/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/240620.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 Thursday, June 20, 2024, Vol. 25, No. 124 Headlines F R A N C E BABILOU FAMILY: Moody's Affirms 'B2' CFR, Outlook Remains Stable STELLAGROUP: Moody's Affirms B2 CFR & Rates Amended Term Loan B2 G E R M A N Y PRESTIGEBIDCO GMBH: Moody's Affirms B1 CFR & Rates New Sec Notes B1 I R E L A N D ARMADA EURO II: Moody's Affirms B1 Rating on EUR12MM Class F Notes ARMADA EURO VI: S&P Assigns B-(sf) Rating on Class F Notes BNPP IP 2015-1: Moody's Affirms B2 Rating on EUR9MM Class F Notes L U X E M B O U R G ARRIVAL SA: Files Insolvency Case in Luxembourg VIVION INVESTMENTS: S&P Affirms 'BB' LT ICR, Outlook Negative N E T H E R L A N D S DRIVE PARENTCO: Moody's Assigns 'B2' CFR, Outlook Stable PRECISE MIDCO: S&P Upgrades Rating to 'B', Outlook Stable SIGMA HOLDCO: Moody's Affirms 'B2' CFR, Outlook Remains Stable U N I T E D K I N G D O M AC LANDSCAPES: Bought Out of Administration, 34 Jobs Saved BRANTS BRIDGE 2022-1: Moody's Affirms B3 Rating on Class X1 Notes CROWN FIT-OUT: Collapses Into Administration EACHCHAIN TRADING: Falls Into Administration LINKLINE TRANSPORT: Set to Appoint Administrators LUKE MIDCO II: Moody's Assigns First Time 'B3' Corp. Family Rating MAILSHOP MAILING: Goes Into Administration NORTHWAY MUSHROOMS: Enters Administration ORBIT PRIVATE: Moody's Affirms 'B2' CFR, Outlook Remains Stable PLACE 2 PLACE: Loss-Making Contract Prompts Administration RAPID RESPONSE: Falls Into Administration SWIFT ELECTRICAL: Bought Out of Administration, 34 Jobs Saved - - - - - =========== F R A N C E =========== BABILOU FAMILY: Moody's Affirms 'B2' CFR, Outlook Remains Stable ---------------------------------------------------------------- Moody's Ratings has affirmed the B2 long-term corporate family rating and the B2-PD probability of default rating of Babilou Family SAS ("Babilou" or "the company"), a France-based international provider of childcare and early education. Concurrently, Moody's has affirmed the B2 ratings on the EUR797 million senior secured term loan B3 (TLB) due November 2027 and the EUR112 million senior secured revolving credit facility (RCF) due May 2027, both borrowed by Babilou Family SAS. The outlook remains stable. "Moody's have affirmed Babilou's B2 ratings to reflect its resilient business model, good industry demand dynamics, solid revenue growth with broadly stable profitability margins and a supportive regulatory environment and tax regime in France, its largest market," says Víctor García Capdevila, a Moody's Vice President-Senior Analyst and lead analyst for Babilou. "However, the company is weakly positioned in the B2 rating category due to its high Moody's-adjusted gross leverage and its weak interest coverage metrics," adds Mr. García. RATINGS RATIONALE Babilou's B2 CFR reflects the positive industry dynamics within the child care and early education segment; its resilient business model, with a high degree of stability from long-term contracts with major companies in the business-to-business (B2B) segment; the limited customer concentration, the favourable regulatory environment in France (where the company generates 39% of revenues), which provides extensive tax incentives and subsidies to both corporations and parents; and its track record of growth and increased international diversification. The rating, however, is constrained by Babilou's high Moody's-adjusted gross debt/EBITDA of 5.8x in 2023, weak interest coverage metrics and weak cash flow generation; the negative impact of labor shortages, leading to lower occupancy rates and higher personnel expenses; pricing pressures from intensified competition in the B2B segment; exposure to potential unfavorable regulatory changes in France; and the execution risks tied to a rapid and ambitious organic and inorganic growth strategy. Despite facing operational challenges mainly related to inflationary pressures and labour shortages leading to lower occupancy rates and higher personnel expenses, Babilou has demonstrated resilience in its operating performance over the past four years. The company's revenue and EBITDA grew by a compound annual growth rate (CAGR) of 17% and 19% respectively, from 2019 to 2023, to EUR867 million and EUR129 million. The private early education market continues to see significant growth due to factors such as increased female workforce participation, stable birth rates, shifting parental preferences towards early education over mere care, and a shortage of spots in collective childcare institutions. Furthermore, employers are increasingly facilitating and sponsoring early education assistance for their employees' children as part of their compensation packages to improve retention rates, recruitment, productivity and the work-life balance of employees. These positive demand dynamics should continue supporting Babilou's operating performance, but at the same time, the company continues an ambitious organic and inorganic growth strategy that keeps leverage high, and requires significant capex that is putting pressure on cash flow generation and interest coverage metrics. Babilou's Moody's-adjusted gross leverage, proforma for acquisitions, reduced to 5.8x in 2023 from 6.2x in 2022. This decrease was driven by a robust 10% growth in Moody's-adjusted EBITDA, which rose to EUR197 million in 2023 from EUR178 million in 2022. Meanwhile, Moody's-adjusted gross debt remained constant year-on-year at around EUR1.1 billion in 2023. Moody's base case scenario assumes further deleveraging in 2024 and 2025 towards 5.5x and 5.3x, respectively. This is expected to be driven by a mid-single digit EBITDA growth, reaching EUR204 million in 2024 and EUR217 million in 2025. This growth is supported by the acquisition and opening of new nurseries, maturation of previously opened nurseries and higher occupancy rates. One of the primary factors constraining Babilou's credit quality is its interest coverage metric, defined as EBITA/interest expense, which remained notably low in 2023 at approximately 1.1x. Moody's base case scenario assumes a slight improvement in this credit metric, anticipating it to reach 1.2x in 2024 and 1.4x in 2025. However, even with this improvement, the metric would still remain weak for the current rating category. LIQUDITY Moody's considers Babilou's liquidity to be adequate. As of March 2024, the company reported a cash balance of EUR16 million, bolstered by the EUR89 million available under the EUR112 million revolving credit facility (RCF), maturing in May 2027. The RCF is subject to a consolidated senior secured net leverage springing covenant of 9.5x when drawings exceed 40%. Moody's anticipates comfortable headroom under this covenant for the upcoming 12-18 months. The company does not have debt maturities until 2027, when its RCF and TLB mature. In 2023, Babilou generated a modest positive free cash flow of EUR2.2 million. However, Moody's base case scenario assumes a negative free cash flow generation of EUR11 million and EUR3 million in 2024 and 2025, respectively. High capex needs of around EUR120 million, including leases, and interest expenses of around EUR90 million in 2024 limit the company's FCF generation capacity. STRUCTURAL CONSIDERATIONS Babilou's probability of default rating of B2-PD reflects the use of an expected family recovery rate of 50%, as is consistent with all first lien covenant-lite capital structures. The EUR797 million TLB and the EUR112 million RCF are rated B2, in line with the company's CFR. All facilities are guaranteed by the company's subsidiaries and benefit from a guarantor coverage of not less than 80% of the group's consolidated EBITDA. The security package includes shares, bank accounts and intercompany receivables of material subsidiaries. The EUR124 million shareholder loan provided by Antin Infrastructure Partners and due 6 months after the final debt maturity of the TLB has received equity credit under Moody's Hybrid Equity Credit methodology. RATIONALE FOR THE STABLE OUTLOOK While the company is weakly positioned in the B2 category owing to its high leverage and weak interest coverage metrics, the stable outlook on the rating reflects the resiliency of the business model, the positive industry demand dynamics, a supportive regulatory environment and Moody's expectation of a slight improvement in leverage and interest coverage metrics over the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the rating could develop if Babilou's Moody's-adjusted gross leverage declines well below 4.5x. The company would also need to demonstrate a material and sustained improvement in interest coverage metrics and free cash flow generation. The rating could face downward pressure if the company's earnings decline or if it undertakes acquisitions financed with debt, resulting in its Moody's-adjusted gross leverage persistently exceeding 5.5x. The rating could also be negatively impacted if its interest coverage ratio does not improve from the current levels of around 1.0x, or if the company's free cash flow remains consistently negative or its liquidity worsens. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Babilou Family SAS (Babilou) is a leading international provider of child care and early education for infants and children under the age of six years, with more than 56,000 seats and 1,200 centres across 10 different countries. In 2023, Babilou generated revenue of EUR867 million and Moody's-adjusted EBITDA of EUR197 million. The group is owned by Antin Infrastructure Partners (Antin, 57%), the founders (20%), TA Associates (16%), Raise Investment (5%) and the management team (2%). STELLAGROUP: Moody's Affirms B2 CFR & Rates Amended Term Loan B2 ---------------------------------------------------------------- Moody's Ratings has affirmed Stellagroup's (Stella or the company) B2 corporate family rating and B2-PD probability of default rating. Concurrently, Moody's has assigned a new B2 instrument rating to Stella's amended and extended EUR510 million backed senior secured term loan B2 due 2029 and EUR80 million backed senior secured revolving credit facility (RCF) due 2028. The outlook remains stable. The rating action follows Stella's announcement that it intends to refinance its currently outstanding EUR510 million backed senior secured term loan B due 2026 and EUR60 million backed senior secured revolving credit facility due 2025 (RCF). As part of the transaction, maturities will be extended and the RCF facility is expected to be upsized by EUR20 million. The transaction is credit positive because it will address the refinancing of maturities and strengthen liquidity. The rating action reflects Moody's expectations that the transaction will be completed as planned. RATINGS RATIONALE The rating action reflects: -- Stella's robust operating performance in 2023, amid depressed construction markets, and Moody's expectations that credit metrics will remain commensurate with the current rating over the next 12-18 months. This includes debt/EBITDA at around 5.0x (5.5x in 2023 pro-forma Pratic Spa acquisition and proposed refinancing) and EBIT / interest of 1.8x. -- Moody's expectations of weak construction markets in 2024, notably within the new build segment. This downturn will be partially mitigated by Stella's high exposure to renovation activities (around 70% of revenue), which has been more stable namely in France (50% of revenue). Moody's forecasts improving construction markets from 2025, albeit the level of uncertainty remains high. -- Moody's forecasts of stable earnings in 2024 (pro-forma Pratic Spa acquisition) and earnings growth from 2025. In 2024, this will be supported by cross selling initiatives and gross margin expansion. Moody's expects that demand improvement from 2025 coupled with ongoing cross-selling and efficiency gains will drive earnings growth. The reduction in leverage will be further supported by the repayment of earn outs related to acquisitions, which is included in Moody's leverage. -- The company's track record of free cash flow (FCF) generation supported by solid margins and low capital spending needs. The rating agency forecasts positive FCF of around EUR50 million in 2024 and EUR35 million in 2025. The reduction in FCF generation in 2025 reflects the higher interest payment following the proposed refinancing and some working capital absorption reflecting volume increase. FCF will likely be used to perform bolt-on acquisitions. The rating remains supported by Stella's leading market position in the rolling shutters market in France, good liquidity, higher profitability than that of peers and experienced management team with a strong track record of earnings growth. The rating remains constrained by Stella' small size, with product and geographical concentration; competitive market environment, especially in Germany, where Stella has a weaker market position; and risk related to debt funded acquisitions or shareholder distributions. LIQUIDITY Stella's liquidity is good, supported by around EUR62 million of cash on balance sheet and access to a EUR80 million backed senior secured RCF pro-forma the proposed transaction. These sources, along with internally generated cash flow, are more than sufficient to cover working capital consumption, which typically peaks in the first half of the year, and basic cash needs including capital spending and interest payment. The springing financial covenant under the group's backed senior secured RCF is only tested if the backed senior secured RCF is drawn by more than 40%. Following the proposed transaction, there will be no near-term debt maturities with the backed senior secured RCF and the backed senior secured term loan B2 expiring in 2028 and 2029, respectively. STRUCTURAL CONSIDERATIONS Following the proposed transaction, Stellagroup's capital structure will consist of EUR510 million backed senior secured term loan B2 and a EUR80 million backed senior secured RCF, both ranking pari passu in terms of priority of claims. The debt is secured by share pledges over the shares of operating subsidiaries accounting for at least 80% of the group's consolidated EBITDA. These operating subsidiaries also guarantee the senior debt. The bank debt is borrowed by Stellagroup, the top company of the restricted group. The existing real estate debt of around EUR20 million rank senior to the senior debt in Moody's Loss Given Default waterfall. However, the backed senior secured term loan B2 and backed senior secured RCF are rated in line with the CFR, given the small size of the real estate debt compared with the overall debt quantum. The B2-PD PDR is at the same level as the CFR, reflecting the use of a standard recovery rate of 50%, which reflects a capital structure with first-lien bank loans and the covenant-lite nature of the loan documentation. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's expectations that credit metrics will remain in line with the requirement for the current rating over the next 12-18 months, including debt/EBITDA of around 5.0x and FCF/Debt in the mid-single digit range in percentage term. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Moody's-adjusted debt/EBITDA is sustained below 5.0x and Moody's-adjusted FCF/debt increases to the mid-single digit in percentage terms while maintaining a good liquidity. Negative pressure on the rating would arise if Moody's-adjusted Debt/EBITDA increases sustainably above 6.0x, operating margins weakens or FCF turns negative on a sustained basis, leading to a deterioration of Stellagroup's liquidity profile. The principal methodology used in these ratings was Building Materials published in September 2021. COMPANY PROFILE Headquartered in France, Stellagroup is a vertically integrated producer of closure systems for homes, and industrial and commercial buildings. In 2019, the company acquired CRH's awnings and shutters business, which nearly doubled its size. Stella has operations in France, Germany, Italy, the Netherlands and the UK. Pro forma for the acquisition of Pratic Spa closed in June 2023, the company generated revenue of EUR652 million and reported EBITDA of EUR118 million in 2023. Stella has been majority-owned by private equity firm PAI Partners since 2019. ============= G E R M A N Y ============= PRESTIGEBIDCO GMBH: Moody's Affirms B1 CFR & Rates New Sec Notes B1 ------------------------------------------------------------------- Moody's Ratings has affirmed PrestigeBidCo GmbH's (BestSecret or the company) B1 corporate family rating and its B1-PD probability of default rating. Concurrently, Moody's assigned a B1 rating to the proposed EUR550 million backed senior secured floating rate notes due in 2029 to be issued by the company. The outlook remains stable. The proceeds from the proposed issuance along with cash on balance sheet will be used to repay the EUR400 million existing backed senior secured notes due in July 2027, pay dividend of EUR250 million and transaction fees and related costs. Moody's expects the existing backed senior secured notes will be repaid upon closing of the refinancing transaction and to withdraw the existing B1 rating of this instrument at that stage. RATINGS RATIONALE BestSecret's strong operating performance continued in 2023 with revenue growing by 17% year-on-year while Moody's adjusted EBITDA grew by 35% with solid performance in Q1 2024. Growth has been driven mostly by volume gains and steady demand for BestSecret's products as customers continue to shop online in the mid to luxury off-price fashion market. This operating momentum has helped in reducing Moody's adjusted gross debt/EBITDA to 3.2x over the last twelve months (LTM) ending 31st March 2024 compared to 3.5x at the end of 2022. However, higher growth capex investments in the fulfillment center located in Poland resulted in weak Moody's adjusted (EBITDA-capex)/interest expense at 1.4x as of LTM March 2024, while free cash flow (FCF)/debt was modest at 6.4%. With the dividend payment of EUR250 million, the company's sponsor Permira will be taking out cash from BestSecret for the first time since investing in it in 2016. Moody's expects Permira to continue to support the development of BestSecret's business and not extract further dividends from it at least in the next 12-18 months. Proforma for this dividend payment, Moody's adjusted gross debt /EBITDA would rise to 4.3x as of LTM March 2024 resulting in the weak positioning of BestSecret in the B1 rating category. Moody's expects BestSecret to continue growing its market share in the online segment of the mid to luxury off-price fashion market driven by the expanded capacity in its fulfillment centers, continuous investments in technology and its ability to partner and secure more merchandise from premium and luxury brands. The agency estimates the company to generate revenue of around EUR1.4 to EUR1.6 billion and Moody's adjusted EBITDA of EUR184 to EUR225 million in 2024 and 2025 respectively. This will result in Moody's adjusted leverage of 4.0x by the end of 2024 and 3.2x in 2025 while Moody's adjusted (EBITDA-capex)/interest expense will remain weak at 0.9x in 2024 improving to 2x in 2025 as capex normalizes. Moody's adjusted FCF/debt will be negative in 2024 due to the dividend payment and higher capex and is expected to improve to 6% by 2025. LIQUIDITY BestSecret's liquidity remains adequate after incorporating the proposed transaction. It is supported by cash balance of EUR97 million on a proforma basis and access to revolving credit facility (RCF) of EUR110 million, expected to be fully available at closing of the transaction. The company's business is highly seasonal, with sales, inventory and liquidity subject to intra-year fluctuations. Sales and EBITDA are typically highest in the fourth quarter of the year because of the Christmas shopping season and Cyber week. The RCF is subject to a springing senior net leverage covenant, with a limit of 4.75x, tested on a quarterly basis, only when the RCF is drawn more than 40%. Moody's expects the company to maintain ample headroom under this covenant. STRUCTURAL CONSIDERATIONS The B1 rating assigned to the proposed EUR550 million backed senior secured notes due 2029 issued by PrestigeBidCo GmbH reflects their presence as the largest debt instrument in the capital structure, ranking pari-passu with the EUR110 million RCF. The backed senior secured notes and the RCF benefit from a similar guarantor package, including upstream guarantees from guarantor subsidiaries, representing substantially all of BestSecret's consolidated EBITDA. Both instruments are secured, on a first-priority basis, by certain share pledges, security assignments over intercompany receivables, and security over material bank accounts. The probability of default rating of B1-PD reflects the use of a 50% family recovery assumption, consistent with a capital structure including a mix of bond and bank debt. ESG CONSIDERATIONS Governance is a key driver for this action reflecting the company's decision to execute a dividend recapitalization transaction for the first time since 2016 that will result in an increase in leverage and weak credit metrics for the B1 rating in 2024. Moody's expects credit metrics to improve in the next 12-18 months assuming Permira does not extract further dividends. Best Secret's CIS-4 continues to indicate that the rating is lower than it would have been if ESG risk exposures (primarily governance related) did not exist. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's expectation of continued growth in sales and earnings led by growing online penetration in the off-price fashion market such that credit metrics will improve from 2025 onwards after the temporary deterioration in 2024. The outlook also assumes that BestSecret will continue to invest in the development of its online activities while maintaining adequate liquidity. Moody's expects the company to refrain from embarking on any dividend recapitalisations or debt funded acquisitions in the next 12 to 18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be upgraded if the company generates sustained revenue growth, EBITDA and margin improvement, such that its Moody's-adjusted gross debt/EBITDA is sustainably maintained below 3.0x and EBIT/interest expense rises above 3.0x. An upgrade would also require more robust FCF, approaching 10% of Moody's-adjusted gross debt and the maintenance of adequate liquidity, while demonstrating a balanced financial policy. Ratings could be downgraded if earnings weaken such that (1) adjusted Debt/EBITDA increases towards 4.0x; (2) EBIT/Interest falls sustainably below 1.5x; (3) FCF/Debt remains below 5%, or (4) if liquidity weakens. Any material debt-funded acquisition or more aggressive financial policy could further put pressure on the ratings. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail and Apparel published in November 2023. COMPANY PROFILE PrestigeBidCo GmbH is the 100% shareholder of Best Secret GmbH, which was founded in 1924 as a wholesale fabrics business. The company now operates as a members-only off-price fashion retailer. Headquartered in Munich, the company offers premium to luxury designer brand clothing and accessories at discounted prices for men, women and children through online and in-store channels. For the last twelve months ending March 2024, the company generated revenue of EUR1.3 billion and Moody's adjusted EBITDA of EUR171 million. In 2016, the private equity firm Permira acquired a majority stake in BestSecret from Ardian (previously Axa Private Equity). The two founding families, Schustermann and Borenstein, remain minority shareholders of the company. ============= I R E L A N D ============= ARMADA EURO II: Moody's Affirms B1 Rating on EUR12MM Class F Notes ------------------------------------------------------------------ Moody's Ratings has upgraded the ratings on the following notes issued by Armada Euro CLO II Designated Activity Company: EUR20,000,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Oct 12, 2023 Upgraded to Aa3 (sf) EUR8,500,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Oct 12, 2023 Upgraded to Aa3 (sf) EUR22,500,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to A3 (sf); previously on Oct 12, 2023 Affirmed Baa1 (sf) Moody's has also affirmed the ratings on the following notes: EUR193,000,000 (Current outstanding amount EUR118,359,681) Class A-1 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Oct 12, 2023 Affirmed Aaa (sf) EUR25,000,000 (Current outstanding amount EUR15,331,565) Class A-2 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Oct 12, 2023 Affirmed Aaa (sf) EUR30,000,000 (Current outstanding amount EUR18,397,878) Class A-3 Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Oct 12, 2023 Affirmed Aaa (sf) EUR28,000,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Oct 12, 2023 Upgraded to Aaa (sf) EUR10,000,000 Class B-2 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Oct 12, 2023 Upgraded to Aaa (sf) EUR23,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Oct 12, 2023 Affirmed Ba2 (sf) EUR12,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed B1 (sf); previously on Oct 12, 2023 Affirmed B1 (sf) Armada Euro CLO II Designated Activity Company, issued in April 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Brigade Capital Europe Management LLP. The transaction's reinvestment period ended in May 2022. RATINGS RATIONALE The rating upgrades on the Class C-1, C-2 and D notes are primarily a result of the significant deleveraging of the Class A-1, A-2 and A-3 notes following amortisation of the underlying portfolio since the last rating action in October 2023 and a shorter weighted average life of the portfolio which reduces the time the rated notes are exposed to the credit risk of the underlying portfolio. The affirmations on the ratings on the Class A-1, A-2, A-3, B-1, B-2, E and F notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralisation ratios. The Class A-1, A-2, and A-3 notes have paid down by approximately EUR74.3million 30% since the last rating action in October 2023 and EUR 95.9 million (38.7%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased across the capital structure. According to the trustee report dated May 2024 [1] the Class A/B, Class C, Class D, Class E and Class F OC ratios are reported at 148.77%, 132.52%, 121.99%, 112.83% and 108.58% compared to September 2023 [2] levels of 142.55%, 128.68%, 119.50%, 111.38% and 107.56%, respectively. Moody's notes that the May 2024 principal payments are not reflected in the reported OC ratios. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR303.4m Diversity Score: 38 Weighted Average Rating Factor (WARF): 2942 Weighted Average Life (WAL): 3.35 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.23% Weighted Average Coupon (WAC): 4.06% Weighted Average Recovery Rate (WARR): 45.20% The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in May 2024. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance methodology" published in October 2023. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. ARMADA EURO VI: S&P Assigns B-(sf) Rating on Class F Notes ---------------------------------------------------------- S&P Global Ratings assigned credit ratings to the class A, B, C, D, E, and F notes and the class A-L1 loan and A-L2 loan issued by Armada Euro CLO VI DAC. The issuer also issued unrated subordinated notes. Under the transaction documents, the rated notes and loans 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 will end approximately 4.6 years after closing and the non-call period will end 1.6 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 our counterparty rating framework. Portfolio benchmarks CURRENT S&P Global Ratings' weighted-average rating factor 2,891.48 Default rate dispersion 452.14 Weighted-average life (years) 5.00 Obligor diversity measure 93.31 Industry diversity measure 23.86 Regional diversity measure 1.46 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 1.50 Identified 'AAA' weighted-average recovery (%) 38.07 Actual weighted-average spread (%) 4.22 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, 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. "In our cash flow analysis, we used the EUR300 million target par amount, the covenanted weighted-average spread (4.15%), the covenanted weighted-average coupon (4.50%), and the identified weighted-average recovery rate at each rating level, calculated in line with our CLO criteria. 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 shows that the class B to F notes benefit from break-even default rate (BDR) and scenario default rate cushions that we would typically consider to be in line 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 on these classes of notes. The class A notes, A-L1 loan, and A-L2 loan can withstand stresses commensurate with the assigned ratings. "Until the end of the reinvestment period on Jan. 15, 2029, 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 compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, if 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 rating levels. "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 is bankruptcy remote, in line with our legal criteria." The transaction is managed by Brigade Capital Europe Management LLP, which is an affiliate of Brigade Capital Management LP and a limited liability partnership incorporated in the U.K. Following S&P's analysis of the credit, cash flow, counterparty, operational, and legal risks, S&P believes that its assigned ratings are commensurate with the available credit enhancement for the class A to F notes and the A-L1loan and A-L2 loan. 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 notes and A-L1 loan and A-L2 loan based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance S&P said, "We regard the exposure to environmental, social, and governance (ESG) credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average." Ratings AMOUNT CREDIT CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT(%) A AAA (sf) 94.00 Three-month EURIBOR 38.00 plus 1.47% A-L1 loan AAA (sf) 67.00 Three-month EURIBOR 38.00 plus 1.47% A-L2 loan AAA (sf) 25.00 Three-month EURIBOR 38.00 plus 1.47% B AA (sf) 34.30 Three-month EURIBOR 26.57 plus 2.10% C A (sf) 17.00 Three-month EURIBOR 20.90 plus 2.60% D BBB (sf) 20.70 Three-month EURIBOR 14.00 plus 3.75% E BB- (sf) 12.40 Three-month EURIBOR 9.87 plus 6.64% F B- (sf) 10.00 Three-month EURIBOR 6.53 plus 8.39% Sub Notes NR 28.60 N/A N/A *The ratings assigned to the class A, B notes and the A-L1 loan and A-L2 loan address timely interest and ultimate principal payments. The ratings assigned to the class C, D, E, and F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. BNPP IP 2015-1: Moody's Affirms B2 Rating on EUR9MM Class F Notes ----------------------------------------------------------------- Moody's Ratings has upgraded the rating on the following notes issued by BNPP IP Euro CLO 2015-1 DAC: EUR24,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Upgraded to Aa3 (sf); previously on Jul 22, 2022 Upgraded to A1 (sf) Moody's has also affirmed the ratings on the following notes: EUR185,000,000 (Current outstanding amount EUR146,129,334) Class A Senior Secured Floating Rate Notes due 2030, Affirmed Aaa (sf); previously on Jul 22, 2022 Affirmed Aaa (sf) EUR13,500,000 Class B-1 Senior Secured Floating Rate Notes due 2030, Affirmed Aaa (sf); previously on Jul 22, 2022 Upgraded to Aaa (sf) EUR12,632,000 Class B-2 Senior Secured Fixed Rate Notes due 2030, Affirmed Aaa (sf); previously on Jul 22, 2022 Upgraded to Aaa (sf) EUR16,800,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Affirmed Baa1 (sf); previously on Jul 22, 2022 Upgraded to Baa1 (sf) EUR18,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Affirmed Ba2 (sf); previously on Jul 22, 2022 Affirmed Ba2 (sf) EUR9,000,000 Class F Senior Secured Deferrable Floating Rate Notes 2030, Affirmed B2 (sf); previously on Jul 22, 2022 Affirmed B2 (sf) BNPP IP Euro CLO 2015-1 DAC, issued in April 2015 and refinanced in April 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by BNP PARIBAS ASSET MANAGEMENT France SAS. The transaction's reinvestment period ended on July 15, 2022. RATINGS RATIONALE The rating upgrade on the Class C notes is primarily a result of the deleveraging of the Class A senior notes following amortisation of the underlying portfolio since the payment date in October 2023. The affirmations on the ratings on the Class A, B-1, B-2, D, E and F notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralisation ratios. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR239.9m Defaulted Securities: EUR4.6m Diversity Score: 47 Weighted Average Rating Factor (WARF): 3120 Weighted Average Life (WAL): 3.80 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.89% Weighted Average Coupon (WAC): 3.41% Weighted Average Recovery Rate (WARR): 45.60% Par haircut in OC tests and interest diversion test: 0% The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in May 2024. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank provider, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance methodology" published in October 2023. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. -- Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. -- Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes that, at transaction maturity, the liquidation value of such an asset will depend on the nature of the asset as well as the extent to which the asset's maturity lags that of the liabilities. Liquidation values higher than Moody's expectations would have a positive impact on the notes' ratings. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. =================== L U X E M B O U R G =================== ARRIVAL SA: Files Insolvency Case in Luxembourg ----------------------------------------------- Arrival SA announced that the Company filed on May 16, 2024, a bankruptcy petition with the Tribunal d'Arrondissement de et a Luxembourg of Luxembourg, and on May 22, 2024, the Court rendered a judgment whereby the Company is declared bankrupt. As of May 22, 2024, the Company's board of directors no longer manages the Company's affairs and Mr. Philippe Thiebaud was appointed by the Court as bankruptcy trustee of the Company, in accordance with Luxembourg law. About Arrival Arrival's mission is to master a radically more efficient New Method to design, produce, sell and service purpose-built electric vehicles, to support a world where cities are free from fossil fuel vehicles. Arrival's in-house technologies enable a unique approach to producing vehicles using rapidly-scalable, local Microfactories. Arrival (Nasdaq: ARVL) is a joint stock company governed by Luxembourg law. VIVION INVESTMENTS: S&P Affirms 'BB' LT ICR, Outlook Negative ------------------------------------------------------------- S&P Global Ratings affirmed its 'BB' long-term issuer credit rating on Vivion Investments S.a.r.l and its 'BB+' issue rating on its senior secured notes. S&P also affirmed its 'BB-' rating on the senior unsecured notes. The negative outlook indicates that S&P could lower the rating if Vivion fails to improve its EBITDA interest coverage ratio to close to 1.8x, calculated for the 12 months after its planned refinancing closes, or if adjusted debt to EBITDA increased above 9.5x or the debt-to-debt plus equity ratio rose above 60%, within the next 12 months. Vivion Investments S.a.r.l recently reported full year 2023 results in which its S&P Global Ratings-adjusted EBITDA interest coverage ratio declined to 1.6x, as of Dec. 31, 2023. Although this is below the downside threshold of 1.8x, S&P views the drop as temporary and expect Vivion to take sufficient steps to improve the coverage ratio to close to 1.8x. S&P said, "Our rating action on Vivion is based on our expectation that its EBITDA interest coverage ratio has only temporarily weakened to below our 1.8x downside threshold.In its full-year results for 2023, the company's S&P Global Ratings-adjusted EBITDA interest coverage ratio declined to 1.6x, which is slightly below our rating downside threshold of 1.8x. The main reason for the deterioration in coverage was Vivion's one-time recognition of EUR21 million in expected credit losses on rent and receivables for 2023; this caused a 20-basis point drop in the ratio. Our forecast does not include further rent losses, and we understand that Vivion plans to take steps within the next 12 months to improve the coverage ratio to close to 1.8x for the 12 months following the refinancing activities. Steps may include either repaying the company's expensive debt with cash, or refinancing it early, at a cheaper rate. Our base case assumes that the company will repay the upcoming unsecured notes stub of EUR180 million, which is due to mature in August 2024, partly with cash and partly from secured bank financing. Therefore, we expect Vivion's overall average cost of debt to remain about 6.5%-7.0% over the next 12 months." Despite the company's relatively weak EBITDA interest coverage, its leverage remains relatively low. At year-end 2023, adjusted debt to EBITDA was 10.3x and debt to debt plus equity was 46.6%. S&P said, "We anticipate that the company's ratio of debt to EBITDA will improve toward 8.5x over the next 12 months, because rental income is expected to improve and we do not expect to see further rent loss on hotel receivables. We predict that debt to debt plus equity will be stable at about 47%--this includes our assumption that the portfolio could see a further devaluation of 3%-5% over 2024 if the first half of the year sees the expected expansion in yields." Vivion's operating performance benefits from a resilient tenant base and a recovery in its hotel segment, and is expected to remain stable over the next 12-24 months. In 2023, Vivion's revenue grew by 4%, mainly supported by new rental agreements in the German portfolio, indexation of existing leases, and positive rent reviews in the U.K. portfolio. The occupancy rate for its German and U.K. assets remained stable at around 89%-90% and 100%, respectively. All of its U.K. leases and over 90% of its German leases are either indexed to inflation or include step-up rent components. Therefore, S&P forecasts a positive like-for-like rental income growth of about 3.0%-3.5% in 2024 and 2.0%-2.5% in 2025, assuming broadly stable occupancy rates for the overall portfolio. In addition, Vivion has long-term office leases with public and blue-chip companies and owns hotels that have well-known operators; this enables it to maintain stable and predictable cash flow generation. Vivion's liquidity remains adequate, supported by a strong cash position and limited short-term debt maturities for the 12 months from Jan. 1, 2024.As of Dec. 31, 2023, Vivion's cash and liquid assets stood at about EUR530.5 million (including EUR33.1 million of marketable securities), which is more than sufficient to cover its 2024 debt maturities of about EUR373 million. The company recently extended the maturity of a EUR67 million German secured bank loan to 2025 from first-quarter 2024. S&P said, "We understand that it is in discussion with banks to refinance additional secured bank loans, at or before their maturity dates. The company undertook a refinancing transaction last year, which left it with limited maturities in 2025 and 2026. Vivion had an average debt maturity of about four years, as of Dec. 31, 2023--we expect this to lengthen after it repays its unsecured notes stub in August 2024 and refinances its German secured bank loans. Of its debt, 97% is fixed or hedged, which limits volatility risk arising from interest-rate movements. The company had sufficient headroom under its covenants, as of Dec 31, 2023. A high proportion of its cash is held at Vivion's subsidiary, Golden Capital Partners, but we understand that there are no restrictions limiting Vivion from accessing this cash, if needed, via intracompany loans or dividend payments." S&P said, "The negative outlook indicates that we could lower the rating if Vivion fails to improve its EBITDA interest coverage ratio to close to 1.8x, calculated for the 12 months after the refinancing closes, or if adjusted debt to EBITDA increased above 9.5x or the debt-to-debt plus equity ratio rose above 60%, within the next 12 months." S&P could downgrade the company if Vivion fails to maintain: -- EBITDA interest coverage of close to 1.8x sustainably; -- Debt to EBITDA below 9.5x; or -- Debt to debt plus equity below 60%. S&P could also lower the rating if Vivion's operating performance deteriorates, so that occupancy rates decline or rental growth is lower than anticipated, or if it sees further asset devaluations. S&P could revise the outlook to stable if: -- EBITDA interest coverage remains at or above 1.8x sustainably; -- Debt to EBITDA remains below 9.5x; -- Debt to debt plus equity remains well below 60%; -- Liquidity remains adequate and Vivion's operating performance, including occupancy rates, rental growth, and asset values, does not materially deteriorate; and -- The company maintains a prudent financial policy under which it uses its high cash balance to make asset acquisitions that would increase its asset and EBITDA bases, or prioritizes the repayment of high-interest debt. ===================== N E T H E R L A N D S ===================== DRIVE PARENTCO: Moody's Assigns 'B2' CFR, Outlook Stable -------------------------------------------------------- Moody's Ratings has assigned a B2 corporate family rating and B2-PD probability of default rating to Drive Parentco B.V. (nexeye or the company), a holding company owner of optical retailer nexeye. At the same time, Moody's has assigned B2 instrument ratings to fully owned subsidiary Drive Bidco B.V.'s proposed EUR325 million backed senior secured term loan B due in 2031 and EUR70 million backed senior secured revolving credit facility due in 2030. The outlook for both entities is stable. Net proceeds from the proposed transaction will be used to finance the acquisition of nexeye by private equity firm Kohlberg Kravis & Roberts (KKR). "nexeye's B2 rating reflects the company's good brand position in the Belgian and Dutch optical retail markets, as well as its good margins and positive free cash flow generation" said Guillaume Leglise, a Moody's Vice President - Senior Analyst and lead analyst for the company. "At the same time, the rating is constrained by the company's small scale and leveraged capital structure", added Mr Leglise. RATINGS RATIONALE The B2 rating considers nexeye's (i) leading market position in optical retail activities in the Netherlands and Belgium; (ii) the industry's stable operating environment supported by favorable demographic trends as well as rather inelastic demand for healthcare-related goods; (iii) the company's track record of revenue growth supported by a loyal customer base, a growing store network and a good omnichannel infrastructure; (iv) its value proposition which attracts customers in the context of the current inflationary environment and limited reimbursements for prescription eyewear in the company's core markets; (v) its good operating margins which results in positive Moody's-adjusted free cash flows (FCF), and good liquidity. Conversely, the rating is constrained by (i) the company's limited scale compared to some direct optical competitors in Europe; (ii) its modest geographic diversity, with some concentration in Belgium and the Netherlands, albeit reducing through its expansion in Germany, (iii) its leveraged capital structure, with Moody's-adjusted gross leverage of 4.5x pro forma the transaction, based on EBITDA in the 12 months to May 31, 2024; (iv) the execution risk related to the store roll-out plan of the Eyes + More (E+M) banner in the German market; and (v) the fierce competition in the fragmented optical retail market, emphasized by the limited brand awareness of the E+M banner. Governance considerations were an important driver of the rating action. Moody's considers that nexeye is exposed to high governance risks, reflecting its leveraged capital structure and its majority private equity ownership. nexeye is controlled by KKR, which, as often is the case in private-equity sponsored deals, can have a high tolerance for leverage and a comparatively less transparent governance framework than listed companies. Also, nexeye has grown through acquisitions in the past, a strategy which could potentially be pursued again in the future, to drive operational growth. LIQUIDITY PROFILE Pro forma the proposed transaction, Moody's expects nexeye will have good liquidity. While the initial cash balance is expected to be modest, at around EUR20 million, this will be largely mitigated by positive FCFs and access to a revolving credit facility (RCF) of EUR70 million, which Moody's expects to be undrawn at closing. The RCF is expected to be mobilised for rental guarantees for around EUR6 million. Moody's expects nexeye to generate positive FCF over the next 12 to 18 months, as seen historically, which reflects the company's good margins, low working capital requirements, offset to some extent by high capital spending related to the store roll-out plan. Nexeye's RCF has a single springing maintenance covenant of 8.5x senior secured leverage that is activated if the facility is drawn by more than 40%. Moody's anticipates that the company will have significant capacity against the threshold if tested. The proposed TLB and RCF are expected to mature in 2031 and 2030 respectively and no other debt maturity is expected before. STRUCTURAL CONSIDERATIONS The B2 ratings assigned to the term loan and RCF, in line with the CFR, reflect their pari passu ranking in the capital structure, a collateral package comprising share pledges, intercompany receivables and material intellectual property, and upstream guarantees from material subsidiaries of the group representing at least 80% of the group EBITDA. The B2-PD probability of default rating, in line with the CFR reflects Moody's assumption of a 50% family recovery rate typical for bank debt structures with a loose set of covenants. CONVENANTS Moody's has reviewed the marketing draft terms for the new credit facilities. Notable terms include the following: Guarantor coverage will be at least 80% of consolidated EBITDA (determined in accordance with the agreement) and include all companies representing 5% or more of consolidated EBITDA. Only companies incorporated in the Netherlands, Germany and Belgium are required to provide guarantees and security. Security will be granted over key shares, bank accounts and receivables. Incremental facilities are permitted up to the greater of EUR70 million and 1.0x consolidated EBITDA, plus unlimited amounts up to a senior secured leverage ratio of 4.5x. Unlimited unsecured debt is permitted subject to a 2.0x fixed charge coverage ratio or a total leverage ratio (calculated excluding the fixed incremental facility basket) of 6.5x. Unlimited restricted payments are permitted if senior secured leverage is 4.0x or lower. Asset sale proceeds are only required to be applied in full (subject to exceptions) where senior secured leverage is 4.0x or greater. Adjustments to consolidated EBITDA include the full run rate of cost savings and synergies, capped at 25% of consolidated EBITDA and believed to be realisable within 24 months of the relevant event. The proposed terms, and the final terms may be materially different. RATINGS OUTLOOK The stable outlook reflects Moody's expectation that the company will sustain its current operating performance, with single-digit earnings growth and broadly stable operating margins despite the currently sluggish macroeconomic environment. The outlook assumes that the company will maintain positive FCF, adequate liquidity and will not embark on any transformational debt-funded acquisitions or dividend recapitalisations. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure on the rating could materialize if the company continues to generate organic growth at both revenue and profitability levels, leading to Moody's-adjusted debt/EBITDA reducing sustainably below 4.0x; its Moody's-adjusted EBITDA minus capex/interest expense is maintained above 2.0x; and Moody's-adjusted FCF/debt staying sustainably above 5%; and the company maintains a balanced financial policy, including good liquidity. Negative pressure on the rating could materialize if the company significantly deviates from current Moody's expectations, including positive like-for-like sales growth and earnings growth; its Moody's-adjusted debt/EBITDA deteriorates towards 5.5x; its Moody's-adjusted EBITDA minus capex/interest expense approaches 1.5x; its Moody's-adjusted FCF/debt reduces to low single percentage digits; or its liquidity weakens. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail and Apparel published in November 2023. COMPANY PROFILE Drive Parentco B.V. is the parent company of the nexeye group, a retailer of 'value-for-money' optical and eye care goods based in Gorinchem, Netherlands, and founded in 1982. The group operates under three brands : Hans Anders (HA) in the Netherlands and Belgium, Eyes + More (E+M) in Germany, Austria, Belgium, Netherlands and Sweden, and Direkt Optik (DO) in Sweden through a total of 719 sites. The company is currently owned by private equity firm KKR which acquired it in April 2024 from its previous private equity owner 3i Group plc (Baa1 stable). For the full year ending January 31, 2024, the company reported EUR386 million of revenues and an EBITDA of EUR96 million (post-IFRS). PRECISE MIDCO: S&P Upgrades Rating to 'B', Outlook Stable --------------------------------------------------------- S&P Global Ratings raised to 'B' from 'B-' its ratings on raised to 'B' from 'B-' its ratings on ERP provider Precise Midco B.V. (Exact), its EUR1.6 billion of senior secured facilities and its EUR70 million revolving credit facility. The recovery rating on these instruments remains unchanged at '3' (60%). S&P said, "The outlook is stable, reflecting our expectation that Exact's revenue and EBITDA will continue to increase organically in 2024-2025, yielding FOCF close to EUR120 million, FOCF to debt above 7%, and adjusted debt to EBITDA below 7x., its EUR1.6 billion of senior secured facilities and its EUR70 million revolving credit facility. The recovery rating on these instruments remains unchanged at '3' (60%). "The outlook is stable, reflecting our expectation that Exact's revenue and EBITDA will continue to increase organically in 2024-2025, yielding FOCF close to EUR120 million, FOCF to debt above 7%, and adjusted debt to EBITDA below 7x. "The upgrade mainly reflects the company's track record of maintaining S&P Global Ratings-adjusted leverage at or below 8x since 2021, combined with healthy and recurring positive annual FOCF, which we expect to continue." The deleveraging trend was primarily driven by increased EBITDA thanks to reported sound year-on-year revenue growth of 17% in 2023 and strong S&P Global Ratings-adjusted margin of about 47%. This was amid a EUR400 million increase in S&P Global Ratings-adjusted debt last year following the issuance of a term loan B to fund a EUR250 million dividend (paid in this year) and accumulate cash for potential acquisitions. As a result, at end-2023 the group posted S&P Global Ratings-adjusted debt to EBITDA of 7.3x (broadly unchanged from 7.2x in 2022), and we forecast a meaningful decline to 6.6x in 2024, absent large debt-funded acquisitions or dividend recaps. We estimate Exact will report annual FOCF after leases of about EUR110 million in 2024 and EUR140 million in 2025. S&P said, "In our view, Exact's thoughtful acquisition strategy, focusing on scalable regional expansions in Benelux and DACH, should help sustain the forecast deleveraging. Since 2018--when the company scaled back its international greenfield projects, after years of operating losses in the U.K., Germany, France, and Spain--Exact has been focusing on expansion in its home region and DACH. We note, in particular, the acquisitions of Unit4 Bedrijfssoftware, Unit4's branch serving the Dutch and Belgian customers, in 2020 and Germany-based Weclapp in 2022. The company aims to replicate Exact's successful business model--as accounting and ERP software solutions provider for small and medium sized businesses in the Benelux--to the fragmented DACH region, which has high strategic value as Germany is a large total addressable market (TAM) with no strong local cloud champion. We think the company's aim of expanding in DACH enterprise resource planning (ERP) markets through mergers and acquisitions (M&A) will continue to weigh on its credit metrics, limiting rating upside to B+, but we expect management's expertise for integrations and scalability of existing SaaS operations should support EBITDA and profitability growth and deleveraging capabilities. For instance, following the acquisition of Unit4 Bedrijfssoftware in 2020, leverage returned to about 8x one year after 10x at deal's closing. "Exact has a track record of profitable growth. The company's profitability has gradually and significantly increased in recent years. The adjusted EBITDA margin improved to 47% in 2023 from 32% in 2019, on the back of the Unit4 Bedrijfssoftware acquisition, a competitor in Benelux, and its successful integration and synergy on costs, as well as scalability of Saas' offering and strong endorsement with accountancy customers. We view the current profitability as higher than the sector average of 25%-30%, with potential to further gradual increase. This also reflects strong growth prospects and high recurring revenues above 90%. We think the company's strong profitability, coupled with limited working capital and capital expenditure needs (majority is capitalized software development costs), have created a sound foundation for sustained cash flow growth. "Exact's creditworthiness is underpinned by its leading position in Benelux, scalable business model, and expanding addressable market. It's top position is underpinned by a loyal customer base resulting in limited customer churn of about 4%, which was gradually declining from already low 6% in 2019 despite the pandemic-related fallout. Exact specializes in providing a range of software solutions to small business and accountancy firms (SB&A), where it generates two-thirds of its revenue; the remaining third comes from midsize enterprises. In the SB&A segment, where the company enjoys a strong market position, it offers multi-tenant cloud-based integrated business platform (Exact Online, weclapp), as well as accountancy and ERP solutions. The growth prospects in this segment stem from ongoing digitalization of small businesses and connecting with larger customers via its offering the Exact Online Premium edition, with extended functionalities. In the mid-market segment Exact offers a range of integrated financial ERP, CRM, and HRM software, and aims at maintaining solid organic growth while maintaining its market position. "We consider that Exact's services are mission critical, and costly and time-consuming to replace, while the costs for services tend to be a small component for its clients. Thanks to meaningful price increases, the scalable Saas model, cross-selling and upselling opportunities, and further expansion on current markets, we expect the strong organic growth momentum will continue. "The stable outlook reflects our expectation that Exact's revenue and EBITDA will continue to increase organically in 2024-2025, leading to solid FOCF close to EUR120 million, FOCF to debt above 7%, and adjusted debt to EBITDA below 7x. "We could lower the rating if adjusted debt to EBITDA exceeds 8x or if FOCF to debt drops below 5% for a prolonged period. We think this might occur in case of additional large, debt-funded acquisitions, or sizable debt-funded dividends. "We could raise the rating if Exact sustainably reduced adjusted debt to EBITDA below 5.5x and achieved FOCF to debt of close to 10% on the back of EBITDA growth, while the company and the owners demonstrate a commitment to, or sufficient track record of, maintaining these ratios. "Governance factors are a moderately negative consideration in our credit rating analysis of Exact. Our assessment of the company's financial risk profile as highly leveraged reflects corporate decision-making that prioritizes the interests of the controlling owners, which is the case for most rated entities owned by private-equity sponsors. Our assessment also reflects their generally finite holding periods and focus on maximizing shareholder returns." SIGMA HOLDCO: Moody's Affirms 'B2' CFR, Outlook Remains Stable -------------------------------------------------------------- Moody's Ratings has affirmed the B2 long-term corporate family rating and the B2-PD probability of default rating of Sigma Holdco BV (Upfield or the company), the parent company of Upfield B.V., a global manufacturer of plant butters and spreads, plant creams, liquids and plant cheeses. The outlook on both entities remains stable. Concurrently, Moody's has assigned a B1 rating to the proposed EUR400 million backed senior secured notes due 2029 to be issued by Upfield B.V and guaranteed by Sigma Holdco BV, which will rank pari passu with the backed senior secured first lien term loans. Proceeds from the issuance of the new notes will be used to partly repay the backed senior unsecured notes due in 2026. Moody's has also affirmed the B1 ratings on the backed senior secured first lien term loans (TLBs) due 2028 and on the backed senior secured first lien revolving credit facility (RCF) due 2027 all borrowed by Upfield B.V. and affirmed the Caa1 ratings on the backed senior unsecured ratings on the EUR685 million and the $525 million notes due 2026 issued by Sigma Holdco BV. "The rating affirmation reflects the company's recent strong performance in line with Moody's expectations, and stronger liquidity after having successfully extended all the TLBs maturities to 2028. The action also reflects Moody's expectation that Upfield will continue to deleverage on the back of continued operating performance improvement to a level that would strongly position the company in the rating category", says Paolo Leschiutta, a Moody's Senior Vice President and lead analyst for Upfield. RATINGS RATIONALE The rating affirmation reflects the company's strong operating performance during 2023 despite challenging macroeconomic conditions and on the back of significant pass-through of high raw material costs to customers in the first half of 2023, which resulted in only modest volume attrition. The company has managed to increase prices by around 6.5% in 2023, while limiting the decline in volumes to 5.3% (of which 2.7% was as a result of company's controlled actions in an effort to optimize its product offering), leading to 13.5% growth in its normalized EBITDA at constant currency. The stronger performance together with lower restructuring costs and increasing cost efficiencies benefitted free cash flow (FCF) generation, albeit the FCF has overall decreased and remains limited by the higher interest expenses following the TLBs refinancing in 2023 and in early 2024. As of March 2024, the company's financial leverage, measured as Moody's adjusted gross debt to EBITDA stood at 7.5x, in line with the 7.4x reported as of December 2023 and the 7.5x reported as of December 2022. Moody's forecasts that the company's leverage will decline towards 7.1x in 2024 and 6.7x in 2025, on the back of a solid operating performance, positioning the company more solidly in the B2 rating category. However, raw materials price deflation could challenge Upfield to maintain the current level of pricing, creating uncertainty around the evolution of the top line, as volumes recovery remains sluggish amid ongoing soft consumer sentiment. In this context, the company's hedging policy provides for some visibility on future cost giving the company a better tool to manage potential volatility in demand. Moody's also notes the progress the company has made in recent years in rejuvenating its product offering from traditional plant spreads to plant creams and plant cheeses, focusing on innovation and on products that are experiencing rapid growth in some key markets like the US and the UK. The rating remains supported by Upfield's strong business profile in light of its significant scale, strong portfolio of brands, leading global market positions with extensive geographical diversification, and good growth potential offered by product innovation and expansion into adjacent plant-food categories like cheese. The rating is also supported by the company's positive FCF generation. LIQUIDITY Upfield's liquidity is good, with cash on balance sheet of EUR204 million as of March 2024, good availability under its EUR700 million RCF (EUR567 million available as of March 2024, as this was partially used in early 2023 to repay some of the more expensive debt) and Moody's expectation of positive FCF (in excess of EUR100 million per year). The company maintains a comfortable covenant capacity, with net senior secured leverage at 5.0x as of March 2024, against a maximum level of 8.5x. The company faces the maturity of the equivalent EUR1.1 billion senior unsecured notes in 2026, although it has started to address these refinancing needs with the recently launch of a new senior secured notes for EUR400 million due in 2029. Term loans maturities have been extended to 2028. STRUCTURAL CONSIDERATIONS The B2-PD probability of default rating, in line with the B2 CFR, reflects a 50% corporate family recovery assumption applicable for mixed bank/bond debt structures. The B1 ratings of the term loans, the RCF and the new senior secured notes reflect the first-lien nature of these facilities with no structural subordination because of the guarantee structure. However, the security package only covers significant assets in the UK and the US, and share pledges, intercompany receivables and some bank accounts in other jurisdictions. The Caa1 senior unsecured rating on the remaining outstanding senior unsecured notes reflects the contractual subordination of the notes to the term loans, the RCF and the new senior secured notes. Moody's notes, however, that the repayment of the junior debt with new senior debt weakens the position of the senior debtholders within the capital structure and further switches from junior to senior debt might result in the senior debt losing the current rating uplift compared to the CFR. The current uplift of the senior debt rating could disappear in case of failure to further improve the company's credit quality or to reduce the overall amount of debt outstanding. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's expectation that the company will sustain its strong operating performance and free cash flow generation which will allow for modest debt reduction, such that its Moody's-adjusted debt/EBITDA will decline towards 6.5x over the next 12-18 months. The stable outlook also assumes that the company will address its upcoming debt maturities in due course. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's could upgrade the rating if the company demonstrates solid top-line growth with improving profitability, leading to significant positive FCF generation and a reduction in leverage (Moody's-adjusted gross debt/EBITDA) towards 6.5x, both on a sustained basis. Before an upgrade, the company will need to maintain a Moody's-adjusted EBITA interest cover above 2.0x. Moody's could downgrade the rating if the company fails to maintain the current level of earnings, leading to negative FCF over the next 12-18 months, which would weaken liquidity, as illustrated by reduced availability under its revolving credit facility (RCF) or a significant deterioration in covenant capacity. Quantitatively, Moody's can downgrade the rating if the company's leverage, on a Moody's-adjusted gross debt/EBITDA basis, remains above 7.5x; its Moody's-adjusted EBITA interest coverage ratio declines below 1.5x; or it fails to address its maturities at least more than 12 months in advance. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Consumer Packaged Goods published in June 2022. COMPANY PROFILE Upfield, formed in 2018, is global leader in plant-based foods, operating in four categories of plant butters and spreads, plant creams, liquids and plant cheeses, with most of its revenue coming from the sale of plant spreads. In 2023, the company reported revenue of EUR3.28 billion and company-normalised EBITDA of EUR831 million. The company operates largely in retail (89% of revenue) and partially in food service. Upfield is geographically diversified across both developed and emerging markets, with no significant concentration in any one market. Its largest markets are the US, Germany, the UK and the Netherlands. Upfield is controlled by funds managed and advised by Kohlberg Kravis Roberts & Co. Inc. (KKR). =========================== U N I T E D K I N G D O M =========================== AC LANDSCAPES: Bought Out of Administration, 34 Jobs Saved ---------------------------------------------------------- Business Sale reports that AC Landscapes and Treeworks UK Limited, a specialist landscaping company headquartered in Devon, has been acquired out of administration. The sale of the company as a going concern to an unconnected buyer has saved more than 30 jobs. Although based in Devon, the company operates across the South West, North East, North West and Midlands. It holds a number of strategic long-term frameworks with National Highways, providing landscaping, vegetation management and arboricultural consultancy services to the UK's strategic highway and electricity distribution markets. The company, which was founded in 2007, generates around GBP4 million in annual turnover, but fell into administration last week, with Gary Lee and Paul Stanley of Begbies Traynor appointed as joint administrators on June 14, Business Sale relates. The joint administrators have now secured a sale of the business as a going concern to an unconnected third party, enabling the company to fulfil its existing contracts and saving 34 jobs, Business Sale discloses. BRANTS BRIDGE 2022-1: Moody's Affirms B3 Rating on Class X1 Notes ----------------------------------------------------------------- Moody's Ratings has upgraded the ratings of two notes in Brants Bridge 2022-1 PLC. The rating action reflects the better than expected collateral performance and the increased levels of credit enhancement for the affected notes. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain their current ratings. GBP295.6M Class A Notes, Affirmed Aaa (sf); previously on Jun 10, 2022 Definitive Rating Assigned Aaa (sf) GBP20.0M Class B Notes, Upgraded to Aaa (sf); previously on Jun 10, 2022 Definitive Rating Assigned Aa1 (sf) GBP10.0M Class C Notes, Upgraded to Aa3 (sf); previously on Jun 10, 2022 Definitive Rating Assigned A2 (sf) GBP5.8M Class D Notes, Affirmed Baa2 (sf); previously on Jun 10, 2022 Definitive Rating Assigned Baa2 (sf) GBP6.7M Class X1 Notes, Affirmed B3 (sf); previously on Jun 10, 2022 Definitive Rating Assigned B3 (sf) RATINGS RATIONALE The rating action is prompted by decreased key collateral assumptions, namely the portfolio Expected Loss (EL) and MILAN Stressed Loss due to better than expected collateral performance, as well as by an increase in credit enhancement available for the affected notes. Revision of Key Collateral Assumptions: As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolio reflecting the collateral performance to date. The performance of the transaction has continued to be stable, with 90 days plus arrears standing at 0.70% of current pool balance and no losses recorded since closing. Moody's decreased the expected loss assumption to 1.12% as a percentage of original pool balance from 2.20% due to better than expected performance. The revised expected loss assumption corresponds to 2.32% as a percentage of current pool balance. Moody's has also reassessed loan-by-loan information as a part of its detailed transaction review to determine the credit support consistent with target rating levels and the volatility of future losses. As a result, Moody's has decreased the MILAN Stressed Loss assumption to 7.7% from 9.4%. Increase in Available Credit Enhancement Sequential amortization and a non-amortizing reserve fund led to the increase in the credit enhancement available in this transaction. For instance, the credit enhancement for Class B and Class C notes affected by the rating action increased to 13.45% from 6.5% and to 7.24% from 3.5% respectively since closing. The principal methodology used in these ratings was "Residential Mortgage-Backed Securitizations" published in May 2024. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see Residential Mortgage-Backed Securitizations methodology for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement and (3) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. CROWN FIT-OUT: Collapses Into Administration -------------------------------------------- Business Sale reports that Crown Fit-Out & Refurbishment Limited, a refurbishment contractor specialising in the hospitality, leisure and rail industries, fell into administration earlier this month, with Gary Thompson and David Meany of Quantuma Advisory appointed as joint administrators. In the company's accounts for the year to October 31, 2022, its total assets were valued at around GBP2.7 million, while net assets amounted to GBP711,851. EACHCHAIN TRADING: Falls Into Administration -------------------------------------------- Business Sale reports that Eachchain Trading Limited, which trades as De Marchi Engineering, fell into administration at the start of June, with Paul Wood and Neil Vinnicombe of Begbies Traynor appointed as joint administrators, Business Sale relates. In the company's accounts for the year to November 30, 2023, its fixed assets and current assets were each valued at around GBP1.2 million, while net assets amounted to GBP181,708, Business Sale discloses. Eachchain Trading Limited is a sheet metal fabrication company headquartered in Wiltshire. LINKLINE TRANSPORT: Set to Appoint Administrators ------------------------------------------------- Carol Millett at MotorTransport reports that Northamptonshire warehousing and logistics business Linkline Transport has filed a notice of intention to appoint administrators via law firm Shoosmiths. The Wellingborough-based company posted the notice on June 14, MotorTransport relates. Linkline Transport, which has been a member of both Fortec and The Pallet Network (TPN), was founded in 1993 and lists Primark and GXO as clients. It has operating licences for 100 trucks and 130 trailers and has 237,000sq ft of warehousing. It employs around 50 staff and provides logistics, haulage, warehousing and pallet network services across the UK. The firm specialises in home delivery, contract and general haulage, pallet deliveries and white label services. Last May, Linkline Transport secured a GBP12.5 million funding line from Shawbrook Bank, including a GBP5 million confidential invoicing finance loan, which was to be used to help the Wellingborough-based company expand into additional sites, MotorTransport recounts. According to Companies House, Linkline's accounts were due to be filed by the end of March and are now overdue, MotorTransport notes. LUKE MIDCO II: Moody's Assigns First Time 'B3' Corp. Family Rating ------------------------------------------------------------------ Moody's Ratings has assigned a first-time B3 Corporate Family Rating and a B3-PD Probability of Default Rating to Luke Midco II Limited ("Darktrace" or "the company"), the proposed holding company of global cybersecurity vendor Darktrace plc. Concurrently, Moody's has assigned a B2 rating to the proposed $1,685 million backed senior secured first-lien term loan and the $150 million backed senior secured revolving credit facility (RCF), due in 2031 and 2029, respectively, as well as a Caa2 rating to the proposed $460 million backed senior secured second-lien term loan due in 2032, all to be issued by Leia Finco US LLC. The outlook on all ratings is stable. Proceeds from the first-lien and second-lien term loans, along with an equity contribution of $3.2 billion, will be used by the company to finance Thoma Bravo's public-to-private buyout of Darktrace, announced in April 2024. The $150 million first-lien revolving credit facility is expected to be undrawn at close. RATINGS RATIONALE The B3 CFR reflects Darktrace's strong business profile, underpinned by: 1) a leading position in the network detection and response (NDR) market supported by its cutting-edge technology; 2) the high growth profile demonstrated over the past few years and Moody's expectation of double digits revenue and EBITDA growth, supported by the increasing spending in cybersecurity technologies to defend against evolving security threats; 3) its high revenue visibility, with 99% of its base being recurring in nature; and 4) its good liquidity, supported by positive free cash flow (FCF) generation and access to an ample revolving credit facility. At the same time, the CFR reflects: 1) Darktrace's highly leveraged capital structure at closing of the transaction, with Moody's-adjusted leverage (on a cash-EBITDA basis and pro forma for the operating efficiencies) well above 8.0x; 2) the relatively less sticky nature of Darktrace's solutions compared to enterprise resource planning and certain other software application and the uncertainties around the impact of the macroeconomic environment on the operating performance of the company; 3) its exposure to the very competitive and fast changing cybersecurity market, which requires constant investments in R&D and marketing to enhance the product offering and the brand awareness across end-customers; and 4) the potential for shareholder-friendly financial policies under the new ownership. Darktrace has been a pioneer in using self-learning artificial intelligence to detect, investigate and respond to cyber-threats in real time. The unsupervised machine learning technology that underpins its products allows them to protect against unknown and insider threats that get past other traditional cyber defenses. Darktrace is the leading vendor in the NDR market and is increasingly driving more exposure to other segments of the cybersecurity industry such as endpoint and email, thereby expanding its total addressable market. The company reported a revenue CAGR in excess of 30% over the past three years, driven by a significant increase in the customer base and in the average contract value. Moody's anticipates Darktrace's top line to grow in the mid-to-high teens over the next couple of years, driven by the overall market growth as well as the company's ongoing focus on up-selling and cross-selling products across the existing customer base. The majority of the company's revenue is generated on a recurring subscription basis, which coupled with solid customer retention rates, provide high revenue predictability. Moody's expects Darktrace's EBITDA expansion to be higher than revenue growth over the next 12-18 months due to the operating leverage of the business. Pro forma for the one-time costs that will be implemented shortly after closing and before share based payments, the rating agency estimates that Moody's-adjusted leverage for Darktrace stood at 8.8x on a cash EBITDA basis (accounting basis: 10.2x) in the 12 months that ended December 2023. Under Moody's current expectations, Darktrace's leverage is likely to decline towards 7x on a cash EBITDA basis over the next 12-18 months (8x-8.5x on an accounting basis) primarily benefitting from EBITDA growth. Despite the significant debt servicing payments after the closing of the LBO, Moody's expects Darktrace's free cash flow to remain positive and to improve over time, supported by EBITDA growth, limited capital spending and the absence of major working capital needs. This is likely to translate into a Moody's-adjusted FCF/debt in the low single digits percentages over the next 12-18 months. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS After the closing of the LBO, Darktrace will be a private company fully owned by the private equity firm Thoma Bravo and will not have an independent board of directors. Financial policies are expected to be aggressive across the period, as highlighted by the very high leverage at closing. However, this is partially offset by the proportion of equity in the capital structure, which is larger than other private equity owned companies and suggests a commitment to the business as well as a strong loan to value. Furthermore, Moody's believes that the company will be able to leverage Thoma Bravo's strong track record and expertise in the cybersecurity industry. LIQUIDITY Darktrace's liquidity is good. Following the transaction, the company is likely to have a cash balance of at least $180 million and access to a fully undrawn $150 million RCF due in 2029. Moody's forecast that Darktrace will generate positive free cash flow over the next 12-18 months provides further support to the overall liquidity profile of the business. The RCF contains a springing first lien net leverage covenant tested if drawings reach or exceed 40% of facility commitments. Moody's expects the headroom under the covenant to be adequate and to increase over time. Darktrace has no debt maturities in the near term, with the $1,685 million first-lien term loan and the $460 million second-lien term loan maturing in 2031 and 2032, respectively. The first-lien term loan includes an amortisation mechanism of 1% per year. STRUCTURAL CONSIDERATIONS The B3-PD probability of default rating reflects Moody's typical assumption of a 50% family recovery rate, and takes account of the covenant-lite structure of the term loans. The B2 rating of the first-lien senior secured credit facilities, comprising the term loan and the RCF, is one notch above the CFR and reflects the $460 million of second-lien term loan ranking below the first-lien debt in the capital structure. The Caa2 rating of the second-lien facility, two notches below the CFR, reflects the substantial amount of prior ranking first-lien debt in the structure. COVENANTS Moody's has reviewed the marketing draft terms for the new credit facilities. Notable terms include the following: Guarantor coverage will include all US companies and all companies from England and Wales that are material subsidiaries (being a restricted subsidiary that represents 5% or more of Group EBITDA). Only companies incorporated in USA and England & Wales are required to provide guarantees and security. All asset security will be granted in the USA. Entities incorporated in England & Wales will grant security over material operating accounts, shares, intercompany receivables and their material registered intellectual property, as well as a customary floating charge over the assets located in England & Wales. Incremental facilities are permitted up to the greater of $331.25 million and 1.0x consolidated EBITDA (determined in accordance with the agreement). Unlimited pari passu debt is permitted up to a first lien net leverage ratio of 5.10x, and unlimited unsecured debt is permitted subject to a consolidated net leverage ratio of 6.95x or a 1.75x fixed charge coverage ratio. Unlimited restricted payments are permitted if consolidated net leverage is 6.05x or lower. Asset sale proceeds are only required to be applied in full (subject to exceptions) where total leverage is 4.60x or greater. Adjustments to consolidated EBITDA include the full run rate of cost savings and synergies, uncapped and arising from steps to be taken within 36 months. The proposed terms, and the final terms may be materially different. RATING OUTLOOK The stable rating outlook reflects Moody's view that Darktrace's EBITDA will continue to grow over the next 12-18 months, supported by organic revenue growth and operating efficiencies. As a result, the rating agency expects Moody's adjusted debt/EBITDA (on a cash-EBITDA basis) to reduce gradually from its current high level towards 7x and FCF generation to improve. The stable outlook also incorporates Moody's assumption that there will be no transformational acquisition and no deterioration in the liquidity profile of the company. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating pressure could materialise over time should Darktrace: -- maintain strong revenue growth rates with increasing profitability margins; and -- Moody's-adjusted debt/EBITDA (on a cash-EBITDA basis) declines to around 6.0x; and -- Moody's-adjusted FCF/debt sustainably moves towards 5% A rating downgrade would be considered if: -- Darktrace's operating performance were to weaken significantly; or -- Moody's-adjusted debt/EBITDA (on a cash-EBITDA basis) fails to reduce from the current high levels; or -- free cash flow remains negative for an extended period; or -- liquidity weakens PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Software published in June 2022. COMPANY PROFILE Headquartered in Cambridge, United Kingdom, Darktrace is a leading cybersecurity company that uses self-learning artificial intelligence to detect, neutralise and prevent cyber incidents. The company has a well diversified customer base of approximately 9,400 organisations across 110 countries. In the 12 months ended December 2023, Darktrace reported revenues of $616 million and company-adjusted EBITDA of $202 million. MAILSHOP MAILING: Goes Into Administration ------------------------------------------ Business Sale reports that The Mailshop Mailing Limited, a direct mail firm based in Nottingham, fell into administration last week, with Mark Hodgett and Nathan Jones of FRP Advisory appointed as joint administrators. The company filed a notice of intention (NOI) to appoint administrators last month, with reports suggesting that its trade insurance had been cut after it incurred losses, Business Sale relates. In its accounts for the year to July 31, 2022, its fixed assets were valued at GBP1.6 million and current assets at GBP3.4 million, Business Sale discloses. However, at the time, its net assets amounted to just £65,586, Business Sale notes. NORTHWAY MUSHROOMS: Enters Administration ----------------------------------------- Tyrone Courier reports that Killeeshil mushroom compost producer at the centre of an odour row has entered administration, it has been revealed. According to Tyrone Courier, a spokesperson for the firm issued a Joint Administrators Statement to the Courier which said: "Andrew Dolliver and Luke Charleton of EY-Parthenon's Turnaround and Restructuring Strategy team were appointed as Joint Administrators of Northway Mushrooms Limited, trading as Northway Mushrooms." ORBIT PRIVATE: Moody's Affirms 'B2' CFR, Outlook Remains Stable --------------------------------------------------------------- Moody's Ratings has affirmed Orbit Private Holdings I Ltd B2 corporate family rating and B2-PD probability of default rating. Concurrently, Moody's has affirmed the B1 instrument ratings of the upsized $855 million backed senior secured first-lien loan due in 2028 and $175 million backed senior secured first-lien revolving credit facility (RCF) due in 2026 and the Caa1 instrument rating of the senior unsecured notes due 2029, all issued by Armor Holdco, Inc. Moody's has also affirmed the B1 instrument rating of the GBP200 million backed senior secured first lien term loan due in 2028 issued by Earth Private Holdings Ltd. The outlook on all entities remains stable. The proceeds of the additional GBP175 million USD equivalent of first-lien loan raised will be entirely used to pay a special dividend to Orbit's shareholders. RATINGS RATIONALE The affirmation of Orbit's B2 CFR reflects the significant improvement in the company's credit metrics over the past 15 months, with a Moody's-adjusted Debt/EBITDA that has decreased to 4.1x based on the last 12 months (LTM) period to March 31, 2024, down from the very high level of 7.9x at financial year-end December 31, 2022. This rapid de-leveraging has been driven by the increase in Moody's-adjusted EBITDA to GBP245 million for the LTM period to March 31, 2024 compared to GBP131 million in 2022 due to the significantly high interest income offsetting the softness in the company's Shareholder Services business. Pro forma for the fungible GBP175 million USD equivalent add-on raised for the special dividend, Moody's-adjusted gross leverage increases by 0.7x to 4.8x, based on the LTM period to March 31, 2024. Despite this increase in leverage and the debt-funded dividend payment which Moody's considers credit negative, Orbit's rating remains adequately positioned within the B2 rating category. While leverage remains moderate despite the dividend, the rating reflects Moody's expectation that interest income (estimated by Moody's at around GBP180 million for 2024 compared to GBP166 million in 2023) after 2024 will gradually come down as interest rates reduce suggesting that credit metrics could weaken again beyond the next 12 months. Orbit's rating remains somewhat constrained by the limited free cash flow generation. During the year 2023, Orbit's Moody's-adjusted free cash flow turned positive but remained modest at GBP22 million due to higher interest paid and project-related capital spending. Moody's forecasts Orbit's free cash flow to be consistently positive in 2024 and beyond (excluding the special dividend), but to remain low relative to its adjusted debt, in the low-single digits in percentage terms. The B2 CFR continues to reflect its resilient business profile as an established operator in the market for share registrations, pension administration and other regulatory services, with leading positions in the UK and a significant foothold in the US shareholder services market. ESG CONSIDERATIONS Governance is a key driver for this rating action reflecting the debt-funded dividend recapitalisation transaction that the company is executing for the first time under the majority ownership of private equity firm Siris since 2021. Orbit's credit impact score CIS-4 indicates that the rating is lower than it would have been if ESG risk exposures did not exist. RATING OUTLOOK The stable outlook reflects Moody's expectation that Orbit will return to good revenue growth before interest income from 2024 whilst profitability continues to improve as targeted cost synergies are realised. The outlook further assumes that interest income at the current magnitude is unlikely to be sustained beyond 2024 and as such credit metrics could weaken again beyond the next 12 months. Nevertheless, Moody's expects that the company will maintain leverage at modest levels and maintain a good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the rating could occur if Orbit establishes a track record of achieving operating performance in line with its business plan, its Moody's-adjusted Debt/EBITDA remains sustainably below 5.0x, Moody's-adjusted Free Cash Flow/Debt increases sustainably to the high single-digits in percentage terms and liquidity remains good. Conversely, downward pressure on the rating could develop if Orbit's revenue and EBITDA excluding interest income decline again, Moody's-adjusted Debt/EBITDA sustainably increases above 6.0x, free cash flow turns negative for a sustained period or liquidity weakens. LIQUIDITY Moody's considers Orbit's liquidity to be good. On 31 March 2024, the company had GBP82 million cash on balance sheet, of which around GBP17 million are considered as restricted for regulatory purposes, and access to its $175 million RCF which was fully undrawn. STRUCTURAL CONSIDERATIONS The company's capital structure consists of senior secured term loan due 2028, consisting of tranches of $855 million, including the GBP175 million USD equivalent fungible add-on, and GBP200 million, a pari passu ranking $175 million RCF due 2026 and $350 million senior unsecured notes due 2029. The senior secured facilities benefit from a security package that includes substantially all of the group's tangible and intangible assets as well as share pledges. All instruments further benefit from guarantees by material subsidiaries. The RCF is subject to a springing net first lien leverage covenant, tested when drawn down for more than 35% and set with an initial headroom of at least 35%. The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Orbit is a leading provider of share registration and other complex regulatory services and technology to private and public sector clients with focus on the UK and US markets. The group's origins trace back to 1836, but it was created in its current form following a carve-out from Lloyds Banking Group plc (A3 stable) in 2007. The group is headquartered in the UK and, following the completion of the take-private acquisition, is majority-owned by private equity firm Siris. Orbit offers a wide range of non-discretionary and critical services to its customers across and manages over 32 million shareholder accounts and serves around 6,000 clients globally. During the LTM period ended March 31, 2024, the group generated revenue of GBP733 million and a company-adjusted EBITDA of GBP251 million. PLACE 2 PLACE: Loss-Making Contract Prompts Administration ---------------------------------------------------------- Business Sale reports that Place 2 Place Logistics Limited, a Newcastle-under-Lyme-based logistics company, fell into administration earlier this month, with Alan Coleman and Marco Piacquadio of FTS Recovery appointed as joint administrators. The company fell into administration as a result of a "large, loss-making contract", Business Sale relates. Following their appointment, the joint administrators secured a sale of the company's remaining profitable contract to Emerald Specialist Logistics, in a deal that secured 20 jobs, Business Sale discloses. In the company's accounts for the year ending June 30, 2022, its total assets were valued at just under GBP1.6 million, but net liabilities amounted to GBP326,108, Business Sale states. RAPID RESPONSE: Falls Into Administration ----------------------------------------- Business Sale reports that Rapid Response Transport (UK) Limited, a freight transport business based in Stockton-on-Tees, fell into administration earlier this month, with Greg Whitehead of Northpoint Associates appointed as administrator. The company, said to be the largest courier and storage firm in the Middlesbrough area, provided same day, overnight, refrigerated and European delivery. The firm, which operated out of three bases in the area, had been trading for more than 20 years and held an international operator licence authorising 30 HGVs and 15 trailers. In its accounts for the year to February 28, 2023, its fixed assets were valued at GBP359,014 and current assets at GBP608,543, Business Sale discloses. At the time, its net assets amounted to GBP341,290, Business Sale states. SWIFT ELECTRICAL: Bought Out of Administration, 34 Jobs Saved ------------------------------------------------------------- Rob Andrews at StokeonTrentLive reports that dozens of jobs have been saved -- hours after a loss-making Stoke-on-Trent company collapsed into administration. Thirty-four workers had faced an uncertain future after administrators were appointed at Swift Electrical Wholesalers (S-O-T) Limited, StokeonTrentLive relates. But The Recycling Group immediately stepped in to buy the company and its assets, StokeonTrentLive discloses. The deal was struck this week, StokeonTrentLive notes. Interpath Advisory was appointed administrator on June 17, StokeonTrentLive recounts. According to StokeonTrentLive, administrator Howard Smith said: "The company has encountered significant challenges over the last 12 months, including the loss of a main customer which also resulted in the loss of a key supplier, which impacted profitability. This, in turn, then led to increasing cash flow pressure. In addition, the company has been loss making as it has had difficulty recovering from the pandemic period with changes to its product portfolio. In response to this, the directors recently implemented a turnaround plan; however, the business has not yet returned to profitability. As a result of these mounting pressures, the directors sought to undertake a review of their investment, refinance and sale options. When it became clear that a solvent solution could not be found, they took the difficult decision to seek the appointment of administrators. "We are pleased to have been able to conclude this transaction, safeguarding the future of the business and saving 34 jobs. We wish the team all the very best for the future." Swift Electrical Wholesalers (S-O-T) Limited -- on Fenton Industrial Estate -- is a wholesaler and distributor of kitchen appliances, taps and sinks. ********* 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. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *