/raid1/www/Hosts/bankrupt/TCREUR_Public/240820.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, August 20, 2024, Vol. 25, No. 167
Headlines
G E R M A N Y
ADLER PELZER: Fitch Affirms 'B-' LongTerm IDR, Outlook Stable
PCF GMBH: Moody's Appends 'LD' Designation to Caa1 PDR
I R E L A N D
AQUEDUCT EUROPEAN 7-2022: S&P Assigns B- (sf) Rating to F-R Notes
ARBOUR CLO XIII: S&P Assigns B- (sf) Rating to Class F Notes
CROSS OCEAN X: Fitch Assigns 'B-sf' Final Rating to Class F Notes
OCP EURO 2024-10: S&P Assigns B- (sf) Rating to Class F Notes
TIKEHAU CLO XII: Fitch Assigns 'B-sf' Final Rating to Class F Notes
I T A L Y
BFF BANK: Moody's Extends Review for Downgrade on Ba2 Issuer Rating
R U S S I A
TAJIKISTAN: S&P Raise LT Currency Ratings to 'B', Outlook Stable
U N I T E D K I N G D O M
A E CHILLED: Begbies Traynor Named as Joint Administrators
ALTEC ENGINEERING: FRP Advisory Named as Administrators
ARCTREND LIMITED: Opus Restructuring Named as Administrators
CROOME CUISINE: MB Insolvency Named as Administrators
ESTUARY VIEW PROPERTY: CG&Co Named as Joint Administrators
FRANCIS BROWN: FRP Advisory Named as Administrators
LANDMARK MORTGAGE NO. 1: S&P Affirms 'B-(sf)' Rating on Cl. D Notes
MODPODS INTERNATIONAL: KRE Corporate Named as Administrators
OCADO GROUP: Fitch Assigns 'B-' Final Rating to Sr. Unsecured Notes
PIRNMILL LTD: KBL Advisory Named as Joint Administrators
PRAESIDIAD LTD: EUR290MM Bank Debt Trades at 63% Discount
PREMIER INSURANCE: A.M. Best Cuts FS Rating to B(Fair)
PRINTALICIOUS LIMITED: Begbies Traynor Named as Administrators
- - - - -
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G E R M A N Y
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ADLER PELZER: Fitch Affirms 'B-' LongTerm IDR, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Adler Pelzer Holding GmbH's (APG)
Long-Term Issuer Default Rating (IDR) at 'B-' with a Stable Outlook
and its senior secured instrument rating at 'B' with a Recovery
Rating of 'RR3' following the announcement of a new EUR68 million
term loan. The loan will rank equally with its existing senior
secured notes.
Fitch expects the new loan to increase APG's leverage but not
sufficiently to exceed its negative rating sensitivity.
The ratings reflect the company's leveraged financial structure, as
well as its weak profitability and cash flow generation. This is
mitigated by its leading market position, strong technical
knowledge, and established relationships with original equipment
manufacturers (OEMs). Hence, Fitch regards APG's business profile
as strong for its rating. The Stable Outlook reflects its
expectation that APG will maintain a financial structure that is
consistent with the rating after deleveraging from high levels
during 2020-2022.
Fitch also expects moderate operating margins and cash flow
improvement over the next two to three years, due to easing
supply-chain tensions, reduced cost inflation, cost-synergy
realisation, and better fixed-cost absorption from higher
utilisation rates. Improvements to free cash flow (FCF) are,
however, capped by higher funding costs post-refinancing and the
additional term loan.
Key Rating Drivers
Deleveraging Delayed One Year: The new term loan will increase
APG's EBITDA gross and net leverage to 4.5x and 3.3x, respectively,
by end-2024. This is an increase of 0.5x and 0.3x from its previous
assumptions and as a result there is no longer any gross leverage
headroom. Fitch therefore expects EBITDA gross leverage to remain
flat year-on-year in 2024, as additional gross debt will be
counterbalanced by forecast higher EBITDA. Fitch now projects APG
to deleverage after 2024, on the back of moderate improvements to
operating margin and cash flow generation, but Fitch no longer
expects APG's leverage to exceed its positive rating sensitivity
within its forecast horizon.
Poor Cash Flow Generation: Fitch forecasts moderate improvement in
FCF generation, mostly on a higher EBITDA margin, but sees
increased risk of FCF remaining negative - due to high and fixed
interest charges - in more challenging market conditions. APG's
cash flow generation has historically been mostly negative as a
result of thin operating profitability, a high tax burden and
volatile net working capital (NWC) needs. Weak cash flow is also
the result of dividends to minorities because the company has
several fully consolidated, but only 50%-controlled, joint ventures
(JVs).
Strong Growth Across Regions: APG's revenue grew 9.2% in 2023 to
EUR2.3 billion as it benefitted from a market recovery across all
regions. Fitch expects APG's sales to benefit from higher demand of
acoustic insulation products tied to the increasing penetration of
battery electric vehicles.
Weak but improving Margin: APG's Fitch-adjusted EBIT improved to
3.1% in 2023 (2022: 1.1%), due mainly to stabilising materials
prices after a sharp increase in 2022. Synergies from acquisitions
made in 2021 and which were previously margin-dilutive also helped
support improved profitability. Fitch expects APG´s EBIT margin to
improve in 2024 but to remain below 4%, the current positive rating
sensitivity.
Stretched Trade Payable Terms: Fitch assumes that APG will
progressively reduce its average trade payables to below 100 days
over its five-year forecast period. Its average supplier payables
stood at 130 days in 2022 and 2023, and 158 days in 2021. Fitch
sees stretched payable conditions as a downside risk to APG's cash
flow and leverage if suppliers start to drastically tighten payable
days.
Significant Trapped Cash: APG's reported cash at end-2023 was
around EUR235 million, more than 10% of its 2023 turnover. Fitch
deems EUR33 million as not available for debt repayment due to lack
of full ownership in certain consolidated subsidiaries. Fitch
further restricts available cash at 2% of annual sales due to
intra-year NWC swings.
Derivation Summary
APG's business profile is broadly in line with the 'BB' rating
category. APG has a leading market share and an established top
position in the supply chain with longstanding relationships with
OEMs, due to its strong technical knowledge in solutions for
acoustic and thermal insulation. APG, despite recent acquisitions,
is substantially smaller than the typical Fitch-rated auto
supplier. US-based producers such as Garrett Motion, Inc.
(BB-/Stable) and Tenneco, Inc (B/Positive) generate revenue from a
more stable and profitable after-market business, which is
virtually non-existent in APG.
APG's operating and cash flow margins are at the lower end of auto
suppliers', with a 2023 EBIT margin of around 3.1% and moderately
negative FCF. Fitch expects some improvements in both operating
profitability and FCF, the latter to near break-even in 2024. Fitch
expects APG´s gross deleveraging to be delayed by one year after
the new EUR68 million loan, although it will not materially affect
APG's financial structure.
Key Assumptions
Key Assumptions Within Its Base Case for the Issuer
- Sales CAGR of 3.8% in 2024-2028, supported by solid order
visibility, new project wins and higher content per vehicle
- Fitch-adjusted EBITDA margin expanding towards high single digits
by 2028 on volume growth, reduced input cost inflation, higher
utilisation rates and cost synergies
- Fitch assumes payment in-kind interest on the shareholder loan in
2024-2027
- Shareholder loan to be repaid with EUR30 million of the new EUR68
million term loan
- NWC at 0.5% of sales a year
- Capex at 3.4% of sales a year to 2027
- No dividends to common shareholders
- Dividends to non-controlling interests of EUR10 million-EUR15
million a year
Recovery Analysis
The recovery analysis assumes that APG would be reorganised as a
going concern (GC) in bankruptcy rather than liquidated. Fitch
assumed a 10% administrative claim.
Fitch assumes a GC EBITDA at EUR120 million. Fitch expects APG to
reach such post-restructuring EBITDA by reorganising its business
to focus on more profitable products and regions. Fitch also
assumes OEMs in an APG restructuring may decide to switch their
contracts to financially more stable suppliers.
Fitch used a multiple of 4.5x to estimate the GC EBITDA for APG to
reflect its post-reorganisation enterprise value (EV). The multiple
reflects the company's technical knowledge, established OEM
relationships and leading market share, and is in line with that of
other car suppliers with an established market position and a
larger critical mass.
Fitch ranks APG's EUR400 million senior secured notes and newly
issued EUR68 million term loan as subordinated to its factoring
lines, super senior revolving credit facility (RCF) and debt issued
by subsidiaries. Fitch also assumes that the non-guarantor group
has no financial debt. The allocation of value in the liability
waterfall results in recovery corresponding to 'RR3'/58% for the
senior secured notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBIT margin above 4% on a sustained basis
- FCF margin above break-even on a sustained basis
- EBITDA gross and net leverage below 3.5x and 3.0x, respectively,
on a sustained basis
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBIT margin below 2% on a sustained basis
- Negative FCF margin on a sustained basis
- EBITDA gross and net leverage above 4.5x and 4.0x, respectively,
on a sustained basis
- EBITDA interest coverage below 2.0x
Liquidity and Debt Structure
Refinancing Enhances Financial Flexibility: APG reported EUR235
million readily available cash at end-2023, more than 10% of its
2023 sales. Fitch regards around EUR45 million as trapped in
intra-year NWC swings. In addition, Fitch also restricts EUR33
million due to lack of ownership of cash held in fully consolidated
but only partly owned JVs. APG's 2023 refinancing has increased
APG's financial flexibility via a new RCF of EUR55 million,
particularly in funding short-term cash flow shortfalls. With the
issue of the new loan, the remaining EUR38 million will be added to
cash on hand, enhancing the company's liquidity position.
Reduced Short-Term Refinancing Risks: The 2023 bond issue (EUR400
million maturing in 2027) has removed short-term refinancing risk
but resulted in significantly higher funding costs as cash interest
doubled between 2022 and 2023. In 2024 APG's debt maturities
largely include short-term bank facilities, which Fitch believes
will be rolled over or refinanced. The new term loan has increased
the gross debt quantum by EUR68 million but does not have a
material impact on the debt structure.
Issuer Profile
APG is a worldwide leader in design, engineering and manufacturing
of acoustic and thermal components & systems for the automotive
sector. Headquartered in Hagen, Germany, the company is present in
22 countries with 85 production facilities and 13 R&D centres.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Adler Pelzer
Holding GmbH LT IDR B- Affirmed B-
senior secured LT B Affirmed RR3 B
PCF GMBH: Moody's Appends 'LD' Designation to Caa1 PDR
------------------------------------------------------
Moody's Ratings appended a limited default (LD) designation to PCF
GmbH's (Pfleiderer) Probability of Default Rating, changing it to
Caa1-PD/LD from Caa1-PD. The company's other ratings, including its
Caa1 corporate family rating and the Caa1 rating on the EUR750
million sustainability linked senior secured notes, are unaffected.
The outlook is negative. The /LD designation will be removed after
three business days.
The appending of the PDR with an "/LD" designation follows the
completion of the previously announced amend and extend
transaction. As part of the transaction the company extended the
maturity of its bonds by three years to 2029.
Headquartered in Neumarkt, Germany, Pfleiderer is an intermediate
holding company for a group of entities operating under the
Pfleiderer brand. Pfleiderer is one of the leading European
manufacturers of wood-based products and solutions, with its
origins dating back to 1894. In 2023, the company generated EUR940
million of revenue while the company's adjusted EBITDA was EUR141
million. Pfleiderer operates across two division: Engineered Wood
Products (82% of 2023 revenue) and Silekol (25%).
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I R E L A N D
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AQUEDUCT EUROPEAN 7-2022: S&P Assigns B- (sf) Rating to F-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Aqueduct European CLO
7-2022 DAC's class A-R loan and class A-R, B-R, C-R, D-R, E-R, and
F-R notes. The issuer has unrated subordinated notes outstanding
from the existing transaction and has not issued additional
subordinated notes. It has issued unrated class Z-1, Z-2, and Z-3
notes.
This transaction is a reset of the already existing transaction
which closed in February 2023. The issuance proceeds of the
refinancing debt were used to redeem the refinanced debt (the
original transaction's class A loan, A notes, B-1, B-2, C, D, E,
and F notes, for which S&P withdrew its ratings at the same time),
and pay fees and expenses incurred in connection with the reset.
Under the transaction documents, the rated notes and loan will pay
quarterly interest unless a frequency switch event occurs.
Following this, the notes and loan will permanently switch to
semiannual payments.
The portfolio's reinvestment period will end approximately 4.6
years after closing, while the non-call period will end 1.5 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 and loan through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
CURRENT
S&P Global Ratings' weighted-average rating factor 2,880.13
Default rate dispersion 502.99
Weighted-average life (years) 4.47
Weighted-average life (years) extended
to cover the length of the reinvestment period 4.58
Obligor diversity measure 126.00
Industry diversity measure 18.95
Regional diversity measure 1.36
Transaction key metrics
CURRENT
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.96
Actual target 'AAA' weighted-average recovery (%) 36.38
Actual target weighted-average spread (net of floors; %) 4.06
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 assumed a target par of EUR299.67
million, which does not give credit to additional cash from the
redemption proceeds (given there are no effective date conditions
and reinvestment conditions relating to this cash), the covenanted
weighted-average spread (3.90%), a weighted-average coupon (4.50%)
provided by the arranger, and the target portfolio weighted-average
recovery rates for all the rated notes and loan. We applied various
cash flow stress scenarios, using four different default patterns,
in conjunction with different interest rate stress scenarios for
each liability rating category.
"Under our structured finance sovereign risk criteria, the
transaction's exposure to country risk is sufficiently mitigated at
the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"The transaction's legal structure and framework are bankruptcy
remote. The issuer is a special-purpose entity that meets our
criteria for bankruptcy remoteness.
"Our credit and cash flow analysis show that the class B-R, C-R,
D-R, and E-R notes benefit from break-even default rate and
scenario default rate cushions that we would typically consider to
be in line with higher ratings than those assigned. However, as the
CLO is still in its reinvestment phase, during which the
transaction's credit risk profile could deteriorate, we have capped
our ratings on the notes. The class A-R notes, class A-R loan, and
class F-R notes can withstand stresses commensurate with the
assigned ratings.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for the class
A-R to F-R notes and class A-R loan.
"In addition to our standard analysis, we have also included the
sensitivity of the ratings on the class A-R loan and class A-R to
E-R notes based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category--and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met--we have not included the above scenario analysis results
for the class F-R notes."
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.
"For this transaction, the documents prohibit assets from being
related to certain activities, including but not limited to, the
following: weapons of mass destruction; illegal drugs or narcotics;
pornography or prostitution; payday lending; tobacco and private
prisons. Accordingly, since the exclusion of assets from these
industries does not result in material differences between the
transaction and our ESG benchmark for the sector, no specific
adjustments have been made in our rating analysis to account for
any ESG-related risks or opportunities."
Ratings
AMOUNT CREDIT
CLASS RATING* (MIL. EUR) ENHANCEMENT (%) INTEREST RATE§
A-R AAA (sf) 96.00 38.00 Three/six-month EURIBOR
plus 1.28%
A-R loan AAA (sf) 0.00 38.00 Three/six-month EURIBOR
plus 1.28%
B-R AA (sf) 33.00 27.00 Three/six-month EURIBOR
plus 1.95%
C-R A (sf) 18.00 21.00 Three/six-month EURIBOR
plus 2.20%
D-R BBB (sf) 21.00 14.00 Three/six-month EURIBOR
plus 3.20%
E-R BB- (sf) 12.70 9.77 Three/six-month EURIBOR
plus 5.96%
F-R B- (sf) 9.70 6.53 Three/six-month EURIBOR
plus 8.41%
Z-1 NR 2.50 N/A N/A
Z-2 NR 2.50 N/A N/A
Z-3 NR 0.10 N/A N/A
Sub. Notes NR 22.70 N/A N/A
*The ratings assigned to the class A-R and B-R notes and class A-R
loan address timely interest and ultimate principal payments. The
ratings assigned to the class C-R, D-R, E-R, and F-R notes address
ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
ARBOUR CLO XIII: S&P Assigns B- (sf) Rating to Class F Notes
------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Arbour CLO XIII DAC's
class A, B, C, D, E, and F notes. At closing, the issuer also
issued unrated class M notes and subordinated notes.
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payment.
This transaction has a 1.5 year non-call period and the portfolio's
reinvestment period will end approximately 4.5 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 governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows and excess spread.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
Portfolio benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,716.81
Default rate dispersion 531.53
Weighted-average life (years) 5.03
Obligor diversity measure 127.05
Industry diversity measure 24.90
Regional diversity measure 1.30
Transaction key metrics
CURRENT
Total par amount (mil. EUR) 400.00
Defaulted assets (mil. EUR) 0
Number of performing obligors 151
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.50
'AAA' target portfolio weighted-average recovery (%) 35.78
Target weighted-average spread (net of floors, %) 4.14
Target weighted-average coupon (%) 4.99
Rating rationale
S&P said, "Our ratings reflect our assessment of the collateral
portfolio's credit quality, which has a weighted-average rating of
'B'. We consider that the portfolio is well-diversified at closing,
primarily comprising broadly syndicated speculative-grade senior
secured term loans and senior secured bonds. Therefore, we
conducted our credit and cash flow analysis by applying our
criteria for corporate cash flow CDOs.
"In our cash flow analysis, we modelled the EUR400 million par
amount, the covenanted weighted-average spread of 4.00%, the
covenanted weighted-average coupon of 4.75%, and the target
weighted-average recovery rates. We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our counterparty criteria.
"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk
limited at the assigned ratings, as the exposure to individual
sovereigns does not exceed the diversification thresholds outlined
in our criteria.
"The transaction's legal structure is bankruptcy remote, in line
with our legal criteria.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B to F notes could withstand
stresses commensurate with higher ratings than those we have
assigned. However, as the CLO is still in its reinvestment phase,
during which the transaction's credit risk profile could
deteriorate, we capped our assigned ratings on these notes. The
class A notes can withstand stresses commensurate with the assigned
ratings.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit assets from being related
to the following industries (non-exhaustive list): the development,
production, marketing, maintenance, trade or stock-piling of
weapons of mass destruction, including radiological, nuclear,
biological and chemical weapons, tobacco, anti-personnel land
mines, cluster munitions, pornography, prostitution, thermal coal
mining, and oil sands. Accordingly, since the exclusion of assets
from these industries does not result in material differences
between the transaction and our ESG benchmark for the sector, no
specific adjustments have been made in our rating analysis to
account for any ESG-related risks or opportunities."
Ratings list
AMOUNT CREDIT
CLASS RATING* (MIL. EUR) ENHANCEMENT (%) INTEREST RATE§
A AAA (sf) 248.00 38.00 Three/six-month EURIBOR
plus 1.30%
B AA (sf) 44.00 27.00 Three/six-month EURIBOR
plus 1.95%
C A (sf) 23.00 21.25 Three/six-month EURIBOR
plus 2.35%
D BBB- (sf) 27.00 14.50 Three/six-month EURIBOR
plus 3.35%
E BB- (sf) 20.00 9.50 Three/six-month EURIBOR
plus 6.16%
F B- (sf) 12.00 6.50 Three/six-month EURIBOR
plus 8.27%
M NR 0.25 N/A N/A
Sub. Notes NR 29.10 N/A N/A
*S&P's ratings on the class A and B notes address timely interest
and ultimate principal payments. Our ratings on 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.
CROSS OCEAN X: Fitch Assigns 'B-sf' Final Rating to Class F Notes
-----------------------------------------------------------------
Fitch Ratings assigns Cross Ocean Bosphorus CLO X DAC final
ratings, as detailed below.
Entity/Debt Rating
----------- ------
Cross Ocean Bosphorus
CLO X DAC
A XS2848119256 LT AAAsf New Rating
B XS2848119769 LT AAsf New Rating
C XS2848119686 LT Asf New Rating
D XS2848119843 LT BBB-sf New Rating
E XS2848120262 LT BB-sf New Rating
F XS2848120346 LT B-sf New Rating
Subordinated Notes
XS2848120189 LT NRsf New Rating
Transaction Summary
Cross Ocean Bosphorus CLO X DAC is a securitisation of mainly
senior secured obligations (at least 90%) with a component of
senior unsecured, mezzanine, second-lien loans and high-yield
bonds. Note proceeds have been used to purchase a portfolio with a
target par of EUR400 million. The portfolio is actively managed by
Cross Ocean Adviser LLP. The CLO has a 4.5-year reinvestment period
and an 8.5-year weighted average life (WAL) test limit.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch places the
average credit quality of obligors in the 'B' category. The Fitch
weighted average rating factor of the identified portfolio is
24.3.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the indicative portfolio is 64.1%.
Diversified Portfolio (Positive): The transaction includes various
concentration limits in the portfolio, including a fixed-rate
obligation limit at 5%, a top 10 obligor concentration limit at
25%, and maximum exposure to the three-largest Fitch-defined
industries in the portfolio at 40%. These covenants ensure that the
asset portfolio will not be exposed to excessive concentration.
Portfolio Management (Neutral): The transaction has a 4.5-year
reinvestment period and includes reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed-case portfolio with the aim of testing the robustness of
the transaction structure against its covenants and portfolio
guidelines.
Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed
portfolio was 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period, including passing the over-collateralisation and Fitch
'CCC' limitation tests, and a WAL covenant that progressively steps
down over time, both before and after the end of the reinvestment
period. In Fitch's opinion, these conditions reduce the effective
risk horizon of the portfolio during the stress period.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no negative impact on the
notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio, the
class F notes display a rating cushion of five notches, the class C
notes four notches , the class D and E notes three notches , and
the class B notes two notches. There is no rating cushion for the
class A notes.
Should the cushion between the identified portfolio and the stress
portfolio be eroded due to manager trading or negative portfolio
credit migration, a 25% increase of the mean RDR across all ratings
and a 25% decrease of the RRR across all ratings of the stressed
portfolio would lead to downgrades of up to five notches for the
notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of the Fitch's stress
portfolio would lead to upgrades of up to five notches for the
notes, except for the 'AAAsf' rated notes, which are at the highest
level on Fitch's scale and cannot be upgraded.
During the reinvestment period, based on Fitch's stress portfolio
upgrades may occur on better-than-expected portfolio credit quality
and a shorter remaining WAL test, meaning the notes are able to
withstand larger than expected losses for the transaction's
remaining life. After the end of the reinvestment period, upgrades
may occur in case of stable portfolio credit quality and
deleveraging, leading to higher credit enhancement and excess
spread available to cover losses on the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Cross Ocean
Bosphorus CLO X DAC. In cases where Fitch does not provide ESG
relevance scores in connection with the credit rating of a
transaction, programme, instrument or issuer, Fitch will disclose
in the key rating drivers any ESG factor which has a significant
impact on the rating on an individual basis.
OCP EURO 2024-10: S&P Assigns B- (sf) Rating to Class F Notes
-------------------------------------------------------------
S&P Global Ratings assigned credit ratings to OCP Euro CLO 2024-10
DAC's class A to F notes. At closing, the issuer also issued
unrated subordinated notes.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
CURRENT
S&P Global Ratings' weighted-average rating factor 2,777.22
Default rate dispersion 558.32
Weighted-average life (years) 4.75
Obligor diversity measure 164.05
Industry diversity measure 22.49
Regional diversity measure 1.32
Transaction key metrics
CURRENT
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.00
Actual 'AAA' weighted-average recovery (%) 36.86
Actual weighted-average spread (net of floors; %) 4.12
Actual weighted-average coupon (%) 3.51
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments.
Rationale
S&P said, "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 EUR500 million target par
amount, the actual weighted-average spread (4.12%), the actual
weighted-average coupon (3.51%), and the actual weighted-average
recovery rates calculated in line with our CLO criteria for all
classes of ratings. We applied various cash flow stress scenarios,
using four different default patterns, in conjunction with
different interest rate stress scenarios for each liability rating
category.
"Until the end of the reinvestment period on April 20, 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 it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, 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 ratings.
"We consider the transaction's documented counterparty replacement
and remedy mechanisms to adequately mitigate its exposure to
counterparty risk under our current counterparty criteria.
"We consider the transaction's legal structure and framework to be
bankruptcy remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for the class A
to F notes.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B to F notes could withstand
stresses commensurate with the same or higher ratings than those we
have assigned. However, as the CLO is still in its reinvestment
phase, during which the transaction's credit risk profile could
deteriorate, we have capped our ratings assigned to the notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
based on four hypothetical scenarios and applied to the actual
portfolio characteristics at closing.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance factors
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit (and or for some of these
activities there are revenue limits or can't be the primary
business activity) assets from being related to certain activities,
including, but not limited to, the following: coal mining and/or
coal-based power generation, trade of illegal drugs or narcotics,
including recreational cannabis, the sale of tobacco products, the
production or distribution of antipersonnel landmines, cluster
munitions, biological and chemical, radiological and nuclear
weapons, non-sustainable palm oil production.
"Accordingly, since the exclusion of assets from these industries
does not result in material differences between the transaction and
our ESG benchmark for the sector, no specific adjustments have been
made in our rating analysis to account for any ESG-related risks or
opportunities."
Ratings
AMOUNT CREDIT
CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT (%)
A AAA (sf) 310.00 3mE +1.32% 38.00
B AA (sf) 56.25 3mE +1.90% 26.75
C A (sf) 28.75 3mE +2.25% 21.00
D BBB- (sf) 35.00 3mE +3.25% 14.00
E BB- (sf) 22.50 3mE +5.96% 9.50
F B- (sf) 15.00 3mE +8.40% 6.50
Sub NR 39.95 N/A N/A
*The ratings assigned to the class A and B notes address timely
interest and ultimate principal payments. The ratings assigned to
the class C to F notes address ultimate interest and principal
payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
TIKEHAU CLO XII: Fitch Assigns 'B-sf' Final Rating to Class F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Tikehau CLO XII DAC final ratings, as
detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Tikehau CLO XII DAC
Class A Notes
XS2845221766 LT AAAsf New Rating AAA(EXP)sf
Class B-1 Notes
XS2845221923 LT AAsf New Rating AA(EXP)sf
Class B-2 Notes
XS2845222145 LT AAsf New Rating AA(EXP)sf
Class C Notes
XS2845222491 LT Asf New Rating A(EXP)sf
Class D Notes
XS2845222657 LT BBB-sf New Rating BBB-(EXP)sf
Class E Notes
XS2845222814 LT BB-sf New Rating BB-(EXP)sf
Class F Notes
XS2845223036 LT B-sf New Rating B-(EXP)sf
Sub Notes
XS2845223200 LT NRsf New Rating NR(EXP)sf
Transaction Summary
Tikehau CLO XII DAC is a securitisation of mainly senior secured
obligations (at least 90%) with a component of senior unsecured,
mezzanine, second-lien loans and high-yield bonds. Note proceeds
have been used to fund a portfolio with a target par of EUR400
million. The portfolio is actively managed by Tikehau Capital
Europe Limited. The collateralised loan obligation (CLO) has a
4.6-year reinvestment period and an 8.7-year weighted average life
test (WAL) at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch places the
average credit quality of obligors at 'B'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 24.5.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprise of senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is 61.1%.
Diversified Asset Portfolio (Positive): The transaction also
includes various concentration limits, including a maximum exposure
to the three-largest Fitch-defined industries in the portfolio at
43%. These covenants ensure the asset portfolio will not be exposed
to excessive concentration.
Portfolio Management (Neutral): The transaction has a 4.6-year
reinvestment period, which is governed by reinvestment criteria
that are similar to those of other European transactions. Fitch's
analysis is based on a stressed-case portfolio with the aim of
testing the robustness of the transaction structure against its
covenants and portfolio guidelines.
The transaction has four matrices; two effective at closing with
fixed-rate limits of 7.5% and 12.5%, and two one year post-closing
with fixed-rate limits of 7.5% and 12.5%. All four matrices are
based on a top-10 obligor concentration limit of 18%. The closing
matrices correspond to an 8.7-year WAL test while the forward
matrices correspond to a 7.7-year WAL test.
Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed
portfolio analysis was reduced by 12 months. This is to account for
the strict reinvestment conditions envisaged after the reinvestment
period. These include passing the coverage tests and the Fitch
'CCC' maximum limit after reinvestment and a WAL covenant that
progressively steps down over time after the end of the
reinvestment period. Fitch believes these conditions would reduce
the effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no impact on the class A and E
notes and would lead to downgrades of no more than one notch for
the class B, C and D notes and to below 'B-sf' for the class F
notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B to F notes display a
rating cushion of two notches.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of up to four
notches for the rated notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of the Fitch-stressed
portfolio would lead to upgrades of up to three notches for the
rated notes, except for the 'AAAsf' rated notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
remaining life of the transaction. After the end of the
reinvestment period, upgrades may result from stable portfolio
credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Tikehau CLO XII
DAC. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
=========
I T A L Y
=========
BFF BANK: Moody's Extends Review for Downgrade on Ba2 Issuer Rating
-------------------------------------------------------------------
Moody's Ratings extended the review for downgrade on all of BFF
Bank S.p.A.'s (BFF) ratings and assessments including its:
long-term (LT) and short-term (ST) deposit ratings of Baa3/Prime-3
respectively, LT issuer and senior unsecured debt ratings of Ba2,
preferred stock non-cumulative rating of B2(hyb), LT and ST
Counterparty Risk Ratings (CRR) of Baa2/Prime-2 , LT and ST
Counterparty Risk (CR) Assessments of Baa2(cr)/Prime-2(cr) as well
as BFF's Baseline Credit Assessment (BCA) and Adjusted BCA of ba2.
RATINGS RATIONALE
Moody's initiated the review for downgrade on BFF's ratings on May
22, 2024 following the bank's announcements on May 9 and 10, 2024
that its supervisor, the Bank of Italy, took several temporary
measures including the suspension of dividends on 2024 profits.
The review extension is a result of continued dialogue between BFF
and its supervisor. On July 11, 2024, BFF presented its responses
to the Bank of Italy regarding the supervisor's findings. While BFF
awaits the Bank of Italy's response, the supervisor operates
without a rigid timeline for decision-making.
Moody's review will assess the effects of the final remediation
measures on BFF's risk profile, including on its governance updated
practices.
Given the ongoing review for downgrade, there is currently no
positive pressure on the ratings. The BCA could stabilize if the
bank's remediation actions were to, in Moody's opinion,
successfully address financial and governance risks. Moreover,
Moody's would confirm the deposit and debt ratings if the bank were
to maintain its existing buffer of liabilities subject to bail-in.
If Moody's determine that the bank's credit profile has weakened
(evidenced by among other things lower capital or profitability,
higher asset risk, reduced asset diversification or funding
pressure), this could lead to a downgrade in ratings and
assessments.
Additionally, a decrease in the pool of liabilities subject to
bail-in could also result in a downgrade of deposit and debt
ratings due to an increased loss-given-failure.
Lastly, since Moody's could maintain the negative adjustment on
"corporate behavior", the completion of the review could result in
a multi-notch downgrade.
PRINCIPAL METHODOLOGY
The methodology used in these rating was Banks Methodology
published in March 2024.
===========
R U S S I A
===========
TAJIKISTAN: S&P Raise LT Currency Ratings to 'B', Outlook Stable
----------------------------------------------------------------
On Aug. 16, 2024, S&P Global Ratings raised its long-term foreign
and local currency ratings on Tajikistan to 'B' from 'B-'. The
outlook is stable. The short-term rating was affirmed at 'B'. Also,
S&P revised upward its transfer and convertibility assessment to
'B'.
Outlook
The stable outlook reflects our expectation that Tajikistan will
sustain moderate debt-service needs over the next 12 months. S&P
also expects the government's debt stock will remain highly
concessional, offsetting risks from the country's structurally
volatile external position.
Downside scenario
S&P said, "We could take a negative rating action should
Tajikistan's external or fiscal performance prove much weaker than
our baseline expectations. We could also lower the rating if
Tajikistan's government debt-servicing capacity becomes strained,
for example, because of reduced access to concessional funding."
Upside scenario
A positive rating action could result from a sustained improvement
in Tajikistan's governance, transparency, and data disclosure
standards, including in the broader public sector.
Rationale
S&P said, "The upgrade reflects our view that Tajikistan's
resilient economic growth and narrower fiscal deficits will keep
its highly concessional government debt at a moderate level. It
also reflects our expectation that the country's new IMF policy
coordination arrangement could help contain fiscal risks emanating
from the country's large and financially weak SOE sector."
Additionally, higher foreign exchange (FX) reserves--which have
doubled compared to pre-pandemic levels--and continued access to
multilateral financing will assist the authorities in meeting their
medium-term fiscal and external financing requirements. This
includes those related to the ongoing flagship Rogun Hydropower
Project (HPP).
Since 2022, strong labor remittances, an appreciating exchange
rate, and capital inflows--primarily from Russia--have supported
Tajikistan's economic performance and strengthened its external
balance sheet. In addition, modest fiscal deficits and high nominal
GDP growth have led to a decline in the government's net
debt-to-GDP ratio.
Tajikistan's government debt-service obligations will remain
moderate over the next 12 months owing to the high component of
concessional borrowing in the government's debt stock (65% of total
debt). The first of six semi-annual principal payments of $83
million on the country's only 2027 Eurobond issuance will commence
in March 2025 and end in September 2027.
In addition, the economy's strong growth prospects, contained
headline fiscal deficits, modest and highly concessional government
debt, and improved FX reserves position support the ratings. That
said, the ratings on Tajikistan remain constrained by weak
institutional effectiveness, very low GDP per capita, a narrow and
concentrated export base, high reliance on workers' remittances,
fiscal risks from financially weak SOEs, and limited monetary
policy effectiveness.
Institutional and economic profile: Tajikistan's economy relies on
Russia for trade and labor remittances
-- Tajikistan's GDP per capita, estimated at $1,300 in 2024,
remains one of the lowest globally.
-- Flagship infrastructure projects to increase hydroelectricity
energy capacity could support medium- to long-term trade and growth
prospects.
-- President Emomali Rahmon has been at the helm of political
power since 1992, with decision-making centralized and succession
processes untested.
According to official statistics, Tajikistan's real GDP expanded
8.3% in 2023, compared with 8.0% in 2022, on broad-based growth in
the export-oriented agriculture, construction, and mining sectors.
S&P said, "We forecast growth will revert to historical averages of
6% over the medium term, as industrial sector growth moderates in
line with our assumption of softening metal prices (S&P Global
Ratings assumes gold prices of $2,100 per ounce [/oz] in 2024,
$2,000/oz in 2025, and $1,700/oz in 2026). In our view, the
disclosure of more complete national accounts data would enhance
macroeconomic risk visibility."
Expanding electricity production is a potential source of growth
and exports beyond S&P's forecast horizon. Tajikistan commenced the
construction of the Rogun HPP in 2016, disbursing $3 billion since
inception to finance the project's first two of six turbines (the
third turbine is expected in 2025). In 2023, the government
budgeted Tajikistani somoni (TJS) 2,506 million ($236 million; 2%
of GDP) for the Rogun HPP, and S&P expects this amount will remain
relatively fixed until the project is finalized in 2035. The Rogun
HPP is already generating electricity at about 10%-15% of total
capacity. The revenue generated--estimated at $1.1 billion over
2024-2035--will be reinvested in constructing the remaining
turbines and maintaining those already completed.
The remaining cost to complete the project by 2035 is estimated at
$6.4 billion. The Tajik government is negotiating a financing
package with a consortium of multilateral and bilateral partners to
cover about 50% of this cost, with the other half expected to come
from the government's budget and project revenue. The provisional
external funding envelope includes $1.73 billion in
semi-concessional loans, $850 million in grant funding, and $390
million in concessional loans. S&P understands the disbursements
will be made once the Tajik government finalizes power purchase
agreements with the Kazakhstan and Uzbekistan governments for
electricity exports, expected in 2024 or 2025. Upon completion, the
project is assumed to export about 60% of its total output to
Central Asia.
Other growth-enhancing investment projects include the
rehabilitation and modernization of the Kairakkum, Golovnaya, and
Nurek HPPs, all of which are expected to improve domestic energy
production. Additionally, the regional Central Asia-South Asia
power project (CASA-1000)--which could allow Tajikistan and
Kyrgyzstan to supply hydroelectric power to Pakistan through
Afghanistan--is planned to finalize construction work in Kyrgyzstan
and Pakistan by year-end 2025 (95% of the construction work in
Tajikistan has been completed). In November 2023, the World Bank
approved an additional $21 million in grant funding for CASA-1000
to finance the remaining construction and commissioning works in
Tajikistan.
Tajikistan continues to maintain a broad policy of international
neutrality. Relations with Russia remain strong both commercially
and militarily, while those with China have strengthened in recent
years following increased inflows of Chinese capital into Tajik
public infrastructure and mining projects. Border disagreements
with neighboring Kyrgyzstan have flared into sporadic bouts of
violence in the disputed zones, but S&P understands the two
countries are currently negotiating a border demarcation deal.
S&P said, "In our view, Tajikistan's highly centralized
decision-making and untested power succession could undermine
policymaking predictability. We acknowledge, however, that it has
also provided a relatively high degree of political stability."
President Rahmon has dominated Tajikistan's political landscape
since the mid-1990s, when a long civil war ended and the economy
started to recover from the pronounced recession that followed the
dissolution of the Soviet Union in 1991. The president has ultimate
decision-making power and is serving his fifth consecutive term
after reelection in October 2020. The country's constitution sets
no limit on the number of presidential terms, while the
presidential administration controls strategic decisions and sets
the policy agenda.
Flexibility and performance profile: External and fiscal balance
sheets have improved despite long-standing structural
vulnerabilities
-- Tajikistan's external position has strengthened on the back of
resilience in gold exports and remittance inflows, but the economy
remains exposed to external shocks.
-- General government debt is moderate as a share of GDP, but the
high level of debt at loss-making SOEs pose significant contingent
liability risks.
-- S&P views monetary policy effectiveness as limited considering
the country's small domestic banking system and shallow capital
markets.
Structurally, Tajikistan's external position remains susceptible to
global shocks, reflecting the country's narrow export base, high
dependence on imports, and strong reliance on workers' remittances,
largely from Russia (about 90% of total remittances). Although
trade exposure to neighboring China, Kazakhstan, and Uzbekistan has
increased since the start of the Russia-Ukraine conflict, Russia
remains one of Tajikistan's largest trading partners, accounting
for about one-quarter of the total trade (mostly fuel imports).
Tajikistan's external position has strengthened after posting four
consecutive current account surpluses over 2020-2023. S&P said, "We
project the current account will remain in surplus in 2024 and
2025, supported by resilient remittances and commodity exports.
However, we expect a small deficit of about 1.0% of GDP in
2026-2027, in line with our assumption of declining gold prices."
In 2022, Tajikistan introduced a new tax code aimed at broadening
the tax base and modernizing administration. To that end, the
government reduced the number of taxes to seven from 10 and lowered
rates on resident and nonresident income, corporate income, and
standard value-added tax (VAT). In 2023, tax revenue increased to
20% of GDP from 17% in 2022, as the expansion in industry and
construction translated into strong growth in corporate, property,
and non-income tax revenue. On the expenditure front, capital
outlays increased due to higher spending on energy and transport
projects, while public sector wages, pensions, and student
allowances also surged following a 20% nominal rate hike in July
2023.
S&P said, "We project the general government deficit will average a
moderate 2.2% of GDP over 2024-2027 (excluding credit lines from
revenue), compared to a deficit of 1.1% in 2023. This includes
another public sector wage adjustment of 40% in July 2024 and
continued on-budget capital expenditure for Rogun HPP of about
1%-2% of GDP annually. We also forecast a spike in interest costs
related to the three-year repayment of $40 million of debt
suspended under the Debt Service Suspension Initiative (DSSI)
starting in 2024. Together with the recent issuance of new domestic
securities at market-determined yields of 6%-8%, compared to 1%-2%
historically, interest costs are expected to rise to 5.6% of
general government revenue on average over 2024-2027, from 4.6% in
2023."
A high proportion of central government debt--about 90% of total
debt--is denominated in foreign currency, exposing the government's
balance sheet to exchange rate volatility risks. Because of strong
GDP growth, currency appreciation, and debt repayments, net general
government debt declined to about 24% of GDP in 2023, from about
41% in 2020. S&P forecasts a modest rise in the net debt-to-GDP
ratio, reaching a still moderate 28% by 2027, reflecting some
currency weakness and additional external debt accumulation for
Rogun HPP.
In 2017, Tajikistan's government issued its only commercial
external debt obligation, a $500 million Eurobond, to fund the
first two turbines of the Rogun HPP. The bond was issued with a
maturity of 10 years, with principal payments of $83 million (0.8%
of GDP) to be made in six equal semi-annual instalments commencing
March 2025 and ending September 2027. Until then, the government's
commercial debt service relates to annual interest payments on the
bond of about $35.6 million (0.3% of GDP), based on an interest
rate of 7.125%.
S&P said, "Our assessment of Tajikistan's public finances includes
material contingent liabilities from SOEs. In our view, high debt
levels at loss-making SOEs--especially in the energy,
communications, transport, and financial sectors--present sizable
fiscal risks to the government. In addition to poor governance and
transparency standards, we understand the weak financial position
of some SOEs requires government intervention to service their
debt. We broadly estimate SOE liabilities, including loans,
penalties, and arrears, at about 35% of GDP, of which about 90% is
held by the national power company Barqi Tojik (BT). Separately,
the government continues to guarantee external loans for
enterprises such as BT and Khujand Water Supply (amounting to $140
million; 1.2% of GDP in 2023), which we include in our calculation
of general government debt."
BT's structural earnings deficit stems from selling electricity
below cost-recovery levels, contributing to significant arrears to
private sector creditors and suppliers (about 7.5% of GDP at
end-2023). To address this issue, the government, in collaboration
with the World Bank, has committed to the firm's financial recovery
over 2022-2031 (previously 2019-2025). The plan aims to raise
average domestic power tariffs to full-cost recovery levels by
2027, while also reducing the company's technical and commercial
losses. To this end, the government raised electricity prices for
residential and industrial consumers by 17% in 2022 and further by
15% in 2024.
S&P said, "In our view, Tajikistan's monetary policy effectiveness
remains limited due to the country's shallow capital markets,
dollarization, and high reliance on cash (comprising three-quarters
of the total money supply). Average inflation fell to 3.7% in 2023,
from 6.6% in 2022, below regional peers and the National Bank of
Tajikistan's (NBT's) target range of 6%, plus or minus two
percentage points. We expect inflation will remain around 3%-4%,
supported by a continued tight monetary policy, exchange rate
stability, and agricultural import substitution. In response to
subdued prices, the NBT lowered its policy rate to 9.0% in July
2024, marking the third rate cut this year.
"The NBT has increased banking system oversight and tightened
underwriting standards in recent years. However, we think the
financial sector still exhibits high credit risk due to banks'
lending and underwriting standards, low levels of household wealth,
and high credit concentration." Nonperforming loans declined to
12.5% of total loans at year-end 2023 from a peak of 46.8% at
year-end 2016, but they remain elevated due to banks' outsized
exposure to loss-making SOEs. Dollarization levels have been
trending downward but remain high: FX-denominated deposits and
loans accounted for 44.5% and 32.7% of total deposits and loans at
year-end 2023, respectively.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
UPGRADED; RATINGS AFFIRMED
TO FROM
TAJIKISTAN
Sovereign Credit Rating B/Stable/B B-/Stable/B
Transfer & Convertibility Assessment B B-
Senior Unsecured B B-
===========================
U N I T E D K I N G D O M
===========================
A E CHILLED: Begbies Traynor Named as Joint Administrators
----------------------------------------------------------
A E Chilled Limited was placed into administration proceedings in
the High Court of Justice, No CR-2024-004 795, and Jeremy Karr and
Simon John Killick of Begbies Traynor (Central) LLP were appointed
as joint administrators on Aug. 12, 2024.
A E Chilled Limited offers freight transport by road. Its
registered office is at Suite 7 Big Offices, Poulton Close, Dover,
CT17 0HL.
The administrator can be reached at:
Jeremy Karr
Simon John Killick
Begbies Traynor (Central) LLP
31st Floor
40 Bank Street, London
E14 5NR
For further details, contact:
Monika Flont
E-mail: monika.flont@btguk.com
Tel No: 020 7262 1199
ALTEC ENGINEERING: FRP Advisory Named as Administrators
-------------------------------------------------------
Altec Engineering Limited was placed into administration
proceedings in the High Court of Justice, Business and Property
Courts of Leeds, Insolvency & Companies List, Court Number:
CR-2024-LDS-000799, and Allan Kelly and Antonya Allison of FRP
Advisory Trading Limited were appointed as administrators on Aug.
9, 2024.
Altec Engineering is an automation specialist, providing advanced
solutions to a wide range of applicatio. Its registered office is
at Unit 1 Bowburn North Industrial Estate, Bowburn, Durham, DH6 5PF
to be changed to Suite 5, Bulman House, Regent Centre, Gosforth,
Newcastle upon Tyne, NE3 3LS. Its principal trading address is at
Unit 1 Bowburn North Industrial Estate, Bowburn, Durham, DH6 5PF.
The administrator can be reached at:
Allan Kelly
Antonya Allison
FRP Advisory Trading Limited
Suite 5, 2nd Floor
Bulman House, Regent Centre
Newcastle Upon Tyne
NE3 3LS
For further details, contact:
Sarah Dorkin
E-mail: cp.newcastle@frpadvisory.com
Tel No: 0191 605 3737
ARCTREND LIMITED: Opus Restructuring Named as Administrators
------------------------------------------------------------
Arctrend Limited was placed into administration proceedings in the
High Court of Justice, Court Number: CR-2024-000478, and Louise
Williams and Paul Mallatratt of Opus Restructuring LLP were
appointed as administrators on Aug. 8, 2024.
Arctrend Limited designs and manufactures metal products, offering
bellows, stainless braid, fosters couplings, gas meter hose
connectors, steel mill pipe work, hoses, and assemblies. Its
registered office and principal trading address is at 3 Meaford
Business Park, Meaford, Stone, Staffordshire, United Kingdom, ST15
0WQ.
The administrators can be reached at:
Louise Williams
Paul Mallatratt
Opus Restructuring LLP
Offices Tavistock & Selby
29 Bridgford Road, West Bridgford,
Nottingham, NG2 6AU
Tel No: 0115 666 8230
Alternative Contact:
Lee Cuthbert
CROOME CUISINE: MB Insolvency Named as Administrators
-----------------------------------------------------
Croome Cuisine Limited was placed into administration proceedings
in the High Court of Justice, Business and Property Courts of
England and Wales in Birmingham, and Mark Bowen of MB Insolvency
was appointed as administrator on Aug. 13, 2024.
Croome Cuisine is in the business of butter and cheese production.
Its registered office is at Anglo House, Worcester Road,
Stourport-on-Severn, Worcestershire DY13 9AW. Its principal
trading address is at The Dairy, Pond Farm, Whittington, Worcester
WR5 2RQ.
The administrator can be reached at:
Mark Bowen
MB Insolvency
11 Roman Way, Berry Hill
Droitwich
WR9 9AJ
For further details, contact:
Curtis Roberts
E-mail: mark@mb-i.co.uk
Tel No: 01905 776 771
ESTUARY VIEW PROPERTY: CG&Co Named as Joint Administrators
----------------------------------------------------------
Estuary View Property Limited was placed into administration
proceedings in the High Courts of Justice Business and Property
Courts, No CR-2024-004839, and Edward M Avery-Gee and Nick
Brierley of CG&Co were appointed as joint administrators on Aug.
13, 2024.
Estuary View Property is involved in the development of building
projects. Its registered office and principal trading address is
at 1386 London Road, Leigh On Sea, SS9 2UJ.
The joint administrators can be reached at:
Edward M Avery-Gee
Nick Brierley
CG&Co
27 Byrom Street
Manchester
M3 4PF
For further details, contact:
Matthew Bannon
E-mail: info@cg-recovery.com
Tel No: 0161 358 0210
FRANCIS BROWN: FRP Advisory Named as Administrators
---------------------------------------------------
Francis Brown Limited was placed into administration proceedings in
the High Court of Justice, Business and Property Courts of England
and Wales, Court Number: CR-2024-003320, and Steven Philip Ross and
Allan Kelly of FRP Advisory Trading Limited were appointed as
administrators on Aug. 12, 2024.
Francis Brown Limited operates in the heavy fabrication design and
manufacturing industry. Its registered office address is at Church
Road, Stockton-On-Tees, TS18 2HL to be changed to F17 Evolve
Business Centre, Cygnet Way, Houghton le Spring, DH4 5QY. Its
principal trading office address is at Hill Street East, Stockton
on Tees, TS18 2HL.
The administrator can be reached at:
Steven Philip Ross
Allan Kelly
FRP Advisory Trading Limited
Suite 5, 2nd Floor, Bulman House
Regent Centre, Newcastle Upon Tyne
NE3 3LS
For further details, contact:
Georgia Foster
E-mail: cp.newcastle@frpadvisory.com
Tel No: 0191 605 3737
LANDMARK MORTGAGE NO. 1: S&P Affirms 'B-(sf)' Rating on Cl. D Notes
-------------------------------------------------------------------
S&P Global Ratings took various credit rating actions on Landmark
Mortgage Securities No. 1 PLC and Landmark Mortgage Securities No.
3 PLC. Specifically, S&P:
-- Raised to 'AA- (sf)' from 'A+ (sf)' its ratings on Landmark
Mortgage Securities No. 1's class B, Ca, and Cc notes. At the same
time, S&P affirmed its 'B- (sf)' rating on the class D notes.
-- Raised to 'AA (sf)' from 'A (sf)', 'A (sf)' from 'BBB+ (sf)',
and 'BB+ (sf)' from 'B+ (sf)' S&P's ratings on Landmark Mortgage
Securities No. 3's class B, C, and D ratings, respectively. At the
same time, S&P affirmed its 'AAA (sf)' rating on the class A
notes.
The rating actions follow S&P's full analysis of the most recent
transaction information it has received and the transactions'
structural features.
S&P said, "We applied our global RMBS criteria to our analysis of
these transactions. Since last review, our weighted-average
foreclosure frequency (WAFF) assumptions have increased at all
rating levels, reflecting the observed increase in arrears relative
to the current balance.
"Our weighted-average loss severity assumptions decreased at all
rating levels, reflecting the updated house price index assumptions
used in our analysis. Further, the rise in credit enhancement from
which all classes of notes benefit has prompted these rating
actions."
Landmark Mortgages Securitisation No. 1 PLC
In this transaction, the WAFF at all rating levels has risen
markedly after total delinquencies in June 2024 reached 35.3%, with
our assumption on the 90+ day overdue accounts being 100%
foreclosure. At the same time, available credit enhancement for the
class B and Ca/Cc notes has increased substantially.
Credit analysis results
WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 61.5 27.6 17.0
AA 56.1 19.2 10.8
A 52.0 7.8 4.1
BBB 46.2 2.9 1.3
BB 40.0 2.0 0.8
B 38.4 2.0 0.8
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity
S&P said, "Barclays Bank PLC is the cross-currency counterparty for
Landmark Mortgages Securitisation No. 1. Under our counterparty
criteria, our ratings are capped by our 'AA-' resolution
counterparty rating (RCR) on Barclays Bank, given the transaction's
collateral framework and legal documentation. Therefore, we raised
our ratings on the class B, Ca, and Cc notes to 'AA- (sf)' from 'A+
(sf)'.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B, Ca, and Cc notes is
commensurate with higher ratings than those currently assigned.
However, given the ratings are capped at the RCR on Barclays Bank,
we limited our upgrades.
"The class D notes did not pass our 'B' rating level stresses,
recording small shortfalls. Consequently, we assessed the key
variables under our criteria for assigning 'CCC' ratings, together
with an analysis of performance data. In our view, timely repayment
of interest and ultimate principal on these notes does not depend
on favourable business, financial, and economic conditions. We
therefore affirmed our 'B- (sf)' rating on the class D notes."
Landmark Mortgages Securitisation No. 3 PLC
Arrears have risen less sharply in this transaction, with total
delinquencies at 22.2% in June 2024. This has led to a smaller rise
in our WAFF assumptions than in Landmark Mortgages Securitisation
No. 1. Given that the reserve fund is fully funded, the transaction
is currently amortizing on a pro-rata basis, resulting in a slower
build-up in credit enhancement.
Credit analysis results
WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 42.6 34.8 14.8
AA 36.8 27.0 9.9
A 33.7 14.9 5.0
BBB 30.3 8.6 2.6
BB 27.0 5.1 1.4
B 26.1 3.1 0.8
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity
S&P said, "The transaction benefits from a liquidity facility and
interest rate swap provided by NatWest Markets PLC. Under our
counterparty criteria, our ratings would be capped at our 'A+' RCR
on NatWest Markets. As we do not give credit to liquidity
facilities and interest rate swaps in rating scenarios above 'A+',
no rating cap applies. The liquidity facility commitment fee is
modelled in all rating scenarios.
"We raised our ratings on the class B, C, and D notes, reflecting
the tranches' available credit enhancement as indicated by our
credit and cash flow analysis.
"The fully funded reserve provides 10.9% of credit enhancement to
the class D notes, and results in this class passing at rating
levels above 'BB+'. However, given the transaction's increasing
arrears, pro-rata amortization, and the tranche's vulnerability to
tail-end risk, we limited our upgrade to 'BB+ (sf)'."
Landmark Mortgage Securities No. 1 and No. 3 are backed by mortgage
pools of nonconforming first-ranking residential mortgages in the
U.K. originated prior to the 2007-2009 global financial crisis.
MODPODS INTERNATIONAL: KRE Corporate Named as Administrators
------------------------------------------------------------
Modpods International Ltd was placed into administration
proceedings in the High Court of Justice, Court Number:
CR-2024-004819, and Paul Ellison and Chris Errington of KRE
Corporate Recovery Limited were appointed as administrators on Aug.
12, 2024.
Modpods International is in the business of designing and producing
modular buildings. Its registered office is at c/o KRE Corporate
Recovery Limited, Unit 8, The Aquarium, 1-7 King Street, Reading,
RG1 2AN. Its principal trading address is at TU Square, Northview
Road, Walsgrave Triangle, Coventry, CV2 2SP.
The administrators can be reached at:
Paul Ellison
Chris Errington
KRE Corporate Recovery Limited
Unit 8, The Aquarium,
1-7 King Street
Reading, RG1 2AN
E-mail: info@krecr.co.uk
Tel No.: 0118 947 9090
Alternative contact:
Kelly Rumsam
OCADO GROUP: Fitch Assigns 'B-' Final Rating to Sr. Unsecured Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Ocado Group PLC's (Ocado) new GBP450
million senior unsecured notes a final instrument rating of 'B-'
with a Recovery Rating of 'RR4'. This is aligned with Ocado's
Long-Term Issuer Default Rating (IDR) of 'B-', which has a Stable
Outlook, and its existing unsecured instrument rating.
The new senior unsecured notes, together with new GBP250 million
convertibles notes, were issued by Ocado plc. The proceeds of the
new notes have been largely used towards part prepayment of its
existing debt. The new notes rank equally and share the same
guarantors as Ocado's existing debt.
Fitch views positively Ocado's proactive approach in refinancing
almost half of its around GBP1,450 million debt following the
settlement of tender offers on 13 August. This exercise leaves
nearly GBP400 million debt due in 2025-2026. Based on its estimates
and assuming refinancing of the whole debt, Ocado may maintain
sufficient cash to fund its capex in FY24-FY26 (year-end November).
Ocado has also extended its GBP300 million undrawn revolving credit
facility (RCF) to support its liquidity, as part of the refinancing
exercise.
Ocado's rating reflects its technological capabilities to help
drive online grocery profitability as well as high execution risk
to reach scale and profitability.
Key Rating Drivers
Reduced Refinancing Risk: Fitch views positively Ocado's GBP700
million new debt issue to part-refinance its upcoming debt
maturities, in particular part of its GBP600 million convertible
notes due in December 2025 and its GBP500 million unsecured notes
due in October 2026. A slight discount on voluntary tender debt
repurchases allowed Ocado to reduce debt by a similar amount it
raised in fresh debt, in addition to paying transaction costs and
adding some cash to its balance sheet. Fitch expects Ocado to
refinance its remaining debt, a portion (GBP173 million) of which
is due in December 2025.
Improving, Positive FY24 EBITDA: Fitch forecasts EBITDA (post
rents) of around GBP60 million in FY24 before it rises to GBP185
million by FY26. This compares with GBP14 million in FY23 after a
period of losses for the last nine years. However, following the
group's update in mid-July, its forecast now excludes one new
customer fulfilment centre (CFC) due to a mutual agreement with its
customer, Canadian food retailer Sobey's, to pause their new
opening. Its forecast also reflects improved profitability from
customer Kroger, a US food retailer.
High Execution Risk: Fitch sees high execution risk in Ocado's
business plan to ramp up existing CFCs, roll out new CFCs and
deliver efficiencies to drive earnings growth. Profit growth plans
rest on the addition of eight new international CFCs over the next
three years and on reaching full CFC capacity by the fifth or six
year of going live. Customers' CFCs have demonstrated
slower-than-anticipated ramp-up, due to weaker online grocery
demand and, in some cases, operational challenges. Ocado is helping
its clients via its "partner success" programme but the results of
these efforts are not fully within Ocado's control.
Satisfactory Liquidity: Ocado had sufficient cash balances of
around GBP800 million at FYE23 to fund FY24 and FY25 capex, but
cash will be eroded by FY27. Cash will be supported by nearly
GBP160 million cash inflows to be received from its Autostore
settlement over FY24-FY25. Its GBP300 million RCF, currently
undrawn, has been extended to 2027, but benefits from springing
maturity if notes maturing in 2026 and 2027 are not refinanced by
July 2026.
Scale and Cost Control: Fitch believes the business should generate
adequate profit margins once it reaches scale, with EBITDA margins
improving to 16.5% by FY27. Its forecast incorporates lower direct
operating costs, including technology and support costs. Ocado has
stated it targets to reduce annual cash technology costs to GBP240
million (from GBP292 million in FY23) and its cash support costs to
GBP150 million (GBP191 million in FY23) in the medium term.
Negative FCF: Fitch projects an average of GBP300 million annual
negative free cash flow (FCF) over FY24-FY26. Ocado has stated that
it expects to turn FCF-positive in 2HFY26. Fitch understands from
management that Ocado has further scope to lower its technology and
support costs. Fitch also understands from management that the
group does not intend to raise more debt beyond its refinancing
needs and plans to fund growth capex from internally generated cash
in the medium term.
Further Refinancing Expected: Its rating case projects that despite
the transaction, Fitch expects Ocado to refinance its remaining
GBP400 million outstanding debt due in 2025 and 2026 and a further
GBP350 million convertible notes due in January 2027 as well as
raise some new funding. Fitch also sees a risk that FCF may remain
negative in FY27, after it has deployed its current cash balances.
Key International Customers: Kroger is a key customer with eight
live CFCs that have been slower to ramp up against the original
plan of 20 CFCs, which Ocado is assisting via its "partner success"
programme. Recently Kroger has demonstrated confidence in Ocado's
solution by ordering the latest technology to retrofit its existing
CFCs. Sobey's has three live CFCs, while the fourth one has been
paused. The opening of two new CFCs for Australian food retailer
Coles is expected shortly, after a delay from FY23.
Overall, at FYE23, Ocado's technology was employed at 14
international CFCs by five customers, with an average of 3.14
modules in each CFC, which have gradually gone live since FY20.
Alcampo CFC went live last month.
Incremental OIA: Ocado plans to grow its intelligent automation
(OIA) segment in a capital-light way, having one contracted
partner, US healthcare distributor McKesson Corporation, to go live
in FY25. Fitch incorporates only limited profit and cash
contribution, but understand from management that Ocado has a
strong OIA pipeline and growth ambitions for this segment.
Low Margin for JV ORL: Ocado Retail Limited (ORL), which Fitch
deconsolidates in its projections, reported only a small profit in
FY23, which was in line with its guidance. Despite continued
positive momentum in 1HFY24, ORL guides to a fairly low 2.5%
adjusted EBITDA margin (before GBP33 million payment for unused
capacity at Hatfield CFC to Ocado solutions) for FY24.
Importance of Profitable Online Channel: Ocado's technology enables
efficiency and profitability in the online channel, which is
critical to retailers. Fitch expects retail sales in the online
channel to expand in the long term, which should continue driving
demand for Ocado's solutions.
Derivation Summary
Fitch analyses Ocado under its Business Service Navigator
framework. This reflects that the UK retail operations under
50%-owned ORL are ringfenced with no direct recourse from Ocado's
lenders and its view that the business risk profile of the
solutions business will drive Ocado's credit quality in the long
term, due to its accelerating growth and investments.
In comparison with Irel Bidco S.a.r.l (IFCO, B+/Stable), which
provides reusable packaging container solutions to the retail
sector, Ocado is less established and has higher execution risk.
IFCO is a global leader in a niche market and benefits from scale,
geographic diversification, as well as longstanding customer
relationships in a sector with good growth prospects. Ocado will
have similar characteristics once its business reaches its targeted
scale, in addition to a contracted revenue base, low customer churn
and high switching costs (a function of its bespoke technology).
This helps counterbalance some reliance on Kroger as its key
customer and partner.
Once it reaches scale, Ocado should demonstrate solid profitability
for the rating, with an EBITDA margin trending towards 16%, which
is below the more established IFCO's above 20%. Given their current
excessive level, leverage metrics are not a rating driver for Ocado
but its expectation of a progressive reduction to around 7x-8x by
FY26 supports the rating. This level compares with lower expected
leverage for IFCO at below 6.0x, which is better aligned with the
'B' rating category.
Fitch has also compared Ocado with Polygon Group AB (B/Negative), a
market leader on the European property damage restoration industry.
Both companies have comparable business profiles with leading
market positions in their respective industries and similar scale.
Ocado has better geographical diversification and expected revenue
visibility than Polygon, which is exposed to the German market with
shorter-length contracts. This is offset by the higher execution
risk of Ocado's business.
Polygon had higher EBITDA margin of around 6.0% in 2022 but Fitch
expects Ocado's profitability to improve to 11.0% in FY25 as it
continues to ramp up existing CFCs and drive efficiencies. Polygon
had lower EBITDA leverage at around 9.0x in 2022 than Ocado due to
lower operating profitability, but is expected to recover to around
7.0x.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
(restricted group, excluding ORL):
- Revenue for the technology solutions segment to grow to GBP630
million in FY26 as CFCs are ramped up and rolled out (eight new
CFCs and 46 new modules to be added in FY24-FY26)
- Revenues for UK logistics increasing towards GBP720 million by
FY26
- EBITDAR for the technology solutions segment to rise to GBP185
million in FY26 from near GBP65 million in FY24
- EBITDAR for the UK logistics segment to gradually grow to around
GBP35 million in FY27 from around GBP30 million in FY24
- Lease cost on average GBP30 million per year in FY24-FY26
- Gross capex (excluding ORL) averaging GBP430 million a year in
FY24-FY27
- Cash inflows of GBP100 million and GBP58 million in FY24 and
FY25, respectively, from Autostore settlement
- No dividends from ORL
- No M&A, no common dividend payments
Recovery Analysis
Fitch's Key Recovery Rating Assumptions:
The recovery analysis assumes that Ocado would be reorganised as a
going concern (GC) in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim and the value available to
creditors to consist of the sum of Ocado restricted group's
enterprise value (EV) and 50% of ORL.
Ocado's GC EBITDA is based on FY25 EBITDA for the restricted group
capturing CFCs that are under construction now and to open shortly.
Fitch expects GBP95 million (unchanged) of this would be available
to creditors post-restructuring, due to execution risks in the
international technology segment while also recognising a more
established UK business.
Fitch has used an unchanged 6.0x EV/EBITDA multiple, which is in
line with business services companies' distressed multiple, but it
also reflects the strong growth of Ocado's business and its market
position
Additionally, Fitch attributes half of its estimated GBP0.6 billion
(GBP0.9 billion previously) GC valuation of ORL business to Ocado's
cashflow waterfall. Fitch views that a default of ORL would not be
simultaneous and consequently base the JV valuation on an expected
sustainable medium-term EBITDA of GBP75 million (revised from
GBP110 million) and an 8x multiple, which is not a distressed
valuation. The multiple is based on trading multiples for grocers
and higher multiples for pure online retailers and technology
companies. Any additional debt at the JV above the assumed GBP30
million RCF will affect the value attributed to it.
Ocado's GBP300 million secured RCF ranks ahead of its other
existing debt. New senior unsecured notes (GBP450 million due 2029)
and remaining outstanding senior unsecured notes (GBP224 million
due 2026) rank equally with its total of GBP773 million new and
existing convertibles.
The outcome of the recovery analysis for senior unsecured notes is
'B-'/'RR4', aligned with Ocado's Long-Term IDR. The waterfall
analysis output percentage is unchanged at 32%. Should additional
debt ranking ahead or equally with unsecured notes be added to
Ocado's capital structure, this will push the Recovery Rating of
the notes lower to 'RR5'.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Fitch does not envisage a positive rating action during
FY24-FY28, due to execution risks associated with its
transformation into a solutions and business service provider.
However, over the long term, evidence of greater maturity of the
business, with increasing scale and diversification and lower
upfront capex would indicate a successful execution of Ocado's
growth strategy and would be positive for the rating, together
with:
- EBITDA trending towards GBP200 million
- Sufficient positive FCF generation to fund growth capex
- EBITDA interest coverage recovering towards 1.5x
- Visibility of EBITDA gross leverage trending below 6.5x on a
sustained basis
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Inability to refinance 12-15 months ahead of material debt
maturities or insufficient liquidity to fund at least two years of
capex
- Continued execution challenges, such as further delays in the
roll-out of new CFCs, inability to scale up existing CFCs, or
deliver technology or support cost efficiencies, preventing EBITDA
from reaching at least GBP50 million in FY24 and at least GBP100
million by FY25, and a faster cash burn than captured in its rating
case
- Readily available cash materially below GBP500 million at FYE24
Liquidity and Debt Structure
Adequate Cash to Fund Investments: The restricted group (ie
excluding ORL) has an adequate, but declining, cash position
comprising around GBP800 million cash and a fully undrawn GBP300
million RCF. Fitch expects this liquidity to support its FY24-FY26
high capex. Fitch estimates available liquidity of around GBP850
million at FYE24.
Refinancing Risk Reduced: Ocado's medium-term liquidity profile is
strongly dependent on its ability to turn cash flow positive and to
timely address remaining maturities with nearly GBP400 million due
over 2025-2026. The RCF has been extended by three years to 2027 as
part of the refinancing exercise, but it would be available only
until July 2026 if notes maturing in 2026 and 2027 are not
refinanced by then.
Ocado raised GBP700 million in July 2024, comprising GBP450 million
unsecured notes (10.5%) and GBP250 million convertible notes
(6.25%), both due in 2029. Proceeds were used to partly repay
existing debt. This results in broadly unchanged gross debt while
increasing the portion of unsecured notes within the capital
structure.
Issuer Profile
Ocado is a technology company that develops end-to-end operating
solutions for online grocery retail. It also has its own grocery
retail operations, which are ringfenced in a JV with M&S.
Date of Relevant Committee
13 May 2024
External Appeal Committee Outcomes
In accordance with Fitch's policies the Issuer appealed and
provided additional information to Fitch that resulted in a rating
action that is different than the original rating committee
outcome.
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
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
----------- ------ -------- -----
Ocado Group PLC
senior unsecured LT B- New Rating RR4 B-(EXP)
PIRNMILL LTD: KBL Advisory Named as Joint Administrators
--------------------------------------------------------
Pirnmill Ltd was placed into administration proceedings in the High
Court of Justice, Business and Property Court in Newcastle, Company
& Insolvency List, and Richard Cole and Steve Kenny of KBL
Advisory Limited were appointed as joint administrators on Aug. 8,
2024.
Pirnmill Ltd provides contract and interim project management and
engineering services to the automotive and consumer goods
industries. Its registered office and principal trading office is
at Unit 9 Belmont Industrial Estate, County Durham, DH1 1TN.
The joint administrators can be reached at:
Richard Cole
Steve Kenny
KBL Advisory Limited
Stamford House
Northenden Road, Sale
Cheshire, M33 2DH
For further information, contact:
Amy Lowden
E-mail: amy@kbl-advisory.com
Tel No: 0161 637 8100
PRAESIDIAD LTD: EUR290MM Bank Debt Trades at 63% Discount
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Participations in a syndicated loan under which Praesidiad Ltd is a
borrower were trading in the secondary market around 37.3
cents-on-the-dollar during the week ended Friday, Aug. 16, 2024,
according to Bloomberg's Evaluated Pricing service data.
The EUR290 million Term loan facility is scheduled to mature on
October 4, 2024. The amount is fully drawn and outstanding.
Praesidiad Limited provides security products and solutions. The
Company offers force protection solutions, perimeter security
systems, industrial mesh, and fencing products that defend and
protect military, commercial, and domestic end-users. The Company's
country of domicile is the United Kingdom.
PREMIER INSURANCE: A.M. Best Cuts FS Rating to B(Fair)
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AM Best has downgraded the Financial Strength Rating to B (Fair)
from B+ (Good) and the Long-Term Issuer Credit Rating to "bb"
(Fair) from "bbb-" (Good) of Premier Insurance Company Limited
(Premier) (Gibraltar). The outlook of these Credit Ratings is
negative.
The Credit Ratings (ratings) reflect Premier's balance sheet
strength, which AM Best assesses as adequate, as well as its
marginal operating performance, limited business profile and
appropriate enterprise risk management.
The rating downgrades reflect a weakening in Premier's operating
performance and balance sheet strength fundamentals. This follows
the company reporting a larger than expected, and third consecutive
year of operating losses in 2023, resulting in a material depletion
of its reported shareholders' equity. The assessment considers
actions taken by Premier's management to strengthen the company's
balance sheet through a series of capital injections from its
non-operating holding company, Premier Underwriting Holdings
(Gibraltar) Ltd. (PUHGL), in 2023 and 2024.
Premier's balance sheet strength is underpinned by risk-adjusted
capitalization at the adequate level, as measured by Best's Capital
Adequacy Ratio (BCAR). Offsetting balance sheet strength factors
include the company's small and reduced capital base in absolute
terms, which heightens potential balance sheet volatility. The
balance sheet strength assessment also factors in a neutral holding
company impact arising from PUHGL, which operates without any debt
and is expected to maintain risk-adjusted capitalization at least
at the adequate level on a consolidated basis.
Premier reported a loss after tax of GBP 4.3 million in 2023, which
followed a loss after tax of GBP 6.2 million in 2022; these are
represented by a return-on-equity ratio of -39.1% and 42.5%,
respectively. The deterioration in the company's operating
performance was driven by a string of poor underwriting results in
2022 and 2023, due to the strengthening of its reserves, in part to
reflect market-wide pressures including claims inflation and
settlement delays, which are negatively impacting the U.K. motor
insurance sector. AM Best expects underwriting performance to
improve markedly following significant rate increases implemented
throughout 2024, as well as a scale-down of the company's non-core
books of business, which historically run at higher loss ratios.
Nonetheless, the U.K. motor industry remains highly competitive,
and its challenging dynamics represent a significant headwind to
the company in achieving its business plans.
As a mono-line motor insurer in the United Kingdom, Premier's
limited business profile is reflected by its small book of business
that is concentrated by product offering and geography.
PRINTALICIOUS LIMITED: Begbies Traynor Named as Administrators
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Printalicious Limited was placed into administration proceedings in
the High Court of Justice, The Business and Property Courts of
England and Wales, Court Number: CR-2024-004748, and Bai Cham and
Manjit Shokar from Begbies Traynor (Central) LLP, were appointed as
administrators on Aug. 7, 2024.
Printalicious Limited operates in the manufacturing, printing and
publishing industry. The company's registered office is at 6th
Floor AMP House, Dingwall Road, Croydon, CR0 2LX.
The administrators can be reached at:
Bai Cham
Manjit Shokar
Begbies Traynor (Central) LLP
Innovation Centre Medway,
Maidstone Road
Chatham, Kent, ME5 9FD
For further information, contact:
Ben Parsons
Amber Mapley
E-mail: medway@btguk.com
Tel No: 01634 975440
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