a 70% haircut and
instead become shareholders of 96% of shares in the group. With the
latest restructuring that was effectuated in January this year,
Naviera Armas is currently pursuing an ambitious turnaround plan
that incorporates fleet and route optimisation. Moody's
acknowledges that positive effects can already be seen such as
EBITDA (on a Spanish GAAP basis) turning positive in 2023 bringing
leverage down to more sustainable levels than what was the case
historically.
Bahia De Las Isletas, S.L.'s Caa2 rating is constrained by (1)
execution risks related to the current turnaround plan, including
the ability to optimize its route network and current fleet; (2)
Naviera's high fixed-cost structure but even more so weak track
record in its ability to pass on bunker cost increases; (3) its
relatively high leverage, low interest coverage and negative free
cash flow (FCF) expected over the next 12-18 months; (4) history of
poor corporate governance with related party transactions impacting
the company negatively and (5) lack of fleet renewals.
More positively, the rating incorporates (1) the company's
well-established market positions, with a large ferry fleet and
multiple routes creating some barriers to entry; (2) signs that
initiatives implemented by new management have already rendered
positive effects and (3) stable underlying business fundamentals
with good revenue visibility on part of its business.
RATIONALE FOR STABLE OUTLOOK
The stable outlook rests on Moody's view that despite high
uncertainty over performance for the next 12-18 months, the
company's lenders will continue to support the current
transformation to a more sustainable business model, including
already executed corporate governance enhancing initiatives such as
an independent board and management team.
STRUCTURAL CONSIDERATIONS
The Caa3 ratings on the issuer's EUR194 million senior secured
notes due December 2026 is one notch lower than the CFR. This
reflects that the notes rank behind the EUR61m term loan and the
EUR20m reverse factoring facility in terms of the transaction
security.
ESG CONSIDERATIONS
Corporate governance has historically weakened credit quality
significantly for Naviera Amras, not at least due to related party
transactions with the Armas family. Although Moody's positively
note that the new board has prevented such transactions to happen
going forward, Naviera is leasing five vessels from SPV's that in
the same time owes Naviera over EUR60 million.
LIQUIDITY
Naviera Armas has a weak liquidity profile. As of Feb 29 this year,
the company's liquidity sources included cash on balance sheet of
EUR15.4 million, a EUR20 million reverse factoring facility (EUR10
million currently drawn) and a EUR50 million factoring facility
(EUR20 million currently drawn). Under Moody's base case, the
company's main cash uses include around EUR35 - EUR40 million in
dry-docking / other maintenance capex as well as regular lease
payments of around EUR39 million, both in 2024 and 2025. Mitigating
the weak liquidity is the fact that after July 2024, interest on
the senior secured notes follows a PIK toggle scheme such that cash
interest will be paid if the minimum projected cash balance as of
the last day of each of the 13 consecutive months from the relevant
interest determination date exceeds EUR20 million, with the
remaining portion of interest accruing by increasing the notional
debt amount.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Naviera Armas' operating
performance improves so as to:
-- support stronger profitability levels
-- reduce the company's negative FCF generation to help address
the sustainability of the capital structure, and
-- further strengthen the liquidity position
A rating upgrade would also require the company to successfully
address the refinancing of its super senior secured term loan that
matures in June 2025.
Conversely, the ratings could be downgraded if:
-- a deteriorating liquidity position, operating performance or
ability to service its debt
-- Moody's sees a rising risk of a default with losses to
debtholders.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Shipping
published in June 2021.
COMPANY PROFILE
Headquartered in Las Palmas, Naviera Armas is a Spanish ferry
operator. The company provides passenger and freight maritime
transportation services mainly in the Canary Islands (between
islands and to/from the Iberian peninsula) and the route Spain –
Morocco / Algeria. As of December 31, 2023, the company operated a
fleet of 23 vessels, of which 16 are owned and the remainder
leased. The company also operates the largest land transportation
business in Spain with a fleet of more than 500 trucks. For the
first nine months of 2023 the company reported revenue of EUR453
million and a company-adjusted EBITDA of EUR65 million.
LSF11 BOSON: DBRS Cuts Class C Notes Rating to BB(low)
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DBRS Ratings GmbH took the following credit rating actions on the
notes issued by LSF11 Boson Investments S.a.r.l. (Compartment 2)
(the Issuer) and resolved the Under Review with Negative
Implications (UR-Neg.) status of the credit ratings where they were
placed on 8 December 2023:
-- Class A1 notes confirmed at A (low) (sf) with Stable trend
-- Class A2 notes confirmed at BBB (high) (sf) with Stable trend
-- Class B notes confirmed at BB (high) (sf) with Stable trend
-- Class C notes downgraded to BB (low) (sf) from BB (sf) with
Negative trend
The credit ratings on the Class A1 and Class A2 notes (together,
the Class A notes) address the timely payment of interest and the
ultimate repayment of principal by the legal final maturity date.
The credit ratings on the Class B and Class C notes address the
ultimate payment of interest and principal by the legal final
maturity date. Morningstar DBRS' credit ratings do not address
Additional Note Payments (as defined in the transaction documents).
Morningstar DBRS does not rate the Class D or Class P notes
(together with the rated notes, the notes) also issued in this
transaction.
The notes are collateralized by a pool of secured Spanish
nonperforming loans (NPLs) and real estate owned assets (REOs)
originated by Banco de Sabadell S.A (Sabadell) and acquired by Lone
Star from Sabadell via one of its subsidiaries, LSF11 Boson
Investments S.a.r.l. (Compartment 2) (formerly LSF113 S.a.r.l.; the
transferor) in December 2020 (the original purchase date). In July
2021, Sabadell and the transferor also entered into a
sub-participation agreement in respect of certain nonaccelerated
loans included in the portfolio. The transferor allocated all its
contractual positions to the Issuer in 2021. As of the July 2021
cut-off date, the gross book value of the loan pool was
approximately EUR 626.8 million and the total outstanding balance
of the sub-participated loans was EUR 21.7 million. The total real
estate value (REV) backing the portfolio amounted to EUR 564.9
million and mostly consisted of residential properties situated in
Spain (93.8% by REV). About 5.4% of the real estate assets by value
were already repossessed as of the cut-off date.
Servihabitat Servicios Inmobiliarios, S.L.U. services the secured
loans and REOs. Hudson Advisors Spain, S.L.U. is the asset manager
and backup administrator facilitator and, as such, acts in an
oversight and monitoring capacity, providing input on asset
resolution strategies.
CREDIT RATING RATIONALE
The credit rating actions follow a review of the transaction and
are based on the following analytical considerations:
-- Transaction performance: Assessment of the portfolio recoveries
as of 31 October 2023, with a focus on: (1) a comparison of actual
gross collections against the servicer's initial business plan
forecast; (2) the collection performance observed over the past
months; and (3) a comparison of current performance and Morningstar
DBRS' expectations.
-- Updated business plan: The servicer's updated business plan as
of October 2023, received in January 2024, and the comparison with
the initial collection expectations.
-- Portfolio characteristics: Loan pool composition as of 31
October 2023 and the evolution of its core features since
issuance.
-- Transaction liquidating structure: The order of priority
entails a fully sequential amortization of the notes (i.e., the
Class A2 notes will begin to amortize following the full repayment
of the Class A1 notes unless an enforcement notice has been
delivered; the Class B notes will begin to amortize following the
full repayment of the Class A2 notes, and the Class C notes will
begin to amortize following the full repayment of the Class B
notes).
-- Liquidity support: The Class A, Class B, and Class C reserve
funds provide liquidity support to the respective classes of notes
and currently stand at EUR 8.2 million, EUR 0.3 million, and EUR
0.5 million, respectively (amounts at closing of EUR 11.0 million,
EUR 1.0 million, and EUR 1.8 million, respectively, and target
amounts equivalent to 5.0%, 8.25%, and 11.0% of the outstanding
balances, respectively).
-- The exposure to the transaction account bank and the downgrade
provisions outlined in the transaction documents.
Additionally, the Issuer operating expenses account, the Issuer
general account, and the REO company (ReoCo) general account are
aimed at providing support to both the Issuer and the ReoCo in
respect of operating expenses, corporate costs, servicing fees and
expenses, and subparticipation fees since inception. The accounts
were funded at closing with proceeds from the issuance of the notes
at EUR 1.0 million, EUR 2.0 million, and EUR 3.0 million,
respectively, and they are replenished on each interest payment
date (IPD) for an amount equal to the estimated budget for the
following two IPDs. The total balance of the three accounts as of
the November IPD was EUR 4.1 million.
According to the investor report dated 27 November 2023, the
principal amounts outstanding on the Class A1, Class A2, Class B,
Class C, Class P, and Class D notes were EUR 139.6 million, EUR
20.0 million, EUR 12.0 million, EUR 16.0 million, EUR 2.0 million,
and EUR 376.8 million, respectively. The balance of the Class A1
notes has amortized by approximately 30.2% since issuance. The
current aggregated transaction balance is EUR 566.4 million.
As of October 2023, the transaction was performing significantly
below the servicer's initial expectations. The actual cumulative
net collections (before servicing fees and corporate costs) was EUR
60.4 million, whereas the servicer's initial business plan
estimated cumulative net collections (before servicing fees and
corporate costs) of EUR 100.8 million for the same period.
Therefore, as of October 2023, the transaction was underperforming
by EUR 40.3 million (-40.0%) compared with initial expectations.
At issuance, Morningstar DBRS estimated cumulative net collections
(before servicing fees and corporate costs) for the same period of
EUR 40.1 million, EUR 41.4 million, EUR 43.2 million, and EUR 43.7
million at the A (low) (sf), BBB (high) (sf), BB (high) (sf), and
BB (sf) stressed scenarios, respectively. Therefore, as of November
2023, the transaction was above Morningstar DBRS' initial stressed
scenarios.
Pursuant to the requirements set out in the receivable servicing
agreement, an updated portfolio business plan was approved and
delivered in January 2024. The updated portfolio business plan,
combined with the actual cumulative net collections as of October
2023, resulted in a total of EUR 356.9 million, which is 17.5%
lower than the total net disposition proceeds of EUR 432.8 million
estimated in the initial business plan. Excluding actual net
collections, the Servicer's expected future net collections from
November 2023 account for EUR 296.5 million, and are expected to be
realized over a longer period of time. The updated Morningstar DBRS
A (low) (sf), BBB (high) (sf), BB (high) (sf), and BB (low) (sf)
credit rating stresses assume a haircut of 24.6%, 21.1%, 18.4%, and
16.5%, respectively, to the Servicer's updated business plan,
considering future expected net collections.
The final maturity date of the transaction is November 30, 2060.
Morningstar DBRS' credit rating on the rated notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are the related Interest Payment Amounts and
the related Class Balance.
Morningstar DBRS' credit rating do not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations.
Morningstar DBRS' long-term credit rating provides opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued.
Notes: All figures are in euros unless otherwise noted.
MADRID RMBS II: Fitch Hikes Rating on Class D Notes to 'BBsf'
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Fitch Ratings has upgraded four tranches of Madrid RMBS I, FTA,
four tranches of Madrid RMBS II, FTA and three tranches of Madrid
RMBS III, FTA and affirmed the remaining tranches. Fitch has also
removed five tranches from Rating Watch Positive (RWP). The
Outlooks are Stable.
Entity/Debt Rating Prior
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Madrid RMBS II, FTA
Class A3 ES0359092022 LT AA+sf Upgrade A+sf
Class B ES0359092030 LT AAsf Upgrade A+sf
Class C ES0359092048 LT BBB-sf Upgrade BB+sf
Class D ES0359092055 LT BBsf Upgrade Bsf
Class E ES0359092063 LT CCsf Affirmed CCsf
Madrid RMBS III, FTA
Class A3 ES0359093020 LT AA+sf Upgrade A+sf
Class B ES0359093038 LT AAsf Upgrade BB+sf
Class C ES0359093046 LT BBBsf Upgrade BB+sf
Class D ES0359093053 LT CCCsf Affirmed CCCsf
Class E ES0359093061 LT Csf Affirmed Csf
Madrid RMBS I, FTA
Class A2 ES0359091016 LT AA+sf Upgrade A+sf
Class B ES0359091024 LT AA-sf Upgrade A+sf
Class C ES0359091032 LT BB+sf Upgrade BBsf
Class D ES0359091040 LT BB-sf Upgrade B-sf
Class E ES0359091057 LT CCsf Affirmed CCsf
TRANSACTION SUMMARY
The transactions were originated between 2006 and 2007 and comprise
Spanish fully amortising residential mortgages serviced by
CaixaBank, S.A. (BBB+/Stable/F2). The current portfolio balances
are in the range of 17% and 23% relative to the initial portfolio
balances as of the latest reporting date.
KEY RATING DRIVERS
Updated Interest Deferability Rating Approach: The upgrades and
removal from RWP of the senior class A and B notes reflect the
agency's view that payment interruption risk (PIR) in the event of
a servicer disruption is immaterial up to 'AA+sf' instead of 'A+sf'
previously, as per the update of Fitch's Global Structured Finance
Rating Criteria on 19 January 2024. This because interest
deferability is permitted under transaction documentation for all
rated notes and does not constitute an event of default.
The upgrades of Madrid III's class B and C notes also reflect the
update of Fitch's Global Structured Finance Rating Criteria in
relation to interest deferability, which previously capped the
ratings at 'BB+sf'. The removal of the deferral cap under the new
criteria reflects its assessment that any interest deferrals on the
notes will be fully recovered by the legal maturity date, that
deferrals are a common structural feature in Spanish RMBS, and that
the transactions' documentation include a defined mechanism for the
repayment of deferred amounts. Nevertheless, Fitch considers in its
analysis that Madrid III's class C and D notes have been deferring
interests for more than 10 years. Fitch expects them to continue
deferring for a long period.
CE Continues to Increase: The rating actions reflect Fitch's view
that the notes are sufficiently protected by credit enhancement
(CE) to absorb the projected losses commensurate with the rating
scenarios. Fitch expects the CE ratios in all three transactions to
continue building up, considering the sequential amortisation of
the notes. For example, the average modelled CE for the senior
notes across all deals increased to 54% as of February 2024 versus
44% a year earlier.
Volatile Asset Performance Expectation: In Fitch's view, the
transactions are exposed to asset performance volatility following
increasing arrears. Loans in arrears by over 90 days excluding
defaults in the three deals ranged between 0.8% and 1.1% as of
December 2023, higher than 0.2% to 0.3% a year earlier, and above
the average for Fitch-rated Spanish RMBS deals of 0.8%. Fitch views
the rated notes as vulnerable to performance deterioration, which
may reduce their model-implied-ratings (MIR) in future reviews.
Accordingly, Fitch has constrained the ratings on the notes at up
to five notches below their MIR, as Fitch expects the MIRs to
converge with the current ratings.
Portfolio Risky Features: The portfolios are highly exposed (over
66%) to the region of Madrid. To address regional concentration
risk, Fitch applies higher rating multiples to the base foreclosure
frequency (FF) assumption to the portion of the portfolios that
exceeds 2.5x the population within this region relative to the
national total, in line with its European RMBS Rating Criteria.
Additionally, more than 40% of the portfolios were originated via
third-party brokers, a feature that carries a FF adjustment of 150%
within Fitch's credit analysis.
Madrid RMBS I, II and III have an elevated Environmental, Social
and Governance (ESG) Relevance Score of '5' for Transaction &
Collateral Structure due to unmitigated payment interruption risk
(PIR) for the 'AAA' rating case, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
a lower rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Long-term asset performance deterioration, such as increased
delinquencies or larger defaults, which could be driven by adverse
changes to macroeconomic conditions, interest rates or borrower
behaviour. For instance, a combination of increased defaults and
decreased recoveries by 30% each could trigger downgrades of up to
five notches.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Increasing liquidity protection sufficient to fully mitigate PIR
could lead to an upgrade of the senior notes to 'AAAsf'.
- Stable to improved asset performance driven by stable
delinquencies and defaults would lead to increasing CE and
potentially upgrades. For instance, a combination of decreased
defaults and increased recoveries by 15% each could trigger
upgrades of up to eight notches.
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
Madrid RMBS I, FTA, Madrid RMBS II, FTA, Madrid RMBS III, FTA
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. Fitch has not reviewed the results of
any third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided about
the underlying asset pools ahead of the transaction's Madrid RMBS
I, FTA, Madrid RMBS II, FTA and Madrid RMBS III, FTA initial
closing. The subsequent performance of the transactions over the
years is consistent with the agency's expectations given the
operating environment and Fitch is therefore satisfied that the
asset pool information relied upon for its initial rating analysis
was adequately reliable.
Overall, 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.
ESG CONSIDERATIONS
Madrid RMBS I, II and III have an ESG Relevance Score of '5' for
Transaction & Collateral Structure due to unmitigated PIR for the
'AAA' rating case, which has a negative impact on the credit
profile, and is highly relevant to the rating, resulting in a lower
rating.
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.
PEPPER IBERIA 2022: DBRS Confirms BB(high) Rating on Class E Notes
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DBRS Ratings GmbH confirmed its credit ratings on the notes issued
by Pepper Iberia Unsecured 2022 DAC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (high) (sf)
The credit ratings on the Class A and Class B Notes address the
timely payment of interest and the ultimate repayment of principal
by the legal final maturity date in November 2032. The credit
ratings on the Class C, Class D, and Class E Notes address the
ultimate payment of scheduled interest while these classes of notes
are subordinated but the timely payment of scheduled interest when
they are the senior-most class of notes outstanding, and the
ultimate repayment of principal by the legal final maturity date.
The confirmations follow an annual review of the transaction and
are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses, as of the February 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the notes to cover the
expected losses at their respective credit rating levels; and
-- No revolving termination event to date.
The transaction is a securitization backed by a pool of
point-of-sale loans and personal instalment loans granted to
individual consumers residing in Spain by Pepper Finance
Corporation, S.L.U. Pepper Assets Services, S.L.U. (Pepper Assets
Services) services the receivables. The transaction includes an
initial 24-month revolving period, which is scheduled to end in May
2024. During the revolving period, the originator may offer
additional receivables that the Issuer will purchase, provided that
the eligibility criteria and concentration limits set out in the
transaction documents are satisfied. The revolving period may end
earlier than scheduled if certain events occur, such as the breach
of performance triggers, insolvency of the originator, or
replacement of the servicer.
PORTFOLIO PERFORMANCE
As of the February 2024 payment date, loans that were one to two
months and two to three months delinquent represented 0.9% and 0.4%
of the portfolio balance, respectively, while loans more than three
months delinquent represented 0.7%. Gross cumulative defaults
amounted to 1.3% of the aggregate original and subsequent
portfolios.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS updated its base case PD and LGD assumptions to
4.6% and 85.2%, respectively, based on the current portfolio
composition given the upcoming end of the revolving period on the
May 2024 payment date.
CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides
credit enhancement to the rated notes. As of the February 2024
payment date, credit enhancement to the Class A, Class B, Class C,
Class D, and Class E Notes was 23.0%, 16.0%, 10.0%, 5.5%, and 3.5%,
respectively, which is stable since closing due to the revolving
period.
The transaction benefits from an amortizing reserve fund available
to cover senior fees and interest payments on the most senior class
of notes. The required cash reserve amount is equal to 1.75% of the
Class A, Class B, Class C, and Class D Notes' outstanding balance
and gets replenished up to its target amount in accordance with the
interest priority of payments. As of the February 2024 payment
date, the cash reserve is at its target balance of EUR 3.6
million.
Citibank Europe plc (Citibank Europe) acts as the account bank for
the transaction. Based on Morningstar DBRS' Long-Term Issuer Rating
of AA (low) on Citibank Europe, the downgrade provisions outlined
in the transaction documents, and other mitigating factors inherent
in the transaction structure, Morningstar DBRS considers the risk
arising from the exposure to the account bank to be consistent with
the credit ratings assigned to the rated notes, as described in
Morningstar DBRS' "Legal Criteria for European Structured Finance
Transactions" methodology.
J.P. Morgan SE acts as the interest cap provider for the
transaction. Morningstar DBRS' private credit rating on J.P. Morgan
SE is consistent with Morningstar DBRS' "Derivative Criteria for
European Structured Finance Transactions" methodology to act in
such capacity. Morningstar DBRS notes that the downgrade provisions
in the transaction documents are not fully consistent with its
criteria and continues to monitor the transaction based on its
credit rating on J.P. Morgan SE or a potential replacement.
Morningstar DBRS' credit ratings on the rated notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents.
Morningstar DBRS' credit rating does not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued.
Notes: All figures are in euros unless otherwise noted.
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S W I T Z E R L A N D
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FERREXPO PLC: Moody's Affirms 'Caa3' CFR, Outlook Remains Negative
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Moody's Ratings affirmed Ferrexpo plc's Caa3 long term corporate
family rating and Caa3-PD probability of default rating. The
outlook remains negative.
RATINGS RATIONALE
The affirmation of Ferrexpo's Caa3 CFR reflects the company's
exposure to governance and legal considerations. At present, the
company is involved in different legal disputes, including those
involving allegations against its largest shareholder related to
his activities within a now-defunct bank. While these charges do
not directly implicate Ferrexpo, there is a risk that the
prosecutors may look to recover damages directly from the company.
In that context, in September 2023, Ukraine's (Ca stable) State
Enforcement service froze a 50.3% stake (despite the fact that the
holding position of its largest shareholder at the time was 49.5%)
in two of Ferrexpo's Ukrainian subsidiaries, an action taken on
behalf of the Central Bank of Ukraine. Earlier, in March 2023, the
Deposit Guarantee Fund, which protects the rights of bank
depositors in Ukraine, secured a similar freeze on shares owned by
Ferrexpo in the company's three primary operating subsidiaries.
While the freezing of shares does not have any impact on the
operation of the company, Moody's will monitor if the prosecutors
take further actions which may eventually hinder the successful
execution of the company's business model.
Ferrexpo's Caa3 CFR also reflects the operational and logistical
risks on the company from the enduring military conflict in
Ukraine. The company has demonstrated resilience so far, ramping up
production to up to two of its four pelletiser lines throughout
2023, but its ability to deliver its products to its primary
markets remains uncertain. The closure of Ukraine's Black Sea ports
following the Russian invasion led to a halt in Ferrexpo's seaborne
sales via the Port of Pivdennyi, impacting company's revenue and
its ability to commit sales volumes to customers beyond Europe.
Ferrexpo's CFR remains constrained by Ukraine's local- and
foreign-currency ceilings at Caa3. The company's Caa3 CFR, one
notch higher than the Government of Ukraine's Ca foreign and
domestic currency long-term issuer ratings and foreign currency
senior unsecured debt ratings, incorporates Ferrexpo's net cash
position, characterized by minimal lease liabilities and an absence
of financial debt.
Revenues decreased to USD647million in the last twelve months
period June 30, 2023 from USD2,101 million in 2022 and underlying
EBITDA (as reported by the company) decreased to USD343 million
from USD1,057 million during the same period due primarily to the
scale back in production after numerous challenges arising from the
ongoing invasion of Russia in Ukraine, which translated into
reduced sales volumes, as well as a weaker pricing environment. The
rating agency projects a further decline in EBITDA for the full
year 2023 before a gradual recovery from 2024, particularly if the
company manages to successfully operate at a minimum of two
pelletiser lines throughout the entire year in the context of
relatively stable iron prices. In 2023, production fell to 4.2
million tonnes from 6.2 million tonnes in 2022, from which Moody's
expects an improvement in 2024.
LIQUIDITY
Moody's considers Ferrexpo's liquidity adequate based on net cash
of around USD108 million as of the end of 2023, the majority of
which is located in offshore accounts. Despite the drop in
production and earnings, Moody's forecasts that Ferrexpo will
generate low to moderately positive free cash flow (FCF) in 2023
and 2024 thanks to significantly reduced capital expenditures to
maintenance levels at or below USD100 million, limited tax payments
and a balanced approach towards working capital to adjust output to
demand. Additionally, the rating agency assumes no or limited
dividend payments. All of this should help the company to maintain
its net cash balance at above USD100 million, which is its prime
source of liquidity in the absence of any third-party undrawn
credit lines. Ferrexpo has no significant maturities or meaningful
debt in its capital structure that requires regular interest or
principal payments.
OUTLOOK
The negative outlook reflects the various legal proceedings
involving the company and its largest shareholder, which may
negatively affect the company's operations and liquidity position,
as well as the significant challenges coming from the military
conflict between Russia and Ukraine.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the ratings at this stage is unlikely absent a change
in the sovereign ratings or ceilings as Ferrexpo's CFR is at the
level of Ukraine's country ceiling. Further downgrade could be
driven by a sovereign downgrade or further weakening in the
companies' credit profile as a result of pronounced physical damage
to assets, market and logistics disruptions, cash flow generation,
impaired liquidity, or an unfavorable outcome of the legal
proceedings against the company and its largest shareholder.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Mining
published in October 2021.
COMPANY PROFILE
Headquartered in Switzerland and incorporated in the UK, Ferrexpo
is an iron ore pellet producer with mining and processing assets
located in the Poltava region of central Ukraine. The company
exports all of its production. Ferrexpo is listed on the London
Stock Exchange, with 49.3% of its shares held by Fevamotinico
S.a.r.l, a holding company owned by Kostyantin Zhevago and two
other members of his family, with the remaining shareholding being
institutional investors, pension funds and private individuals.
===========================
U N I T E D K I N G D O M
===========================
LOGISTICS GROUP: Goes Into Administration
-----------------------------------------
TheBusinessDesk.com reports that Logistics Group, the parent of
Wigan-based logistics specialist, ArrowXL, has fallen into
administration.
However, ArrowXL CEO Charlie Shiels, told TheBusinessDesk.com that
it is business as usual for the company, despite the development.
It is understood Logistics Group's banker, HSBC, its main lender,
was behind the move to place the group into administration, which
happened on March 22, TheBusinessDesk.com relates.
Daniel Butters and Daniel Smith, of Teneo, were appointed joint
administrators by HSBC, TheBusinessDesk.com discloses.
Logistics Group is owned by the Barclay family, which also owns
Liverpool-based online retailer, Very Group, a client of ArrowXL.
ArrowXL, which has its headquarters in Martland Mill Lane, Wigan,
and further sites at Worcester, Airdrie, Carrickfergus and Enfield,
delivers more than two million customer orders a year for
retailers, ecommerce companies and manufacturers.
MARKET HOLDCO: S&P Affirms 'B' Long-Term ICR, Outlook Stable
------------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term issuer credit rating
on U.K. grocery retailer Morrisons' parent company, Market Holdco 3
Ltd. (UK). At this stage, S&P does not anticipate any change to the
existing issue and recovery ratings on the group's rated debt
instruments from this transaction.
The stable outlook reflects additional rating leeway following the
PFS sale, with S&P Global Ratings-adjusted debt to EBITDA of 9.0x
(6.0x-7.0x excluding preference shares). S&P also expects the
company will maintain its like-for-like revenue growth and generate
positive free operating cash flow (FOCF) after lease payments.
The proposed transaction improves Morrisons' financial flexibility
and reduces the pressure of its high debt burden. Morrisons is
disposing of its 337 PFS to Motor Fuel Group (MFG). The enterprise
value of the transaction is GBP2.5 billion, consisting of GBP1.95
billion of cash, plus a non-cash consideration. As part of the
transaction, Morrisons will also sell associated landbank of 339
acres, which includes a carve-out of land including some from
Morrisons' larger carparks. The company has outlined its intention
to use these proceeds to repay some of its outstanding debt.
Morrisons' leverage for fiscal 2023 was 9.8x (8.1x excluding
preference shares) and was higher than our previous expectation of
about 8.1x (7.5x) for the period, indicating almost no rating
headroom at the current 'B' rating. Through this transaction, under
the assumption that most of the cash proceeds will be used to repay
debt, group leverage should fall toward 9.0x (7.0x excluding
preferred equity) which improves the group's financial flexibility.
S&P forecasts only a modest drop in group cash flow from this
transaction because expanding wholesale earnings and reduced
financial interest payments will largely offset the loss of EBITDA
from the PFS business.
S&P maintains its satisfactory assessment of the group's business
profile pro forma the PFS sale. Morrisons' fuel business generated
GBP219 million of reported underlying EBITDA in 2023 and accounted
for approximately 20% of the company's EBITDA base with a higher
margin than the overall group. While dilutive to consolidated
EBITDA margin, this disposal reduces the regulatory risks in light
of the increased regulatory scrutiny arising from the U.K.
Competition and Markets Authority into anti-competitive behavior
among fuel operators. It also reduces the group's need for sizable
capital expenditure to build out electric vehicle (EV) charging
infrastructure across its estates. Morrisons will have a supply
contract in place with MFG to supply the forecourt kiosks with food
and groceries, which could be expanded to the legacy MFG business
estate. Another supportive growth factor will be the long-term
commercial agreement in place for the EV charging network developed
by MFG, which could bring additional footfall to Morrisons' retail
stores. The Morrisons branding will stay in place at the 337
forecourts to perpetuity, while pump prices will continue to follow
traditional supermarket pricing strategy, thereby supporting the
fuel, groceries, and convenience customer traffic.
Discounters' market share gains in the U.K. grocery market show
signs of plateauing. The U.K. grocery market remains highly
competitive, but there are indications that the substantial market
share gains made by discounters such as Aldi and Lidl, over the
past 10 years are beginning to level off. Morrisons, which saw its
market share decline to 8.8% in March 2023, from 10% in March 2020,
has stabilized its position in recent months, maintaining an 8.8%
share according to Kantar Worldpanel. On the other hand, Aldi's and
Lidl's market share gains have slowed and Kantar data suggest they
might have lost some market share in recent weeks.
Morrisons launched an Aldi and Lidl price match program in 2024,
following in the footsteps of Tesco, which introduced a similar
initiative in 2020. Morrisons is adopting a customer-centric
approach to foster loyalty. Its loyalty scheme, which offers
personalized point rewards and pricing, has seen increased customer
sign-ups. However, Morrisons still has ground to cover to attract
price-conscious customers as market leaders heavily invest in low
prices through their loyalty programs. Tesco's Clubcard, with 16
million members, offers exclusive discounts under its "Clubcard
Prices" scheme, while Sainsbury's Nectar card also provides
personalized pricing for its customers.
Morrisons' fiscal 2023 results showed improvement, with
like-for-like revenue growth and margin improvement, but were below
our expectations. EBITDA generation of GBP906 million (+15% year on
year) and GBP300 million of working capital improvement measures
did not translate into meaningful FOCF after lease payments. This
was because of about GBP200 million of adverse impact arising from
the fuel payable reduction as fuel prices declined during the
second half of the fiscal period. Working capital at Morrisons has
always been heavily influenced by the fuel business' exposure to
volatile oil prices, relatively long payment terms to suppliers,
and fluctuations in fuel inventories. The terms of the transaction,
in our understanding, should protect Morrisons from material
one-off changes in its working capital position on PFS sale.
S&P said, "We consider Morrisons' high freehold supermarket real
estate, relative to other rated retailers, as a credit support. At
fiscal year-end 2023, Morrisons reported 81% of its supermarket
real estate as freehold. We think that the transaction has not led
to a material change, and the group will continue with the strategy
of owning most of its core asset base.
"We do not expect any change in the '2' recovery score or 'B+'
issue rating for senior secured loans and notes. The GBP1.2 billion
senior subordinated debt bears a fixed rate coupon of 6.75% which
is relatively attractive in the context of the Bank of England's
base rate of 5.25%. Therefore, rather than repaying its
subordinated debt, we expect the group to use the proceeds to repay
the relatively expensive senior secured debt. We estimate the
enterprise value of the group will drop after the sale of
forecourts and we understand the freehold property of book value of
GBP500 million and market value of GBP700 million-GBP1,000 million
will leave the group. Even after accounting for the lower
enterprise value after the transaction, we expect the recovery
expectation for the remaining senior secured debt will increase
from the current 80% rounded estimate recovery. At the same time,
we do not expect any change to the issue and recovery ratings on
the senior secured debt, reflecting our view that the documentation
for the secured term loan allows for a greater amount of secured
debt to be raised on the path to default, which could dilute
recovery for the other instruments.
"The stable outlook reflects the additional rating leeway following
the PFS sale, with S&P Global Ratings-adjusted leverage of 9.0x
(6.0x-7.0x excluding preference shares). It also considers the
expectation that the company will maintain its like-for-like
revenue growth, driven by a customer-centric approach that fosters
enhanced loyalty and stabilizes its market share in a highly
competitive environment with steady growth in profitability and
positive FOCF after lease payments."
Upside scenario
S&P could raise its ratings on Morrisons if it can demonstrate:
-- Sustained organic growth in the retail and wholesale business
while improving its S&P Global Ratings-adjusted EBITDA margin above
5%;
-- Successful implementation of its strategic plan of
strengthening its market offering while achieving the full extent
of its GBP700 million cost saving plan and GBP500 million working
capital improvement program; and
-- Sustained improvement in credit metrics (leverage materially
below 7.0x) and FOCF after lease payments above GBP100 million
annually.
Downside scenario
S&P could lower its ratings on Morrisons if the group's operating
performance falls short of its current base case, reflecting a
deterioration in the group's competitive position and leading to
prolonged high leverage and weak credit metrics for an extended
period. Specifically, we could take a negative rating action if,
over the next 12 months:
-- Adjusted leverage exceeded 10.0x (8.0x excluding preferred
equity); or
-- Annual FOCF after lease payments fell materially, potentially
constraining the group's liquidity.
S&P could also downgrade Morrisons if the group's credit metrics
deteriorated as it pursues material sale and leaseback transactions
or debt-funded acquisitions, or if it raised additional debt for
shareholder returns (including preference share repayments), even
if the debt documentation permits such actions.
NEWDAY FUNDING: Fitch Hikes Rating on 2022-3 Cl. F Notes to 'B+sf'
------------------------------------------------------------------
Fitch Ratings has assigned NewDay Funding Master Issuer Plc's
series 2024-1's notes expected ratings. The assignment of final
ratings is contingent on the receipt of final documentation
conforming to information already reviewed.
Fitch has also upgraded 38 tranches of NewDay Funding series
2021-1, 2021-2, 2021-3, 2022-1, 2022-2, 2022-3, 2023-1, VFN-F1 V1
and VFN-F1 V2 and affirmed 12 classes.
Entity/Debt Rating Prior
----------- ------ -----
NewDay Funding
2024-1 Class A LT AAA(EXP)sf Expected Rating
2024-1 Class B LT AA+(EXP)sf Expected Rating
2024-1 Class C LT A+(EXP)sf Expected Rating
2024-1 Class D LT BBB+(EXP)sf Expected Rating
2024-1 Class E LT BB(EXP)sf Expected Rating
2024-1 Class F LT BB-(EXP)sf Expected Rating
2021-1 Class A1
XS2296139798 LT AAAsf Affirmed AAAsf
2021-1 Class A2
65120LAA9 LT AAAsf Affirmed AAAsf
2021-1 Class B
XS2296139954 LT AA+sf Upgrade AAsf
2021-1 Class C
XS2296140028 LT A+sf Upgrade Asf
2021-1 Class D
XS2296140291 LT BBB+sf Upgrade BBBsf
2021-1 Class E
XS2296140374 LT BB+sf Upgrade BBsf
2021-1 Class F
XS2296140457 LT BB-sf Upgrade B+sf
2021-2 Class A1
XS2358473374 LT AAAsf Affirmed AAAsf
2021-2 Class A2
65120LAB7 LT AAAsf Affirmed AAAsf
2021-2 Class B
XS2358473887 LT AA+sf Upgrade AAsf
2021-2 Class C
XS2358474000 LT A+sf Upgrade Asf
2021-2 Class D
XS2358474182 LT BBB+sf Upgrade BBBsf
2021-2 Class E
XS2358474422 LT BB+sf Upgrade BBsf
2021-2 Class F
XS2358474778 LT BB-sf Upgrade B+sf
2021-3 Class A1
XS2399701254 LT AAAsf Affirmed AAAsf
2021-3 Class A2
65120LAD3 LT AAAsf Affirmed AAAsf
2021-3 Class B
XS2399700447 LT AA+sf Upgrade AAsf
2021-3 Class C
XS2399700793 LT A+sf Upgrade Asf
2021-3 Class D
XS2399791149 LT BBB+sf Upgrade BBBsf
2021-3 Class E
XS2399805972 LT BB+sf Upgrade BBsf
2021-3 Class F
XS2399973176 LT BB-sf Upgrade B+sf
2022-1 Class A1
XS2452635118 LT AAAsf Affirmed AAAsf
2022-1 Class A2
65120LAK7 LT AAAsf Affirmed AAAsf
2022-1 Class B
XS2452635464 LT AA+sf Upgrade AAsf
2022-1 Class C
XS2452635548 LT A+sf Upgrade Asf
2022-1 Class D
XS2452635977 LT BBB+sf Upgrade BBBsf
2022-1 Class E
XS2452636272 LT BB+sf Upgrade BBsf
2022-1 Class F
XS2452636512 LT BB-sf Upgrade B+sf
2022-2 Class A
Loan Note LT AA+sf Upgrade AAsf
2022-2 Class C
XS2498643589 LT A+sf Upgrade Asf
2022-2 Class D
XS2498643829 LT BBB+sf Upgrade BBBsf
2022-2 Class E
XS2498644124 LT BB+sf Upgrade BBsf
2022-2 Class F
XS2498644470 LT B+sf Affirmed B+sf
2022-3 Class A
XS2554910591 LT AA-sf Upgrade Asf
2022-3 Class D
XS2554989678 LT BBB+sf Upgrade BBBsf
2022-3 Class E
XS2554989918 LT BB+sf Upgrade BBsf
2022-3 Class F
XS2554991062 LT B+sf Upgrade Bsf
2023-1 Class A1
XS2716700286 LT AAAsf Affirmed AAAsf
2023-1 Class A2
65120LAL5 LT AAAsf Affirmed AAAsf
2023-1 Class B
XS2716700526 LT AA+sf Upgrade AAsf
2023-1 Class C
XS2716700799 LT A+sf Upgrade Asf
2023-1 Class D
XS2716700872 LT BBB+sf Upgrade BBBsf
2023-1 Class E
XS2716700955 LT BB+sf Upgrade BBsf
2023-1 Class F
XS2716701094 LT BB-sf Upgrade B+sf
VFN-F1 V1 Class A LT BBB+sf Upgrade BBB-sf
VFN-F1 V1 Class E LT BB+sf Upgrade BBsf
VFN-F1 V1 Class F LT BB-sf Upgrade B+sf
VFN-F1 V2 Class A LT AA-sf Upgrade A+sf
VFN-F1 V2 Class E LT BBsf Affirmed BBsf
VFN-F1 V2 Class F LT BB-sf Upgrade B+sf
TRANSACTION SUMMARY
The notes issued by NewDay Funding Master Issuer Plc are
collateralised by a pool of non-prime UK credit card receivables
originated by NewDay Limited (NewDay). NewDay is one of the largest
specialist credit card companies in the UK, and offers cards both
under its own brands and in partnership with individual retailers.
Only the cards branded by NewDay, which are targeted at higher-risk
borrowers on average, are included in this transaction. The cards
co-branded with retailers are financed through a separate
securitisation.
KEY RATING DRIVERS
Revised Asset Assumptions: Fitch has reduced its steady-state
charge-off rate for NewDay Funding Master Issuer to 17% from 18%,
and increased its steady-state monthly payment rate (MPR) to 11%
from 10%. The revised assumptions primarily reflect NewDay's
increasing strategic focus on acquiring and retaining lower risk
borrowers. Fitch also considered the strength and stability of
portfolio performance metrics during challenging macroeconomic
conditions, as well as continued refinements to NewDay's automated
credit scoring process.
Strong Performance Relative to Assumptions: The reduced
steady-state charge-off rate remains above performance levels
observed since mid-2020. Over the last year, charge-offs and the
MPR have averaged 12.4% and 14.4%, respectively. Performance
metrics are expected to fluctuate around its steady-states through
the economic cycle.
Rating Stresses Unchanged: Charge-off and MPR stresses are
unchanged and remain at the low end of the spectrum (3.5x and 45%
at 'AAAsf', respectively). This considers the high absolute level
of the steady-state charge-off rate (even at its revised level),
the low volatility in the historical data and the low payment rates
typical of the non-prime credit card sector.
Yield, Purchase Rate Assumptions Maintained: Fitch assumed a
steady-state yield of 30% and a purchase rate of 100%, which are
unchanged. Yield stresses are maintained at 40% at 'AAAsf'. Fitch
also assumed a 0% purchase rate in the 'Asf' category and above,
considering that the seller is unrated and there is reduced
probability of a non-prime portfolio being taken over by a third
party in a high-stress scenario.
Upgrades of Existing Series: The upgrades of the series 2021-1,
2021-2, 2021-3, 2022-1, 2022-2, 2022-3, 2023-1, VFN-F1 V1 and
VFN-F1 V2 notes reflect the impact of the reduced charge-off and
increased MPR assumptions.
VFNs Add Flexibility: The structure includes a separate originator
variable funding note (VFN), purchased and held by NewDay Funding
Transferor Ltd (the transferor), in addition to series VFN-F1 and
VFN-F2, providing the funding flexibility typical and necessary for
credit card trusts. It provides credit enhancement to the rated
notes, adds protection against dilutions through a separate
functional transferor interest and meets UK and US risk-retention
requirements.
Key Counterparties Unrated: The NewDay Group acts in several
capacities through its various entities, most prominently as
originator, servicer and cash manager. The degree of reliance on
the group is mitigated in this transaction by the transferability
of operations, agreements with established card service providers,
a back-up cash management agreement and a series-specific liquidity
reserve.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in upside and
downside environments. The results below should only be considered
as one potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
The quantitative sensitivities below are presented for the new
series 2024-1 notes. The other nine series that Fitch has taken
rating actions on have highly comparable structures, and Fitch
believes these sensitivities are broadly representative of all
series under the trust.
Rating sensitivity to increased charge-off rate
Increase steady state by 25% / 50% / 75%:
Series 2024-1 A: 'AA+sf'/ 'AAsf' / 'AA-sf'
Series 2024-1 B: 'AA-sf'/ 'A+sf' / 'Asf'
Series 2024-1 C: 'Asf'/ 'BBB+sf' / 'BBBsf'
Series 2024-1 D: 'BBB-sf'/ 'BB+sf' / 'BBsf'
Series 2024-1 E: 'B+sf'/ 'Bsf' / N.A.
Series 2024-1 F: 'Bsf'/ N.A. / N.A.
Rating sensitivity to reduced monthly payment rate (MPR)
Reduce steady state by 15% / 25% / 35%:
Series 2024-1 A: 'AA+sf'/ 'AAsf' / 'AA-sf'
Series 2024-1 B: 'AA-sf'/ 'A+sf' / 'Asf'
Series 2024-1 C: 'Asf'/ 'A-sf' / 'BBB+sf'
Series 2024-1 D: 'BBBsf'/ 'BBB-sf' / 'BB+sf'
Series 2024-1 E: 'BB-sf'/ 'BB-sf' / 'B+sf'
Series 2024-1 F: 'B+sf'/ 'B+sf' / 'Bsf'
Rating sensitivity to reduced purchase rate
Reduce steady state by 50% / 75% / 100%:
Series 2024-1 D: 'BBBsf'/ 'BBBsf' / 'BBBsf'
Series 2024-1 E: 'BB-sf'/ 'BB-sf' / 'BB-sf'
Series 2024-1 F: 'B+sf'/ 'B+sf' / 'B+sf'
No rating sensitivities are shown for the class A to C notes, as
Fitch is already assuming a 100% purchase rate stress in these
rating scenarios.
Rating sensitivity to increased charge-off rate and reduced MPR
Increase steady-state charge-offs by 25% / 50% / 75% and reduce
steady-state MPR by 15% / 25% / 35%:
Series 2024-1 A: 'AAsf'/ 'Asf' / 'BBB+sf'
Series 2024-1 B: 'A+sf'/ 'BBB+sf' / 'BBB-sf'
Series 2024-1 C: 'BBB+sf'/ 'BBB-sf' / 'BBsf'
Series 2024-1 D: 'BB+sf'/ 'BB-sf' / 'Bsf'
Series 2024-1 E: 'B+sf'/ N.A. / N.A.
Series 2024-1 F: 'Bsf'/ N.A. / N.A.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Rating sensitivity to reduced charge-off rate and increased MPR
Reduce steady-state charge-offs by 25% / 50% / 75% and increase
steady-state MPR by 15% / 25% / 35%:
Series 2024-1 A: 'AAAsf'
Series 2024-1 B: 'AAAsf'
Series 2024-1 C: 'AA+sf'
Series 2024-1 D: 'Asf'
Series 2024-1 E: 'BBBsf'
Series 2024-1 F: 'BBB-sf'
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
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 conducted a review of
origination files as part of its ongoing monitoring.
Prior to the transaction closing, Fitch reviewed the results of a
third-party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Prior to the transaction closing, Fitch conducted a review of a
small targeted sample of the originator's origination files and
found the information contained in the reviewed files to be
adequately consistent with the originator's policies and practices
and the other information provided to the agency about the asset
portfolio.
Overall, 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.
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.
ROBINSONS CARAVANS: Ex-Director Issues Statement After Collapse
---------------------------------------------------------------
John Smith at Workshop Guardian reports that David Robinson, an
ex-director and owner, along with his father, of Robinsons Caravans
has now made a statement to clarify certain information regarding
the situation after the caravan and motorhome dealer was placed
into administration earlier this month.
He added that he had not been contacted by the administrators at
any point, saying he only learned about the administration from the
press, Workshop Guardian notes.
Robinson's traded at two sites, in Chesterfield and Worksop, and
also owned Golden Castle Caravans near Tewksbury, which was also
placed into administration, but was immediately sold to
Gloucestershire Leisure with 17 jobs being saved, Workshop Guardian
discloses.
According to Workshop Guardian, a spokesperson for Interpath
Advisory, who have been appointed as administrators, said "certain
parts" of the remaining business and its assets had been sold to
Storebon Holdings Limited, part of the Couplands Caravans group.
This has resulted in nine jobs at the Worksop dealership, on
Gateford Road, being saved, Workshop Guardian states.
According to Workshop Guardian, Mr. Robinson said: "We sold
Robinsons Caravans in 2019 to Paul Seabridge, to be paid over an
agreed period.
"Unfortunately, shortly after, Mr Seabridge was unable to maintain
the payments and at this time he introduced us to MBH Corporation,
a PLC listed on the Frankfurt Stock Exchange, with the outstanding
debt transferring to a bond maturing in 2025.
"When we sold the business it was solvent having unencumbered
assets of around GBP4 million, 74 staff and had been trading
profitably since its formation in 1963.
"On February 23, 2024 we learned that the directors of MBH intended
to file a notice of appointment at court on February 26.
"We hoped this wouldn't affect the business's within MBH, such as
Robinsons.
"It was a shock a short time after to hear in the press that
Robinsons Caravans had already been put into administration.
"We are extremely surprised that the administrators did not contact
us at any time.
"We are extremely sorry for all our loyal employees, customers and
suppliers that are affected by what has happened to the business
and we look forward to the outcome of the administrators
investigations into what has gone wrong since we left the business
in 2019."
UNIVERSAL SUPPLY: Bought Out of Administration
----------------------------------------------
Business Sale reports that Universal Supply Chain & Solutions, a
Northampton-based packing and logistics company, has been acquired
in a pre-pack deal after falling into administration.
The company collapsed earlier this month, as a result of several
adverse factors, Business Sale relates.
The family-run company specialises in co-packing, as well as
providing full supply chain logistics fulfilment and flexible
warehouse services. The firm core offering is in seasonal
promotions and, more recently, it has diversified into packaging
for the food and cosmetics industries.
As well as management team comprising 13 full-time staff, the
company also employs up to 200 agency staff during peak trading
periods.
However, the company had begun to suffer in recent times as a
result of the combined impact of the COVID-19 pandemic, Brexit, the
war in Ukraine and the loss of major supermarket orders, Business
Sale discloses.
According to Business Sale, Deviesh Raikundalia and Tyrone Courtman
of RSM UK Restructuring Advisory were appointed as joint
administrators of the company on March 12 and secured a pre-pack
sale of the business to Universal Food, Beverage and Luxury Gift
Packaging, which is connected to the company by a former director.
"Universal Supply Chain & Solutions Ltd is an established company
in the East Midlands, and it is unfortunate they have suffered over
the last few months due to factors outside of their control,"
Business Sale quotes joint administrator Deviesh Raikundalia as
saying.
Prakash Mistry, Managing Director of Universal Supply Chain &
Solutions, said that the company had "experienced a period of
downturn in the business caused by the loss of a few lucrative
contracts", Business Sale notes.
*********
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-
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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.
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or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
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