/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/240403.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, April 3, 2024, Vol. 25, No. 68 Headlines D E N M A R K SGL GROUP: Fitch Assigns 'B+(EXP)' Rating to New Sr. Secured Bonds F I N L A N D AHLSTROM HOLDING: S&P Affirms 'B' ICR, Outlook Negative F R A N C E ALTICE FRANCE: S&P Downgrades ICR to 'CCC+', Outlook Developing DEVOTEAM GROUP: Moody's Affirms 'B2' CFR, Outlook Remains Stable G E R M A N Y SC GERMANY 2022-1: Fitch's Outlook on 'BB' E Notes Rating Stable SYNLAB AG: Fitch Keeps 'BB' Rating on Watch Negative I R E L A N D ALBACORE EURO VI: S&P Assigns B- (sf) Rating to Class F Notes CAPITAL FOUR VII: Fitch Assigns 'B-sf' Final Rating to Cl. F Notes CVC CORDATUS XXIV: S&P Assigns B- (sf) Rating to Cl. F-R Notes KINBANE 2024-RPL1: S&P Assigns Prelim B- (sf) Rating to F Notes MADISON PARK XX: Fitch Assigns 'B-sf' Final Rating to Cl. F-R Notes MULLIGAN & HAINES: ATM Hospitality to Invest Fresh Capital ROUNDSTONE SECURITIES 2: Fitch Assigns B+(EXP)sf Rating to F Notes TORO EUROPEAN 9: S&P Assigns B- (sf) Rating to Class F Notes VOYA EURO V: Fitch Affirms 'B-sf' Rating on Cl. F Notes I T A L Y RENO DE MEDICI: Fitch Rates Planned Sr. Sec. Notes 'BB-(EXP)' L U X E M B O U R G SUNSHINE LUXEMBOURG: S&P Withdraws 'B' Issuer Credit Rating N E T H E R L A N D S METINVEST BV: Moody's Affirms 'Caa3' CFR, Alters Outlook to Stable R O M A N I A GLOBALWORTH REAL ESTATE: S&P Affirms 'BB+' ICR, Outlook Negative S P A I N TDA 29 FTA: Fitch Affirms 'CCCsf' Rating on Class D Notes S W E D E N OPTIGROUP BIDCO: Fitch Affirms 'B' LongTerm IDR, Outlook Stable SAMHALLSBYGGNADSBOLAGET: S&P Raises ICR to 'CCC', Outlook Negative T U R K E Y [*] Fitch Hikes 9 Turkish Local & Regional Govt's LT IDRs to 'B+' U N I T E D K I N G D O M 888 HOLDINGS: S&P Affirms 'B' LT ICR After Fiscal 2023 Results DISPLAY CABINETS: Bought of Administration by D C Midlands IDMH LTD: Enters Administration, Liabilities Total GBP3.7 Million PETRA DIAMONDS: Moody's Affirms 'B3' CFR, Alters Outlook to Neg. REDWIGWAM LTD: Goes Into Administration RIGHT TRACK: Funding Issues Prompt Liquidation SKURIO LTD: Falls Into Administration, Owes Nearly GBP6 Mil. SOLO RAIL: Goes Into Administration - - - - - ============= D E N M A R K ============= SGL GROUP: Fitch Assigns 'B+(EXP)' Rating to New Sr. Secured Bonds ------------------------------------------------------------------ Fitch Ratings has assigned SGL Group ApS's ('B/Stable) proposed senior secured callable euro-denominated floating rate bonds an expected rating of 'B+(EXP)'/'RR3', with a waterfall analysis output percentage of 55%. The final rating is contingent on the receipt of final documents conforming materially to the preliminary documentation reviewed. The purpose of the proposed bonds is to refinance part of SGL's USD825 million (EUR750 million equivalent) floating rate notes (FRN) due in 2028 and to finance further acquisitions in the near term, in line with its expectations. Fitch expects the revised waterfall analysis of 55% to be applied to the existing bonds once the transaction closes, without any impact on their ratings. KEY RATING DRIVERS NEW SENIOR SECURED BONDS Expected Senior Secured Rating: The 'B+(EXP)'/RR3 senior secured rating on the upcoming bonds is aligned with the rating of the existing bonds, benefiting from a one-notch uplift from the 'B' IDR. The higher debt amount is mitigated by the additional EBITDA contribution from the two near-term acquisitions resulting in a broadly similar expected waterfall output of 55% (vs. 53% before the transaction). Broadly Similar Terms: The new bonds will be used to refinance part of the outstanding FRNs and fund near-term acquisitions. Fitch expects the main terms to be aligned with those of the existing notes and both issues will rank pari passu. The new issuance should marginally improve SGL's debt maturity profile. SGL Unchanged Strategy: The debt-fueled inorganic growth is aligned with its expectations and does not represent a deviation from SGL's strategy, in its view. The company has a solid record of acquiring and successfully integrating smaller companies and Fitch expects this to continue. On top of the acquisitions of close to USD200 million expected for 2024, Fitch assumes further M&A of around USD100 million per year from 2025, using conservative valuation multiples. Resilient Performance in 2023: Fitch expects EBITDA of around USD185 million in 2023, with a limited year-on-year reduction from a very strong 2022. Even if cash interests absorb almost half the company's EBITDA, the limited working capital needs and asset-light nature of the business should result in positive FCF, better than its expectations, which conservatively included a sizeable absorption from working capital. Slower Deleveraging: Fitch expects EBITDA leverage to remain broadly flat in 2023-2026 at 4.6-4.7x, slightly higher than its previous forecasts, as Fitch expects both EBITDA and debt to increase gradually as a result of external growth. Fitch conservatively assumes a reduction of like-for-like EBITDA (excluding acquisitions), due to easing of transportation and logistical constraints and general macroeconomic uncertainty. This normalisation will be despite the short-term positive rate developments related to route disruptions introduced by the attacks on the Red Sea. Red Sea Route Disruptions: Fitch does not expect the recent ocean freight rates spike to be sustainable over the medium term. Despite the significant disruption introduced by the attacks in the Red Sea, Fitch believes there is more than sufficient capacity in the industry to accommodate longer routes, as signaled by some of the large carriers. Consequently, Fitch is not factoring in a higher rates scenario in its forecasts, although Fitch acknowledges there is some upside potential in the short term due to rate volatility. Still High Funding Costs: Fitch does not expect the decrease in interest rates to materially change SGL's funding costs, which remain a rating constraint. Interest expenses take up a significant portion of operational cash flow and constrain the company's growth strategy and cash generation. Fitch forecasts EBITDA interest coverage to remain around 2.0x, below its negative rating sensitivity of 2.3x. Niche Operator: SGL is a small but fast-growing company in the freight-forwarding market. It operates in all main modes of transport. It focuses on forwarding complex transportation projects and non-standardised goods in sectors including aid & relief, food ingredients and additives, fashion and retail, specialty automotive, and more recently, sovereign defence, with a focus on quality of service rather than price. Its strategy reduces direct competition with larger peers, but SGL remains exposed to the highly competitive nature of the freight-forwarding sector. Portfolio Diversification: Together with diversified logistics solutions (by mode of transport and geography), SGL serves more than 25,000 customers, with the 10 largest having an average tenure of around nine years and no client accounting for more than 3% of gross profit. In addition, SGL provides forwarding services to non-governmental organisations through its ADP division, which tends to be less cyclical than commercial segments. Asset-light Balance Sheet: SGL's business model is asset-light and capex needs are limited, which protect cash flows in case of large declines in sales volumes. Its cost structure is rather flexible with a high share of variable costs (mainly purchases of freight capacity, which is effectively passed through to customers). Fitch views freight forwarding as less volatile than shipping with some margin resilience against economic downturns. DERIVATION SUMMARY Fitch sees SGL's credit metrics as in line with 'B' rated peers. The credit profile is primarily supported by the diversification of the group's customer portfolios and the good positioning in its niche segments. Its earnings are less volatile than those of sole carriers, such as shipping companies, but the group's small size and the highly competitive nature of the business constrains its debt capacity, in its view. Fitch sees InPost S.A. (BB/Stable) as a broad industry peer and a niche leader, with good revenue visibility and limited competition translating into high operating margins. It also has a more conservative financial structure, which largely explains the several notch difference. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - Gross profit increasing towards USD925 million by 2027, mostly through acquisitions but supported by modest organic growth - EBITDA gradually rising to almost USD250 million by 2027 - Acquisitions of around USD200 million in 2024, funded through new debt - Effective interest rate hovering around 9% over the forecast horizon - Modestly negative working capital as the impact from falling rates is offset by increased volumes - Capex averaging around USD24 million per year to 2027 - Yearly acquisitions of around USD100 million from 2025 at enterprise value (EV)/EBITDA multiples around 5-6x - No dividend distributions or equity injections RECOVERY ANALYSIS Fitch's going concern (GC) EBITDA of USD155 million assumes a sharp downturn in the transportation industry. The assumed GC EBITDA takes SGL's 2023 EBITDA as reference and also includes around USD22 million EBITDA contributions from acquisitions to be funded by the new bonds. Fitch then applies a conservative 25% cut, reflecting the issuer's exposure to the economic cycle and consequent trading underperformance, with an increased debt burden. This haircut is proportionately smaller compared to the previous haircut due to a more normalised freight rate scenario. Fitch applies a distressed enterprise value (EV)/EBITDA multiple of 5x to calculate a GC EV, which is in line with the median for 'B' companies in the sector. This results in a GC EV of USD695 million, after deducting administrative claims. Considering the presence of super-senior debt including the DKK750 million super senior revolving credit facility and USD75 million asset-backed loan facility totaling USD186 million, the expected waterfall analysis output percentage on current metrics and assumptions was 55%, which is commensurate with 'RR3', providing a one notch uplift to the expected senior secured rating from the IDR. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Successful implementation of growth strategy, resulting in EBITDA leverage consistently below 4.5x - EBITDA interest coverage consistently above 2.8x - Consistently positive FCF generation Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - EBITDA leverage consistently above 5.5x - EBITDA interest coverage consistently below 2.3x - Negative FCF through the economic cycle LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Fitch forecasts liquidity reached around USD170 million end-2023, further supported by the DKK750 million revolving credit facility and USD75 million asset-backed loan, both committed until 2027 and currently undrawn. The company has no financing needs in the medium term, despite negative FCF after acquisitions under Fitch's rating case. SGL is exposed to refinancing risk only in 2028 when the floating-rate notes mature. ISSUER PROFILE SGL is an asset-light freight forwarder and logistics provider with a global footprint, particularly active in the Nordics, North America and APAC. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery ----------- ------ -------- SGL Group ApS senior secured LT B+(EXP) Expected Rating RR3 ============= F I N L A N D ============= AHLSTROM HOLDING: S&P Affirms 'B' ICR, Outlook Negative ------------------------------------------------------- S&P Global Ratings affirmed its 'B' issuer credit rating on Ahlstrom Holding 3 Oy's (Ahlstrom) and the 'B' issue rating on the senior secured facilities due 2028. The recovery rating remains unchanged at '4'. The negative outlook reflects the possibility of a downgrade in the next 12 months if Ahlstrom is unable to reduce leverage or generate materially positive adjusted FOCF. S&P said, "Although EBITDA improved in 2023, it remained below our expectations. In 2023, S&P Global Ratings-adjusted EBITDA rose to EUR332 million from EUR291 million in 2022. The improvement in 2023 was supported by lower transformation costs--EUR70 million compared with EUR140 million in 2022--but undermined by the decline in volumes, leading to lower fixed cost absorption. Although Ahlstrom's adjusted leverage declined to 8.8x by year-end 2023 from 9.9x in 2022, it remained above our expectations. In 2023 Ahlstrom increased its Term Loan B (TLB) by EUR75 million to fund potential acquisitions. However, adjusted gross debt increased by EUR23 million compared to 2022 since this was partly compensated by lower bank loans and use of factoring. "We anticipate a material adjusted EBITDA improvement in 2024. This is driven by a recovery in volumes, efficiency gains, and a EUR30 million drop in transformation costs. We estimate EBITDA at about EUR402 million in 2024, up from EUR332 million in 2023. We anticipate that this will support a reduction in leverage to 7.3x from 8.8x in 2023 and a return of credit metrics and FOCF generation to levels more commensurate with the current rating. "FOCF will turn positive, reaching about EUR55 million in 2024. After three years of negative FOCF (-EUR28 million in 2023, -EUR70 million in 2022, and -EUR172 million in 2021), we anticipate FOCF will turn positive in 2024. This will mainly be driven by a EUR70 million increase in EBITDA and about EUR50 million of savings from lower capital expenditure (capex). However, this will be partly offset by a rise of about EUR25 million in adjusted working capital needs. S&P Global Ratings-adjusted working capital excludes any movements under factoring facilities. We forecast an adjusted working capital outflow of EUR16 million for 2024 compared to an inflow of EUR8 million in 2023. The drop in capex to about EUR150 million in 2024 from EUR194 million in 2023 reflects the completion of large expansion projects in 2023. "Our forecast reduction in leverage toward 7x and material positive FOCF generation in 2024 support the current 'B' rating. However, the negative outlook reflects the possibility that Ahlstrom's credit metrics could not recover to levels in line with our expectations in 2024. It also reflects uncertainties on the timing and pace of the recovery in demand." The negative outlook reflects the possibility of a downgrade in the next 12 months if Ahlstrom is unable to reduce leverage and generate substantial positive S&P Global Ratings-adjusted FOCF. S&P could lower its ratings in the next 12 months if Ahlstrom: -- Does not generate material positive FOCF; -- Fails to deleverage toward 7.0x; or -- Adheres to a more aggressive financial policy, such as engaging in a large debt-funded acquisition or making substantial dividend payments. S&P said, "We could consider revising the outlook to stable if Ahlstrom improved its profitability, with adjusted debt to EBITDA of 7.0x-7.5x and materially positive FOCF. We would also expect to see the group's financial policy support those credit metrics. "Environmental factors are a neutral consideration in our credit rating analysis of Ahlstrom. That said, we view environmental risks in the pulp and paper industry as sizable given its high water, chemicals, and energy usage. We believe this could expose companies in the sector to pollution incidents, potentially resulting in compensation and corrective action costs, as well as subjecting them to tighter environmental regulations. However, Ahlstrom has set a target to achieve a 42% reduction in its scope 1 and 2 emissions by 2030. Ahlstrom has also set a target to reduce its water intensity ratio, aiming for an average water intake of 60 cubic meters per ton of net production (paper and pulp) by 2030. In 2023, the intensity ratio was 93.7 cubic meter per ton. Furthermore, we expect demand for some of Ahlstrom's products, especially food packaging and parchment, will be supported by sustainability trends and regulations limiting single-use plastics. "Governance factors are a moderately negative consideration. Our assessment of the company's financial risk profile as highly leveraged reflects corporate decision-making that prioritizes the interests of the controlling owners. This is in line with our view of the majority of rated entities owned by private-equity sponsors. Our assessment also reflects generally finite holding periods and a focus on maximizing shareholder returns." =========== F R A N C E =========== ALTICE FRANCE: S&P Downgrades ICR to 'CCC+', Outlook Developing --------------------------------------------------------------- S&P Global Ratings lowered its issuer and issue credit ratings on French telecom company Altice France S.A. and its secured debt to 'CCC+' from 'B-'. At the same time, S&P lowered its issue credit rating on Altice France Holding's unsecured debt to 'CCC-' from 'CCC'. The developing outlook on the rating on Altice France indicates that S&P could lower the rating if the risk of a distressed exchange on the secured debt rises. Conversely, S&P could raise the rating if the company deleverages by using disposal proceeds, along with a debt tender that only includes the unsecured debt or that includes the secured debt, but on a non-distressed basis. S&P said, "Following management's weaker 2024 guidance, we have revised our forecast for Altice France and now anticipate a significantly larger FOCF deficit. In 2023, the company recorded a decline in total reported revenues of 1.3% that was underpinned by a contraction in the fixed and mobile customer base. Reported EBITDA after leases declined by 4% year-on-year in 2023 as some operating costs and rental expenses increased faster than the top line. We revised our forecasts to consider management's more negative view on 2024 trading." For 2024, S&P now expects Altice France will report a revenue decline of 1%-3% and a contraction in reported EBITDA after leases of 4%-6% because: -- The French residential telecom market remains challenging and flexibility to pass on inflationary cost pressures to end-customers is limited; -- Rental costs will continue increasing as Altice France transitions its digital subscriber line and copper-network customers to fiber; and -- Construction revenues from the fiber rollout on XPFibre's behalf will continue declining as the project approaches completion. A moderate decline in capital expenditure (capex) will not offset weaker-than-expected earnings over 2023-2024 and the growing interest burden. This will result in a large FOCF deficit of EUR500 million-EUR600 million per year over 2023-2024, calculated after leases and cash outflows to Altice TV. Altice France has consistently reported negative FOCF after leases over the past few years because of high capex requirements, restructuring costs, and substantial cash outflows to Altice TV. S&P said, "Adjusted metrics remain weak, and we believe the company's reduced commitment and willingness to deleverage increases sustainability risks. We believe weak credit metrics, relatively muted prospects, and management's reduced commitment to further deleverage unless lenders participate increase sustainability risks. As at end-2023, Altice France's adjusted debt to EBITDA was about 7.0x, largely stable year-on-year. We forecast the ratio will remain relatively stable in 2024 as declining reported EBITDA is offset by positive contributions from our pro rata consolidation of XPFibre. EBITDA cash interest coverage will tighten toward 2.0x-2.2x in 2024, from 2.4x in 2023, as the interest burden increases significantly. Additionally, the company backtracked on its pledge to reduce debt by a turn of leverage by August 2024. Despite progress on asset sales that will generate proceeds that are sufficient to address the January and February 2025 debt maturities, Altice France made the use of proceeds conditional to lenders accepting discounted tender offers that reduce leverage to a new target of less than 4x. Finally, we believe the company's alternative to organically deleverage to 4x may not be achievable, given negative free cash flows and Altice France's inability to organically reduce leverage in the past. "We see an increased likelihood that a discounted debt tender by Altice France will extend beyond Altice France Holding's unsecured debt and include Altice France's secured debt, which could result in a distressed exchange. With EUR24 billion in consolidated gross debt between Altice France and Altice France Holding and assuming EBITDA of approximately EUR3.5 billion, Altice France would need to reduce debt by about EUR10 billion to achieve its new leverage target. We do not believe this debt reduction can be achieved through disposal proceeds alone. Barring further equity contributions, this means secured lenders will be asked to participate in discounted debt repurchases. We estimate the company's announced and potential proceeds from asset disposals could total EUR5 billion-EUR6 billion. Given our forecast for negative cash flow generation, this leaves a shortfall of at least EUR4 billion that the company must address through discounted debt repurchases or further equity injections. Altice France has not indicated that the owner will contribute capital to reduce debt beyond the disposal proceeds, which management is currently viewing as equity. A tender for the EUR4 billion in unsecured debt at 50% of par would require about EUR2 billion. This would leave up to EUR4 billion to repurchase EUR6 billion in secured debt, equating to a discount of at least 33%. While such a scenario increases the risk of a distressed exchange, we note that Altice France does not yet have any of the sale proceeds to launch such tenders and that negotiations between lenders and the company could take months. Given that the company has not operated within its prior leverage target for many years, we cannot rule out that leverage will end up between the company's target of 4.0x and the 2023 reported leverage of 6.4x. The latter could require less discounted debt repurchases than outlined above. "The ratings impact on Altice France depends on whether secured lenders participate in an exchange that we view as distressed. Since Altice France guarantees Altice France Holding's unsecured debt on a subordinated basis, an exchange that we view as distressed and tantamount to a default would not affect our rating on Altice France, unless the guarantee is called--something we do not expect if lenders agree to an exchange. However, if an exchange of secured debt occurs and we consider it distressed, we would lower our issue rating on Altice France's debt to 'D' and our issuer credit rating on Altice France to SD (selective default). "We decide whether an exchange is distressed based on the terms if and when lenders accept a tender offer. Depending on the final terms of any exchange on the unsecured and secured debt, we could determine the repurchase of one or both as distressed. Per our criteria, we consider the circumstances, including the discount level, the materiality of the debt being exchanged, the existing rating levels, and the risk of a conventional default if the exchange offer is not accepted. Our issue ratings reflect our view that the likelihood of a tender offer that we could consider distressed is higher for the unsecured debt, given the heavily discounted trading level and the minimal residual equity value at risk at Altice France Holding in the event of a default. "The developing outlook on the rating on Altice France indicates that we could lower the rating if the risk of a distressed exchange on the secured debt rises. Conversely, we could raise the rating if the company deleverages by using disposal proceeds, along with a debt tender that only includes the unsecured debt or also includes the secured debt, but on a non-distressed basis." S&P could lower its rating on Altice France to 'CCC' if: -- The risk of a conventional default, in which unsecured lenders can call the guarantee, increases; -- Altice France launches tender offers for secured debt at prices that translate into a distressed exchange; or -- Altice France's liquidity position deteriorates. This could happen if the company upstreams proceeds from asset sales, which would leave it without sufficient liquidity to address current maturities. S&P could raise its rating on Altice France to 'B-' if: -- S&P is confident that secured lenders will not participate in a debt exchange that we consider distressed; and -- The company deleverages to about 5x or lower by using any combination of proceeds from asset sales, discounted debt repurchases, or equity injections. S&P believes this would also require an improvement in performance and a return to more sustainable cash flows. S&P said, "Altice France's coercive approach to lenders reinforces our longer-term concerns regarding Altice France's governance and its prioritization of shareholder interests. We continue to classify management and governance as weak, based on the company's track record and our view of governance as a long-term credit risk. We think current events demonstrate Altice France's ability and willingness to prioritize shareholder interests over those of creditors and deleveraging. This is in line with the company's decision in 2021 to designate SFR towers as an unrestricted subsidiary and to upstream asset sale proceeds to repay the debt incurred to take the company private in 2020, rather than to reduce Altice France debt. Our assessment also reflects Altice France's track record of consistently operating outside its leverage target and the relatively limited disclosure of key performance indicators, which compares negatively with most European peers." DEVOTEAM GROUP: Moody's Affirms 'B2' CFR, Outlook Remains Stable ---------------------------------------------------------------- Moody's Ratings has affirmed Devoteam Group SAS's B2 corporate family rating and B2-PD probability of default rating. Concurrently, Moody's has affirmed the B2 rating on Devoteam's outstanding EUR565 million senior secured term loan B, and EUR100 million senior secured revolving credit facility (RCF). The outlook remains stable. RATINGS RATIONALE Devoteam's B2 CFR is supported by its specialisation in fast-growing digital transformation technologies and strategic partnerships with leading providers of such technologies, supported by a long-standing high quality client base that is reasonably well diversified across industries. Devoteam benefits from a solid cash flow supported by limited capital spending needs, and maintains good liquidity. The B2 CFR is constrained by the company's moderately high Moody's adjusted leverage of around 5.3x for 2023 which the agency expects to improve towards 4.5x within the next 12-18 months. The company has limited prospects for scalability, as billable headcount must be increased to grow revenue and competition for skilled labour is fierce. The company has a good track record in achieving successful integration of acquisitions, however its acquisitive nature can lead to execution risks and could strain credit metrics. LIQUIDITY Devoteam's liquidity is good, supported by a cash balance of EUR57 million as of September 2023 and positive free cash flow (FCF) generation in the last quarter of 2023. The company also recently received a cash injection of EUR65 million from the sale of 36% of the shares of its Saudi Arabian subsidiary. The company has access to EUR100 million of RCF, maturing in 2027 currently drawn to around EUR25 million. Moody's expects the RCFs to be drawn from time to time for supporting working capital swings. The RCFs include springing maintenance covenants, and if the outstanding balance exceeds 40% then the covenant is set at 7.0x senior secured leverage. The company has sufficient buffer. STRUCTURAL CONSIDERATIONS The company's term loan and RCF are rated B2 in line with the CFR, reflecting a 50% recovery rate and financial collateral customary in European leveraged buy-out transactions (shares, bank accounts and intercompany claims). Moody's views collateral mainly composed of share pledges as a weak security package. The term loan does not benefit from operating subsidiary guarantees due to legal limitations, but ranks pari passu with the RCF with respect to collateral enforcement proceeds under the intercreditor agreement. RATING OUTLOOK The stable outlook reflects Moody's expectation that over the next 12-18 months, the company will reduce leverage, continue to generate solid FCF and maintain good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's would consider upgrading Devoteam's rating if: -- revenue growth or operating margins recover faster than expected; -- the company's ratio of Moody's-adjusted gross debt to EBITDA declines sustainably below 4.5x; -- the company's ratio of Moody's-adjusted free cash flow to gross debt sustainably reaches the high single digits; and -- the company has at least adequate liquidity. Moody's would consider downgrading the company's rating if: -- the recovery in revenue growth and operating margins is materially below expectations; -- the company's ratio of Moody's-adjusted gross debt to EBITDA will remain above 6.0x; -- the company's ratio of Moody's-adjusted free cash flow to gross debt will remain below 5%; -- the company's ratio of Moody's-adjusted EBITA to interest expense will remain below 1.5x; -- or the company does not have adequate liquidity. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Devoteam is a French technology consulting firm based near Paris and operating in over 20 countries across Europe, the Middle East and Africa. It advises corporate clients on the capabilities, selection and customised uses and implementation of digital transformation technologies, including SMACS. Devoteam was founded by Stanislas and Godefroy de Bentzmann in 1995, and it was a listed company (Euronext: DVT) between 1999 and 2021. The process of taking the company private was completed in Q4 2021 with the finalisation of the squeeze-out of minorities. The Bentzmann family controls the company with 62.1% voting rights, and KKR holds 36.6%. In 2023 Devoteam generated revenue of EUR1,130 million and company-adjusted EBITDA of EUR143 million (including IFRS16). ============= G E R M A N Y ============= SC GERMANY 2022-1: Fitch's Outlook on 'BB' E Notes Rating Stable ---------------------------------------------------------------- Fitch Ratings has upgraded five tranches of SC Germany S.A. Compartment Consumer 2020-1 (SCGC 2020) and two tranches of SC Germany S.A. Compartment Consumer 2021-1 (SCGC 2021). It has revised SC Germany S.A. Compartment Consumer 2022-1 (SCGC 2022) class D and E notes' Outlook to Stable from Negative and affirmed all tranches of SC Germany S.A. Compartment Consumer 2023-1 (SCGC 2023). Entity/Debt Rating Prior ----------- ------ ----- SC Germany S.A., Compartment Consumer 2022-1 Class A XS2482884850 LT AAAsf Affirmed AAAsf Class B XS2482885071 LT AA-sf Affirmed AA-sf Class C XS2482886046 LT Asf Affirmed Asf Class D XS2482886475 LT BBBsf Affirmed BBBsf Class E XS2482886558 LT BBsf Affirmed BBsf Class F XS2482886632 LT CCCsf Affirmed CCCsf SC Germany S.A., Compartment Consumer 2023-1 Class A XS2639842348 LT AAAsf Affirmed AAAsf Class B XS2639842694 LT AAsf Affirmed AAsf Class C XS2639843072 LT Asf Affirmed Asf Class D XS2639843403 LT BBBsf Affirmed BBBsf Class E XS2639843742 LT BBsf Affirmed BBsf Class F XS2639844047 LT BBsf Affirmed BBsf SC Germany S.A., Compartment Consumer 2021-1 Class A XS2398387071 LT AAAsf Affirmed AAAsf Class B XS2398387741 LT AA+sf Affirmed AA+sf Class C XS2398388129 LT AA-sf Upgrade Asf Class D XS2398388632 LT BBB+sf Upgrade BBBsf Class E XS2398388715 LT BBB-sf Affirmed BBB-sf SC Germany S.A., Compartment Consumer 2020-1 A XS2239090785 LT AAAsf Affirmed AAAsf B XS2239091320 LT AA+sf Upgrade AAsf C XS2239091593 LT AAsf Upgrade A+sf D XS2239091759 LT A+sf Upgrade BBB+sf E XS2239091833 LT Asf Upgrade BBB-sf F XS2239091916 LT A-sf Upgrade BB+sf TRANSACTION SUMMARY The transactions are securitisations of unsecured consumer loans originated by Santander Consumer Bank. The loans are granted almost exclusively to employed borrowers. SCGC 2020 and 2022 are amortising pro-rata and SCGC 2023 is still revolving. SCGC 2021, following a trigger breach, is now amortising sequentially. The class F notes in SCGC 2021, 2022 and 2023 can be paid down via excess spread in the priority of interest payments. The class F notes of SCGC 2021 have been paid in full. KEY RATING DRIVERS Credit Enhancement Build-Up: Certain asset-backed junior notes (class G and F of SCGC 2021 and 2022; class G of SCGC 2020 and class F of SCGC 2023) are excluded from pro-rata amortisation, which cause the remaining notes to repay quicker and to build up credit enhancement (CE). This CE build-up has also offset the negative impact on the junior tranches of SCGC 2021 from a switch to sequential amortisation following a trigger breach at end-2023. Increasing CE has largely offset rising defaults in SCGC 2021 and 2022 and is primarily driving the upgrades for SCGC 2020 and 2021. SCGC 2023 is still revolving and the pro-rata amortising notes are not building up any CE. Increasing Excess Spread: Following an observed drop in prepayments, Fitch has lowered its prepayment assumption for SCGC 2020, 2021 and 2022 to 18% from 22%, aligning it with SCGC 2023's closing assumption. Moreover, SCGC 2022 has a current weighted average (WA) asset yield of 5.9%, higher than 5.7% in the previous review when the deal was revolving. Higher asset yield and lower prepayments result in higher excess spread benefitting the junior class D and E notes of SCGC 2022. This, in combination with increased CE, improves the credit risk of the class D and E notes, leading Fitch to revise its Outlook for the notes to Stable from Negative. Asset Performance Differs: Performance varies among the four transactions, with SCGC 2020 performing better than the younger transactions. Asset pools of SCGC 2021 and 2022 are reporting higher-than-expected defaults, driven by high inflation and the rising cost of living in the last two years. The deterioration of the SCGC 2022 pool is more severe relative to that of SCGC 2021. However, a slight improvement in asset performance driven by adjustments to underwriting standards by the originator is already visible in SCGC 2023. Default Assumptions Adjusted: To address performance differences, Fitch has revised the base case default rate for SCGC 2021 and 2022 upwards to 5.25% and 6.0% respectively from 4.5%, and kept the assumptions for SCGC 2020 unchanged. The default base case for SCGC 2023 was already at 5.25%. The 'AAAsf' default multiples for the deals have been adjusted to 4.25x from 4.5x for SCGC 2021 and to 4.0x from 4.75x for SCGC 2022, limiting the impact of higher base cases on 'AAAsf' default assumption in line with its methodology. Fitch will continue to monitor the performance and will make further adjustments where appropriate. Excess Spread Partly Clears Defaults: Higher excess spread in SCGC 2022 does not adequately mitigate asset pool deterioration. It is not sufficient to cover its principal deficiency ledger (PDL). With an outstanding PDL of EUR3 million, the class F notes have not amortised further since the last review in May 2023 when they were downgraded. As Fitch expects defaults to remain high, further amortisation of the class F notes from excess spread is unlikely. The class F notes' repayment is therefore highly dependent on default timing and availability of funds at the end of transaction life. This variability of credit risk is commensurate with Fitch's 'CCCsf' rating definition. Pro-Rata Amortisation Trigger Breach Unlikely: SCGC 2021 recently started to amortise sequentially following a trigger breach. The cumulative net loss trigger breach was rather tight, breaching only one month prior to the trigger value stepping up. For the remaining transactions, Fitch does not expect a similar trigger breach as long as performance remains in line with its expectations. Counterparty Risks Addressed: SCGC 2020 and 2021 have fully funded reserves dedicated to liquidity and are currently at their respective floors. SCGC 2022 and 2023 feature a two-tier reserve, replenished at different positions in the interest waterfall. The reserve funds for SCGC 2022 and 2023 can be partially used to cover PDLs. For SCGC 2022 the part of the reserve available to cover PDLs is fully depleted. The reserves are sufficient to cover payment interruption risk for at least three months, in line with its criteria. The transactions also foresee funding of reserves to cover commingling and set-off risks and for SCGC 2023 servicer termination risks upon rating trigger breaches in line with criteria. Replacement conditions for the servicer, account bank and swap counterparty are adequately defined and relevant ratings are in line with its criteria thresholds. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A further weakening of borrowers' debt servicing capacity beyond Fitch's expectation might result in higher-than-expected defaults, negatively affecting transactions' performance. Lower-than-expected recoveries also have a negative impact on the transactions' performance due to large asset pool losses and low available funds to clear PDLs. Sensitivities to higher default rates and lower recoveries are shown below. SCGC 2020 Default rate increased by 10% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AA-sf'; Class D: 'A+sf'; Class E: 'Asf'; Class F: 'BBB+sf' Default rate increased by 25% Class A: 'AA+sf'; Class B: 'AAsf'; Class C: 'A+sf'; Class D: 'A-sf'; Class E: 'BBB+sf'; Class F: 'BBBsf' Recovery rate decreased by 10% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AAsf'; Class D: 'A+sf'; Class E: 'Asf'; Class F: 'A-sf' Recovery rate decreased by 25% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AAsf'; Class D: 'A+sf'; Class E: 'Asf'; Class F: 'A-sf' Default rate increased by 10% and recovery rate decreased by 10% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AA-sf'; Class D: 'Asf'; Class E: 'Asf'; Class F: 'BBB+sf' Default rate increased by 25% and recovery rate decreased by 25% Class A: 'AA+sf'; Class B: 'AA-sf'; Class C: 'Asf'; Class D: 'A-sf'; Class E: 'BBB+sf'; Class F: 'BBBsf' SCGC 2021 Default rate increased by 10% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AA-sf'; Class D: 'BBB+sf'; Class E: 'BBB-sf' Default rate increased by 25% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'A+sf'; Class D: 'BBBsf'; Class E: 'BB+sf' Recovery rate decreased by 10% Class A: 'AAAsf'; Class B: 'AAAsf'; Class C: 'AAsf'; Class D: 'A-sf'; Class E: 'BBBsf' Recovery rate decreased by 25% Class A: 'AAAsf'; Class B: 'AAAsf'; Class C: 'AAsf'; Class D: 'A-sf'; Class E: 'BBBsf' Default rate increased by 10% and recovery rate decreased by 10% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'AA-sf'; Class D: 'BBB+sf'; Class E: 'BBB-sf' Default rate increased by 25% and recovery rate decreased by 25% Class A: 'AAAsf'; Class B: 'AA+sf'; Class C: 'A+sf'; Class D: 'BBBsf'; Class E: 'BB+sf' SCGC 2022 Default rate increased by 10% Class A: 'AA+sf'; Class B: 'A+sf'; Class C: 'A-sf'; Class D: 'BBB-sf'; Class E: 'B+sf'; Class F: 'NRsf' Default rate increased by 25% Class A: 'AAsf'; Class B: 'A+sf'; Class C: 'BBBsf'; Class D: 'BB+sf'; Class E: 'CCCsf'; Class F: 'NRsf' Recovery rate decreased by 10% Class A: 'AAAsf'; Class B: 'AA-sf'; Class C: 'A-sf'; Class D: 'BBBsf'; Class E: 'BBsf'; Class F: 'CCCsf' Recovery rate decreased by 25% Class A: 'AAAsf'; Class B: 'AA-sf'; Class C: 'A-sf'; Class D: 'BBBsf'; Class E: 'BBsf'; Class F: 'NRsf' Default rate increased by 10% and recovery rate decreased by 10% Class A: 'AA+sf'; Class B: 'A+sf'; Class C: 'BBB+sf'; Class D: 'BBB-sf'; Class E: 'B+sf'; Class F: 'NRsf' Default rate increased by 25% and recovery rate decreased by 25% Class A: 'AAsf'; Class B: 'Asf'; Class C: 'BBBsf'; Class D: 'BB+sf'; Class E: 'CCCsf'; Class F: 'NRsf' SCGC 2023 (sensitivities unchanged from closing) Default rates increased by 10%: Class A:'AA+sf'; Class B: 'AA-sf'; Class C:'Asf'; Class D: 'BBBsf'; Class E: 'BBsf'; Class F:'BBsf' Default rate by increased by 25%: Class A:'AA-sf'; Class B: 'A+sf'; Class C: 'BBBsf'; Class D: 'BBB-sf'; Class E: 'BB-sf'; Class F: 'BB-sf' Recovery rates decreased by 10%: Class A: 'AA+sf'; Class B: 'AAsf'; Class C: 'A-sf'; Class D:'BBBsf'; Class E: 'BBsf'; Class F: 'BBsf' Recovery rates decreased by 25%: Class A:'AA+sf'; Class B: 'AAsf'; Class C: 'A-sf'; Class D: 'BBBsf'; Class E: 'BBsf'; Class F: 'BBsf' Default rates increased by 10% and recovery rates decreased by 10%: Class A 'AA+sf'; Class B 'AA-sf'; Class C 'BBB+sf'; Class D 'BBB-sf'; Class E 'BBsf'; Class F 'BBsf' Default rates increased by 25% and recovery rates decreased by 25%: Class A: 'AA-sf'; Class B: 'Asf'; Class C: 'BBBsf'; Class D: 'BBB-sf'; Class E: 'BB-sf'; Class F: 'B+sf' Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Early switch to sequential amortisation could benefit senior notes in the transactions due to faster CE build-up. Junior notes would benefit from longer pro-rata amortisation. The notes could also benefit from an improvement in the macroeconomic outlook and stabilisation of inflation resulting in a reduction in observed defaults. Smaller asset pool losses and higher available funds resulting from higher-than-expected recoveries would also be beneficial to the notes. 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 SCGC 2020 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. 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. SCGC 2021, 2022 and 2023 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. Prior to the transactions 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. 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. SYNLAB AG: Fitch Keeps 'BB' Rating on Watch Negative ---------------------------------------------------- Fitch Ratings is maintaining the ratings of Synlab AG and Synlab Bondco PLC on Rating Watch Negative (RWN), pending regulatory approval of Synlab AG's takeover by Cinven. The RWN continues to reflect the re-leveraging risk of Synlab AG to fund its buyout by Cinven. Fitch will resolve the RWN, downgrade and likely withdraw the IDR of Synlab AG on full completion of the buyout. Fitch also expects to downgrade the senior unsecured rating of Synlab Bondco PLC on completion, and to withdraw it following repayment. Fitch is not taking any rating action on the expected ratings of the top entity of the new restricted group post-transaction, Ephios Subco 3 (Synlab). KEY RATING DRIVERS RWN Maintained Pending Regulatory Approval: Fitch is maintaining the RWN as the takeover is not complete as it is pending regulator's approval, a situation which could last beyond 6 months. The RWN was initially assigned in October 2023 to reflect a high likelihood of an adverse impact on Synlab AG's credit profile stemming from the ongoing takeover by Cinven. Fitch estimates Synlab AG's EBITDAR leverage is likely to rise above 5.0x in 2024, with the debt issuance expected to add around EUR400 million of debt to the new restricted group. Cinven has secured an 84.65% stake in Synlab AG through a public tender process. Fitch believes that Cinven's ambition is to acquire 100% ownership. Therefore, the risk of a further increase in leverage remains high as Cinven may seek to purchase the remaining 15% minority stake over the rating horizon to 2027. Synlab's existing rating drivers are detailed in "Fitch Rates Ephios Subco 3 (Synlab) 'B(EXP)'/Positive; Senior Secured Debt 'B+(EXP)'", dated 4 December 2023. DERIVATION SUMMARY Synlab AG's IDR was placed on RWN as a result of the take-private buyout. Prior to this and since its IPO in April 2021, Synlab AG's IDR of 'BB' had reflected the group's solid market position, strong profitability and cash flow generation, moderate leverage and a conservative financial policy. It is the largest lab-testing company in Europe, with sales sustained at around EUR2.7 billion (excluding pandemic contribution), alongside a defensive business model. Compared with other investment-grade (IG) global medical diagnostic peers such as Eurofins Scientific S.E. (BBB-/Stable) and Quest Diagnostics Inc (BBB/Positive), Synlab AG is more geographically concentrated in Europe (around 95% of sales) and is more exposed to the routine lab-testing market. In addition, IG Eurofins and Quest are 2x-3x larger in total sales and more diversified across other diagnostic markets such as environmental and food-testing. Until 2022 Synlab AG's profitability was broadly in line with IG peers', with solid EBITDAR margins of at least 20% and strong high single-digit FCF margins for 2020-2022. However, its margins declined faster than these peers' in 2023. Synlab AG's rating also factored in a conservative financial risk profile following the IPO, which benefited from a temporarily positive impact of the pandemic in 2020-2022. Before the buyout Synlab AG had lower leverage, compared to Laboratoire Eimer Selas (B/Negative) and Inovie Group (B/Negative), which had EBITDAR leverage projected at between 6.0x and 8.0x to 2025. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - Revenue to have declined 19% in 2023 as a result of falling Covid-19 test sales, despite organic sales growth of the non-Covid-19 underlying business at around 3% - Organic sales growth of around 2.5% for 2024-2026 - No M&A in 2024, followed by EUR50 million in 2025, and EUR100 million in 2026 at enterprise value (EV)/EBITDA multiples of 10x - EBITDA margins (excluding IFRS16 rents) gradually improving towards 14.5% by 2026, from 10.3% in 2023 - Rent expense at around EUR100 million per annum in 2023-2026 - Capex at 5% of sales in 2023-2024, decreasing to around 3.7% in 2025-2026 - No dividend payouts in 2024-2026 RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - The ratings are on RWN, making a positive rating action unlikely Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - The completion of the Cinven takeover may lead to a multi-notch downgrade, due to increased leverage and/or a more aggressive financial policy LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Synlab AG's liquidity is comfortable with Fitch-defined readily available cash (net of restricted cash of EUR50 million for daily operations) of about EUR354 million at end-3Q23, reinforced by EUR500 million available under a committed RCF maturing in 2030. Synlab AG repaid EUR100 million of its term loan B (TLB) in February 2023 and fully repaid another EUR220 million TLB in July 2023. Following the completion of the refinancing, all of Synlab AG's debt will mature in 2030. Stable operating performance with moderate working-capital outflows and capex should support positive internal FCF from 2025. The group benefits from interest-rate hedging for around EUR500 million of its debt until February 2025. ESG CONSIDERATIONS Synlab has an ESG Relevance Score of '4' for Exposure to Social Impacts due to increased risks of tightening regulation that may constrain its ability to maintain operating profitability and cash flows. which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Synlab Bondco PLC senior unsecured LT BB Rating Watch Maintained RR4 BB Synlab AG LT IDR BB Rating Watch Maintained BB senior unsecured LT BB Rating Watch Maintained RR4 BB ============= I R E L A N D ============= ALBACORE EURO VI: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------------- S&P Global Ratings assigned ratings to AlbaCore Euro CLO VI DAC's class A-1 Loan, A-2 Loan, and class A to F European cash flow CLO notes. The issuer also issued subordinated notes. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks CURRENT S&P Global Ratings' weighted-average rating factor 2,850.04 Default rate dispersion 458.39 Weighted-average life (years) 4.74 Obligor diversity measure 115.90 Industry diversity measure 19.51 Regional diversity measure 1.15 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.00 Actual 'AAA' weighted-average recovery (%) 36.78 Actual weighted-average spread (net of floors; %) 4.24 Actual weighted-average coupon (%) 4.86 Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will switch to semiannual payments. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (4.24%), the covenanted weighted-average coupon (4.86%), and the covenanted weighted-average recovery rates. As per the transaction documents, we have also modelled an additional interest payment of EUR7,125.00, EUR18,052.50, and EUR28,427.50 on the class B-2, C, and D notes, respectively, to be paid on the first payment date. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Until the end of the reinvestment period on Oct. 15, 2028, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and it compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "Under our structured finance sovereign risk criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "We also considered the legal structure of the issuer, which is established as a special-purpose entity and meets our criteria for insolvency remoteness. "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 class A-1 Loan, A-2 Loan, and class A to F notes. "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 we have assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings assigned to the notes. "In addition to our standard analysis, we have also included the sensitivity of the ratings on the class A-1 Loan, A-2 Loan, and class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Ratings AMOUNT CREDIT CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT (%) A AAA (sf) 87.00 3mE +1.50% 38.50 A-1 Loan AAA (sf) 84.00 3mE +1.50% 38.50 A-2 Loan AAA (sf) 75.00 3mE +1.50% 38.50 B-1 AA (sf) 37.00 3mE +2.20% 28.00 B-2† AA (sf) 5.00 5.70% 28.00 C† A (sf) 24.90 3mE +2.90% 21.78 D† BBB- (sf) 27.40 3mE +4.15% 14.93 E BB- (sf) 19.70 3mE +6.78% 10.00 F B- (sf) 13.60 3mE +8.29% 6.60 Sub NR 28.70 N/A N/A *The ratings assigned to the class A-1 Loan, A-2 Loan, A, B-1, and B-2 notes address timely interest and ultimate principal payments. The ratings assigned to the class C to F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. †There is an additional interest payment of EUR7,125.00, EUR18,052.50, and EUR28,427.50 on the class B-2, C, and D notes, respectively, only on the first payment date. NR--Not rated. N/A--Not applicable. 3mE--Three-month Euro Interbank Offered Rate. CAPITAL FOUR VII: Fitch Assigns 'B-sf' Final Rating to Cl. F Notes ------------------------------------------------------------------ Fitch Ratings has assigned Capital Four CLO VII DAC final ratings, as detailed below. Entity/Debt Rating ----------- ------ Capital Four CLO VII DAC Class A Loan LT AAAsf New Rating Class A Notes XS2770761877 LT AAAsf New Rating Class B-1 Notes XS2770762099 LT AAsf New Rating Class B-2 Notes XS2770762255 LT AAsf New Rating Class C Notes XS2770762412 LT Asf New Rating Class D Notes XS2770762685 LT BBB-sf New Rating Class E Notes XS2770762842 LT BB-sf New Rating Class F Notes XS2770763063 LT B-sf New Rating Subordinated Notes XS2770763220 LT NRsf New Rating TRANSACTION SUMMARY Capital Four CLO VII DAC is a securitisation of mainly senior secured loans (at least 90%) with a component of senior unsecured, mezzanine, and second-lien loans. The note proceeds have been used to fund an identified portfolio with a target par of EUR350 million. The portfolio is managed by Capital Four CLO Management II K/S and Capital Four Management Fondsmæglerselskab A/S. The CLO envisages a 4.6-year reinvestment period and a 7.5-year weighted average life (WAL). 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 of the identified portfolio is 25.95. Strong Recovery Expectation (Positive): At least 90% 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 62.7% Diversified Portfolio (Positive): The transaction has two matrices effective at closing corresponding to the 10 largest obligors at 20% of the portfolio balance and fixed-rate asset limits at 5% and 15%. It also has two forward matrices corresponding to the same top 10 obligors and fixed-rate asset limits, which will be effective one-year post closing, provided that the collateral principal amount (defaults at Fitch-calculated collateral value) will be at least at the reinvestment target-par balance. The forward matrices may not be applied, as long as the transaction is eligible for a WAL test extension for 18 months since the issue date. The transaction also includes various concentration limits, including exposure to the three largest (Fitch-defined) industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.6-year reinvestment period and includes 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. The transaction could extend the WAL test by one year on the date that is one year from closing, if the adjusted collateral principal amount is at least at the reinvestment target par and if the transaction is passing all its collateral quality and the coverage tests. Cash flow Modelling (Neutral): The WAL used for the Fitch-stressed portfolio and matrices analysis is 12 months less than the WAL covenant to account for structural and reinvestment conditions after the reinvestment period, including the satisfaction of the over-collateralisation test and Fitch 'CCC' limit, together with a consistently decreasing WAL covenant. In Fitch's opinion, these conditions 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 default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would result in downgrades of up to three notches for the class B to E notes and to below 'B-sf' 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 defaults and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the Fitch-stressed portfolio, the class D, and E notes display a rating cushion of two notches and the class B and C notes of one notch. Should the cushion between the identified portfolio and the Fitch-stressed portfolio be eroded 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 Fitch-stressed portfolio would lead to downgrades of up to four notches for the class A to D notes and to below 'B-sf' for the class E and F notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 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 notes, except for the 'AAAsf' rated notes, which are at the highest level on Fitch's scale and cannot be upgraded. 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, meaning the notes are able to withstand larger-than-expected losses for the transaction's remaining life. 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 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 Capital Four CLO VII DAC 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. CVC CORDATUS XXIV: S&P Assigns B- (sf) Rating to Cl. F-R Notes -------------------------------------------------------------- S&P Global Ratings assigned its credit ratings to CVC Cordatus Loan Fund XXIV DAC's class B-1-R, C-R, D-R, E-R, and F-R notes. At the same time, S&P affirmed its ratings on the class A and B-2 notes and withdrew its ratings on the existing class B-1, C, D, E, and F notes. On March 28, 2024, the issuer refinanced the original class B-1, C, D, E, and F notes by issuing replacement notes of the same notional. The replacement notes are largely subject to the same terms and conditions as the original notes, except for the following: -- The replacement notes have a lower spread over Euro Interbank Offered Rate (EURIBOR) than the original notes. -- The class F available amount, which was used as a turbo feature on the original class F notes, has been removed. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior-secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks CURRENT S&P weighted-average rating factor 2,950.55 Default rate dispersion 564.45 Weighted-average life (years) 4.08 Obligor diversity measure 120.61 Industry diversity measure 23.35 Regional diversity measure 1.14 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 1.70 Actual 'AAA' weighted-average recovery (%) 34.88 Rating rationale Under the transaction documents, the rated notes pay quarterly interest unless a frequency switch event occurs. Following this, the notes will switch to semiannual payments. The portfolio's reinvestment period ended in September 2023. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior-secured term loans and senior-secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we used a EUR353.43 million adjusted collateral principal amount, the portfolio's actual weighted-average spread, actual weighted-average coupon, and actual weighted-average recovery rates at each rating level. "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 Bank of New York Mellon, London Branch is the bank account provider and custodian. The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "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 legal structure and framework is bankruptcy remote, in line with our legal criteria. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1-R, B-2, C-R, D-R, and E-R notes could withstand stresses commensurate with higher ratings than those assigned. However, although the CLO is in its amortizing phase, it has just started deleveraging the senior note and, in our view, can still reinvest by using post reinvestment criteria, during which the transaction's credit risk profile could deteriorate. Hence, we have capped the ratings on the notes." For the class F-R notes, the two notches of ratings uplift to 'B-' from the model generated results of 'CCC', reflect several key factors, including: -- Credit enhancement comparison: The available credit enhancement for this class of notes is in the same range as other CLOs that S&P rates and that has recently been issued in Europe. -- Portfolio characteristics: The portfolio's average credit quality is like other recent CLOs. -- S&P's model generated break-even default rate at the 'B-' rating level of 23.81% (for a portfolio with a weighted-average life of 4.08 years), versus if it was to consider a long-term sustainable default rate of 3.1% for 4.08 years, which would result in a target default rate of 12.66%. -- S&P does not believe that there is a one-in-two chance of this note defaulting. -- S&P does not envision this tranche defaulting in the next 12-18 months. -- Following its analysis of the credit, cash flow, counterparty, operational, and legal risks, S&P believes its ratings are commensurate with the available credit enhancement for the class A, B-1-R, B-2, C-R, D-R, E-R, and F-R notes. S&P said, "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E-R 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-R notes." The transaction securitizes a portfolio of primarily senior-secured leveraged loans and bonds, and it is managed by CVC Credit Partners Investment Management. Environmental, social, and governance S&P said, "We regard the transaction's exposure to environmental, social, and governance (ESG) credit factors as broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental and social credit factors is viewed as below average, while governance credit factors are average. The transaction documents prohibit assets from being related to the following industries: manufacture or marketing of anti-personnel mines, nuclear weapons and chemical weapons, revenue from manufacturing of civilian firearms, tobacco production, mining of thermal coal, oil sands extraction, revenue from natural gas or renewables, provides payday lending, revenue from production or marketing of pornography or prostitution, trade in endangered or protected wildlife and production or trade of illegal drugs. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities. Ratings list REPLACEMENT ORIGINAL CREDIT AMOUNT NOTES NOTES ENHANCEMENT CLASS RATING* (MIL. EUR) INTEREST RATE§ INTEREST RATE (%) RATINGS ASSIGNED B-1-R AA (sf) 27.10 3mE + 2.05% 3mE + 3.51% 27.88 C-R A (sf) 21.30 3mE + 2.53% 3mE + 4.56% 21.85 D-R BBB (sf) 20.20 3mE + 3.80% 3mE + 6.15% 16.13 E-R BB- (sf) 15.30 3mE + 6.50% 3mE + 7.47% 11.80 F-R B- (sf) 10.40 3mE + 8.12% 3mE + 11.02% 8.86 RATINGS AFFIRMED A AAA (sf) 210.51 3mE + 1.20% 3mE + 1.20% 40.44 B-2 AA (sf) 17.30 4.79% 4.79% 27.88 *The rating assigned to the class B-1-R notes, along with the ratings on the class A and B-2 notes, addresses timely interest and ultimate principal payments. The ratings assigned to the class C-R, D-R, E-R, and F-R notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to 6mE when a frequency switch event occurs. 3mE--Three-month Euro Interbank Offered Rate. KINBANE 2024-RPL1: S&P Assigns Prelim B- (sf) Rating to F Notes --------------------------------------------------------------- S&P Global Ratings assigned its preliminary credit ratings to Kinbane 2024-RPL 1 DAC's (Kinbane's) class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd notes. At closing, Kinbane will also issue unrated class RFN and Z notes. S&P said, "Our preliminary ratings address the timely payment of interest and the ultimate payment of principal on the class A notes. Our preliminary 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. The class B-Dfrd to F-Dfrd notes can continue to defer interest even when they become the most senior class outstanding. Interest will accrue on any deferred interest amounts at the respective note rate. "Our preliminary ratings on the class E-Dfrd and F-Dfrd notes also address the payment of interest based on the lower of the stated coupon and the net weighted-average coupon." Senior fees and interest due on the class A notes are supported by a liquidity reserve fund, the general reserve fund and available principal. Kinbane is a static RMBS transaction that securitizes a portfolio of EUR330.5 million loans, which comprises mostly (86.1%) owner-occupied and some buy-to-let (BTL) mortgage loans. The Governor and Company of the Bank of Ireland (BOI), KBC Bank Ireland PLC (KBC), and ACC Bank PLC (ACC) originated the majority of the loans. ICS Building Society originated a small portion of the pool. Of the loans, EUR318.4 million are secured over residential properties in Ireland, so credit is only given to this portion in the credit and cash flow analysis, and EUR12.1 million are unsecured. At closing, the issuer will use the issuance proceeds to purchase the beneficial interest in the mortgage loans from the seller. The issuer grants security over all its assets in the security trustee's favor. S&P said, "We consider the issuer to be a bankruptcy remote entity, and we have received preliminary legal opinions that indicate that the sale of the assets would survive the sellers' insolvency. We expect to receive confirmation of the legal opinions before closing." Mars Finance DAC (Mars) and Pepper Finance Corporation (Ireland) DAC (Pepper) will act as servicers for all of the loans in the transaction. Mars assumed servicing responsibility for the BOI-originated loans (both Snow V retail and business banking subpools) in September 2023. A small segment (4.5% of the total pool) migrated earlier, in April 2023. These loans were serviced by their originator (BOI) up to these dates. Pepper is the servicer of the non-BOI-originated loans. S&P has considered this in light of its operational risk criteria, and it does not constrain its ratings. Mars and Pepper will also act as the legal titleholders until a perfection event occurs. There are no rating constraints in the transaction under S&P's structured finance sovereign risk criteria. S&P said, "We expect that the documented replacement triggers and collateral posting framework under the cap agreement will support a maximum rating of 'AAA' under our counterparty risk criteria. Our final ratings will depend on our review of the final relevant transaction documentation and the relevant triggers and framework being compliant." The timely payment of interest on the class A notes is supported by the liquidity reserve fund, which will be fully funded at closing to its required level of 3.0% of the class A notes' balance. Furthermore, the transaction benefits from a yield supplement of 5.50% overcollateralization, which will be released to the revenue waterfall over time. Principal can also be used to cover certain senior items. The class B to F-Dfrd notes are supported by a non-liquidity reserve fund, which will be available to cover any interest shortfalls and principal deficiency ledger (PDL) amounts outstanding. Although the loans in the pool were originated as prime mortgages, the portfolio has been characterized by high arrears levels (currently 55.2%) and a significant number of restructures (currently 76.4%). S&P has accounted for this in its analysis. S&P said, "In our analysis, we gave credit to payment rates and applied a lower arrears adjustment at 'A' rating category and below to loans that have consistently made above 80% of their scheduled monthly mortgage payments and that the servicer identified for permanent restructure." Preliminary ratings PRELIM. AMOUNT CLASS RATING* (MIL. EUR) CLASS SIZE (%)§ A AAA (sf) 218.132 66.0 B-Dfrd AA- (sf) 16.520 5.0 C-Dfrd A- (sf) 11.568 3.5 D-Dfrd BBB- (sf) 7.436 2.3 E-Dfrd BB (sf) 7.436 2.3 F-Dfrd B- (sf) 9.915 3.0 RFN NR 9.370 2.8 Z NR 41.313 12.5 Yield supplement Overcollateralization (YSO) N/A 18.178 5.5 *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. S&P's preliminary ratings on the class E-Dfrd and F-Dfrd notes also address the payment of interest based on the lower of the stated coupon and the net weighted-average coupon. §Note sizes are based on 94.5% of the total asset balance, which excludes the 5.50% overcollateralization. NR--Not rated. N/A--Not applicable. Dfrd--Deferrable. MADISON PARK XX: Fitch Assigns 'B-sf' Final Rating to Cl. F-R Notes ------------------------------------------------------------------- Fitch Ratings has assigned Madison Park Euro Funding XX DAC DAC's final ratings, as detailed below. Entity/Debt Rating Prior ----------- ------ ----- Madison Park Euro Funding XX DAC A-1 XS2507606718 LT PIFsf Paid In Full AAAsf A-2 XS2511498953 LT PIFsf Paid In Full AAAsf A-Loan LT PIFsf Paid In Full AAAsf A-R Loan LT AAAsf New Rating AAA(EXP)sf A-R XS2783650182 LT AAAsf New Rating AAA(EXP)sf B-1 XS2507606809 LT PIFsf Paid In Full AAsf B-1-R XS2783650265 LT AAsf New Rating AA(EXP)sf B-2 XS2507606981 LT PIFsf Paid In Full AAsf B-2-R XS2783650349 LT AAsf New Rating AA(EXP)sf C XS2507607013 LT PIFsf Paid In Full Asf C-R XS2783650422 LT Asf New Rating A(EXP)sf D XS2507607104 LT PIFsf Paid In Full BBB-sf D-R XS2783650695 LT BBB-sf New Rating BBB-(EXP)sf E XS2507607286 LT PIFsf Paid In Full BB-sf E-R XS2783650778 LT BB-sf New Rating BB-(EXP)sf F XS2507607369 LT PIFsf Paid In Full B-sf F-R XS2783650851 LT B-sf New Rating B-(EXP)sf TRANSACTION SUMMARY Madison Park Euro Funding XX DAC is a securitisation of mainly senior secured loans and bonds with a component of senior unsecured, mezzanine, and second-lien loans. The transaction has a target par of EUR400 million. The portfolio is actively managed by Credit Suisse Asset Management Limited. The collateralised loan obligation (CLO) has an approximately 4.6-year reinvestment period and an approximately 7.5-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 92.5% 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 61.1%. Diversified Portfolio (Positive): The transaction includes two Fitch matrices, which are effective at closing. These correspond to a top 10 obligor concentration limit at 20%, two fixed-rate asset limits of 2.5% and 12.5%, respectively, and a 7.5-year WAL. The transaction also includes various concentration limits, including the maximum exposure to the three-largest Fitch-defined industries in the portfolio at 40%. These covenants ensure the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has an approximately 4.6-year reinvestment period and includes 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. The transaction can extend the WAL test by one year to 7.5 years one year after the issue date if the aggregate collateral balance (defaulted obligations at Fitch-calculated collateral value) is greater than or equal to the reinvestment target par balance, and the transaction is passing all tests. Cash Flow Modelling (Positive): The WAL used for the transaction's matrix and Fitch-stressed portfolio analysis 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, amongst others, passing both the coverage tests and the Fitch 'CCC' bucket limitation test post reinvestment as well a WAL covenant that progressively 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 default rate (RDR) and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would have no impact on the class A-R notes and A-R loan but would lead to a downgrade of two notches for the class B-1-R, B-2-R and C-R notes, and of one notch for all other notes. Downgrades, which are based on the identified portfolio, 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 than the Fitch-stressed portfolio, the class B-1-R, B-2-R, D-R, E-R and F-R notes display a rating cushion of two notches, while the class C-R notes display a cushion of one notch. 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 across all ratings and a 25% decrease of the RRR across all ratings of the Fitch-stressed portfolio would lead to a downgrade of up to four notches for the rated notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would lead to an upgrade of up to three notches for the rated notes, except for the 'AAAsf' notes. During the reinvestment period, upgrades, which are based on the Fitch-stressed portfolio, 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 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 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 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. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Madison Park Euro Funding XX DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. MULLIGAN & HAINES: ATM Hospitality to Invest Fresh Capital ---------------------------------------------------------- The Currency reports that examiners of Mulligan & Haines Hospitality Ltd, the company behind the Lock Keeper gastropub in Ashtown, have succeeded in rescuing the business. According to The Currency, the business was owned by Dublin-based Chinese businessman Colm Wu but under the terms of the deal agreed on March 15, new investor ATM Hospitality Services Limited, which is owned by hospitality expert Alan Murtagh, will invest fresh capital in the company and take it over. However, an agreement could not be reached to rescue a separate company called Castor Ventures Ltd, which is behind the city-centre Mulligan & Haines bar and restaurant on Dame Street in Dublin, The Currency relates. ROUNDSTONE SECURITIES 2: Fitch Assigns B+(EXP)sf Rating to F Notes ------------------------------------------------------------------ Fitch Ratings has assigned Roundstone Securities No.2 DAC (RS No.2) expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information previously received. Entity/Debt Rating ----------- ------ Roundstone Securities No.2 DAC A LT AAA(EXP)sf Expected Rating B LT AA(EXP)sf Expected Rating C LT A(EXP)sf Expected Rating D LT BBB(EXP)sf Expected Rating E LT BB(EXP)sf Expected Rating F LT B+(EXP)sf Expected Rating R LT NR(EXP)sf Expected Rating Z LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY RS No.2 is a securitisation of first-lien Irish residential owner occupied (OO; 78%) and buy-to-let (BTL; 22%) mortgage assets originated prior to 2010 by Bank of Scotland Ireland. The pool was previously securitised in Roundstone No.1 DAC, which was not a Fitch-rated transaction. KEY RATING DRIVERS Restructured Loan Portfolio: The portfolio contains a material proportion of loans that are subject to forbearance and restructuring arrangements (19%) as well as a worse-than-the sector historical performance. This led Fitch to apply an originator adjustment of 1.2x to capture potential performance variation not already captured in the 'Bsf' weighted average (WA) foreclosure frequency (FF). As a result of applying higher 'Bsf' FF assumptions, lower stress multiples were applied to ensure FF assumptions at higher rating levels are not overstated and remain stable throughout the life of the transaction. The borrowers in the pool have an average pay rate of around 110% of the monthly payment due since October 2017. Borrowers that have undergone a restructuring have exhibited a more volatile pay rate month-on-month, but the average pay rate over this period is around 113%. High IO Exposure: The pool contains around 62% (by current balance) of interest-only (IO), split between 41% OO and 21% BTL loans. Fitch sees a material risk of prolonged forbearance for OO borrowers and non-paying BTL IO borrowers if bullet payments are not met at loan maturity. Fitch believes this is most likely to materialise for older borrowers with higher loan-to-values (LTVs), and Fitch has therefore assumed no yield from IO loans with an indexed current-loan-to-value (LTV) greater than 60% and to borrowers aged 60 years or older at loan maturity. Unhedged ECB Base Rate Exposure: Close to 100% of the pool tracks the ECB base rate with a WA margin of around 1.1%. There will be no swap in place to hedge the mismatch between the ECB base rate-linked assets and Euribor-linked notes, exposing the transaction to basis risk. Fitch has therefore applied its basis risk assumptions for this exposure in line with the European RMBS Rating Criteria. Below Model-Implied Ratings: The transaction's rising arrears trend implies collateral performance may worsen and excess spread be further depressed. Fitch accounted for this in its analysis by assuming an increased front-loading of defaults of borrowers currently in arrears by one month and more. Fitch has therefore assigned rating for the class F notes at one notch below its model-implied rating (MIR). RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The transaction's performance may be affected by changes in market conditions and the economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce credit enhancement (CE) available to the notes In addition, unanticipated declines in recoveries could result in lower net proceeds, which may make certain notes susceptible to negative rating action depending on the extent of the decline in recoveries. Fitch found that a 15% increase in the WAFF and a 15% decrease in the WA recovery rate (RR) indicate downgrades of four notches for the class C and E notes and three notches for the remaining notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and upgrades. Fitch found a decrease in the WAFF of 15% and an increase in the WARR of 15% indicate upgrades of one notch for the class B notes, up to two notches for the class C notes, up to three notches for the class D and E notes and up to four notches for the class F. 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 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. 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. TORO EUROPEAN 9: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------------ S&P Global Ratings assigned its ratings to Toro European CLO 9 DAC's class A to F European cash flow CLO notes. At closing, the issuer also issued unrated subordinated notes. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will permanently switch to semiannual payments. The portfolio's reinvestment period ends approximately 4.6 years after closing, and its non-call period ends 2.1 years after closing. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior-secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks CURRENT S&P weighted-average rating factor 2,756.93 Default rate dispersion 601.76 Weighted-average life (years) 4.49 Weighted-average life (years) extended to cover the length of the reinvestment period 4.55 Obligor diversity measure 119.87 Industry diversity measure 20.26 Regional diversity measure 1.29 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 1.25 Target 'AAA' weighted-average recovery (%) 38.36 Target weighted-average spread (net of floors; %) 4.37 Target weighted-average coupon (%) 4.59 Rationale S&P said, "Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. The portfolio is well-diversified as of the closing date, primarily comprising broadly syndicated speculative-grade senior-secured term loans and senior-secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow CDOs." The issuer expects to purchase around 20% of the effective date portfolio from a secured special-purpose vehicle (SPV) selling institution. These assets are subject to participations. The transaction documents require that the issuer and the secured SPV use commercially reasonable efforts to elevate the participations by transferring to the issuer the legal and beneficial interests in such assets as soon as reasonably practicable. No further participations may be entered into from the closing date. S&P said, "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (4.15%), the covenanted weighted-average coupon (4.50%), and the covenanted weighted-average recovery rates at all rating levels, 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. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B to F notes benefits from break-even default rate and scenario default rate cushions that we would typically consider commensurate with higher ratings than those assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings assigned to the notes. The class A notes can withstand stresses commensurate with the assigned ratings. "Until the end of the reinvestment period on Oct. 15, 2028, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and it compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "Under our structured finance sovereign risk criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure and framework is bankruptcy remote. The issuer is a special-purpose entity that meets our criteria for bankruptcy remoteness. "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 class A to F notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." The transaction securitizes a portfolio of primarily senior-secured leveraged loans and bonds, and it will be managed by Chenavari Credit Partners LLP. Ratings AMOUNT CREDIT CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT (%) A AAA (sf) 240.00 3mE +1.65% 40.00 B AA (sf) 48.00 3mE +2.50% 28.00 C A (sf) 26.00 3mE +3.35% 21.50 D BBB- (sf) 28.00 3mE +4.50% 14.50 E BB- (sf) 18.00 3mE +6.98% 10.00 F B- (sf) 12.00 3mE +8.46% 7.00 Sub NR 37.50 N/A N/A *The ratings assigned to the class A and B notes address timely interest and ultimate principal payments. The ratings assigned to the class C to F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. NR--Not rated. N/A--Not applicable. 3mE--Three-month Euro Interbank Offered Rate. VOYA EURO V: Fitch Affirms 'B-sf' Rating on Cl. F Notes ------------------------------------------------------- Fitch Ratings has upgraded Voya Euro CLO V DAC's class D notes, and affirmed the others, as detailed below. Entity/Debt Rating Recovery ----------- ------ -------- Voya Euro CLO V DAC A XS2372435797 LT AAAsf Affirmed AAAsf B-1 XS2372435953 LT AAsf Affirmed AAsf B-2 XS2372436845 LT AAsf Affirmed AAsf C XS2372436092 LT Asf Affirmed Asf D XS2372436258 LT BBB+sf Upgrade BBBsf E XS2372436175 LT BBsf Affirmed BBsf F XS2372436332 LT B-sf Affirmed B-sf TRANSACTION SUMMARY Voya Euro CLO V DAC is a securitisation of mainly senior secured obligations. The portfolio is actively managed by Voya Alternative Asset Management LLC, and the transaction will exit its reinvestment period in April 2026. KEY RATING DRIVERS Resilient Performance; Low Refinancing Risk: The rating actions reflect the transaction's resilient performance and low refinancing risk. As per the last trustee report dated 5 February 2024, the transaction is passing all of its collateral quality and portfolio profile tests. The transaction is currently above target par. The transaction has 3.1% 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 is also low, with 2.1% of the assets in the portfolio maturing before the end of 2025, as calculated by Fitch. 'B/B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors in the 'B' category. The weighted average rating factor (WARF), as calculated by Fitch under the updated criteria, is 25.2. High Recovery Expectations: Senior secured obligations comprise 100% of the portfolio. Fitch views the recovery prospects for these assets as more favorable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate, as calculated by Fitch, is 62.7%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 11%, and no obligor represents more than 1.3% of the portfolio balance, as calculated by Fitch. Cash Flow Modelling: The weighted average life (WAL) used for the transaction's stressed portfolio and matrices analysis is 12 months less than the WAL covenant, to account for structural and reinvestment conditions after the reinvestment period, including the over-collateralisation, Fitch 'CCC' limitation and WARF tests passing, among other things. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during the stress period. ESG Relevance Scores: Fitch does not provide ESG relevance scores for Voya Euro CLO V DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. For more information on Fitch's ESG Relevance Scores, visit the Fitch Ratings ESG Relevance Scores page. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread 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 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. ========= I T A L Y ========= RENO DE MEDICI: Fitch Rates Planned Sr. Sec. Notes 'BB-(EXP)' ------------------------------------------------------------- Fitch Ratings has assigned Reno de Medici S.p.A. 's (RDM) EUR590 million planned senior secured floating-rate notes (FRNs) an expected rating of 'BB-(EXP)' rating with a Recovery Rating of 'RR3' following the company's announced upcoming full refinancing of its capital structure. The senior secured rating reflects full repayment of its existing EUR445 million senior secured FRNs and EUR126 million acquisition term loan with the proceeds of the new notes. The new notes will rank equally with its remaining existing senior secured notes behind its revolving credit facility (RCF), which will increase to EUR100 million from existing EUR75 million as part of the refinancing. The 'RR3' Recovery Rating on the new FRNs reflects its expectation of recoveries in the low 50% range. At this level Fitch sees limited headroom for additional senior secured debt without affecting the expected rating on the notes. The assignment of the final rating is contingent on completing the transaction in line with the terms already presented. Fitch has simultaneously affirmed the Long-Term Issuer Default Rating (IDR) of RDM at 'B+' and the Stable Outlook is driven by an improving business profile due to RDM's acquisition of Fiskeby resulting in greater revenue growth opportunities. This is set against weaker free cash flow (FCF) generation in 2024 and a higher leverage profile in 2023, due to subdued volumes and higher debt. KEY RATING DRIVERS Scale and Diversification Constrain Rating: RDM's small size and limited geographical diversification relative to Fitch rated peers' constrain the IDR. Moreover, a lack of vertical integration exposes RDM to volatility in raw material prices. This is counterbalanced by its long-lasting customer relationships and a strong market position in the white and solid board segments in Europe. It benefits from high exposure to non-cyclical end-markets (around 60% of sales) and long-term plastic substitution trend with paper solutions. Weaker Leverage Profile: Fitch estimates RDM's EBITDA leverage to have increased to 6.1x at end-2023, above its negative rating sensitivity of 5.5x, due to lower profitability and the debt-funded Fiskeby's acquisition. However, given that the new refinancing transaction is leverage-neutral, Fitch expects leverage to recover to within rating sensitivities, at 4.9x by end-2024 and further to 4.6x by end-2025 on improving profitability generation. EBITDA Generation Constrained: Fitch forecasts volumes to grow from 2024, after a decline in 2023, on improved demand and supply conditions, coupled with a production restart at its Villa Santa Lucia mill from March 2024. This, coupled with the high-margin Fiskeby facility, should lift EBITDA margins to around 13% in 2024-2025, from 11.3% in 2023. EBITDA margin was at an all-time high at 16.2% in 2022 as price gains exceeded raw material cost increases and compensated for margin erosion in 2021. However, Fitch sees decrease in EBITDA by around EUR8 million in 2024-2025 as per its earlier rating case from the strategic decision taken by management to close the fire-affected Blendecques mill. RDM believes that shifting some of Blendecques capacity to its nearby mills though would slightly affect operational performance in 2024-2025, but would improve cost efficiencies in the longer run and aid margin improvement. Cost Pass-Through Ability: RDM operates with mainly short-term purchase orders, which compares less favourably than peers working on long-term agreements as short-term contracts do not have an embedded cost pass-through mechanism. However, customer churn rates are low and RDM has demonstrated its ability to pass on input cost increases over time. High customer retention is attributed to its long-term relationships and the quality of its product. Neutral to Mildly Positive FCF: Fitch estimates low single-digit positive FCF margins for 2023 on lower EBITDA and higher interest costs due to increased gross debt and higher capex. Capex intensity for 2023 was high at 9.6%, against the industry average of 4%-5%, due to one-off reconstruction cost of EUR45 million for Blendecques mill. As these costs are funded by insurance inflows, Fitch does not expect them to have resulted in a major cash drain for RDM in 2023. Fitch forecasts FCF to turn negative in 2024 on one-off cash outflows of around EUR40 million to close and shift the facilities of Blendecques mill to its other locations. However, from 2025-2026 onwards, RDM's capex intensity across the rating horizon should remain moderate and in line with its peers', which should lead to moderately positive FCF margins. DERIVATION SUMMARY RDM is small in scale compared with other Fitch-rated packaging peers such as Sappi Limited (Sappi: BB+/Stable), CANPACK Group, Inc (Canpack: BB-/Stable), Ardagh Group S.A. (Ardagh: B-/Negative), and Fiber Bidco S.p.A. (Fedrigoni: B+/Stable). Fitch views RDM's business profile as slightly weaker than Fedrigoni's due to its limited geographical diversification. RDM's forecast EBITDA margins (11.3%-13.1%) in 2023-2025 remains in line with Fedrigoni's (around 13.3%) but are higher than Canpack's (around 11.4%) due to its presence in niche sub-market packaging segments and are supported by a lower reliance on external gas requirement. Its FCF margins of less than 1% for 2023-2024 are broadly comparable with Fedrigoni's and with lower-rated but smaller-sized Bormioli Pharma S.p.A's (Bormioli: B/Stable). Fitch forecasts RDM's financial profile in 2024-2025 to be stronger than Fedrigoni's due to its lower expected leverage and stronger coverage ratios. Fitch views RDM's financial structure as commensurate with a 'B' rating category with gross leverage at 6.1x in 2023 due to its Fiskeby debt-funded acquisition before it falls to 4.9x at end-2024 and 4.6x at end-2025. RDM has stronger deleveraging capacity than Bormioli with EBITDA gross leverage of 6.5x at end-2023, 5.8x at end-2024 and 5.2x at end-2025. KEY ASSUMPTIONS - Revenue growth in 2024-2025 on higher volumes (including Fiskeby's first full-year contribution) and normalised prices, after a decline in 2023 on lower average selling prices and volumes - Villa Santa Lucia mills operational from March 2024 whereas Blendecques mill would be closed across the rating horizon - EBITDA margin of around 13% in 2024-2025, up from 11.3% in 2023 - Capex at around 9.5% of sales in 2023 on mill reconstruction and to normalise at around 4%-5% from 2024 - No dividends over the rating horizon - No M&As over rating horizon except for Fiskeby RECOVERY ANALYSIS KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that RDM would be reorganised as a going concern (GC) in bankruptcy rather than liquidated - A 10% administrative claim - The super senior RCF is fully drawn in post-restructuring and ranks ahead of senior secured debt. Credit facilities, representing working capital, trade credit, import finance and general corporate purposes facilities backed by receivables, are also ranked super senior - Fitch's GC EBITDA estimate is EUR90 million, unchanged from previous estimate after factoring in incremental EBITDA from Fiskeby. The GC EBITDA reflects its view of a sustainable, post-reorganisation EBITDA on which Fitch bases the valuation of the company - An enterprise value (EV) multiple of 5.5x is applied to GC EBITDA to calculate a post-reorganisation valuation. It reflects RDM's leading position in European markets, long-term relationship with clients with well-invested production assets and around 60%-70% exposure to resilient end-markets. This is in line with other packaging peers like Ardagh and Fedrigoni - Fitch assumes the post-refinancing debt structure to comprise its EUR590 million new FRNs, an upsized EUR100 million RCF (assumed fully drawn), about EUR24 million factoring (outstanding value at end-December 2023; deducted from EV) and around EUR20 million other debt - Based on the new capital structure, its waterfall analysis generates a ranked recovery for the senior secured noteholders in the 'RR3' category, leading to a 'BB-' rating for the EUR590 million new senior notes. The waterfall-generated recovery computation output percentage is 52%. Under the current capital structure prior to the refinancing, the debt waterfall includes senior secured notes (SSN) of EUR445 million, EUR126 million senior secured term loan for Fiskeby's acquisition, the super senior RCF (fully drawn in post-restructuring in line with Fitch's Criteria), factoring and other local debt. Based on the existing capital structure, its waterfall analysis generates a ranked recovery for the senior secured noteholders in the 'RR3' category, leading to a 'BB-' instrument rating. The waterfall-generated recovery computation output percentage is 55%. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - EBITDA gross leverage below 4.0x on a sustained basis - FCF margin above 3% on a sustained basis - Improved geographical and product diversification Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - EBITDA gross leverage above 5.5x on a sustained basis - Neutral to negative FCF margin on a sustained basis - EBITDA interest coverage below 2.5x LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: The planned refinancing will improve RDM's liquidity profile by extending the debt maturity profile, and reducing the average cost of financing. Fitch expects RDM's liquidity for 2024 to mainly consist of about EUR51 million of Fitch-adjusted readily available cash and the planned upsized EUR100 million RCF with an expected maturity till 2029. Fitch believes RDM's financial flexibility is sufficient. FCF is expected to remain positive in 2025-2026 after being affected by one-off costs at Blendecques mill in 2024. No Material Maturities Near Term: RDM has no significant short-term debt maturities (apart from factoring) as the debt structure is dominated by long-dated senior secured notes and the new acquisition loan. Fitch assumes full repayment of its existing about EUR445million senior secured FRNs and acquisition debt of EUR126 million, both due in 2026, with the proceeds of the new notes due in 2029-2030. ISSUER PROFILE RDM, founded in 1967 and headquartered in Milan, is a leading European producer and distributor of recycled paper board mainly for the packaging industry. ESG CONSIDERATIONS RDM has an ESG Relevance Score of '4+' for Exposure to Social Impacts due to consumer preference shift from plastic to paper and cardboard packaging, which has a positive impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Reno de Medici S.p.A. LT IDR B+ Affirmed B+ senior secured LT BB- Affirmed RR3 BB- senior secured LT BB-(EXP)Expected Rating RR3 =================== L U X E M B O U R G =================== SUNSHINE LUXEMBOURG: S&P Withdraws 'B' Issuer Credit Rating ----------------------------------------------------------- S&P Global Ratings withdrew its 'B' issuer credit rating on Sunshine Luxembourg VII S.a.r.l. (Galderma) and its 'B' issue ratings on Galderma's senior secured facilities at the company's request. The outlook on the issuer credit rating was stable at the time of the withdrawal. Galderma announced its plan to go public on March 6, 2024. The company had repaid its outstanding debt at the time of the closure of the initial public offering on March 25, 2024. ===================== N E T H E R L A N D S ===================== METINVEST BV: Moody's Affirms 'Caa3' CFR, Alters Outlook to Stable ------------------------------------------------------------------ Moody's Ratings affirmed Metinvest B.V.'s Caa3 long term corporate family rating, Caa3-PD probability of default rating, and Caa3.ua national scale rating (NSR) long term corporate family rating. The outlook on Metinvest was changed to stable from negative. RATINGS RATIONALE The affirmation of Metinvest's ratings and the change of outlook to stable from negative reflect Moody's expectation that the company will continue to generate positive free cash flow (FCF) in 2024 to build up a larger cash balance, in particular in its offshore accounts, that will support the ongoing servicing of Metinvest's debt and the repayment of the outstanding notes due June 2025. Nevertheless, the ratings remain constrained by the government of Ukraine's (Ca stable) local- and foreign-currency ceiling set at Caa3. Additionally, Metinvest's Caa3 CFR reflects the company's operational and logistical risks from the enduring war in Ukraine. The company has a significant portion of its assets in Ukraine and continues to face financial and operational challenges in the midst of the invasion of the country by Russia, including direct damages to its assets in 2022, disruption to the workforce, and reduced access to the necessary infrastructure to freely export its goods in the currently extraordinarily stressed circumstances. Moody's notes, however, that the introduction of the Black Sea corridor in the second half of 2023 provided increased capacity for exports. Despite these challenges, Metinvest has demonstrated financial resilience. In 2023, the company's revenues which totalled $7,397 million were down 11% compared to the prior year. Moody's notes that the full-scale invasion of Ukraine impacted the comparability of the Metinvest's performance in 2023 with the previous year as 2022 results included almost two months of activity before the war. Lower selling prices contributed to the overall decline in revenues by 51% and 15% in the Mining and Metallurgical segments in 2023, respectively, across steel, coke, iron ore and coking coal products sales and resales. Pressure on prices was partly mitigated by increased sales volume, in particular in the company's Mining segment, with a strong increase in iron ore products (iron ore concentrate and pellets), while Metallurgical volumes were relatively flat supported among others by higher volumes from Kamet Steel (billets) and re-rolling assets, as well as stronger steel and coke resales. Higher volumes were driven, among other factors, by the reopening of the Black Sea corridor in the second half of 2023 providing additional export opportunities and possibilities to reach distant markets. Moody's expects that Metinvest should benefit from improved access to export markets throughout 2024 driving increased capacity utilization and subsequently higher sales volumes which will more than offset forecast lower average selling prices and result in a moderate recovery in earnings. Concurrently, Metinvest experienced a significant decline in Adjusted EBITDA (as reported by the company) to $861 million in 2023 from $1,873 million in prior year. The decline was mainly driven by lower average sales prices and increased transportation costs, as well as the higher comparison base of 2022 when almost two months of operations were not affected by the war. Despite the decline in EBITDA, Metinvest generated significant positive FCF (as calculated by the company as net cash from operating activities less net cash used in investing activities) of $410 million in 2023 supported by a favourable movement in working capital following destocking of steel and coal products, among others, as well as lower capital expenditures of $284 million focused on maintenance capex to preserve cash. LIQUIDITY Moody's considers that Metinvest benefits from an adequate liquidity position for the next 18 months supported by its cash balance of $646 million as of the end of 2023 which is expected to increase in 2024 thanks to meaningful positive FCF generation. The rating agency assumes that around 75% of the cash balance is in offshore accounts, however, part of this cash is subject to requirement for repatriation of foreign currency proceeds from Ukrainian exports within 180 days under the National Bank of Ukraine (NBU) restrictions. Although the amount of fully unrestricted offshore cash is uncertain, the company has remained current on its debt obligations since the outbreak of the war, and liquidity is likely to be sufficient in 2024 and 2025 for Metinvest to fund its operations, service interest and coupon payments on its debt, and repay the outstanding c. EUR234 million under the senior notes due June 2025. The outstanding amount under the senior notes due 2025 was reduced to EUR234 million in early 2024 following the repurchasing by the company of c. EUR61 million of these notes and their prompt cancellation in January and February 2024. Moody's notes, however, that beyond 2025, Metinvest faces large debt maturities, including the outstanding $494 million senior notes due April 2026, which remain subject to elevated default risk in the absence of access to debt capital markets and of strong earnings and cash flow recovery. OUTLOOK The stable outlook reflects Moody's expectation that Metinvest will increase sales volumes in 2024 with a large proportion directed for export to mitigate lower projected prices while maintaining sufficient level of offshore cash balance to support the timely repayment of the senior notes due June 2025. The stable outlook also reflects the expectation that while the operational environment will remain challenging due to the ongoing war in Ukraine, the company will not experience a deterioration of its production and logistical capacity. 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 Metinvest's CFR is at the level of Ukraine's country ceiling. Downward pressure on the ratings could be driven by a sovereign downgrade or further weakening in the company's credit profile as a result of pronounced physical damage to assets, market and logistics disruptions, cash flow generation and impaired liquidity. Liquidity erosion would likely raise the likelihood of default, which could also result in downward pressure, as would an expectation for lower recovery for bondholders in the event of a default. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Steel published in November 2021. COMPANY PROFILE Metinvest, registered in the Netherlands, is the parent company of a vertically integrated steel and mining group with assets in Ukraine, the European Union (EU), the UK and the US. The company owns assets across the production chain from iron ore mining, coking coal mining and coke production, through to semi-finished and finished steel production. The steel products, iron ore, coke and metallurgical coal are sold on both the Ukrainian and international markets. Metinvest's major shareholders are System Capital Management (71%), a vehicle owned by Mr. Rinat Akhmetov, and Smart Steel Limited (24%). ============= R O M A N I A ============= GLOBALWORTH REAL ESTATE: S&P Affirms 'BB+' ICR, Outlook Negative ---------------------------------------------------------------- S&P Global Ratings affirmed its 'BB+' long-term issuer credit rating on Globalworth Real Estate Investments Ltd. (Globalworth). At the same time, S&P assigned its 'BB' issue rating to the company's proposed senior unsecured notes, and placed its 'BB+' issue rating on Globalworth's existing senior unsecured notes on CreditWatch with negative implications. This indicates that S&P could lower the ratings over the coming weeks if any portion of existing notes remains after its refinancing plans are completed, as per its current expectations. The negative outlook reflects that S&P could downgrade Globalworth over the next 12 months if the company does not complete the transaction as planned or if its EBITDA interest coverage falls toward 1.8x, for example, due to higher-than-anticipated refinancing costs. Pro forma the conclusion of the exchange offer, Globalworth has significantly reduced its refinancing risks over the next few years as it has extended the average maturity profile of its debt to above 5 years, with limited maturities until 2029. Globalworth currently has a EUR450 million bond due March 2025 and a EUR400 million bond due July 2026, which together comprise about 53% of its total outstanding debt. The company has proposed to the holders of these bonds to exchange each par amount of the existing notes for 60 cents of new notes, plus a 40-cent early cash consideration for the bond due in 2025 and 80 cents of new notes plus a 20-cent early cash consideration for the bond due 2026. Hence, the new issuance would comprise a EUR270 million note due in 2029 and a EUR320 million note due in 2030, both bearing a coupon of 6.25% plus non-cash return in the form of payment-upon-redemption of 2%. In addition, the new bonds will include a mandatory redemption feature that returns a further EUR45 million and EUR20 million of cash to holders of the new 2029 and 2030 notes respectively, upon completion of asset sales generating proceeds of at least EUR65 million. S&P said, "We expect the transaction to be completed in April 2024 and as a result, the company's weighted-average maturity would increase to above 5 years (pro-forma closing of the transaction as of April 2024) compared with 3.7 years as of Dec. 31, 2023. Following the transaction, Globalworth would have limited refinancing needs, of EUR147 million in total (mostly secured bank loans), until 2029. "S&P Global Ratings views the exchange as opportunistic as we consider the transaction to be proactive liability management rather than a distressed restructuring, given Globalworth's refinancing plans and that the exchange offer takes place several quarters ahead of the existing bond maturities. Additionally, we do not view a conventional default as likely without the anticipated transaction, given the company's adequate liquidity over the 12 months started Dec. 31, 2023. "Our current negative outlook reflects that Globalworth's adjusted EBITDA-interest-coverage ratio will fall temporarily close to our downside threshold of 1.8x in the next six-to-nine months, but we expect it to recover to above 2x thereafter. The new bonds will have an expected higher coupon, at 6.25% plus non-cash return in the form of payment-upon-redemption of 2%, compared to the existing notes of 3.0% and 2.95%. As a result, we anticipate the company's cost of debt will increase significantly following the refinancing activities, to about 5.0%-5.5% from 3.7% at end-2023. We therefore forecast Globalworth's EBITDA-interest-coverage ratio will deteriorate to 1.8x over the next six-to-nine months but recover to above 2x by mid-2025, supported by deleveraging efforts through asset disposals. Because we expect those efforts will not be completed until near the end of 2024, the improvement in Globalworth's creditworthiness will occur with a delay, starting in 2025. Accordingly, we reassessed Globalworth's financial risk profile to significant from intermediate. "Post transaction, we expect S&P Global Ratings-adjusted debt to EBITDA and debt-to-debt-plus equity ratio to improve materially assuming further asset disposals and debt reduction by the end of 2024.We understand that Globalworth is aiming to further reduce leverage by the end of the year and we assume that the company will complete up to about EUR180 million net proceeds of asset disposals, expected to be closed by the second or third quarter of 2024. Consequently, we expect the company's debt-to-debt-plus-equity ratio to decline to 37%-38% in 2024 and 36%-38% in 2025 (43.3% as of Dec 31.2023), despite our assumption of potential further portfolio devaluation of 2%-3% over 2024-2025. "Furthermore, we anticipate our debt to EBITDA will fall toward 8.0x in 2024 and 7.5x in 2025 (9.4x as of Dec.31, 2023). Consequently, we believe these ratios compare favorably with other peers positioned in the same financial risk category, and we have applied our positive comparable rating analysis modifier, which leads us to derive our 'BB+' long-term issuer credit rating. "We expect operating fundamentals to remain stable for Globalworth over the coming 12 months, bolstered by well-located assets. During 2023, Globalworth reported 5.8% like-for-like growth in net rental income, mostly due to the indexation of leases. At the same time, the average standing occupancy of the company's combined commercial portfolio was 88.3%, an increase of 2.6% compared with the previous year thanks to the disposal of a vacated Polish office building. We expect the company to continue benefiting from positive like-for-like growth in rental income, while maintaining the current occupancy rate, even though we anticipate the leasing market for offices will remain challenging amid slowing economies, and remote working trends. "We rate the new senior unsecured notes at 'BB', one notch lower than the issuer credit rating. Following the transaction, we estimate the capital structure will have a secured debt-to-total outstanding debt of well above 50%. This is above our threshold of 50% of secured debt to total debt, resulting in meaningful structural subordination. We therefore deduct one notch from the 'BB+' long-term issuer rating to derive the 'BB' issue rating on the notes. "We have placed our 'BB+' issue rating on the company's existing senior unsecured bonds on CreditWatch with negative implications, implying a risk of a potential remaining stub, depending on the final acceptance level of the exchange offers. Should the transaction be finalized as per our expectations, we would be likely to downgrade the existing senior unsecured bonds to 'BB', that is, one notch below the long-term issuer credit rating on Globalworth. "The negative outlook reflects our view that we could downgrade Globalworth over the next 12 months if the company does not complete the transaction as planned or if its EBITDA interest coverage falls toward 1.8x, for example, due to higher-than-anticipated refinancing costs." S&P would lower its rating on Globalworth if the company's: -- EBITDA interest coverage falls toward 1.8x or below on a sustainable basis; -- Debt to debt plus equity increases well above 40% for a prolonged period or its debt-to-The EBITDA ratio increases toward 9.5x; -- Liability management is not completed within the anticipated timeframe; or -- Liquidity deteriorates below the adequate assessment level. S&P could revise the outlook to stable if: -- EBITDA interest coverage remains comfortably above 1.8x, -- The debt to debt plus equity ratio remains close to 40%, -- Debt to EBITDA remains well below 9.5x, or -- Liquidity remains adequate. A revision of the outlook back to stable would also depend upon the company's ability to maintain stable operating performance, including positive like-for-like growth, and maintaining stable or improving occupancy levels. S&P will resolve the CreditWatch placement on the existing senior unsecured notes upon completion of the exchange offer, which S&P expects will happen in the next few weeks. ========= S P A I N ========= TDA 29 FTA: Fitch Affirms 'CCCsf' Rating on Class D Notes --------------------------------------------------------- Fitch Ratings has affirmed TDA 29, FTA and TDA 30, FTA's notes and revised the Outlook on TDA 29's class C notes to Positive from Stable, as detailed below. Entity/Debt Rating Prior ----------- ------ ----- TDA 30, FTA Serie A ES0377844008 LT AAAsf Affirmed AAAsf TDA 29, FTA Class A2 ES0377931011 LT AAAsf Affirmed AAAsf Class B ES0377931029 LT AAAsf Affirmed AAAsf Class C ES0377931037 LT Asf Affirmed Asf Class D ES0377931045 LT CCCsf Affirmed CCCsf TRANSACTION SUMMARY The transactions comprise fully amortising Spanish residential mortgages originated and serviced by Banco de Sabadell, SA (BBB-/Positive/F3) and Banca March (not rated) for TDA 29, and by Banca March for TDA 30. Credit enhancement (CE) consists of over-collateralisation and cash reserves. KEY RATING DRIVERS Gradual CE Build Up: The rating actions reflect Fitch's view that the notes are sufficiently protected by credit enhancement (CE) to absorb the projected losses commensurate with rating scenarios. Despite the current pro-rata amortisation of the notes in both deals, Fitch projects CE ratios will increase gradually, considering the non-amortising reserve funds and the strong performance of both transactions. Excessive Counterparty Exposure: The revision of the Outlook on TDA 29's class C notes reflects the rating cap at the transaction account bank (TAB) provider's Long-Term Deposit Rating (Societé Generale, S.A; 'A'). Despite the increase in CE to 4.0% from 3.4% one year ago, the class C notes' rating is capped by the excessive counterparty dependency on the TAB holding the cash reserves. This is because CE held at the TAB represents more than half of the total CE available to this tranche and the sudden loss of these funds would imply a downgrade of 10 or more notches in accordance with Fitch's criteria. TDA 30 Swap Counterparty Triggers Breached: Fitch has not given credit to the total return swap arrangement in TDA 30, as the Issuer Default Ratings (IDR) of the hedge provider (Banco Santander S.A., A-/Stable/F2) are not in line with the contractually defined applicable minimum eligibility triggers of 'A' or 'F1', and transaction parties have confirmed no restructuring or remedial actions will be implemented. The swap documentation has an explicit reference to the Long- and Short-Term IDRs of the derivative provider, therefore the Derivative Counterparty Rating cannot be considered for assessing eligibility, as also confirmed by the trustee. Its exclusion leaves the transaction exposed to excess spread reduction. Neutral Asset Performance Outlook: The rating actions reflect its broadly stable asset performance expectations for the transactions, in line with the neutral asset outlook for eurozone RMBS transactions and Fitch's views on the Spanish housing sector for the next few years. The transactions have a low share of loans in arrears over 90 days (less than 0.6% as of the latest reporting dates) with gross cumulative defaults at 5.1% for TDA 29 and 4.3% for TDA 30. The pools have long seasoning of over 17 years. ESG Considerations: TDA 30's hedge provider is not in line with the contractually defined minimum eligibility triggers and the transaction parties have confirmed no restructuring or remedial actions will be implemented. This has a negative impact on the credit profile and is highly relevant to the rating resulting in a change to the rating of at least one notch. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade For the notes that are rated 'AAAsf, a downgrade of Spain's Long-Term IDR that could decrease the maximum achievable rating for Spanish structured finance transactions. For TDA 29's class C notes, a downgrade of the TAB's long-term deposit rating could trigger a corresponding downgrade of the notes. This is because the notes' rating is capped at the TAB rating given the excessive counterparty risk exposure. CE ratios unable to fully compensate the credit losses and cash flow stresses associated with the current ratings, all else being equal, will also result in downgrades. A 15% increase in the weighted average (WA) foreclosure frequency and a decrease in the WA recovery rate by 15 % would result in a rating impact of two notches for TDA 29's class B and C notes, and TDA 30's class A notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Notes rated at 'AAAsf' are rated at the highest level on Fitch's scale and cannot be upgraded For TDA 29's class C notes an upgrade of the TAB's long-term deposit rating could trigger a corresponding upgrade of the notes. This is because the notes' rating is capped at the TAB rating given the excessive counterparty risk exposure. 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 TDA 29, FTA, TDA 30, 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 pool[s] ahead of the transactions' 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS TDA 29's class C notes' rating is directly linked to the TABs' long-term deposit rating due to excessive counterparty dependency. ESG CONSIDERATIONS TDA 30 has an Environmental, Social and Governance (ESG) Relevance Score of 5 for Transaction Parties & Operational Risk as the hedge provider is not in line with the contractually defined minimum eligibility triggers and transaction parties have confirmed no restructuring or remedial actions will be implemented, which has a negative impact on the credit profile and is highly relevant to the rating resulting in a change to the rating of at least one notch. 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. =========== S W E D E N =========== OPTIGROUP BIDCO: Fitch Affirms 'B' LongTerm IDR, Outlook Stable --------------------------------------------------------------- Fitch Ratings has affirmed OptiGroup Bidco AB's (OptiGroup) Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook. Fitch has also affirmed OptiGroup's senior secured debt rating at 'B+' with a Recovery Rating of 'RR3'. The affirmation balances OptiGroup's high leverage with a solid business profile. The successful integration of the acquired businesses together with implemented cost-efficiency measures should contribute to deleveraging within its current sensitivities over the rating horizon to 2027. OptiGroup has leading market positions in the fragmented business-essentials distribution market and limited geographic, product, customer and supplier concentration. Fitch expects the group to continue to pursue a bolt-on M&A-driven growth strategy, with limited execution risk given its decentralised organisation. Fitch views positively the group's successful integration record and its prudent policy of acquiring companies with a clear strategic fit at sensible valuations. KEY RATING DRIVERS High Leverage, Expected to Decline: Fitch estimates OptiGroup ended 2023 with higher EBITDA leverage than previously anticipated at 7.0x (or 6.6x pro-forma (PF) for acquisitions) due to softer performance. As a result, gross leverage is at the upper end of its 5.5x-7.0x sensitivity range. Fitch forecasts deleveraging towards 5.5x by 2026, driven by contributions from the acquired entities as well as implemented costs - cutting initiatives, which will help support margins. This is underscored in the Stable Rating Outlook. Softer Performance in 2023: Fitch estimates revenue to have declined 11.6% in 2023, due to structural decline in the paper segment, a challenging packaging segment as well as negative foreign-exchange (FX) effects in the Nordics. Packaging is hit by negative developments, particularly in the retail segment. The DIY and construction segments are also showing signs of decline, especially in Finland. In contrast, its facility & safety (FS) and medical segments (41% of 2023 PF revenue) showed strong revenue and EBITDA performance due to pricing and efficiency measures. Fitch estimates PF EBITDA in 2023 to have fallen broadly in line with revenue by 15%. Strong Cash Flow Generation: Fitch estimates the group to have released around EUR75 million of working capital, mainly attributable to inventory management. This, together with its fairly low capex requirement (less than 1% of revenue) and modest M&A in 2023, should have led to a material cash balance at end-2023 (estimated at around EUR193 million, before accounting for restricted cash). Fitch expects the group to use this cash for further M&A, which will contribute to revenue and EBITDA growth over 2024-2027. Bolt-ons Add Diversification: OptiGroup undertook few acquisitions between 2023 to early 2024, which while not material in size, contributed to segmental expansion (packaging in the Nordics and FS in the Netherlands). With its acquisition of Top Service (a provider of critical facility management products to restaurants and hotels in the Bavarian region), the group has entered the German market, where it intends to grow. Fitch expects acquisitions to accelerate in 2024 to compensate for its slower pace in 2023. New acquisitions should help broaden diversification and, absent major unforeseen execution risks, contribute to improved profitability, although margin expansion over the forecast period is slower than previously anticipated. Transition from Paper Positive: Since OptiGroup was spun off from Stora Enso's paper distribution business in 2008, it has diversified into the distribution of other products with better growth prospects and away from non-core commodity paper by selling off its French and German businesses. OptiGroup's core operations in the FS, packaging and medical segments were around 70% of revenue in 2023, with the rest from paper and business supplies, which includes the declining pure paper segment. Decline in Paper Prices: After a very strong performance in 2022, the paper segment materially declined in 2023 on price reduction, with revenue estimated to have declined 20% and EBITDA by 42%. After normalisation in 2023, Fitch expects volumes and sales in the paper segment to contract by low single digits per annum to 2027 although the segment should remain cash flow-positive. Sound Business Profile: Fitch expects the enlarged OptiGroup to generate revenues of EUR1.6 billion in 2024 from the supply of products and solutions to the cleaning and facility management, hotel & restaurant, healthcare, the manufacturing industry and graphical paper sectors. These are all fairly stable sectors as many products relate to daily essentials and therefore enjoy non-cyclical demand. OptiGroup also has good geographic diversification across the Nordics, Benelux, Switzerland, Germany, and a growing number of other countries in Europe. Its strong end-market diversification was underlined by its FS and medicals segments benefiting from increased demand for cleaning and hygiene during the pandemic, which helped compensate for rapidly declining demand for its non-core commodity paper. Continued Acquisitive Growth Expected: Fitch expects OptiGroup to continue its growth strategy of bolt-on acquisitions. Its rating case includes acquisitions of more than EUR250 million over 2024-2027, in line with the group's growth target including acquisitions. Fitch expects acquisitions to be moderate in size and mainly financed by internally generated cash flows. DERIVATION SUMMARY OptiGroup has close peers in other Nordic distributors, including Winterfell Financing S.a.r.l. (Stark Group; B/Stable) and Quimper AB (Ahlsell, B+/Stable), which was recently upgraded on structurally lower leverage (below 5.0x to 2026)) as the latter is less exposed to the new-build residential market. These two peers are larger by revenue and mainly exposed to the more cyclical construction and renovation sectors. OptiGroup's historical margins are broadly similar to those of Stark but weaker than Ahlsell's, as the latter is supported by its strong end-market diversification given its higher exposure to infrastructure and industrial end-markets. Other relevant peers are business services providers Irel Bidco S.a.r.l. (IFCO; B+/Stable), TTD Holding III Gmbh (B/Stable) and Polygon Group AB (B/Negative). These companies are smaller, highly niched but with strong market positions and generally have better margins than OptiGroup. Optigroup has slightly lower leverage than many peers. Polygon in 2021 re-leveraged to above 7x where Fitch expects it to remain until 2024, versus Optigroup's PF EBITDA leverage of 6.2x in 2022 and forecast 5.8x by 2025. KEY ASSUMPTIONS Fitch's Key Assumptions within its Rating Case for the Issuer - Organic sales to decline 1.0% in 2024, on slower performance at its paper and packaging segments. Organic sales 1% CAGR for 2025-2027, driven by FS and medical segments - Gross profit margin to improve to 28.1% in 2025 from 27.8% in 2023 as a result of an improved product mix and increased exposure to spot contracts with small customers - EBITDA margin to rise towards 7.2% in 2027 from 6.8x in 2023 on cost efficiencies and contributions from acquired businesses - Annual restructuring costs of EUR9 million to 2027, reflecting bolt-on acquisitions - Capex at 0.8% of revenue to 2027 - Acquisitions of about EUR100 million in 2024, followed by EUR50 million to 2027, funded by cash on balance sheet based on a 7.5x multiple and 8% EBITDA margin - No dividend distribution to 2027 RECOVERY ANALYSIS KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that OptiGroup would be reorganised as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Its GC EBITDA estimate at EUR90 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA level on which Fitch bases the enterprise valuation (EV). An unchanged EV multiple of 5x EBITDA is applied to the GC EBITDA to calculate a post-reorganisation EV. The 5x multiple is supported by OptiGroup's diversified market exposure, including good geographic coverage and strong market positions in a number of its sectors. The group's two revolving credit facilities (RCFs) totaling EUR60 million are assumed to be fully drawn on default. The RCFs and term loan B are senior secured and rank equally between themselves in the recovery waterfall. The most senior in the structure is EUR35 million debt, which includes an asset-based facility and vendor financing. OptiGroup has drawn down EUR15 million from its EUR80 million factoring facility in the last 12 months. In line with its Corporate Rating Criteria, this amount adjusted for a used discount of 17% is deducted from EV. The waterfall analysis output percentage on metrics and assumptions is 'B+'/'RR3'/58% for senior secured debt (previously 'B+'/'RR3'/59%). RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Increase in EBITDA margin to above 8% on a sustained basis - Gross debt below 5.5x EBITDA on a sustained basis - Free cash flow (FCF) margin sustained above 2% - EBITDA interest coverage above 2.5x on a sustained basis. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Failure to improve EBITDA margin above 6% as a result of unsuccessful integration of acquired companies - Gross debt above 7.0x EBITDA on a sustained basis - FCF margin at breakeven - EBITDA interest coverage sustained below 1.75x LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Fitch views OptiGroup's liquidity as sufficient for 2024-2027, with low single-digit FCF margins and limited working-capital swings. The group estimates to have to have accumulated at end-2023 EUR193 million of cash. Fitch restricts EUR20 million of cash in its analysis. OptiGroup's debt structure includes a EUR465 million first-lien term loan and a EUR200 million second- lien term loan maturing in 2029 and 2030, respectively. It also has access to EUR60 million in its RCFs, fully undrawn at end-2023 and maturing in 2028. ISSUER PROFILE Swedish-based OptiGroup is a distributor of everyday essentials across facility and safety, packaging, medical and paper& business supplies to 105,000 companies across 20+ countries. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- OptiGroup Bidco AB LT IDR B Affirmed B senior secured LT B+ Affirmed RR3 B+ SAMHALLSBYGGNADSBOLAGET: S&P Raises ICR to 'CCC', Outlook Negative ------------------------------------------------------------------ S&P Global Ratings raised its long-term issuer credit rating on Swedish real estate landlord Samhallsbyggnadsbolaget i Norden AB (SBB) to 'CCC' from 'SD' (selective default), and its issue rating on its affected senior unsecured debt to 'CCC' from 'D' (default). S&P affirmed its 'CCC' issue ratings on SBB's 2025 and 2026 senior unsecured notes. The recovery rating remains at '3'. At the same time, S&P raised its issue ratings on the three euro subordinated bonds to 'C' from 'D'. The negative outlook on S&P's long-term rating on SBB reflects the risk of a conventional default or further distressed debt offers within the next 12 months, if SBB does not execute its revised business and funding strategy as planned. On March 26, SBB completed a tender offer at prices well below par, with cash proceeds of EUR163 million allocated solely to the holders of its three euro denominated subordinated notes and its senior unsecured bonds, due 2026, 2027, and 2028. S&P said, "We view the accepted tender offer as distressed due to the risk of a default linked to SBB's vulnerable financial position, and because creditors will receive less than the original promise. We consider these repurchases as tantamount to a default under our criteria because, not only have the lenders received materially less value than they were initially promised under the terms of the original securities, but we also believe that there was a realistic possibility of a conventional default on the instruments subject to the tenders, over the near to medium term. "SBB will continue to face significant debt maturities, totaling about Swedish krona (SEK) 10 billion over 2024 and 2025, including its EUR550 million nominal issued senior unsecured bond, due January 2025. We believe its access to capital markets remains impeded. Asset sales continue to be the most likely path to SBB deleveraging and managing the maturity wall in the foreseeable future. "Moreover, we still view SBB's capital structure as unsustainable over the longer term until the company can demonstrate capital structure stability and an improved liquidity position through access to diversified funding sources or timely asset sales. Although SBB has attracted some funding through the sale of equity stakes in several asset portfolios--demonstrated by the recent Brookfield and Castlelake transaction--we believe execution of these steps remains challenging and carries a high degree of uncertainty under current circumstances. "We raised our ratings on SBB´s subordinated bonds to 'C' as we believe the company will very likely defer hybrid coupon payments within the next 12 months. We continue to believe that SBB is highly likely to defer hybrid coupon payments within the next 12 months, especially after the payment of the common dividend of SEK2.1 billion, expected during the second quarter of 2024. As stated by management in its full-year 2023 report, the company will remain cautious toward hybrid coupon payments until its financial position has improved. Therefore, we raised our issue ratings on the subordinated debt to 'C' from 'D'. We maintain our intermediate equity content on the hybrid instruments reflecting our expectation that the issuer is willing to use the instruments to absorb losses or conserve cash. "We consider hybrids to be eligible for an intermediate equity content assessment if they have at least 10 years remaining before their effective maturity date, as defined by our criteria, when the issuer credit rating is in the 'B' category or lower." The negative outlook reflects the risk of a conventional default or further distressed debt offers within the next 12 months, if SBB does not execute its revised business and funding strategy as planned. S&P said, "We could lower the ratings on SBB if the company fails to execute sufficient asset disposals or otherwise secure sufficient funding for its short-to medium-term liquidity needs. "We could also downgrade the company if additional unexpected events occurred, including materialized legal risk, significantly constraining SBB's credit profile or liquidity, or in the event of another tender offer or bond buyback that we considered to be distressed and tantamount to default. "We could raise the ratings on SBB if the company managed to proceed with sufficient and timely asset disposals or raised additional capital to successfully refinance debt maturities in the medium term and restore its liquidity." =========== T U R K E Y =========== [*] Fitch Hikes 9 Turkish Local & Regional Govt's LT IDRs to 'B+' ------------------------------------------------------------------ Fitch Ratings has upgraded nine Turkish local and regional governments' (LRGs) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRS) to 'B+' from 'B'. The Outlooks on Ankara, Antalya, Bursa, Izmir, Manisa, and Mugla are Positive mirroring the Outlook on the sovereign as their IDRs are capped by the sovereign. The Outlooks on Istanbul, Konya and Mersin are Stable as they are no longer capped by the Turkish sovereign. Fitch has also upgraded Istanbul's senior unsecured rating to 'B+' from 'B'. Under applicable credit rating agency (CRA) regulations, the publication of LRG reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from the schedule in order to comply with the CRAs' obligation to issue credit ratings based on all available and relevant information and disclose credit ratings in a timely manner. Fitch interprets this provision as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that Fitch believes makes it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status. The next scheduled review date for Fitch's ratings on Ankara, Antalya, Bursa, Istanbul is 2 August 2024 and for Izmir, Konya, Manisa, Mersin and Mugla 16 August 2024, but Fitch believes the developments for the issuers warrant such a deviation from the calendar and its rationale for this is set out in the first part (High weight factors) of the Key Rating Drivers section below. The National Ratings (NRs) are unaffected by these rating actions and may be reviewed if its NR equivalency analysis results in different relative creditworthiness across Turkish issuers. KEY RATING DRIVERS HIGH The upgrade of the IDRs of the nine Turkish LRGs follows the upgrade of Turkiye's sovereign ratings (see 'Fitch Upgrades Turkiye to 'B+'; Outlook Positive' dated 8 March 2024 on www.fitchratings.com), as the LRGs' ratings are capped by the sovereign ratings (i.e. their Standalone Credit Profiles (SCPs) ranging from 'bb-' to 'bbb' for Ankara, Antalya, Bursa, Izmir, Manisa and Mugla are above the sovereign while the SCPs of Istanbul, Konya and Mersin at 'b+' are on par with the sovereign). Turkish LRGs cannot be rated above the sovereign due to high fiscal interdependence between the central government and the Turkish subnationals. LOW No changes have been made applied to the LRGs' key rating factors, risk profiles, debt sustainability scores or SCPs. For individual key rating drivers see the latest published rating action commentary. DERIVATION SUMMARY Fitch assesses the SCPs of Ankara and Mugla at 'bbb', reflecting the combination of a 'Weaker' risk profile and debt sustainability metrics assessed in the 'aaa' category. Their IDRs are capped by the Turkish sovereign. Fitch assesses Manisa's SCP at 'bb+', reflecting the combination of a 'Vulnerable' risk profile and debt sustainability metrics assessed in the 'aaa' category and a debt service coverage ratio above 2.0x. Manisa's IDRs are capped by the Turkish sovereign. The SCPs of Antalya, Bursa and Izmir are assessed at 'bb-', reflecting the combination of a 'Vulnerable' risk profile and debt sustainability metrics assessed in the 'aaa' category and a debt service coverage ratio above 1.5x. Their IDRs are capped by the Turkish sovereign. The SCPs of Istanbul, Konya and Mersin are assessed at 'b+', reflecting the combination of a 'Vulnerable' risk profile and debt sustainability metrics assessed in the 'aa' category. Their IDRs are aligned with the sovereign's 'B+' IDR. The Stable Outlooks reflect that their ratings are no longer capped by the Sovereign due to their SCPs being 'b+'. In its assessment Fitch does not apply extraordinary support from the upper-tier government or asymmetric risk. KEY ASSUMPTIONS Rating Cap (Long-Term IDR): 'B+, raised with High Weight' Qualitative assumptions and assessments and their respective change since their last reviews on 9 February 2024 and 23 February 2024 for nine Turkish LRGs and weight in the rating decision are as follows: Ankara and Mugla Risk Profiles: 'Weaker/ Unchanged with Low Weight' Revenue Robustness: 'Midrange/ Unchanged with Low Weight' Revenue Adjustability: 'Weaker/ Unchanged with Low Weight' Expenditure Sustainability: 'Weaker/ Unchanged with Low Weight' Expenditure Adjustability: 'Midrange/ Unchanged with Low Weight' Liabilities and Liquidity Robustness: 'Midrange/ Unchanged with Low Weight' Liabilities and Liquidity Flexibility: 'Weaker/ Unchanged with Low Weight' Debt sustainability: 'aaa' category, Unchanged with Low Weight' Budget Loans (Notches): N/A, Unchanged with Low Weight Ad-Hoc Support (Notches): N/A, Unchanged with Low Weight Asymmetric Risk: 'N/A, Unchanged with Low Weight' Rating Cap (LT IDR): 'B+, raised with High Weight' Rating Cap (LT LC IDR): 'B+, raised with High Weight' Rating Floor: 'N/A, Unchanged with Low weight' Quantitative assumptions - issuer-specific: 'Unchanged with Low Weight' Antalya, Bursa, Izmir and Manisa Risk Profiles: 'Vulnerable/ Unchanged with Low Weight' Revenue Robustness: 'Midrange/ Unchanged with Low Weight' Revenue Adjustability: 'Weaker/ Unchanged with Low Weight' Expenditure Sustainability: 'Weaker/ Unchanged with Low Weight' Expenditure Adjustability: 'Midrange/ Unchanged with Low Weight' Liabilities and Liquidity Robustness: 'Weaker/ Unchanged with Low Weight' Liabilities and Liquidity Flexibility: 'Weaker/ Unchanged with Low Weight' Debt sustainability: 'aaa' category, Unchanged with Low Weight' Budget Loans (Notches): N/A, Unchanged with Low Weight Ad-Hoc Support (Notches): N/A, Unchanged with Low Weight Asymmetric Risk: 'N/A, Unchanged with Low Weight' Rating Cap (LT IDR): 'B+, raised with High Weight' Rating Cap (LT LC IDR): 'B+, raised with High Weight' Rating Floor: 'N/A, Unchanged with Low weight' Quantitative assumptions - issuer-specific: 'Unchanged with Low Weight' Istanbul, Konya and Mersin Risk Profiles: 'Vulnerable/ Unchanged with Low Weight' Revenue Robustness: 'Midrange/ Unchanged with Low Weight' Revenue Adjustability: 'Weaker/ Unchanged with Low Weight' Expenditure Sustainability: 'Weaker/ Unchanged with Low Weight' Expenditure Adjustability: 'Midrange/ Unchanged with Low Weight' Liabilities and Liquidity Robustness: 'Weaker/ Unchanged with Low Weight' Liabilities and Liquidity Flexibility: 'Weaker/ Unchanged with Low Weight' Debt sustainability: 'aa' category, Unchanged with Low Weight' Budget Loans (Notches): N/A, Unchanged with Low Weight Ad-Hoc Support (Notches): N/A, Unchanged with Low Weight Asymmetric Risk: 'N/A, Unchanged with Low Weight' Rating Cap (LT IDR): 'B+, raised with High Weight' Rating Cap (LT LC IDR): 'B+, raised with High Weight' Rating Floor: 'N/A, Unchanged with Low weight' Quantitative assumptions - issuer-specific: 'Unchanged with Low Weight' Fitch's rating case scenario is a "through-the-cycle" scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on the 2018-2022 figures and 2023-2027 projected ratios. Quantitative assumptions - sovereign-related (note that no weights and changes since the last review are included as none of these assumptions were material to the rating action) Figures as per Fitch's sovereign data for 2022 and forecast for 2025, respectively: Quantitative assumptions - sovereign-related (note that no weights and changes since the last review are included as none of these assumptions were material to the rating action) - GDP per capita (US dollar, market exchange rate): 10,525; 14,320 - Real GDP growth (%): 5.5; 3.1 - Consumer prices (annual average % change): 72.0; 29.2 - General government balance (% of GDP): -0.8; -3.0 - General government debt (% of GDP): 31.7; 29.1 - Current account balance plus net FDI (% of GDP): -4.4; -1.6 - Net external debt (% of GDP): 15.9; 16.7 - IMF Development Classification: EM (emerging market) - CDS Market-Implied Rating: 'B+' RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Ankara, Antalya, Bursa, Izmir, Manisa and Mugla: An upgrade of the Turkish sovereign IDRs would lead to upgrades of the IDRs, provided the issuers maintain their debt payback ratios below 5x under Fitch's rating case. Istanbul, Konya and Mersin: - An upgrade would be possible if the debt payback ratios remain below 5x and actual debt service coverage improves towards 1.5x on a sustained basis in its rating case , along with an upgrade of the sovereign. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Antalya, Bursa, Istanbul, Izmir, Konya, Manisa and Mersin: A downgrade of the Turkish sovereign IDRs or a downward revision of the LRGs' SCPs resulting from a debt payback of more than 9x on a sustained basis would lead to downgrades of the IDRs. Ankara and Mugla: A downgrade of the Turkish sovereign IDRs or a downward revision of the SCPs resulting from a debt payback of more than 13x on a sustained basis would lead to downgrade of the IDRs. Sources of Information Committee date: 19 March 2024 PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The IDRs of Ankara, Antalya, Bursa, Izmir, Manisa and Mugla are capped by the Turkish sovereign ratings. Istanbul, Konya and Mersin's IDRs are aligned the Turkish sovereign's ratings. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Ankara Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B Mersin Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B LC ST IDR B Affirmed B Izmir Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B LC ST IDR B Affirmed B Konya Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B Manisa Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B LC ST IDR B Affirmed B Istanbul Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B senior unsecured LT B+ Upgrade B Mugla Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B Bursa Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B LC ST IDR B Affirmed B Antalya Metropolitan Municipality LT IDR B+ Upgrade B ST IDR B Affirmed B LC LT IDR B+ Upgrade B LC ST IDR B Affirmed B =========================== U N I T E D K I N G D O M =========================== 888 HOLDINGS: S&P Affirms 'B' LT ICR After Fiscal 2023 Results -------------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit and issue ratings on 888 Holdings PLC and its senior secured notes, with a '3' recovery rating on the notes. S&P said, "The negative outlook reflects that we could downgrade 888 within the next 12 months if the group underperforms our base-case forecast. This could come from continuing unmitigated headwinds that would lead to the group's S&P Global Ratings-adjusted leverage remaining above 7.5x in 2024; or its free operating cash flow (FOCF) after leases, restructuring, and integration costs being negative for a sustained period. "Results for 2023 largely align with our forecast. Revenue took a negative turn as expected in 2023 to GBP1.71 billion, down 7.5% from 2022 (pro forma; including the results of William Hill and excluding the disposed 888 bingo business for both periods). In our view, the challenging regulatory landscape domestically and overseas continue to loom over the group's top-line momentum. S&P Global Ratings-adjusted EBITDA margin improved marginally to 11.7% in 2023 compared with our previous forecast of 11.1%, which is attributable to more dividends received from the equity-accounted associate and, more materially, streamlined marketing expense and cost synergies at William Hill. These synergies are evident particularly in the group's slashed marketing expense in 2023, to about 14% of total revenue from about 18% for pro forma 2022, although part of that decline is attributable to some demand-driven expense that will decrease in line with revenue. As such, S&P Global Ratings-adjusted debt to EBITDA in 2023 was 8.8x, lower than our previous forecast, although part of the difference comes from foreign exchange variations lowering valuation of borrowings during the year. "We forecast a return to structural growth in 2024, although ongoing regulatory uncertainty dims prospects.In the U.K., where online revenue make up about 39% of group total, the economic outlook is still tough and would rein in discretionary leisure spending, alongside with the group's preemptive safer gambling measures that tightens affordability checks and betting limits. As a result, the group has seen a continuous decline in higher spenders and monthly average revenue per user (ARPU) since the beginning of 2021. Negative momentum continued in first-quarter 2024, leading to an ongoing decline in the year-on-year top line that, if not reversed, could cause the group to underperform against our base-case scenario. Indeed, our 2024 forecast is predicated on 888's ability to return to consistent growth, in particular in U.K. online. This will be seen by how effective the group, under its new executive management, would be in driving player volume and top-line growth. Success will also be subject to external factors such as economic factors affecting players' discretionary spending and the scope and timing of the final U.K. White Paper measures, which may have additional impacts beyond the preemptive measures U.K. gaming companies have been gradually implementing. Still, we acknowledge the group's vigilance in mitigating regulatory risks following the launch of GB Gambling Commission's License Review in 2023. The review concluded without effecting any license conditions or financial penalties, as announced on March 22, 2024. "Rating headroom has decreased as we expect deleveraging to slow. The U.S. strategic review by the group's new executive management has prompted an exit from the Authentic Brands Group (ABG) partnership, which has yielded profitability below the group average. The partnership had originally granted 888 exclusive use of the Sports Illustrated brand for its business-to-consumer online betting and gaming operations. The decision entails $25 million exit fees in 2024, and $25 million spread across 2027-2029. These fees are counted towards exceptional costs, along with restructuring costs related to the William Hill synergies (based on S&P Global Ratings' assumptions) that we have built into our base-case scenario. The heightened exceptional costs, while factoring in some cost savings from the exit, led us to lower our previous adjusted EBITDA estimate for 2024 to GBP225 million-GBP235 million, reining in the improvement in profitability and decelerating the deleveraging trend from our last set of forecasts. As a result, we expect the S&P Global Ratings-adjusted EBITDA margin in 2024 to be 12.5%-13.5%, lower than our previous forecast of 14%-15%. With a stable debt level and assuming no material debt-funded dividend payouts, buybacks, or acquisitions, our rating is predicated on expectations of S&P Global Ratings-adjusted debt to EBITDA below 7.5x in 2024 and below 7.0x in 2025. The slower deleveraging has led to reduced rating headroom, but there is a one-notch uplift in the current rating via the comparable rating analysis modifier that is directly underpinned by the expected material improvement in credit metrics in 2024. Any group underperformance compared with our 2024 base-case forecast could prompt us to consider a downward rating action. A negative rating action could follow cost synergies being less than expected, economic dynamics hindering recovery in U.K. discretionary spending, or more adverse regulatory landscape domestically or internationally. "Prospects of cash flow remain weak but this is mitigated by adequate liquidity. We still expect positive net cash inflow in 2024, backed by improved--despite slower--profitability and normalized working capital variation. This considers the annualized effect of the William Hill acquisition in 2022 and a larger operating scale. In our base-case scenario, FOCF after leases will return to positive levels in 2024 after a dip to negative GBP76 million in 2023, predicated on organic revenue growth and margin recovery from the integration plan's execution. In case of a shortfall in operating performance or delay in realizing synergy plans, interest expense could become a pressure point on cash flows. With adjusted debt of about GBP1.7 billion largely from the acquisition of William Hill and about 30% of its debt being floating-rate, the group is exposed to high interest expense. We forecast an annual interest expense of about GBP160 million in 2024, which is a very significant portion of the GBP225 million-GBP235 million adjusted EBITDA forecast in 2024. We think this is mitigated by the group's adequate liquidity position, thanks to its undrawn GBP150 million revolver and about GBP130 million of cash as of 2023 (net of customer deposits and restricted short-term deposits held as guarantees, which we deem as restricted cash). The group's S&P Global Ratings-adjusted forecast funds from operations (FFO) to debt, which is a core ratio in our analysis, is about 2.5% in 2024, towards the low end of our 0%-12% highly leveraged range. "The negative outlook reflects a one-in-three chance that we could downgrade 888 within the next 12 months if the group underperforms our base-case forecast. This could come from continuing unmitigated headwinds that would lead to the group's S&P Global Ratings-adjusted leverage to remain above 7.5x in 2024; or its FOCF after leases, restructuring and integration costs being negative for a sustained period." S&P could lower the ratings within the next 12 months if 888 underperforms its base-case forecast, which could include: -- S&P Global Ratings-adjusted debt to EBITDA of 7.5x or above in 2024 and 7.0x or above in 2025; -- Adjusted FFO to debt below 2.5% or adjusted FOCF after leases to debt remaining negative; -- Any material deterioration in liquidity; or -- 888 deviating from its financial policy commitment of 3.0x company-reported debt to EBITDA by way of dividends or mergers and acquisitions that would prevent deleveraging toward its policy target. Taken holistically, the above metrics represent the key supplementary ratios for the rating and could indicate, if they stay at the lower end of the range, a weaker financial risk profile for longer than our base-case forecast. S&P said, "We monitor the group's progress toward recovery in key credit metrics for 2024 and will continue doing so as interim results are reported or any other management or strategic guidance updates are announced. "We could consider revising the outlook to stable if the group made material progress on its integration of William Hill while sustainably reducing leverage and achieving positive and increasing FOCF after lease payments." Specifically, an outlook revision would depend on the group's ability to maintain the following credit metrics, which we consider commensurate with the current rating: -- S&P Global Ratings-adjusted debt to EBITDA below 7.0x and on a declining trend, with a continued commitment to leverage remaining below this level; -- Adjusted FOCF to debt after leases of about 2% or more, which would likely require FFO to debt of 4% or greater; and -- Maintenance of adequate liquidity, in part shown by a rising ratio of liquidity sources to uses. S&P said, "Governance factors are a negative consideration in our credit rating analysis of 888 because we see risks from the ongoing impact on revenue by the compliance failings in the Middle East VIP customer accounts and suspensions, which are not recovering as expected, and from the executive management changes. The international segment's pro forma revenue fell 15.7% as of fiscal 23 due to slow recovery in the Middle East, largely offsetting growth in other overseas markets. "Social factors remain a negative consideration in our analysis because we see the group as particularly exposed to the health and safety and social capital implications of its gaming operations. Specifically, we note 888 Holdings' and William Hill's prior fines and the GBP19.2 million of regulatory settlement with the U.K. Gambling Commission fines for player-protection shortcomings. The group is subject to additional license conditions such as a third-party audit to assess the effective implementation of its anti-money-laundering and safer gambling policies, procedures, and controls while the group chair is responsible for ensuring an improvement plan. We acknowledge the group's effort in implementing compliance measures adopted ahead of anticipated U.K. regulatory changes, although this has contributed to a decline in its U.K. online pro forma revenue." DISPLAY CABINETS: Bought of Administration by D C Midlands ---------------------------------------------------------- Business Sale reports that a display cabinet retailer headquartered in the West Midlands has been rescued after being acquired out of administration. Display Cabinets UK Limited, which is based at the Dudley Central Trading Estate, fell into administration last month. According to Business Sale, Currie Young director Steven John Currie was appointed as the administrator of the company on March 18 and subsequently secured a sale of the business and certain of its assets to D C Midlands Limited on March 20. The buyer, which was incorporated in December 2023, is a connected party of the company by virtue of a shared director, Business Sale notes. The acquisition has ensured that six jobs at Display Cabinets UK Limited have been saved, Business Sale states. Display Cabinets UK Limited's most recent accounts at Companies House cover the period ending March 31, 2020, with the site listing an active proposal to strike the company off. At the time of its most recent accounts, the company's current assets were valued at slightly over GBP164,000 and fixed assets at more than GBP41,000, Business Sale discloses. At that time, however, its total assets less liabilities amounted to slightly over GBP20,000, according to Business Sale. IDMH LTD: Enters Administration, Liabilities Total GBP3.7 Million ----------------------------------------------------------------- Business Sale reports that IDMH Limited, which trades as Lighthouse, is a manufacturer of modular homes based in Sheffield. The company, which was founded in 2020, was placed into administration after bosses concluded that there was no near-term solution to secure its future, with Richard Goodall and Marty Rickels of FRP Advisory appointed as joint administrators, Business Sale relates. The company's balance sheet as of November 30, 2022, shows fixed assets valued at GBP416,224 and current assets valued at GBP10.5 million, Business Sale discloses. The company's debts at the time, however, left it with net liabilities totalling GBP3.7 million, Business Sale notes. PETRA DIAMONDS: Moody's Affirms 'B3' CFR, Alters Outlook to Neg. ---------------------------------------------------------------- Moody's Ratings has changed to negative from stable the outlooks on Petra Diamonds Limited (Petra) and Petra Diamonds US$ Treasury Plc. Concurrently, Moody's has affirmed the B3 long-term corporate family rating and B3-PD probability of default rating of Petra, and the B3 backed senior secured rating of the notes issued by Petra Diamonds US$ Treasury Plc. RATINGS RATIONALE The change in outlooks to negative reflects the deterioration in Petra's credit metrics amid the weak diamond market environment and operational challenges which dented production. The path for recovery in credit metrics is uncertain and will depend on the diamond price dynamics and the company's ability to increase its production volume which will require sizeable capital spending. As of December 31, 2023, Petra's credit metrics weakened beyond the levels of Moody's downgrade guidance for its current B3 rating: its leverage increased to 4.2x gross debt/EBITDA from 2.6x as of June 30, 2023 and its EBIT interest coverage declined to negative 0.3x from positive 0.7x, driven by lower EBITDA and EBIT (all metrics are Moody's-adjusted). Moody's estimates that a recovery in Petra's credit metrics to the levels commensurate with its current rating would require a recovery both in diamond prices and the company's production volumes. While the long-term market fundamentals for natural diamonds remain supportive, the perspective of a sustainable recovery in prices from the current low levels remains uncertain for the next 12-18 months. Petra's diamond production declined to 2.7 mcts in the last 12 months that ended December 31, 2023 from 3.3 mcts in FY2022 largely because of operational challenges at its flagship mines – Cullinan and Finsch, as well as suspension of operations at its Williamson mine after the tailings storage facility failure in November 2022. To increase production, in FY2022 Petra commenced certain expansion projects to develop new underground mining areas, with the total company-estimated cost of $421 million, which it intended to spend mostly in FY2024-FY2026. In November 2023, Petra decided to reduce its FY2024 capital spending plan by $65 million to preserve liquidity amid the plummeted earnings. Nevertheless, Moody's expects the company's capital spending to remain above $100 million in each of FY2024 and FY2025, compared with $118 million in FY2023 and $57 million in FY2022, which should result in a gradual increase in production. Petra's B3 CFR continues to factor in (1) supportive long-term natural diamond market fundamentals underpinned by potential supply constraints; (2) the company's solid reserve base at its flagship Cullinan and Finsch mines, and long life of these mines; and (3) its recent track record of debt reduction and proactive liquidity management, including intention to refinance the outstanding $257 million bond due March 2026 a year in advance. The rating also takes into account (1) the company's small scale and operational concentration in the two key mines in South Africa (Ba2 stable); (2) its exposure to the volatile rough diamond prices and USD/ZAR exchange rate; (3) uncertainty over the finding of high value diamonds which results in EBITDA and cash flow volatility; (4) operational challenges at Petra's mines denting its production volume and profitability; (5) its weakened credit metrics amid the depressed diamond market; (6) its refinancing risk related to the March 2026 bond maturity; and (7) its exposure to business, social, political and regulatory risks in South Africa and Tanzania (B1 stable). RATING OUTLOOK The negative outlook reflects the uncertainty over the path of recovery in Petra's credit metrics amid the continuing weak diamond market environment and decreased production at the company's key mines. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's could upgrade the ratings if (1) the company's diamond production volume recovers; (2) its debt/EBITDA declines below 2.5x, EBIT/interest expense increases above 2.0x and it generates positive free cash flow, all on a sustainable basis (all metrics are Moody's-adjusted); and (3) it maintains adequate liquidity at all times. Moody's could downgrade the ratings if the company's diamond production volume does not increase, its debt/EBITDA remains above 4.0x and EBIT/interest expense remains below 2.0x on a sustained basis (all metrics are Moody's-adjusted), or if its liquidity weakens significantly. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Mining published in October 2021. REDWIGWAM LTD: Goes Into Administration --------------------------------------- Business Sale reports that Redwigwam Limited, a Liverpool-based temporary staff booking platform, fell into administration last month, appointing Simon Farr and Anthony Collier of FRP Advisory as joint administrators. According to Business Sale, in the company's accounts for the five months ending May 31, 2023, its fixed assets were valued at GBP2.6 million and current assets at GBP464,608. At the time, its net assets amounted to slightly over GBP24,000, Business Sale discloses. RIGHT TRACK: Funding Issues Prompt Liquidation ---------------------------------------------- Paige Beresford at The Scottish Sun reports that all staff have been made redundant at a Scottish charity after the organisation went into liquidation. Right Track Scotland Limited has appointed William Duncan as liquidator after it collapsed, The Scottish Sun relates. The board of the company placed it into insolvency after it experienced "funding disruption", The Scottish Sun discloses. According to The Herald, its accounts for 2023 showed a drop in income by GBP284,800 against 2022, The Scottish Sun notes. As a result, the charity, registered in Glasgow, has closed its doors for the final time after operating for over 41 years, The Scottish Sun states. And all 20 members of staff were made redundant, according to The Scottish Sun. SKURIO LTD: Falls Into Administration, Owes Nearly GBP6 Mil. ------------------------------------------------------------ Business Sale reports that Skurio Limited, a cybersecurity and digital risk protection company based in Belfast, fell into administration in March, appointing Scott Murray and Ian Davison of Keenan Corporate Finance as joint administrators. According to Business Sale, in its accounts for the year to March 31, 2023, the company reported revenue of slightly over GBP1 million, up from GBP930,736 a year earlier, but saw its pre-tax losses widen from GBP3 million to GBP3.2 million. At the time, the company's net liabilities amounted to nearly GBP6 million, Business Sale discloses. SOLO RAIL: Goes Into Administration ----------------------------------- Business Sale reports that Solo Rail Solutions Limited, a tier 1 single source supplier to the rail industry, fell into administration in March, appointing Roderick Butcher and Richard Goodwin of Butcher Woods as joint administrators. In the company's accounts as of June 30, 2022, its current assets were valued at GBP4.9 million, with total equity amounting to GBP1.7 million, Business Sale discloses. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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