/raid1/www/Hosts/bankrupt/TCREUR_Public/240704.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, July 4, 2024, Vol. 25, No. 134
Headlines
C Z E C H R E P U B L I C
LIBERTY OSTRAVA: Two Investors Express Takeover Interest
F R A N C E
SEQUANS COMMUNICATIONS: 18 Proposals OK'd at Shareholders Meeting
G E R M A N Y
DEMIRE: Four Property Companies at Risk of Insolvency
N E T H E R L A N D S
MERCON: Bankruptcy Plan Unfair to Certain Junior Creditor Groups
R U S S I A
NBU: Fitch Assigns BB-(EXP) Rating on Sr. Unsecured Eurobonds
S W E D E N
IMPLEMENTA SOL: Delisted From Nordic SME Due to Bankruptcy
[*] SWEDEN: Corporate Bankruptcies Up 39% in First Half of 2024
S W I T Z E R L A N D
FLOWBANK SA: FINMA Opens Bankruptcy Proceedings
U N I T E D K I N G D O M
ATOS SE: Expresses Going Concern Doubt for UK Subsidiary
NEW WAVE: Falls Into Administration
PARADOXX LIMITED: Goes Into Administration
TOWD POINT 2019: Fitch Affirms B- Rating on Class E Notes
X X X X X X X X
UPFIELD: Fitch Assigns B Rating to EUR500MM Secured Notes
[*] Corporate Restructurings to Accelerate Over Next Two Years
- - - - -
===========================
C Z E C H R E P U B L I C
===========================
LIBERTY OSTRAVA: Two Investors Express Takeover Interest
--------------------------------------------------------
Albin Sybera at bne IntelliNews reports that two investors are
reportedly interested in taking over Liberty Ostrava, the largest
Czech steel mill, which entered insolvency proceedings.
According to bne IntelliNews, Czech Minister of Labour and Social
Affairs Marian Jurecka said he know of two "very seriously
interested" investors.
Online news outlet Seznam Zpravy (SZ), reported earlier that
defence and heavy industry conglomerate Czechoslovak Group (CSG),
financial group Creditas and and local regional metals company
Trinecke zelezarny are among the potential investors into Liberty
Ostrava, bne IntelliNews relates.
The steelworks, owned by struggling British-based Liberty Steel,
part of industrialist Sanjeev Gupta's GFG Alliance, has shuttered
most of its production since the end of last year when its key
energy provider Tameh Czech stopped supplies to the plant over
missing payments, bne IntelliNews notes.
Employees have been on paid leave since then and the company
management pursued a reorganisation plan which was backed by the
majority of creditors under a court moratorium protecting Liberty
Ostrava against creditors, bne IntelliNews relays.
However, without any warning, last Friday Liberty Ostrava appeared
in the insolvency registry, with stated liabilities exceeding CZK5
billion, bne IntelliNews discloses.
According to bne IntelliNews, Liberty Steel later said that, "given
the ongoing material risks and uncertainties facing Ostrava,
Liberty has decided the right course of action is to initiate a
sale of Ostrava's operations and withdraw the preventative
restructuring plan in order to enter into a judicial reorganisation
under the Insolvency Act".
The company said the reorganisation would "provide the time and
protection to undertake the sales process and further restructuring
measures to stem losses", bne IntelliNews notes.
The company blamed market conditions -- namely global oversupply
and historically high imports into Europe from countries which face
much lower regulatory and decarbonisation costs, bne IntelliNews
states. Soaring energy and coal prices and falling steel demand
and prices following Russia's invasion of Ukraine have hurt a
sector already struggling to adapt to European Union environmental
rules that reduced competitiveness compared to Asian rivals, bne
IntelliNews notes.
It also pointed to the Czech goverment's failure to transfer
emission permits to Liberty Ostrava, bne IntelliNews relays.
Relations between the British-based group and the Czech government
have all but broken down, with Czech ministers accusing the
indebted group of failing to communicate and of moving money out of
the company to other operations, bne IntelliNews discloses.
The government has refused to run to the aid of Liberty Ostrava and
now appears determined to transfer its operations to a domestic
investor, according to bne IntelliNews.
Before entering insolvency, Liberty Ostrava had around 5,000
employees, according to the reports in the Czech public media.
Unions say up to 30,000 jobs in total are dependent on the plant in
what is one of Czechia's poorest regions.
===========
F R A N C E
===========
SEQUANS COMMUNICATIONS: 18 Proposals OK'd at Shareholders Meeting
-----------------------------------------------------------------
Sequans Communications S.A. announced that at the combined ordinary
and extraordinary meeting of shareholders held on June 28, 2024,
the Company's shareholders approved all of the proposals brought
before the meeting, as described in the Agenda, with the exception
of the 16th proposal to approve a capital increase reserved for
employees. The results are in line with the recommendations that
were made by the Board of Directors.
Ordinary Matters:
1. Approval of the statutory financial statements for the year
ended December 31, 2023
2. Approval of the consolidated accounts for the year ended
December 31, 2023
3. Appropriation of net loss for the year ended December 31,
2023
4. Agreements with related parties
5. Approval of the compensation plan for non-executive
directors
6. Renewal of Mr. Georges Karam as director
7. Renewal of Mr. Wes Cummins as director
8. Appointment of Mr. Zvi Slonimsky as director
Extraordinary Matters:
9. Acknowledgment of net equity less than half of the
company's nominal capital and decision to continue operations
10. Issuance of stock subscription warrants to subscribe up to
2,520,000 ordinary shares (representing, to date, 630,000 ADS);
establishing the conditions for exercising the stock warrants and
adoption of an issuance agreement; revocation of shareholders'
preemptive subscription rights in favor of Ms. Maria Marced Martin
and Messrs. Wesley Cummins, Yves Maitre, Richard Nottenburg, Hubert
de Pesquidoux, Dominique Pitteloud, and Zvi Slonimsky; powers to be
granted to the Board of Directors
11. Authorization granted to the Board of Directors to grant
stock subscription options to employees and management of the
Company and of its subsidiaries, and revocation of shareholders'
preemptive subscription rights in favor of the beneficiaries of
such options; conditions attached to such authorization; powers to
be granted to the Board of Directors
12. Authority delegated to the Board of Directors to issue
stock subscription warrants reserved to a specific class of persons
and revocation of shareholders' preemptive subscription rights in
favor of such class
13. Authorization granted to the Board of Directors to issue
restricted free shares to employees and management of the Company
and of its subsidiaries, and revocation of shareholders' preemptive
subscription rights in favor of the holders of such restricted free
shares; conditions attached to such authorization; powers to be
granted to the Board of Directors
14. Setting an overall ceiling of 12,000,000 ordinary shares
(representing, to date, 3,000,000 ADS) for issues of stock
subscription options, stock subscription warrants and restricted
free shares granted pursuant to resolutions 12, 13 and 14 of this
general shareholders' meeting
15. Authority delegated to the Board of Directors to carry out
a capital increase representing up to a maximum nominal amount of
€1,000,000 by issuing shares and/or securities that confer rights
to the Company's equity and/or to securities that confer the right
to an allotment of debt securities, reserved to specific classes of
persons and revocation of preemptive subscription rights in favor
of such classes, and to amend the terms of any debt securities
issued under this or prior delegations authorized by the
shareholders
16. Authority delegated to the Board of Directors to decide to
increase the share capital by issuing shares reserved for employees
and revocation of preemptive subscription rights in favor of such
employees
17. Delegation of powers to the Board of Directors to proceed
to a reduction of the share capital by way of incorporation of
losses into capital, with terms and timing to be decided by the
Board of Directors
18. Delegation of authority to the Board of Directors to
proceed to a reduction of the share capital by buying back shares
in view of their cancellation, with terms and timing to be decided
by the Board of Directors.
19. Powers and formalities
About Sequans Communications
Colombes, France-based Sequans Communications is a fabless
semiconductor company that designs, develops, and markets
integrated circuits and modules for 4G and 5G cellular IoT
devices.
As of December 31, 2023, the Company has $109.2 million in total
assets, $115.2 million in total liabilities, and $6.1 million in
total deficit.
Paris-La Defense, France-based Ernst & Young Audit, the Company's
auditor since 2008, issued a "going concern" qualification in its
report dated May 15, 2024, citing that the Company has suffered
recurring losses from operations, has a working capital deficiency,
and has stated that substantial doubt exists about the Company's
ability to continue as a going concern.
=============
G E R M A N Y
=============
DEMIRE: Four Property Companies at Risk of Insolvency
-----------------------------------------------------
Libby Cherry at Bloomberg News reports that German landlord Demire
notes a "risk of insolvency" for four of its property companies in
a statement, following unsuccessful attempts to extend a loan that
matured on June 30.
According to Bloomberg, a EUR82-million non-recourse loan was
borrowed from DZ Hyp AG to finance the Limes-Portfolio.
Demire notes an extension to the maturity of the loan has not been
granted, Bloomberg relates. "Subsequent negotiation attempts, in
which Demire's main shareholder offered additional support for the
four property companies concerned, have also been unsuccessful."
On the basis of recent discussions with DZ Hyp, Demire believes it
"should be possible to agree on the orderly repayment of the Loan
outside of an insolvency of the property companies".
Demire notes that the 2024 high-yield bond cannot be accelerated
due to this circumstance, Bloomberg discloses.
=====================
N E T H E R L A N D S
=====================
MERCON: Bankruptcy Plan Unfair to Certain Junior Creditor Groups
----------------------------------------------------------------
Randi Love at Bloomberg Law reports that Mercon Coffee Corp.'s
bankruptcy plan unfairly discriminates against certain junior
creditor groups and seeks to shield too many third parties from
litigation, the Justice Department said.
The Netherlands-based green coffee supplier filed for Chapter 11 in
December, citing an inability to pay its debts on time because of
pandemic-era supply disruptions and high borrowing costs, Bloomberg
Law relates. It submitted its liquidation plan in May, Bloomberg
Law notes.
But the plan would allow a group of Dutch claimants to receive 20%
of their claims while denying the same treatment to other
creditors, the DOJ's bankruptcy watchdog, the US Trustee, said in
an objection filed on June 20 in the US Bankruptcy Court for the
Southern District of New York, Bloomberg discloses.
"One class of unsecured creditors is receiving a recovery more than
two times greater than what another class of unsecured creditors is
receiving," Bloomberg quotes the watchdog as saying.
The plan also allows another class to retain its interests in a
Mercon unit indefinitely, the US Trustee said, Bloomberg notes.
According to Bloomberg, regardless of Dutch law, the US has said
"it is a violation of the absolute priority rule if equityholders
retain their interests when unsecured creditors are not being paid
in full," according to the objection.
Merco, Bloomberg says, is also seeking to provide third-party
litigation releases to numerous individuals and entities, including
chief restructuring officer Harve Light -- a proposal that already
drew the US Trustee's objection last month.
Mercon doesn't have the authority to release potential claims
against the other parties that are property of the bankruptcy
estate, the US Trustee reaffirmed in its June 20 filing, Bloomberg
recounts.
The biggest chunk of Mercon's US$357 million debt is a US$202.5
million credit facility secured by Rabobank, Bloomberg relays,
citing court records.
About Mercon Coffee
Mercon Coffee Corp. -- https://www.merconcoffeegroup.com/ -- is a
supplier of green coffee to the international coffee roasting
industry. It is headquartered in the Netherlands and has offices
around the globe.
Mercon and its affiliates filed Chapter 11 petitions (Bankr.
S.D.N.Y. Case No. 23-11945) on Dec. 7, 2023. In the petition filed
by its chief restructuring officer, Harve Light, Mercon reported
$100 million to $500 million in both assets and liabilities.
Judge Michael E. Wiles oversees the cases.
The Debtors tapped Baker & McKenzie, LLP and Chipman Brown Cicero &
Cole, LLP as bankruptcy counsels; Dentons Nicaragua, S.A. and Resor
N.V. as special counsels; Rothschild & Co US Inc. and Rothschild &
Co Mexico S.A. de C.V. as financial advisor and investment banker;
Harve Light of Riveron Management Services, LLC as chief
restructuring officer. Kroll Restructuring Administration, LLC is
the Debtors' claims and noticing agent and administrative advisor.
The U.S. Trustee for Region 2 appointed an official committee to
represent unsecured creditors in the Debtors' Chapter 11 cases.
O'Melveny & Myers, LLP and Ankura Consulting Group, LLC serve as
the committee's legal counsel and financial advisor, respectively.
===========
R U S S I A
===========
NBU: Fitch Assigns BB-(EXP) Rating on Sr. Unsecured Eurobonds
-------------------------------------------------------------
Fitch Ratings has assigned JSC National Bank for Foreign Economic
Activity of the Republic of Uzbekistan's (NBU) upcoming issue of US
dollar-denominated senior unsecured Eurobonds an expected long-term
rating of 'BB-(EXP)'.
The issue size, tenor and interest rate are yet to be determined.
According to the draft documentation, NBU plans to use the proceeds
from this bond for general banking business.
The final rating is contingent upon the receipt of final documents
conforming to information already received.
KEY RATING DRIVERS
The expected rating is in line with NBU's Long-Term Issuer Default
Rating (IDR) of 'BB-', as the notes will represent unconditional,
senior unsecured obligations of the bank, which rank pari passu
with its other senior unsecured obligations.
NBU's Long-Term IDRs reflect Fitch's view of a moderate probability
of state support, as reflected by its 'bb-' Government Support
Rating (GSR). This view is based on full state ownership, high
systemic importance, policy role as the key lender to strategic
industries, and the low cost of support relative to the sovereign
international reserves.
The bond draft documentation includes the change of control clause,
under which bondholders will have an option to redeem the notes at
par if the Republic of Uzbekistan ceases to beneficially own
(directly or indirectly) 50% plus 1 share of NBU's issued and
outstanding voting common shares.
For more details on NBU see Fitch's latest rating action commentary
dated 5 April 2024, available on www.fitchratings.com.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
NBU's senior unsecured debt rating could be downgraded if the
Long-Term IDR was downgraded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
NBU's senior unsecured debt rating could be upgraded if the
Long-Term IDR was upgraded.
DATE OF RELEVANT COMMITTEE
03 April 2024
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
NBU's Long-Term IDRs, GSR and debt ratings are directly linked to
Uzbekistan's sovereign IDR.
ESG CONSIDERATIONS
JSC National Bank for Foreign Economic Activity of the Republic of
Uzbekistan has an ESG Relevance Score of '4' for Governance
Structure as Uzbekistan's authorities are highly involved in the
bank at board level and in its business and strategy development,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating
----------- ------
JSC National Bank for
Foreign Economic
Activity of the Republic
of Uzbekistan
senior unsecured LT BB-(EXP) Expected Rating
===========
S W E D E N
===========
IMPLEMENTA SOL: Delisted From Nordic SME Due to Bankruptcy
----------------------------------------------------------
MT Newswires reports that Sweden-based Implementa Sol (IMSOL-B.ST)
was delisted from the Nordic SME exchange as it was declared
bankrupt by the Stockholm District Court.
The delisting of the solar cell company took effect immediately,
according to a June 11 release.
[*] SWEDEN: Corporate Bankruptcies Up 39% in First Half of 2024
---------------------------------------------------------------
Niclas Rolander at Bloomberg News reports that Sweden saw the
largest number of employees hit by bankruptcies in more than five
years in June, according to data from Creditsafe, as the default of
vehicle-component supplier IAC Group Sweden AB affected some 1,400
workers.
In total, 3,500 people were affected as the total number of
bankruptcies rose by 3% on year, according to the statistics,
Bloomberg notes. While that marks a smaller annual increase than
seen in recent months, the credit reference agency noted that June
2023 was one of the worst months for company defaults last year,
Bloomberg states.
According to Bloomberg, in the first half of 2024, the number of
companies that filed for bankruptcy increased by 39%, as
homebuilders have seen demand plummet, consumption has been subdued
and companies that deferred taxes during the pandemic see bills
come due.
"Even though levels appear to have stabilized, this year will be
one of the toughest yet for Swedish companies when it comes to
bankruptcies," Bloomberg quotes Creditsafe chief executive Henrik
Jacobsson as saying in a statement. "We have long warned that
deferred taxes would cause bankruptcies and we now see that large
companies are also forced to give up because of a heavy load of
debt from the pandemic."
The Swedish subsidiary of International Automotive Components
Group, which was the largest company to default during June, owed
some SEK1.2 billion (US$114 million) in taxes deferred during the
pandemic, Bloomberg discloses. Its administrator is currently
looking for buyers who can continue operations, Bloomberg says.
=====================
S W I T Z E R L A N D
=====================
FLOWBANK SA: FINMA Opens Bankruptcy Proceedings
-----------------------------------------------
The Swiss Financial Market Supervisory Authority FINMA has opened
bankruptcy proceedings against FlowBank SA on June 13, 2024. This
measure became necessary as the bank no longer has the minimum
capital required for its business operations. There are also fears
that the bank is over-indebted.
FINMA established that FlowBank no longer has sufficient capital
for its operations as a bank. The minimum capital requirements,
which must be always met, have been significantly and seriously
breached. FlowBank SA and its management bodies were unable to
take steps to sustainably restore compliance with the capital
requirements within the required timeframe. Moreover, there are
well-founded concerns that the bank is currently over-indebted. As
there is no prospect of a restructuring, the bank must be wound up.
FINMA has appointed the law firm Walder Wyss AG as liquidator to
carry out the bankruptcy proceedings.
Serious breach of supervisory law
FINMA took enforcement action against FlowBank SA in October 2021
for serious breaches of supervisory law concerning capital
requirements, organizational adequacy, and risk management.
Despite measures ordered in October 2022 and the appointment of an
independent auditor, ongoing compliance deficiencies, including
breaches of capital ratio requirements, led to further action in
June 2023. A monitor reported repeated violations, inadequate
organization, and inaccurate financial reporting. Additionally,
FlowBank engaged in high-risk business relationships and
transactions without proper due diligence, violating money
laundering due diligence obligations and FINMA's prohibition on
high-risk activities, highlighting significant and ongoing
compliance failures.
Given the serious malpractice, the prolonged non-compliance with
licensing conditions and the bank's inability to restore compliance
with the law, FINMA ordered the withdrawal of the bank's licence on
8 March 2024 and disqualified its guarantee of proper business
conduct. This ruling does not yet have legal force due to a pending
appeal at the Federal Administrative Court. However, during the
appeal various precautionary measures decreed by FINMA, e.g. to
prevent assets from being withdrawn by the bank, are in effect.
FINMA intervening immediately
After the bank's board of directors approved the 2023 financial
statements just a few days ago, and confirmed data to assess the
risk of insolvency has only been available for a short time, FINMA
established that FlowBank SA's financial situation is much worse
than the bank originally reported. The bank was clearly in breach
of the minimum capital requirements at the end of 2023 and again at
the end of April 2024. In addition, there are well-founded
concerns that the bank is over-indebted as at the end of April
2024. The bank was unable to carry out an eligible capital
increase within the required timeframe. This new situation
requires FINMA to intervene immediately to protect depositors,
which is why it has placed the bank into bankruptcy.
Repayment of privileged deposits
FINMA's primary aim is to protect depositors. In a first step the
liquidator will therefore repay deposits up to CHF100,000
(privileged deposits) to the clients concerned as quickly as
possible. According to current calculations, the privileged
deposits can be repaid in full out of the bank's available funds.
"Therefore, we do not expect the Swiss banks' deposit insurance
scheme (esisuisse) to be involved. Client custody accounts will
also be segregated from the estate and repaid." says FINMA's
Spokesperson Patrizia Bickel.
FlowBank SA is a bank offering online brokerage and trading with
its head office in Geneva and subsidiaries in London and the
Bahamas. The bank has total assets of approximately CHF 680
million, holds over 22,000 client accounts and employs around 140
staff worldwide.
=========================
FINMA starts FlowBank Bankruptcy Proceedings
14.06.2024
The Swiss Financial Market Supervisory Authority FINMA has opened
bankruptcy proceedings against FlowBank SA on 13 June 2024. This
measure became necessary as the bank no longer has the minimum
capital required for its business operations. There are also fears
that the bank is over-indebted.
FINMA established in the last week that FlowBank no longer has
sufficient capital for its operations as a bank. The minimum
capital requirements, which must be always met, have been
significantly and seriously breached. FlowBank SA and its
management bodies were unable to take steps to sustainably restore
compliance with the capital requirements within the required
timeframe. Moreover, there are well-founded concerns that the bank
is currently over-indebted. As there is no prospect of a
restructuring, the bank must be wound up. FINMA has appointed the
law firm Walder Wyss AG as liquidator to carry out the bankruptcy
proceedings.
Serious breach of supervisory law
FINMA took enforcement action against FlowBank SA in October 2021
for serious breaches of supervisory law concerning capital
requirements, organizational adequacy, and risk management. Despite
measures ordered in October 2022 and the appointment of an
independent auditor, ongoing compliance deficiencies, including
breaches of capital ratio requirements, led to further action in
June 2023. A monitor reported repeated violations, inadequate
organization, and inaccurate financial reporting. Additionally,
FlowBank engaged in high-risk business relationships and
transactions without proper due diligence, violating money
laundering due diligence obligations and FINMA's prohibition on
high-risk activities, highlighting significant and ongoing
compliance failures.
Given the serious malpractice, the prolonged non-compliance with
licensing conditions and the bank's inability to restore compliance
with the law, FINMA ordered the withdrawal of the bank's licence on
8 March 2024 and disqualified its guarantee of proper business
conduct. This ruling does not yet have legal force due to a pending
appeal at the Federal Administrative Court. However, during the
appeal various precautionary measures decreed by FINMA, e.g. to
prevent assets from being withdrawn by the bank, are in effect.
FINMA intervening immediately
After the bank's board of directors approved the 2023 financial
statements just a few days ago, and confirmed data to assess the
risk of insolvency has only been available for a short time, FINMA
established that FlowBank SA's financial situation is much worse
than the bank originally reported. The bank was clearly in breach
of the minimum capital requirements at the end of 2023 and again at
the end of April 2024. In addition, there are well-founded concerns
that the bank is over-indebted as at the end of April 2024. The
bank was unable to carry out an eligible capital increase within
the required timeframe. This new situation requires FINMA to
intervene immediately to protect depositors, which is why it has
placed the bank into bankruptcy.
Repayment of privileged deposits
FINMA's primary aim is to protect depositors. In a first step the
liquidator will therefore repay deposits up to CHF 100,000
(privileged deposits) to the clients concerned as quickly as
possible. According to current calculations, the privileged
deposits can be repaid in full out of the bank's available funds.
"Therefore, we do not expect the Swiss banks' deposit insurance
scheme (esisuisse) to be involved. Client custody accounts will
also be segregated from the estate and repaid." says FINMA's
Spokesperson Patrizia Bickel.
FlowBank SA is a bank offering online brokerage and trading with
its head office in Geneva and subsidiaries in London and the
Bahamas. The bank has total assets of approximately CHF 680
million, holds over 22,000 client accounts and employs around 140
staff worldwide.
===========================
U N I T E D K I N G D O M
===========================
ATOS SE: Expresses Going Concern Doubt for UK Subsidiary
--------------------------------------------------------
The Times reports that the British subsidiary of Atos, the French
tech giant that is a big UK government contractor, has warned in
its accounts that there is a "material uncertainty" about its
ability to continue as a going concern.
In the accounts for Atos UK's holding company for the year ending
December 2022, Grant Thornton, the company's auditor, said that the
UK subsidiary was reliant on cash from its French parent company
that may not arrive, given the French business's growing problems,
The Times relates.
Atos's UK arm has almost GBP1 billion in 43 contracts, including
providing IT infrastructure to the NHS and the Ministry of Defence
and managing disability benefits, according to researchers at
Tussell, which provides analysis of public sector procurement.
Since the beginning of this parliament, it has won contracts worth
about GBP2.4 billion.
Atos has EUR2 billion in debt set to mature this year alone, and
meeting its financing maturities will probably be contingent on the
company obtaining new bank financing or issuing more debt or
equity, The Times discloses.
It was revealed that the government had begun to line up providers
that could be called on to provide services in the event that Atos
went bust, The Times notes. Documents from the Cabinet Office had
previously warned of the "severe implications" for the continuity
of "critical" public services if Atos's UK arm were to collapse,
according to the i newspaper.
Grant Thornton, as cited by The Times, said that the wider
difficulties and uncertainty about the company's restructuring
meant that for its UK arm, a "material uncertainty exists that may
cast significant doubt on the company's ability to continue as a
going concern".
In January, shares in Paris-listed Atos fell by about 16% when the
company replaced its chief executive amid its debt struggles, The
Times recounts. Several weeks ago, the IT giant accepted a GBP600
million bid by the French government for the company's most
sensitive businesses as part of its restructuring, The Times
relays.
In the past three years, shares in the company have lost more than
97% of their value, The Times states. It has struggled with a
rapid turnover of executives and difficulties managing its
performance and cutting its debt, The Times notes.
"Atos is undergoing a financial restructuring and reached an
agreement with a consortium and its creditors which will create a
stable financial future globally and in the UK. The provision of
services to our customers has remained unaffected and we will
continue providing high-quality services to the UK public and
private sectors as we have for over 30 years," The Times quotes a
spokesman for Atos saying.
NEW WAVE: Falls Into Administration
-----------------------------------
Business Sale reports that New Wave Foods Limited, an
Inverness-based seafood supplier specialising in seaweed, fell into
administration last month, with Graham Smith and Callum Carmichael
of FRP Advisory appointed as joint administrators.
In the company's accounts for the year to July 31, 2022, its fixed
assets were valued at GBP311,205 and current assets at GBP862,023,
Business Sale discloses. At the time, its net assets amounted to
GBP345,736, Business Sale notes.
PARADOXX LIMITED: Goes Into Administration
------------------------------------------
Business Sale reports that Paradoxx Limited, a Belfast-based beauty
company specialising in sustainable, vegan, plastic-free,
cruelty-free beauty products, fell into administration last week,
with James Neill and John Donaldson of KPMG appointed as joint
administrators.
According to Business Sale, in the company's accounts for the year
to December 31 2022, its fixed assets were valued at GBP177,748 and
current assets at around GBP2.4 million, while total net assets
amounted to GBP105,714.
TOWD POINT 2019: Fitch Affirms B- Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has placed Towd Point Mortgage Funding 2019 - Auburn
13 PLC's (Auburn 13) class C, D and E notes on Rating Watch
Negative (RWN).
Entity/Debt Rating Prior
----------- ------ -----
Towd Point Mortgage
Funding - Auburn 13 plc
A1 XS2053911264 LT AAAsf Affirmed AAAsf
A2 XS2062950584 LT AAAsf Affirmed AAAsf
B XS2053911421 LT AAAsf Affirmed AAAsf
C XS2053911934 LT AA+sf Rating Watch On AA+sf
D XS2053912239 LT BB+sf Rating Watch Revision BB+sf
E XS2053913393 LT B-sf Rating Watch Revision B-sf
TRANSACTION SUMMARY
The transaction is a static pass-through RMBS securitisation of
primarily legacy buy-to-let (BTL) loans, originated by Capital Home
Loans in England, Wales, Scotland and Northern Ireland.
KEY RATING DRIVERS
Deteriorating Asset Performance: Repossessions have significantly
increased since the last surveillance to 2.65% from 0.9% on a
cumulative basis, leading to a greater performance adjustment
factor and a smaller performing portfolio.
Repossessions data includes the receiver of rent cases, which
usually prevail in similar BTL pools. Since the investor report
data does not track the net number of repossessions, Fitch has
conservatively treated the whole amount as defaults (in line with
the last surveillance approach). This led to lower model-implied
ratings (MIRs) for the class C, D and E notes, resulting in the
RWN. Should the transaction not be called in July as anticipated,
Fitch will further investigate the proportion of receiver of rent
versus repossessions and adjust its analysis accordingly, which
could lead to downgrades of the class C, D, and E notes.
Updated Interest Deferability Rating Approach: Deterioration in
performance has prevented the class D and E notes from being
upgraded, despite the removal of the 'BB+sf' rating cap under its
latest Global Structured Finance Rating Criteria. Under the updated
criteria, Fitch may now assign ratings up to 'AA+sf' to notes if
interest deferrals are fully repaid by legal final maturity. Fitch
views payment interruption risk as immaterial up to 'AA+sf', when
interest deferrals do not cause a default.
Call Option Exercise in July: The transaction is anticipated to be
called in July, following the issuance of additional notes as part
of the Auburn 15 deal (rated by Fitch). The provided documents
indicate an intention to repurchase the existing pool. Fitch
regards the likelihood of exercising the call option as very high
and have incorporated this assumption into the affirmation of
ratings.
Principal Deficiency Outstanding: The transaction has an amount
outstanding on its principal deficiency ledger (PDL) being carried
forward. The PDLs have been accumulating largely due to
insufficient revenue collections, resulting in draws on the
liquidity reserves of the more senior notes. These drawings require
replenishment from principal funds, which creates a record on the
PDL. In addition, the transaction has been suffering losses that
have been contributing to the total PDL amount.
An outstanding PDL effectively reduces the level of credit
enhancement (CE) available to the collateralised notes and is
credit negative for the transaction. This is offset by the
continuing build-up of CE for the class A1, A2 and B notes due to
sequential amortisation, supporting the ratings affirmation for
these notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by adverse changes in
market conditions and the economic environment. Weakening asset
performance is strongly correlated with increasing levels of
delinquencies and defaults that could reduce CE available to the
notes.
Unanticipated declines in recoveries could also result in lower net
proceeds, which may make certain notes susceptible to negative
rating action depending on the extent of the decline in recoveries.
A 15% increase in the weighted average (WA) foreclosure frequency
(FF) and a 15% decrease in the WA recovery rate (RR) would lead to
downgrades of up to two notches for the class B notes, three
notches for the class C notes and four notches for the class D
notes.
Additionally, non-exercise of the call option in July may lead to
negative rating actions based on the additional analysis.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and, potentially,
upgrades. A decrease in WAFF of 15% and an increase in WARR of 15%
would lead to upgrades of up to three notches for the class C notes
and five notches for the class D notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Prior to the transaction closing, Fitch sought to receive a
third-party assessment conducted on the asset portfolio
information, but none was available for this transaction.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Auburn 13 has an ESG Relevance Score of '4' for Customer Welfare -
Fair Messaging, Privacy & Data Security due to a high proportion of
interest-only loans in legacy owner-occupied mortgages, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
===============
X X X X X X X X
===============
UPFIELD: Fitch Assigns B Rating to EUR500MM Secured Notes
---------------------------------------------------------
Fitch Ratings has assigned Sigma Holdco BV's (Upfield) EUR500
million five-year senior secured notes issue a final 'B+' rating
with a Recovery Rating of 'RR3'. The notes have been issued by
Upfield B.V. Fitch has also affirmed the company's senior unsecured
debt at 'CCC+' with a Recovery Rating of 'RR6' and the long-term
senior secured rating of the term loans issued by Upfield USA Corp
and Upfield B.V. at 'B+' with a Recovery Rating of 'RR3'.
The recent revision of Upfield's Outlook to Stable from Positive
reflected Fitch's expectations of slower deleveraging due to weaker
than expected revenue performance (also affected by FX) and
increase in debt in 2023. This has delayed the expected
deleveraging, despite its assumption of a moderate improvement in
the EBITDA margin, with EBITDA leverage projected to remain above
6.0x well until 2027. Refinancing risk is manageable following the
recent credit facility extension and timely replacement of
maturities.
Upfield's rating continue to reflect its moderately strong business
profile as a geographically-diversified global category leader with
a strong brand portfolio and high EBITDA margin. This is balanced
by execution risks related to operating in a sector with continued
consumption decline of plant-based spreads, including margarine, in
many developed markets, partly offset by still growing demand in
emerging markets.
KEY RATING DRIVERS
New Notes Neutral to Rating: Proceeds from the EUR500 million
secured notes are being used to redeem a portion of the outstanding
unsecured senior US dollar notes and unsecured senior euro notes,
which makes the transaction leverage neutral. Fitch's waterfall
analysis results in a ranked recovery for the term loan B (EUR4.5
billion outstanding at end-March 2024 plus added EUR500 million)
creditors in the 'RR3' band, indicating a 'B+' instrument rating,
one notch above the IDR.
If any excess above EUR350 million senior unsecured notes is not
refinanced by January 2026, senior secured facilities B6, B7 and B8
will see springing maturity to 2026 instead of 2028, which could
heighten refinancing risk next year.
Delayed Deleveraging: Fitch projects EBITDA gross leverage will
stay above 6.0x over 2024-27 due to higher than expected
Fitch-calculated EBITDA gross leverage at end-2023. The ratio only
declined to 7.2x (2022: 7.9x) as a result of increased debt, with
an additional revolving credit facility (RCF) drawdown and lower
EBITDA than its projections. The company is committed to
deleveraging toward more sustainable levels, which Fitch considers
to be below 6.0x.
EBITDA Margin Improvement: Fitch forecasts a strong Fitch-adjusted
EBITDA margin at around 24.5% over 2024-27, supported by savings
from efficiency and value creation initiatives, as well as high
price increases, which drove the ratio improvement to 24.3% in 2023
(2022: 21.1%). Fitch assumes a further decline in some key raw
material costs is likely to be partly offset by higher marketing
and promotion spending. Upfield reported a material gross profit
margin increase in 1Q24 (of nearly 600bp) due to modest commodity
deflation and further efficiency savings, despite a continuing
decline in organic revenue.
Robust Free Cash Flow: Fitch projects Upfield will generate strong
free cash flow (FCF) of around EUR130 million-EUR250 million
annually in 2024-2027, or a mid-to-high single digits FCF margin.
This differentiates it from peers, allowing higher leverage
capacity. Despite increased interest charges, strong FCF will be
supported by high operating profitability and limited capex needs
in 2024-2027, as well as a reduction in non-underlying cash costs,
which included separation and restructuring costs after its buyout,
to EUR45 million in 2023 from around EUR300 million previously.
Fitch treats EUR30 million as ongoing business reorganisation
costs.
Modest Revenue Growth: After two years of sales volume decline
(-5.3% in 2023), Fitch projects a mild recovery in sales volumes in
2024 due to reducing inflation, which should support consumer
spending. The company has accelerated innovation, promotion and
marketing activities. However, Fitch expects only modest growth
thereafter, given the maturity of the category and still moderate
share of faster growing nascent categories including plant-based
butter, creams and cheese. Efforts to turn around the perception of
products, leveraging on trends favouring consumption of plant-based
foods and sustainable packaging remain key.
In 1Q24, sales volume decline decelerated to 1.2%, due to pricing
actions and promotions. The plant-based spread category is exposed
to eating habits, including consumer perceptions in many developed
markets that butter is healthier and tastier than plant-based
spread. Despite significant progress in the plant-based butter,
creams and cheese portfolio, the predominance of traditional
spreads in the company's revenue is reflected in Upfield's ESG
Relevance Score for Exposure to Social Impacts.
Global Category Leader: Upfield's rating is supported by its
leading position in the global plant-based spread market, with
major market shares in countries that widely consume the product.
Sales are more than 3x higher than that of the second-leading
company in Upfield's broader reference market of butter and
spreads. The rating also considers Upfield's leading market shares
in other high-growth plant-based food categories, but Fitch
estimates that these only account for around 25% of sales.
DERIVATION SUMMARY
Upfield generates significantly higher FCF than most packaged-food
companies with comparable revenue due to a higher-than-average
EBITDA margin and low capex needs.
Nomad Foods Limited (BB/Stable) has a higher rating than Upfield,
despite its more limited geographical diversification and smaller
business scale. The rating differential is due to Nomad's lower
leverage, and less challenging demand fundamentals for frozen food
than for spreads.
Ulker Biskuvi Sanayi A.S. (B+/Positive), a Turkish confectionary
producer, is rated higher than Upfield mainly due to significantly
lower EBITDA gross leverage (2023: 3.1x) while having smaller scale
and narrower geographical diversification. Ulker's rating is
constrained by the Turkish Country Ceiling.
KEY ASSUMPTIONS
- Organic sales growth of around 2% in 2024, driven by increased
promotions with sales volumes recovery, followed by low-single
digit annual revenue growth over 2025-2027.
- EBITDA margin sustainable above 24% in 2024-2027.
- Annual capex at around EUR100 million in 2024, reducing to around
EUR80 million a year to 2027.
- No M&A or dividends.
RECOVERY ANALYSIS
The recovery analysis assumes that Upfield would remain a going
concern in restructuring and that it would be reorganised rather
than liquidated. Fitch assumes a 10% administrative claim in the
recovery analysis.
The EBITDA estimate reflects its view of sustainable,
post-reorganisation EBITDA of EUR560 million, on which Fitch bases
the enterprise value.
Fitch also assumes a distressed multiple of 6.0x, reflecting
Upfield's large size, leading market position and high inherent
profitability compared with sector peers. Fitch assumes Upfield's
EUR700 million RCF would be fully drawn in a restructuring.
Its waterfall analysis generates a ranked recovery for the term
loan B (EUR4.5 billion outstanding at end-March 2024) creditors in
the 'RR3' band, indicating a 'B+' instrument rating, one notch
above the IDR. Issuance of a new EUR500 million senior secured debt
assuming the partial redemption of the outstanding senior unsecured
instruments will result in the waterfall analysis output percentage
declining to 53% from 54% for the senior secured instruments
(versus initially planned EUR400 million).
Conversely, its analysis generates a ranked recovery in the 'RR6'
band, indicating a 'CCC+' rating for the senior unsecured notes
(EUR1.1 billion outstanding at end-March 2024), with 0% recovery
expectations based on current metrics and assumptions, with no
impact from the completed EUR500 million secured debt issuance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- Successful execution of the corporate strategy, evidenced in
EBITDA gaining scale towards EUR900 million.
- Steady profitability, with FCF generation in the mid-single
digits on a sustained basis.
- Refinancing of the 2026 debt maturities, with EBITDA leverage
falling towards 6.0x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Failure to execute the product development strategy, resulting in
a continued organic decline in sales and structural deterioration
of the EBITDA margin below 20%.
- EBITDA leverage of above 7.5x for a sustained period.
- Inability to generate a positive FCF margin in the mid-single
digits due to higher-than-expected restructuring charges or
unfavourable changes in working capital.
- EBITDA interest coverage ratio of below 2.0x.
LIQUIDITY AND DEBT STRUCTURE
Satisfactory Liquidity: Upfield had cash of EUR204 million at
end-March 2024 as well as access to a EUR700 million RCF, of which
EUR133 million was drawn. Liquidity is also supported by its
projection of strong positive FCF. The company also has access to a
factoring line, of which EUR110 million was utilised at end-2023.
After the recent EUR500 million issuance with subsequent partial
unsecured notes repayment, the company will have addressed part of
the coming maturities in 2026, when remaining euro and dollar bonds
are due. Although Upfield also successfully refinanced its term
loan B in 2023 extending maturities to 2028, this is now subject to
a springing covenant that can shift the maturity to 2026.
ISSUER PROFILE
Upfield is the world's largest plant-based food producer, including
spreads and butter.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG CONSIDERATIONS
Sigma Holdco BV has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to a deterioration in its revenue performance
from consumer concerns in some markets about the healthiness of its
products, which has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Upfield USA Corp
senior secured LT B+ Affirmed RR3 B+
Upfield B.V.
senior secured LT B+ Affirmed RR3 B+
senior secured LT B+ New Rating RR3 B+(EXP)
Sigma Holdco BV
senior unsecured LT CCC+ Affirmed RR6 CCC+
[*] Corporate Restructurings to Accelerate Over Next Two Years
--------------------------------------------------------------
The volume of new corporate restructuring mandates is set to
continue rising over the next two years as distressed companies
grapple with geopolitical uncertainty, tightening interest rates,
and new regulatory challenges, according to new research
commissioned by CSC, the world's leading provider of global
business administration and compliance solutions.
CSC's study, Global Restructuring Trends in 2024: Navigating the
Opportunities and Challenges, reveals that the overwhelming
majority (83%) of sector professionals expect to see the volume of
restructuring mandates grow significantly or modestly over the next
two years, with a quarter (25%) predicting a significant increase.
CSC commissioned research among 150 independent senior executives
in the global financial services, legal, private credit, and
private debt sectors to shed new light on what's driving the rise
in global restructurings, as well as challenges facing the
industry, and key regional differences.
"The acceleration in global restructurings builds on the rise we've
seen over the past 12-24 months. In the U.K., for example, there
were more than 25,000 registered company insolvencies in 2023, the
most for 30 years," says Michelle Dreyer, managing director of
CSC's Global Restructuring Practice.
"We're seeing a number of companies that took on a considerable
amount of debt during COVID and are now seeing that debt come due.
But as rates are now so much higher, they can't just go to their
lender or a different lender and refinance," Dreyer adds. "Some
restructurings are actually companies that probably should have
filed in 2020, but because they were so bolstered by the cheap
money in the market, they've been able to hold out until now. We're
now seeing the aftermath of all that inexpensive money."
Two-thirds (65%) of industry experts said the biggest challenge to
restructuring distressed companies was overcoming regulatory
hurdles, which at times favors liquidation rather than
rehabilitation. Other key challenges are inexperienced management
teams (cited by 55% of respondents), which are unaccustomed to the
transition from normal company operations to a very different and
complex bankruptcy environment. Some 40% of respondents highlighted
rising interest rates as a major driver in the restructuring
market.
"Many individuals in management have little or no experience in
dealing with the challenges of a systemic downturn," adds Dreyer.
"Management teams often have a difficult time transitioning from
normal company operations to what is needed in a bankruptcy
proceeding, meaning that the support of experienced providers who
can move quickly to assist them becomes hugely valuable."
CSC's study identified North America and Europe as the two regions
witnessing the most significant volumes of restructuring activity.
Over 40% of those surveyed selected these geographies, with their
mature regulatory frameworks making them attractive to companies
from beyond their own borders.
"Regulatory changes can also have a positive impact on
restructuring and make certain jurisdictions more attractive,
resulting in the high use of COMI shifts," says Dreyer. "Only a
very small minority said they use just one independent external
vendor during restructuring processes, highlighting the difficulty
of finding a one-stop-shop during what are exceptional times for
management teams. At CSC, we provide expertise from highly
experienced professionals across a variety of products and a truly
joined-up, global cross-border service."
To receive a copy of CSC's Global Restructuring 2024 report, please
contact Camilla Wyatt or Saffron Wainwright at
cscteam@citigatedewerogerson.com.
CSC, in partnership with Pure Profile, surveyed 150 senior
executives in the financial services, legal, private credit, and
private debt sectors globally to gauge views on the state of the
global restructuring industry. Respondents were equally split
between North America, APAC, U.K., and Europe.
About CSC
CSC -- http://www.cscglobal.com-- is the trusted partner of choice
for more than 90% of the Fortune 500(R), more than 90% of the 100
Best Global Brands (Interbrand(R)), and more than 70% of the PEI
300. It is the world's leading provider of global business
administration and compliance solutions, specialized administration
services to alternative asset managers across a range of fund
strategies, transactions involving capital markets participants in
both public and private markets, domain name system management and
digital brand and fraud protection, and corporate tax software
solutions. Founded in 1899 and headquartered in Wilmington,
Delaware, USA, CSC prides itself on being privately held and
professionally managed for more than 125 years. CSC has office
locations and capabilities in more than 140 jurisdictions across
Europe, the Americas, Asia Pacific, and the Middle East.
*********
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
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Information contained herein is obtained from sources believed to
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