/raid1/www/Hosts/bankrupt/TCREUR_Public/241113.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, November 13, 2024, Vol. 25, No. 228
Headlines
F R A N C E
HESTIAFLOOR 2: Fitch Assigns 'B+' Final Rating on Sr. Secured Debt
L U X E M B O U R G
CIDRON AIDA: Fitch Assigns 'B+' Rating on EUR725MM Term Loan B
PICARD GROUPE: Fitch Lowers Rating on EUR650MM Sec. Notes to B+
N E T H E R L A N D S
BODY SHOP: Declared Bankrupt in the Netherlands
S P A I N
NEINOR HOMES: Fitch Assigns BB- Final Rating on EUR325MM Sec. Notes
T U R K E Y
ICA ICTAS: Fitch Assigns 'BB-' Final Rating on $405MM Secured Bonds
U N I T E D K I N G D O M
ALPHACARE NW: Path Business Named as Joint Administrators
AURELIA BIOSCIENCE: PricewaterhouseCoopers Named as Administrators
BARROW GROUP: Begbies Traynor Named as Joint Administrators
BRIDGEGATE FUNDING: Fitch Puts Rating on A to X Notes on Watch Neg.
ESLINGTON VILLA: FRP Advisory Named as Joint Administrators
GRANITE SEARCH: FRP Advisory Named as Joint Administrators
INDOOR CLIMATE: Opus Restructuring Named as Joint Administrators
LOK DEVELOPMENTS: Leonard Curtis Named as Joint Administrators
MORTIMER PLC 2024-MIX: Moody's Assigns B1 Rating to Class X Notes
MYA CLINICS: Auker Rhodes Named as Joint Administrators
PIERPOINT 2024-1: Fitch Assigns BB+sf Final Rating on Two Tranches
SHELLCO 2021: Kreston Reeves Named as Joint Administrators
SOLPRO MANUFACTURING: Begbies Traynor Named as Administrators
UNIVERSAL ENVIRONMENTAL: Begbies Traynor Named as Administrators
USURPO LTD: Leonard Curtis Named as Joint Administrators
VIRTUAL ARTS: Parker Andrews Named as Joint Administrators
WICKED VISION: Begbies Traynor Named as Joint Administrators
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F R A N C E
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HESTIAFLOOR 2: Fitch Assigns 'B+' Final Rating on Sr. Secured Debt
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Fitch Ratings has assigned a final 'B+' senior secured rating to
Hestiafloor 2's (Gerflor) new debt issue with a Recovery Rating of
'RR3'. Gerflor's amendment and extension (A&E) of the existing
EUR900 million senior secured term loan B (TLB) has extended the
maturity by three years to February 2030.
Gerflor's Issuer Default Rating (IDR) balances its high leverage
with a solid business profile and sound profitability. The group
has recently improved its leverage profile, resulting in greater
rating headroom. Fitch expects continued improving operating
profitability, which, combined with the net shareholder equity
injection in 2023, will help the group reduce EBITDA gross leverage
to around 5.5x by end-2025. This is underlined in the Positive
Outlook.
The group's operating profitability improvement will be supported
by its end-market diversification and focus on the more resilient
renovation end-market with limited exposure to the softer
residential and office end-markets.
Key Rating Drivers
Leverage High but Falling: The rating is constrained by high
leverage and expected modest deleveraging over the next four years.
Fitch forecasts Fitch-defined EBITDA leverage of 5.7x at end-2024,
5.5x at end-2025 and about 5x at end-2027, driven by mid-single
digit revenue growth and a modest rise in EBITDA margins. Fitch
assumes positive free cash flows (FCF) in 2024-2027 will be mainly
used for continued bolt-on acquisitions. Shareholder net equity
injection of about EUR75 million in 2023 provided further funds for
acquisitions and helped Gerflor repay its revolving credit facility
(RCF) drawdown.
Resilient Operating Profitability: Fitch expects continued
resilient operating profitability to be supported by the group's
sound end-market diversification and its focus on the more
resilient renovation end-market. It has limited exposure to the
weaker residential and office end-markets but meaningful exposure
to stable commercial end-markets such as education, healthcare and
transport. Fitch expects continued normalisation of raw material
and transportation costs versus 2022. Profitability will be further
supported by contribution from new bolt-on acquisitions and new
product launches.
Through-the-Cycle Positive FCF: Fitch expects positive FCF margins
of 2%-3% annually in 2024-2027. Fitch expects increasing operating
profitability to be partly offset by continued high interest costs,
large growth capex and working-capital investments to support
Gerflor's revenue growth.
Continued Acquisitive Strategy: Fitch expects Gerflor to continue
its M&A-driven growth strategy, with total net acquisitions of
about EUR40 million a year assumed over 2024-2027. Fitch expects
acquisitions to be moderate and mostly financed by internally
generated cash flows. The group has a successful integration record
and policy of acquiring companies with a clear strategic fit at
sound valuations. The M&A pipeline, deal parameters and post-merger
integration remain important rating drivers.
Derivation Summary
Gerflor has a leading market position in its resilient niche
flooring segment. It is larger than building product peers such PCF
GmbH (CCC+) and similar in size to Victoria PLC (B+/Stable). It is
much smaller than Mohawk Industries, Inc. (BBB+/Stable) and
slightly smaller than Tarkett Participation (B+/Stable). Gerflor
has better geographical diversification than Victoria, although
both have a fairly high exposure to Europe, while Tarkett is more
geographically diversified.
Like most building-product companies, Gerflor has limited product
differentiation but has developed innovative product solutions,
enabling it to cater to a wide range of end-customers. Gerflor's
distribution channels result in a strong exposure to renovation or
refurbishment construction activities (estimated at 75%-80% of
revenue), similar to that of Tarkett.
Gerflor's EBITDA margins (around 13%) are stronger than those of
higher-rated peers Tarkett (7%-8%) and Victoria (11%-12%).
Gerflor's leverage profile is weaker and Fitch expects EBITDA gross
leverage of 5.6x-5.2x in 2024-2026 compared with 4.6x-4.1x for
Tarkett over the same period.
Key Assumptions
- Mid-single digit annual revenue growth in 2024-2027
- Broadly stable Fitch-defined EBITDA margin at 12.9%-13.1% in
2024-2027
- Capex at 3.7% of revenue in 2024 and 4% annually in 2025-2027
- Working-capital requirement of 0.9%-1.0% in 2024-2027
- New M&A of around EUR40 million annually in 2024-2027
Recovery Analysis
The recovery analysis assumes that Gerflor would be reorganised as
a going concern in bankruptcy rather than liquidated.
Fitch assumes a 10% administrative claim. Factoring line and other
credit facilities rank super senior.
Its going-concern EBITDA estimate of EUR140 million reflects
Gerflor's most recent acquisitions and its view of a sustainable,
post-reorganisation EBITDA on which Fitch bases its valuation. In
this scenario Gerflor would generate neutral-to-negative FCF.
Fitch uses an enterprise value multiple of 5.5x to calculate a
post-reorganisation valuation. It reflects Gerflor's leading
position in its niche markets (such as sport and transport),
long-term relationship with blue-chip clients and a loyal customer
base due to its direct distribution channel.
Following the completed A&E transaction, its waterfall analysis
generates a ranked recovery for the senior secured debt (new EUR900
million term loan B and EUR210 million RCF) in the 'RR3' category,
leading to a 'B+' rating for the EUR900 million TLB. The
waterfall-generated recovery computation output percentage is 52%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Application of conservative financial policy with EBITDA gross
leverage below 5.5x
- Higher operating margin leading to FCF margins in mid-single
digits
- Greater diversification across segments or geographies
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA gross leverage above 7.0x
- EBITDA interest coverage below 2.5x
- EBITDA margins below 12%
- Neutral-to-negative FCF margins
Liquidity and Debt Structure
Comfortable Liquidity: At end-July 2024, Gerflor had around EUR61
million of Fitch-adjusted cash balance (excluding about EUR14
million restricted for intra-year working capital swings) and
access to an undrawn EUR190 million of its EUR210 million RCF,
previously due 2026 but which has been extended to 2029 as part of
the A&E. Fitch forecasts that positive FCF in 2024-2027 will be
mainly used for bolt-on acquisitions. The group's debt structure is
dominated by its EUR900 million TLB, previously due 2027 but which
has been extended to 2030 following the completion of the A&E.
Issuer Profile
France-based Gerflor specialises in resilient flooring (vinyl and
linoleum) and walls and finishes solutions that are primarily sold
to commercial customers. Operations are primarily in European
countries, as well as the Americas and Asia Pacific.
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
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Hestiafloor 2
senior secured LT B+ New Rating RR3 B+(EXP)
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L U X E M B O U R G
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CIDRON AIDA: Fitch Assigns 'B+' Rating on EUR725MM Term Loan B
--------------------------------------------------------------
Fitch Ratings has assigned Cidron Aida Finco S.a.r.l.'s EUR725
million term loan B (TLB) a final 'B+' rating with a Recovery
Rating of 'RR3'. Cidron Aida is financing vehicle directly owned by
ADVANZ PHARMA HoldCo Limited (B/Stable).
ADVANZ's IDR remains constrained by its scale and moderate
execution risks in implementing its strategy as an asset-light
multinational pharmaceutical company focused on niche and
specialised drugs. The rating also reflects the company's increased
focus on specialised products, as well as its growing
diversification across drugs, treatment areas and geographies.
The Stable Outlook reflects Fitch's expectation of continued solid
profitability resulting in strong free cash flow (FCF) generation
to be reinvested in the business to accelerate growth. Despite the
proposed increased debt, Fitch forecasts ADVANZ will maintain ample
leverage headroom under its negative sensitivity.
Fitch has withdrawn the rating on the previous EUR305 million TLB
of 'B+'/'RR3', following its cancellation.
Key Rating Drivers
Comfortable Rating Headroom: Fitch forecasts gross EBITDA leverage
to increase to 5.1x following the TLB issue, from 4.1x at end-2023,
which remains comfortable for the rating. Fitch expects leverage to
reduce to slightly above 4.5x by 2027, driven by contributions from
recently acquired treatments, which should support the company's
investments in growth. Fitch therefore expects leverage to remain
comfortably within the 'B' rating sensitivities in the medium
term.
The refinancing has result in a substantial amount of overfunding
but Fitch views it as rating-neutral in light of the currently
uncertain commercial success of ADVANZ's pipeline products, its
strategic refocus on specialised products, which will likely
require additional capital, and heightened litigation risks.
Acquisitions Drive Growth: Fitch expects ADVANZ's organic growth
will be driven in the short term by recently acquired
margin-accretive products Tostran, Progynova, Androcur, Atarax, and
Nootropil. The contribution from these drugs should support
investments in the marketing of targeted specialised treatments,
driving ADVANZ's medium- to longer-term growth. Fitch projects it
will spend GBP175 million-GBP200 million a year in 2025-2027 on
acquisitions, mainly funded by internally-generated cash. Fitch
would treat higher-than-expected M&A and large debt-funded deals
during this period as event risk.
Reinvesting Robust FCF: ADVANZ's moderately high financial leverage
is supported by strong, albeit gradually reducing, profitability,
with EBITDA margins under its rating case trending towards 38%
(from 43% in end-2023). This is predicated on cost increases and
investments in its pipeline and marketing infrastructure to support
projected revenue growth. The asset-light manufacturing set-up
supports strong cash generation, with FCF margins likely to remain
in double digits, which Fitch assumes will be fully reinvested in
external growth opportunities.
Moderate Execution Risks: Fitch assesses ADVANZ's initiatives in
in-licensing and distribution agreements as having moderate
execution risk, as the strategy entails increased investments in
the pipeline and associated product development and
commercialisation risks. Nevertheless, Fitch estimates this will
help offset the steady decline of its established off-patent drug
portfolio, subject to life-cycle management. Fitch views the focus
on bringing specialised drugs to market as a differentiator with
some European leveraged-finance asset-light peers, resulting in
greater organic growth potential.
Growth Opportunities in Generic Market: Structural volume growth in
generic drug markets is driven by an ageing population, higher
prevalence of chronic diseases and an increasing number of drugs
losing patent protection. Smaller groups like ADVANZ have
significant inorganic growth opportunities stemming from larger
innovative pharma companies divesting smaller off-patent drugs to
optimise portfolio. However, Fitch expects generic drug pricing to
remain under pressure, spurring investments in scale, low-cost
manufacturing and more specialised products to protect growth and
profitability.
Litigation Heightens Event Risk: Fitch assumes continued regulatory
pressure on pharmaceutical groups as the focus on the value of new
treatments to healthcare systems increases, particularly as
governments face fiscal consolidation post-pandemic. Fitch
acknowledges that risks for ADVANZ have increased, given the mixed
results of the Competitions and Markets Authority investigation
into possible past competition infringements, as well as the recent
revocation of the marketing authorisation for Ocaliva, with
revocation having been temporary suspended.
Fitch currently views the negative resolution on all these cases as
event risk. Consequently, Fitch includes the legal costs within its
rating case as well as the revenue contribution from Ocaliva, but
do not include fines or other related payouts.
Derivation Summary
Fitch rates ADVANZ and conducts peer analysis using its Global
Navigator Framework for Pharmaceutical Companies. Fitch considers
its 'B' rating against other asset-light scalable specialist
pharmaceutical companies focused on off-patent branded and generic
drugs such as CHEPLAPHARM Arzneimittel GmbH (B+/Stable),
Pharmanovia Bidco Limited (B+/Stable) and European generic drug
manufacturer Nidda Bondco GmbH (Stada; B/Stable).
ADVANZ's business model focuses not only on life-cycle and
intellectual property management of off-patent branded and generic
drugs, as is the case for CHEPLAPHARM and Pharmanovia, but is also
involved in bringing new niche, specialty and complex treatments to
market through in-licencing and distribution agreements, which is
more similar to Stada's strategy in the specialty pharmaceuticals
segment.
In contrast to CHEPLAPHARM and Pharmanovia, ADVANZ's growth will be
driven by organic growth opportunities related to the company's
pipeline and inorganic growth through acquisition and in-licensing
of niche branded and generic drugs. Nevertheless, ADVANZ will have
a structurally lower margin than these peers, albeit still strong
for the rating category. This is partly driven by its decision to
develop a sales channel in certain therapeutic areas targeting
European hospitals, which in turn calls for higher in-house
marketing and distribution expenses.
Compared with Stada, the company has a weaker business risk profile
due to its significantly smaller size and scale, which is
compensated by a less aggressive financial policy.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue slightly above GBP700 million in 2024, driven by organic
revenue. Fitch expects growth to be in double digits in 2025 as the
company integrates contributions from its latest acquisitions;
mid-single digits in 2026; and double digits in 2027
- EBITDA margin around 42% in 2024, moderating to 38% by 2027
- Maintenance capex at 0.5%-0.7% of total capex through 2027. Fitch
views milestone payments and GBP80 million of acquisitions annually
as capex, as it views acquisitions as necessary to offset the
organic portfolio decline
- Acquisitions of GBP133 million in 2024, and GBP175 million per
year over 2025-2027, of which Fitch views GBP80 million as capex
- Working-capital outflow at around 1.5% of sales in 2024, due to
the ramp-up of the commercialisation of recently acquired products.
Fitch expects it will moderate towards 1% in 2025-2026, before it
increases in 2027
- No dividends to 2027
Recovery Analysis
The recovery analysis is based on a going-concern (GC) approach.
This reflects the company's asset-light business model supporting
higher realisable values in financial distress compared with
balance-sheet liquidation.
Distress could arise primarily from material revenue-and margin
contraction, following volume losses and price pressure, given its
exposure to generic competition. For the GC enterprise value (EV)
calculation, Fitch continues to estimate a post-restructuring
EBITDA of about GBP200 million, which reflects organic earnings
post-distress and implementation of possible corrective measures.
Fitch continues to apply a 5.5x distressed EV/EBITDA multiple,
which would appropriately reflect the company's minimum valuation
multiple before considering value added through portfolio and brand
management.
After deducting 10% for administrative claims, and assuming the
company's committed revolving credit facility (RCF) of EUR214
million will be fully drawn prior to distress, its principal
waterfall analysis generated a ranked recovery in the 'RR3'/58%
band for all senior secured instruments, ranking equally among
themselves. The reduction from the previous 69% recovery to 58%
reflects the increased indebtedness following the EUR725 million
TLB issue.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Successful implementation of the organic growth strategy,
complemented by selective and carefully executed acquisitions
leading to:
- EBITDA margin sustained above 40% as well as continued strong
cash generation with FCF margins comfortably in double digits
- EBITDA leverage at or below 4.5x on a sustained basis
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unsuccessful implementation of the organic growth strategy or
acquisitions that lead to:
- A persistent decline in the EBITDA margin, translating into
weakening cash generation, with the FCF margin declining towards
low single digits or zero
- A more aggressive financial policy leading to EBITDA leverage
above 6.0x on a sustained basis
Liquidity and Debt Structure
Adequate Liquidity: Fitch views ADVANZ's liquidity as adequate,
based on the Fitch-defined readily available cash position of
around GBP89 million at end-June 2024 (excluding GBP50 million that
Fitch treats as not readily available for debt service). This is
further supported by full availability under its EUR214 million RCF
maturing in April 2031, in addition to GBP216 million additional
cash from the TLB refinancing. ADVANZ's capital structure benefits
from long-dated maturities, with no debt repayment until April
2028.
Issuer Profile
ADVANZ is a pharmaceutical company with focus on specialty
medicines distributed in Europe and Canada.
Date of Relevant Committee
08 October 2024
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
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Cidron Aida Finco
S.a.r.l.
senior secured LT B+ New Rating RR3 B+(EXP)
senior secured LT WD Withdrawn B+
PICARD GROUPE: Fitch Lowers Rating on EUR650MM Sec. Notes to B+
---------------------------------------------------------------
Fitch Ratings has downgraded the ratings of Picard Groupe SAS's
senior secured EUR650 million fixed-rate notes and Lion/Polaris Lux
4 S.A.'s senior secured EUR775 million floating-rate notes to 'B+'
from 'BB-'. Fitch has removed the Rating Watch Negative (RWN) on
these notes. Fitch has also affirmed Picard Bondco S.A.'s (Picard)
Long-Term Issuer Default Rating (IDR) at 'B' with a Stable
Outlook.
The downgrade reflects a lower Recovery Rating of 'RR3' from 'RR2'
following the increased senior debt amount.
The affirmation of the IDR reflects its expectation of rapid
deleveraging from high levels pro forma for the transaction. Fitch
expects the EUR120 million vendor loan, which is part of the
transaction and which Fitch treats as debt given its 2027 maturity,
to be repaid with proceeds from an equity raise before mid 2025.
However, failure to do so could lead to negative rating action on
the IDR and the ratings of the Notes.
Key Rating Drivers
Tap Weighs on Notes' Rating: The incremental EUR200 million tap on
senior secured notes issued by Lion/Polaris Lux 4 results in a
one-notch downgrade given the lower percentage of recovery under
its going-concern (GC) recovery analysis. The proceeds will be
upstreamed to the current shareholders to help finance the
acquisition by Invest Group Zouari (IGZ), which owns 45.7% of
Picard, of Lion Capital's shares. The acquisition will also be
funded by new equity and a shareholder loan from Intermediate
Capital Group (ICG), and a EUR120 million vendor loan from Lion
Capital, which Fitch would treat as debt given its December 2027
maturity is before the 2029 maturity of the notes.
Vendor Loan Refinancing: A key assumption of its affirmation is the
expectation that the vendor loan will, shortly after its
utilization, be repaid with cash proceeds from a minority stake
sale at IGZ level before July 2025. Assuming such refinancing takes
place before the end-March 2025, Fitch expects leverage to be at
7.4x for FY25 (ending March 2025), and trending below 7x in FY26.
This remains in line with Picard's IDR, but exhausts its rating
headroom. Failure to refinance with equity proceeds, with leverage
remaining above 7x beyond FY26, could lead to adverse consequences
on Picard's credit quality, triggering potential negative rating
action.
Financial Policy Reset: Post-transaction, Picard would be owned
50.4% by the Zouari family and 49.6% by ICG through IGZ, marking
the exit of Lion Capital as a main shareholder with a record of
frequent dividend recapitalisation. Fitch views the funding of
Lion's buyout by IGZ as aggressive, through additional debt at
Picard together with shareholder and vendor loans sitting outside
the restricted group. While Fitch views the change of ownership as
potentially resetting financial policy, the new owners will need to
demonstrate creditor-friendly behaviour before Fitch incorporates
any positive elements in its credit view, given the initial
re-leveraging transaction.
Business Strategy Unchanged: Fitch does not expect any change in
business strategy for Picard as a result of the change of
shareholding structure with the majority ownership moving to the
Zouari family following the transaction. The Zouari family operates
a number of food and non-food retail businesses in France,
including stores in franchising under the Franprix and Monoprix
banners, but Fitch expects these to continue to operate separately
from Picard and have not assumed any synergies across other
business of the Zouari group.
Easing Margin Pressure: Fitch believes the EBITDA margin bottomed
out in FY24 at 12% and will recover in FY25 towards 13% as pressure
from high energy costs eases and most of its FY25 electricity costs
are already hedged. Selective and cautious price increases aimed at
protecting its market share and profitability demonstrate Picard's
ability to maintain its gross margin at around 44%, despite a
difficult consumer environment over FY23-FY24. Fitch expects it to
be stable to FY28.
Picard's profit margins are high for the sector, as they are
underpinned by its business model, with revenue largely generated
by own-brand products, a premium offering, and structurally
profitable asset-light expansion.
Steady Sales Growth: Picard has a strong record of steady sales
growth in France, driven by its diversified and frequently renewed
offering in frozen food, which Fitch believes caters to different
consumer needs, while retaining repeat customers. This translated
into average annual like-for-like growth of 1.9% over FY17-FY24,
which Fitch expects to continue to FY28. Fitch also believes Picard
is well-positioned to continue exploiting opportunities to roll out
new stores where it does not have a physical presence (both
directly operated and franchised), driving incremental sales.
FCF Supports Cash Accumulation: Fitch expects Picard to generate
positive annual average free cash flow (FCF) of EUR60 million in
FY25-FY28 (around 3% of sales), supported by limited working
capital swings and capex needs. The strong cash flow generation
differentiates Picard from many of its peers in food retail.
Robust Business Model: Picard's leadership in a niche market and
highly profitable own brand continue to underpin its business
model. The group was resilient during the pandemic and in the
recent inflationary environment as its price increases were only
partially offset by a decrease in volumes.
Derivation Summary
Picard's overall profile remains weaker than that of larger food
retail peers, such as Bellis Finco plc (ASDA; B+/Positive) or
Market Holdco 3 Limited (Morrisons; B/Positive), due to its smaller
scale and weaker diversification in non-food products and services.
Picard is also smaller in sales than UK frozen food specialist WD
FF Limited (Iceland; B/Stable), but its materially stronger
profitability leads to an equivalent level of EBITDAR.
Following this transaction, Fitch would expect Picard's gross
leverage to remain higher than its peers with anticipated gross
EBITDAR leverage of up to 7.4x in FY25 (pro forma for vendor loan
refinancing with equity), versus 6.4x in March 2025 for Iceland,
under 6x in FY25 for Morrisons and at around 5x by end-2024 for
ASDA.
However, Picard has strong brand awareness and customer loyalty,
which is key for its positioning as the leader in the French frozen
food retail sector. It also has high profitability, due to its
unique business model that is mostly based on own-brand products
and premium positioning. This makes it comparable with food
manufacturers, rather than with its immediate food retailing peers.
This differentiating factor results in superior cash flow
generation that supports Picard's financial flexibility and
satisfactory liquidity.
Key Assumptions
- Revenue growth of 3.0% in FY25, driven equally by like-for-like
growth, store expansion and franchisee growth;
- Revenue growth in FY26-FY28 of 3.6% on average, with a slightly
higher contribution from expected store and franchise expansions;
- EBITDA margin increasing to 13.0% in FY25 (FY24: 12.0%) as energy
cost normalises, trending back towards pre-pandemic levels by FY27
at 13.4%;
- Capex averaging 3.1% of revenue over FY25-FY28;
- Neutral working capital movements in FY25-FY28;
- EUR120 million Vendor Loan maturing in 2027 treated as debt, and
refinanced before July 2025 with minority equity;
- Revenue growth of 3.0% in FY25, driven equally by like-for-like
growth, store expansion and franchisee growth.
Recovery Analysis
Fitch assumes that Picard would be considered a GC in bankruptcy
and that it would be reorganised rather than liquidated. Fitch has
assumed a 10% administrative claim in the recovery analysis.
In its bespoke GC recovery analysis Fitch estimates
post-restructuring EBITDA available to creditors of about EUR180
million, unchanged from its previous analysis.
Fitch also assumes a fully drawn EUR75 million revolving credit
facility (RCF).
Fitch has maintained a distressed enterprise value/EBITDA multiple
at 6.0x, which reflects Picard's structurally cash-generative
business operations, despite its small scale.
Its waterfall analysis generates a ranked recovery for Picard's
existing EUR1.4 billion senior secured notes in the 'RR3' category,
resulting in a 'B+' rating with a waterfall-generated recovery
computation (WGRC) of 63%. The Recovery Rating of its EUR310
million senior unsecured notes remains 'RR6', with a rating of
'CCC+' and a WGRC of 0%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Continuation of solid operating performance, for example,
reflected in like-for-like revenue growth and growing EBITDA with
strong FCF margins in mid-single digits;
- EBITDAR leverage below 5.5x on a sustained basis, driven mostly
by debt prepayments, reflecting a commitment to more conservative
capital allocation;
- Operating EBITDAR fixed-charge coverage above 2x on a sustained
basis.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Failure to refinance the EUR120 million vendor loan with minority
equity sales proceeds before mid-2025;
- Deteriorating competitive position or sustained erosion in
like-for-like sales growth, EBITDA and FCF margin, for example, due
to the inability to manage cost inflation, leading to the inability
to deleverage;
- Subdued operating performance, maintenance of the EUR120 million
vendor loan in the capital structure, or evidence of a more
aggressive financial policy including material dividend
distributions leading to EBITDAR leverage remaining above 7x beyond
FY26;
- Diminished financial flexibility, due to lost financial
discipline, reduced liquidity headroom or operating EBITDAR
fixed-charge coverage permanently below 1.5x.
Liquidity and Debt Structure
Satisfactory Liquidity: Picard's liquidity is adequate, with an
estimated EUR91 million of cash proforma for the transaction. The
RCF provides an extra EUR75 million of liquidity buffer (pro forma
for the EUR15 million increase), improving its liquidity profile.
Low capex intensity and manageable working-capital outflows provide
for healthy positive FCF generation that Fitch estimates will
further improve Picard's liquidity. Cash balances dropped following
its July 2024 refinancing when a EUR200 million portion of cash on
the balance sheet was applied to debt reduction. Fitch expects
available cash to return to pre-refinancing levels by FY27.
However, the evolution of its liquidity position is subject to
whether its 2027 unsecured notes are refinanced or part repaid.
Issuer Profile
Picard is a French food retailer with a leading market share of
around 20% in the highly specialised and niche frozen-food market.
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
----------- ------ -------- -----
Picard Groupe SAS
senior secured LT B+ Downgrade RR3 BB-
Picard Bondco S.A. LT IDR B Affirmed B
senior unsecured LT CCC+ Affirmed RR6 CCC+
Lion/Polaris Lux 4 S.A.
senior secured LT B+ Downgrade RR3 BB-
=====================
N E T H E R L A N D S
=====================
BODY SHOP: Declared Bankrupt in the Netherlands
-----------------------------------------------
NL Times reports that cosmetics chain The Body Shop has been
declared bankrupt by the court, according to a notification in the
Central Insolvency Register. In a statement on Facebook, the chain
itself speaks of a bankruptcy in the Netherlands. The stores will
remain open for the time being, while a bankruptcy administrator
investigates whether there are possibilities for a restart.
NL Times relates that the Body Shop filed for bankruptcy and it was
declared by the District Court for Midden-Nederland on Nov. 5. The
Body Shop is registered in Weesp, which is officially part of
Amsterdam. A bankruptcy administrator based in Amsterdam has been
assigned to handle the next steps.
Gift vouchers can no longer be exchanged in the stores, the company
reports, NL Times says. The chain has 27 branches in the
Netherlands, with around 100 employees, including temporary
workers. The Dutch webshop has not been working for some time.
According to a statement on the site, this is due to planned
updates, but that situation has been going on for months.
The British branch of the almost 50-year-old cosmetics company,
which is known for its sustainable hair and skin products, was
declared bankrupt earlier this year, NL Times recalls. There was
also talk of bankruptcy in Belgium. The German investor Aurelius
had token over The Body Shop in November last year, but the company
ran into problems during the important period around Christmas.
According to NL Times, the court-appointed bankruptcy administrator
Cedric de Breet cannot yet say much about the chance of a restart.
"There is interest," is all that he would say. He also has yet to
answer to the cause of the bankruptcy. He will also investigate
that in the coming period.
Trade union CVN is shocked by the bankruptcy, pointing out that
another well-known name is in danger of disappearing from the Dutch
shopping street. "After the coronavirus, experts had already warned
that there would be more bankruptcies. We are now seeing that
happen. One after the other is falling over," responded trade union
leader Erik Maas, NL Times relays.
NL Times adds that Mr. Maas called it "especially sad for the
employees" that The Body Shop has gone bankrupt in the Netherlands.
CNV is now looking into what the union can do for them.
Mr. Maas emphasized the importance of quick clarity for the staff.
He remembers that at Big Bazar, there was sometimes only one
employee left to close the store. According to him, such situations
should be avoided because they compromise the safety of the staff.
The Body Shop was founded in 1976 in Brighton, England, by Anita
Roddick. The group once had 3,000 stores in 70 countries. In 2006,
Roddick sold the chain to the French cosmetics giant L'Oréal. She
died a year later.
=========
S P A I N
=========
NEINOR HOMES: Fitch Assigns BB- Final Rating on EUR325MM Sec. Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Spanish housebuilder Neinor Homes,
S.A.'s EUR325 million senior secured notes a final rating of 'BB-'
with a Recovery Rating of 'RR3'.
The ratings reflect Neinor's high leverage pro-forma for the notes
issue, partially offset by its solid business profile. Neinor's
renewed focus on its core build-to-sell (BTS) segment and
capital-light approach to joint venture (JV) partnerships should
improve its cash flow cycle, instead of capital-intensive,
long-term build-to-rent (BTR) projects.
Fitch expects Neinor's net debt/EBITDA leverage to decrease from
around 4.0x at end of 2024 (pro forma for the notes issuance) to
around 3.0x over the next two years. This improvement will be
supported by good visibility in BTS sales and the growing portion
of fees generated from development and management services provided
to its JV partners
Key Rating Drivers
Business Strategy Shift: In March 2023, Neinor's management
outlined a new financial policy aimed at enhancing shareholder
returns, targeting EUR600 million in distributions over the next
five years. To support this plan, the company divested its BTR
developments, shifting away from its initial strategy of becoming a
long-term rental operator.
Management's refocus on BTS and providing development services to
institutional JV co-investors, while retaining a minority 10%-20%
stake until project sale, should accelerate cash flow cycles and
reduce capital commitment. Additionally, Neinor is entering the
senior living segment by co-investing with specialised operators in
this growing residential segment.
Revised Debt Structure: In 1Q23, Neinor launched a voluntary cash
tender offer on its previous secured notes (EUR300 million),
redeeming them in April 2023. Subsequently, the company moved to a
covenant-lite, fully bank-funded, debt structure, which enabled it
to fulfil its updated shareholders policy. The EUR325 million new
secured green issue will be partially used to repay the corporate
bank debt (EUR175 million), with the remainder earmarked for
potential new BTS co-investments or opportunistic land
acquisitions.
Leverage Increase: Fitch expects Neinor's net debt to rise to
around EUR360 million by end-2024 (end-2023: EUR215 million),
resulting in an increase in net debt/EBITDA to 4.0x (end-2023
Fitch's calculated net debt/EBITDA: 1.9x). Fitch expects this ratio
to decline gradually to around 3.0x in the next 24 months as EBITDA
is expected to grow, benefitting from increasing fees from JVs.
Additionally, developer loans should decrease, given the company's
revised delivery targets of around 2,000 units per year and the
consequent reduction in funding needs.
Good Revenue Visibility: The 1H24 orderbook was 1,761 units (value:
EUR601 million), providing good visibility for the management's
targeted sales for 2025. The company has a solid track record of
achieving a year-end pre-sales ratio of around 65%-70% of the
targeted sales for the next year and around 30%-35% pre-sales for
the following year. The company monitors the rate at which the
stock is sold, which has been on average a healthy 4.5%-6.0% per
month in the past 3 years. The cancellation rate continues to be at
a historical low level. The vast availability of owned land
(equivalent to around 12,000 units, or six years of production,
excluding recent land acquisitions after 1H24) is credit positive
as it limits the investment needs.
Profits to Improve: Neinor's revenue declined by 22% to EUR591
million in 2023 (2022: EUR763 million) due to weakened demand
stemming from rising interest rates and worsening economic
conditions. Fitch calculates that the company generated an EBITDA
margin of 19.5% and EBITDA of EUR115 million in 2023 (2022: 16.4%
and EUR125 million), partly supported by profits from the sale of
BTR assets. From December 2022 to September 2024, Neinor disposed
of six BTR assets, raising EUR275 million and achieving 75% of its
BTR sales target.
BTR's divestment is expected to generate proceeds of EUR100
million. Group revenue should remain broadly unchanged in 2024 and
increase in 2025 benefitting from an increase in average selling
prices and from JV fees. Fitch expects EBITDA at about EUR90
million-EUR100 million in each of the next two years.
Favourable Housing Demand: Neinor's portfolio is located in Spain's
attractive areas, where there is limited new housing supply and
stable or growing demand. In 2023, the value of new home
transactions dropped 7.6% yoy due to rising interest rates and
worsening economic conditions, which briefly weakened buyer
confidence. However, by 4Q23, the value of transactions rebounded
with a 5% increase over the same quarter in 2022 and a 24% rise
from 3Q23, as mortgage rates began to decrease. In 1H24 the total
value transacted on newly built property has increased 6% yoy.
Shareholders Friendly Policy: Out of Neinor's EUR600 million
five-year shareholder distribution target, EUR200 million has been
distributed as at 3Q24. Fitch expects total shareholders'
distributions of EUR240 million and EUR125 million in 2024 and 2025
respectively, partly funded with proceeds from BTR divestments.
Sustained large dividend outflows would mean Neinor taking longer
to deleverage.
Derivation Summary
With an average selling price (ASP) of over EUR300,000 per unit,
Neinor targets the medium-to-high-end segments of the housing
demand for its modern apartments. The ASP is similar to Spanish
peer AEDAS Homes, S.A. (BB-/Stable) at EUR358,000 and higher than
Via Celere Desarrollos Inmobiliarios, S.A.U. (BB-/Stable) at
EUR255,000. The UK-based peers Miller Homes Group (Finco) PLC
(Miller Homes, B+/Stable) and Maison Bidco Limited (trading as
Keepmoat; BB-/Stable) focus on single-family homes in selected
regions of the UK away from London.
The Berkeley Group Holdings plc (BBB-/Stable) developments command
higher ASP at GBP644,000 (2023 UK average: GBP283,000) than its
domestic peers, reflecting its London-centred development
portfolio.
Spanish homebuilders' funding profiles share similarities to the UK
homebuilders. UK and Spanish homebuilders have to fund land
acquisition before marketing and development costs up until
completion. Customer deposits are small (5% to 10% in the UK and up
to 20% in Spain). UK homebuilders can reduce the upfront cost of
land acquisition by using option rights.
In Spain, land vendors may offer deferred payment terms, reducing
the initial cash outflow for homebuilders. Spanish homebuilders
usually start new developments once the project's funding is
procured, with financial institutions usually requiring 30%-50%
pre-sales before granting developers bespoke financing for each new
development.
Kaufman & Broad S.A. (BBB-/Stable) is one of France's largest
homebuilders and has the best funding profile in comparison to its
rated peers. Its customers pay in staged instalments through the
construction phase. The French homebuilder can acquire land after
marketing and use option land, further benefiting its working
capital.
The different BTR strategies implemented by Spanish homebuilders
led to a differentiation in their financial profiles and their
leverage metrics which may have temporarily exceeded Fitch's rating
sensitivities. AEDAS Homes' BTR strategy entails seeking advance
agreements with PRS operators to deliver turnkey BTR developments
before committing capital, minimising the risk of the end-purchase
of its projects. As a result, the company displayed steady leverage
metrics over the past three years, with its net debt/EBITDA
constantly below 2x.
Via Celere entered into a joint venture (JV) with Greystar Real
Estate Partners in March 2023 for the forward sale of 12 BTR
projects. Under this agreement, Via Celere retained 45% ownership
in this JV which acquires at completion the rental housing units
that Greystar markets and operates. In 2023 Via Celere completed
2,031 housing units (2022: 1,781), with approximately half BTR
apartments, thus adversely impacting the company's financials.
Revenue and EBITDA declined of around EUR220 million and EUR70
million, respectively, from 2022. As a result, 2023 net debt/EBITDA
increased to 4.8x (2022: 1.2x), despite the record high number of
units delivered. Fitch expects Via Celere's net debt/EBITDA to be
restored to within Fitch's sensitivities for the rating by end-2024
as the BTR projects are mostly completed.
Fitch forecasts Neinor to take slightly longer to restore its net
debt/EBITDA sustainably to below 3.0x, the threshold commensurate
with a 'BB-' IDR, following the implementation of its revised
business and financial strategy.
Key Assumptions
Fitch's Key Assumptions within its Rating Case for the Issuer:
- Around 2,000-2,200 BTS deliveries per year in 2024-2026 and
gradual exit from the BTR segment;
- JV fees for the provision of development services to gradually
increase to above EUR20 million per year in the next three years;
- Dividend distribution according to the management's plan of
returning the remaining EUR365 million to shareholders in
2024-2025;
- No M&A activity
Recovery Analysis
Fitch uses a liquidation approach for homebuilders as potential
buyers' primary focus would be valuable assets such as land and
ongoing developments rather than keep the business as a going
concern.
Fitch's recovery analysis has assumed the following debt based on
management's financing plans, instead of the latest reported debt:
- A fully drawn EUR40 million super-senior revolving credit
facility (RCF) as first-lien secured debt. This is a new RCF which
management expects will remain undrawn. Fitch assumed it to be
fully drawn under a recovery scenario.
- Secured debt of EUR185 million: Neinor expects development and
land financing debt of this amount by end-2024. These are typically
secured against development and land assets and rank above the
proposed EUR325 million senior secured bond.
- EUR325 million senior secured notes: This has share pledges over
three main operating subsidiaries (Neinor Peninsula, S.L.U., Neinor
Sur, S.L.U and Neinor Norte, S.L.U. and intercompany receivables
owed to the issuer of guarantors). EUR175 million of the proceeds
will be used to repay an existing green loan and the remainder for
land or JV investments.
Neinor's key assets are its inventories amounting to EUR1.1 billion
at end-June 2024, which include its sites and land, construction
work-in-progress and completed buildings with almost no deferred
land payment outstanding. Neinor's development assets were valued
by Savills and CBRE and had a net realisation value of EUR1.3
billion at YE June 2024.
Fitch used an 80% advance rate for Neinor's accounts receivable,
which were minimal, and inventory which results in a 100% recovery
rate for all of Neinor's secured debt. Fitch treated Neinor's
EUR325 million senior secured bond as second-lien debt. Under
Fitch's "Recovery Ratings Criteria," with IDRs of 'B+', the
recovery rating is capped at 'RR3'/70%, giving it a one-notch
uplift above the IDR
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA net leverage below 3.0x
- Reduced FCF volatility
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA net leverage above 4.0x
- Negative FCF over a sustained period
Liquidity and Debt Structure
Ample Liquidity:Neinor's liquidity, pro-forma for the EUR325
million notes issue, is ample. It comprises a new EUR40 million
super-senior revolving credit facility (RCF) and around EUR150
million of surplus cash after the repayment of the existing term
loan (EUR175 million).
Following this transaction there is no corporate debt maturing
until 2030 when the notes will be due. At 1H24 Neinor had EUR227
million of land and developer loans, typically drawn by the company
and its subsidiaries to fund new projects and repaid upon their
completions and sale.
Issuer Profile
Neinor Homes is a Spanish-based homebuilder operating in the
country's largest communities.
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
----------- ------ -------- -----
Neinor Homes, S.A.
senior secured LT BB- New Rating RR3 BB-(EXP)
===========
T U R K E Y
===========
ICA ICTAS: Fitch Assigns 'BB-' Final Rating on $405MM Secured Bonds
-------------------------------------------------------------------
Fitch Ratings has assigned ICA Ictas Altyapi Yavuz Sultan Selim
Koprusu ve Kuzey Cevre Otoyolu Yatirim ve Isletme A.S.'s USD405
million secured amortising bonds a 'BB-' final rating with a Stable
Outlook.
The proceeds from the issue are being used to finance the
completion of the Sariyer-Kilyos Motorway Tunnel (Kilyos) in
Turkiye.
RATING RATIONALE
The rating benefits from what is effectively availability-based
revenue, with volume risk assumed by the concession-granting
authority through a minimum traffic guarantee. The tariffs are US
dollar-denominated and inflation-linked, with foreign-exchange (FX)
risk largely covered by periodic tariff resets. The rated bonds are
subordinated to existing senior facilities but are fully
amortising, with typical covenants and reserves.
Under the Fitch Rating Case (FRC), the project achieves a robust
average annual debt service coverage ratio (DSCR) of 1.98x.
However, the rating is capped at the rating of the Turkish
sovereign (BB-/Stable), as the Turkish General Directorate of
Highways (KGM), essentially the Turkish government, is responsible
for the guaranteed payments.
KEY RATING DRIVERS
Revenue Risk - Volume - Stronger
Minimum Guaranteed Traffic: The project generates revenue through
tolls on the Northern Marmara Motorway and the Third Bosphorus
Bridge, while the under-construction tunnel will be toll-free. It
benefits from a minimum traffic guarantee for the bridge and the
motorway, with compensation from KGM if toll revenues fall below
guaranteed levels. Located in Istanbul, Turkiye's business hub, the
ring road and tunnel serve the northern corridor as a congestion
reliever and are crucial for heavy goods vehicles between Europe
and Asia.
Revenue Risk - Price - Stronger
Inflation-Linked Tariffs: The US dollar-denominated tariffs are set
in the concession agreement and are linked to inflation. Tariffs
are converted to local currency at the beginning of each period.
Toll rates are collected in local currency but long-term FX risk is
eliminated by periodic tariff resets, with the residual short-term,
inter-period FX risk largely hedged either through financial
markets or arrangements with KGM. There is a history of tariff
interventions. However, the real effect of political pressures is
limited as long-term traffic revenue is below the annual revenue
guaranteed amount.
Infrastructure Dev. & Renewal - Midrange
New Asset, Reasonable Condition: The motorway and bridge have
capacity to accommodate forecast traffic with detailed maintenance
planning. The motorway and bridge are in reasonable condition, with
scheduled works on the bridge bearings, for which costs are covered
by the operation and maintenance (O&M) contractor. Heavy and
ordinary maintenance of the existing motorway and bridge are funded
through internal cash flows.
Despite initial delays, the technical advisor believes that the
tunnel construction will be completed on schedule and within
budget. The expansion of the project limits its assessment of
infrastructure and renewal to 'Midrange'.
Debt Structure - 2 - Midrange
Solid Debt Structure; Bonds Subordinated: The fixed-rate, US
dollar-denominated secured bonds rank junior to the project
company's existing senior facilities. They are fully amortising but
have a back-ended profile with 45% and 40% due in April and October
2027, respectively. The secured covenanted debt structure offers
adequate protection to debt holders against adverse developments.
Liquidity reserves include a six-month debt service reserve account
covering interest and principal.
The bondholders benefit from a security package including a debt
assumption agreement with the Turkish Treasury. This is not
reflected in its probability of default-based rating, but
bondholders benefit from favourable compensation provisions backed
by the Ministry of Treasury and Finance of the Republic of Turkiye.
Upon certain events, including the project's default, the Turkish
Treasury will either assume the debt under the bonds or repay the
outstanding amounts. A sovereign bond default would trigger a
default of the bond.
Financial Profile
Under the FRC, Fitch assumes traffic to remain materially below the
guaranteed threshold until the end of the concession. Fitch adds a
10% stress to the project's unspent construction, lifecycle, O&M
and special- purpose vehicle costs. Construction and O&M costs are
contracted, but Fitch sees some uncertainty around these expenses.
Fitch also applies a six-month delay to the opening of the tunnel.
The resulting metrics are robust. The average projected DSCR over
the remaining life of the debt is 1.98x with a minimum DSCR of
1.75x in 2026.
PEER GROUP
Kilyos's closest peers are Societa di Progetto Brebemi S.p.A. (BBM,
BB+/Negative) and Salerno Pompei Napoli S.p.A (SPN, BBB/Stable).
Kilyos and BBM are strategic connecting roads in economically
strong areas, while SPN is located in an economically weaker
region. BBM and SPN are exposed to volume risk and benefit from
price-cap mechanism while Kilyos benefits from a minimum traffic
guarantee. Of these three projects, Kilyos is the only one that is
exposed to expansion works.
All three issuers have fully amortising debt with project
finance-debt features, but Kilyos's bonds are subordinated.
Kilyos's rating is also constrained to the Turkish sovereign rating
via the revenue guarantee provided by KGM, effectively the
government of Turkiye.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Negative action on Turkiye's sovereign rating
- Significant weakening of the project's credit profile due to a
substantial increase of costs
- A significant delay beyond the FRC assumptions in the tunnel
construction works
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Positive action on Turkiye's sovereign rating
TRANSACTION SUMMARY
The project comprises the design, build and operate of a new tunnel
within an existing concession of the motorway between Odayeri and
Paşaköy including the Third Bosphorus Bridge located in Istanbul.
The tunnel extension will link the northern suburbs of Istanbul to
the city centre.
CREDIT UPDATE
The issuer issued its USD405 million bonds on 31 October 2024, with
a %7.536 coupon rate and a maturity on 31 October 2027.
FINANCIAL ANALYSIS
N/A
SECURITY
The bonds will be secured by:
- Equity compensation receivables and related rights of the
shareholder and the issuer
- Shareholder loan receivables in respect of equity funding for the
project
- English law charges over the debt service reserve account and the
disbursement account
- Extraordinary compensation receivables and related rights of the
EPC contractor and the O&M contractor in respect of the project
- Insurances and reinsurances in respect of the project
The bonds and the senior facility do not have any common security.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
ICA Ictas Altyapi Yavuz
Sultan Selim Koprusu ve
Kuzey Cevre Otoyolu
Yatirim ve Isletme A.S.
ICA Ictas Altyapi
Yavuz Sultan Selim
Koprusu ve Kuzey Cevre
Otoyolu Yatirim ve
Isletme A.S./Toll
Revenues - Senior
Secured Debt/1 LT LT BB- New Rating BB-(EXP)
===========================
U N I T E D K I N G D O M
===========================
ALPHACARE NW: Path Business Named as Joint Administrators
---------------------------------------------------------
Alphacare NW Domiciliary and Support Services Ltd was placed into
administration proceedings in the Leeds Court, Court Number:
CRS2024LDS001090, and Gareth Howarth of Path Business Recovery
Limited was appointed as administrators on Oct. 30, 2024.
Its registered office is at 2nd Floor, 9 Portland Street,
Manchester, M1 3BE. Its principal trading address is at 207
Knutsford Road Grappenhall, Warrington, WA4 2QL.
The joint administrators can be reached at:
Gareth Howarth
Path Business Recovery Limited
2nd Floor, 9 Portland Street
Manchester, M1 3BE
Tel No: 0161 413 0999
For Further Details, Contact:
The Joint Administrators
Email: BRCMTNorthandScotland@bdo.co.uk
Tel: +44 151 237 4437
Alternative contact: Owen Casey
AURELIA BIOSCIENCE: PricewaterhouseCoopers Named as Administrators
------------------------------------------------------------------
Aurelia Bioscience Limited was placed into administration
proceedings in the Business and Property Courts in Leeds Insolvency
and Companies List (ChD), Court Number: CR2024LDS001068, and Edward
Williams and Ross Connock of PricewaterhouseCoopers were appointed
as administrators on Oct. 29, 2024.
Aurelia Bioscience engages in research and experimental development
on biotechnology.
Its registered office is at 42 Charnwood Campus, 9 Summerpool Road,
Loughborough, Leicestershire, England, LE11 5RD.
The joint administrators can be reached at:
Ross Connock
Edward Williams
PricewaterhouseCoopers
1 Chamberlain Square
Birmingham, B3 3AX.
For further information, contact:
Sarah Robson
Kate Fox
Email: uk_charnwood_creditors@pwc.com
Tel No: 0113 289 4000
BARROW GROUP: Begbies Traynor Named as Joint Administrators
-----------------------------------------------------------
Barrow Group Limited was placed in administration proceedings in
the High Court of Justice, Business and Property Court in Leeds,
Insolvency and Companies List (ChD), Court Number:
CR-2024-LDS-001100, and Andrew Mackenzie and Louise Longley of
Begbies Traynor (Central) LLP were appointed as administrators on
Nov. 1, 2024.
Barrow Group engages in accounting and auditing activities.
Its registered office is at Jackson House, Station Road, Chingford,
London, E4 7BU.
The joint administrators can be reached at:
Andrew Mackenzie
Louise Longley
Begbies Traynor (Central) LLP
Floor 2, 10 Wellington Place
Leeds, LS1 4AP
Further Details Contact:
Benjamin Silverwood
Begbies Traynor (Central) LLP
Email: benjamin.silverwood@btguk.com
Tel No: 0113 2858610
BRIDGEGATE FUNDING: Fitch Puts Rating on A to X Notes on Watch Neg.
-------------------------------------------------------------------
Fitch Ratings has placed Bridgegate Funding PLC's class A to X
notes on Rating Watch Negative (RWN) following the identification
of an analytical error related to the transaction's principal
deficiency ledger (PDL) condition. The RWN reflects the continued
use of principal available funds to cover interest shortfalls on
the class C to F notes, contrary to its understanding of the
intentions of transaction parties prior to closing.
The resolution of the RWN depends on amending the transaction
documents to ensure the PDL condition operates as Fitch understands
was intended at closing. If the Issuer is unable to update the
documents, this could result in downgrades for the rated notes of
between one and four notches as set out in the 'rating
sensitivities' section below. Fitch expects to resolve the rating
watch within six months.
The downgrade of the class D notes reflects the underperformance of
the collateral pool, with rising late-stage arrears, a large
portion of loans being past their scheduled maturity, and
larger-than-expected losses. These factors have collectively
continued to erode revenue. The class Z notes PDL balance has
increased in the last year to GBP34.5 million from GBP14.4 million,
reducing the most junior notes' capacity to absorb further
principal losses.
Entity/Debt Rating Prior
----------- ------ -----
Bridgegate Funding PLC
A XS2549049612 LT AAAsf Rating Watch On AAAsf
B XS2549049885 LT AAsf Rating Watch On AAsf
C XS2549050032 LT Asf Rating Watch On Asf
D XS2549050206 LT BB-sf Downgrade BBB-sf
E XS2549050461 LT B-sf Rating Watch On B-sf
F XS2549050628 LT CCCsf Rating Watch On CCCsf
X XS2442283565 LT CCsf Rating Watch On CCsf
Transaction Summary
The transaction is a securitisation of both owner-occupied (OO) and
buy-to-let (BTL) mortgages originated by The Mortgage Business, a
subsidiary of Bank of Scotland Plc.
KEY RATING DRIVERS
Analytical Error: Fitch has identified an incorrect modelling of
the PDL condition applied since closing. According to the
transaction documents, the PDL condition for the class C to F notes
is satisfied if either (i) the relevant class PDL does not exceed
10% of the note's outstanding amount, or if loans that are in
arrears by 270 days or more after the cut-off date are less than 2%
higher than at the cut-off date, or (ii) the relevant class notes
are the most senior class of notes.
Its initial modelling had treated the PDL condition as breached if
either of the two conditions in limb (i) were breached. It has been
confirmed to Fitch by the cash manager that its modelling reflects
how the clause was intended to operate but the final documents do
not align with the intention. Fitch understands that discussions
are ongoing between the issuer and other relevant parties to amend
transaction documents and reflect the original intention for the
PDL condition.
Lower Model-Implied Ratings: Fitch has updated its analysis to
reflect the correct modelling of the PDL condition as documented.
This correction, which ensures the continued application of
principal available funds to cover interest shortfalls on the class
C to F notes, results in lower model-implied ratings, as set out in
Rating Sensitivities below. Should the transaction documents remain
unchanged, it is likely that the rated bonds will be downgraded by
up to four notches.
Asset Performance Deterioration: One-month plus and three-month
plus arrears were up at 23.8% and 18.0% as of the July 2024
interest payment date (IPD), from 18.7% and 12.7% a year ago.
Six-month plus arrears have risen to 13.9% from 8.4%. This is due
to low repossession activity for late arrears. However, the total
number of loans in arrears has fallen from a year ago, suggesting
stabilisation in arrears build-up. Roll risk to late-stage arrears
remains a key rating driver. Fitch was not provided with the
restructuring data at closing but 13.9% of the loans in the June
2024 loan level data were flagged as restructured.
Large Loss on Repossessed Loans: As of July 2024, cumulative losses
(GBP17 million) from repossessions (GBP40.3 million) suggest a loss
severity higher than its expected case. Losses are added to the PDL
to be recovered from future excess revenue receipts. To date, there
has not been sufficient excess revenue to credit the PDL and these
amounts remain outstanding.
Loans Past Maturity: As of July 2024, 12% of the collateral
portfolio has missed the final balloon payment at the respective
loan maturity date, versus 7% at closing. A portion of these are
flagged as performing, as they are current with their interest
payments. Fitch classified these loans as restructured, reflecting
the assumption that if they are deemed performing by the servicer
there is likely to have been some arrangement or implicit term
extension.
For loans past maturity that were classified as restructured and
where no date of last arrears was provided, a date within the 12-24
month bucket was assumed to be the last date in arrears, affecting
3% of the collateral.
Insufficient Revenue for Interest Payments: The revenue generated
on the asset pool remains insufficient to pay senior fees and all
interest due on the notes. As a result, principal has been applied
to pay notes interest since the first IPD. Revenue insufficiency
was envisaged at closing, as Fitch assumed a PDL of GBP6.2million.
However, the class Z PDL continues to rise, with an average GBP5.5
million recorded at each IPD, totaling 50.1% of outstanding class
balance as of July 2024. Lack of excess revenues affects the
ability to clear future outstanding PDL debits, unless asset
collection rates improve.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by adverse changes in
market conditions and the economic environment. Weakening economic
performance is strongly correlated to increasing delinquencies and
defaults that could reduce credit enhancement available to the
notes.
Additionally, unanticipated declines in recoveries could result in
lower net proceeds, which may make certain notes susceptible to
negative rating action, depending on the extent of the decline in
recoveries. Fitch found that a 15% weighted average foreclosure
frequency (WAFF) increase and a 15% weighted average recovery rate
(WARR) decrease would result in a downgrade of five notches on the
class C notes, four notches on the class D notes, three notches on
the class B notes and two notches on the class A notes. The class E
notes would be downgraded to a distressed rating category, while
the class F notes will remain at their distressed rating.
If the PDL condition in the transaction documents is not reverted
to its original intention and the transaction continues to use
principal to pay interest on the class C to F notes, the
sensitivity indicates the following potential downgrades:
Class A notes: downgrade of one notch under a limited number of
scenarios
Class B notes: downgrade of two notches
Class C notes: downgrade of four notches
Class D notes: downgrade of two notches
Class E notes: downgrade to distressed ratings
Class F notes: remain at distressed ratings
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and,
potentially, upgrades. Fitch tested an additional rating
sensitivity scenario by applying a decrease in the WAFF and an
increase in the WARR of 15% each. The results indicate upgrades of
up to two notches for the class B notes, three notches for the
class C notes, and five notches for class D notes. The sensitivity
has no impact on the class A, E and F ratings.
A transaction documents update will lead to the resolution of the
RWN and the affirmation of the notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Prior to the transaction closing, Fitch reviewed the results of a
third-party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
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
Bridgegate Funding PLC has an ESG Relevance Score of '4' for
Customer Welfare - Fair Messaging, Privacy & Data Security due to
high proportion of IO loans in legacy OO mortgages, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
Bridgegate Funding PLC has an ESG Relevance Score of '4' for Human
Rights, Community Relations, Access & Affordability due to a
significant proportion of the pool containing OO loans advanced
with limited affordability checks, which has a negative impact on
the credit profile, and is relevant to the ratings in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ESLINGTON VILLA: FRP Advisory Named as Joint Administrators
-----------------------------------------------------------
Eslington Villa Limited was placed in administration proceedings in
the High Court of Justice Business and Property Courts in
Newcastle-upon-Tyne, Insolvency & Companies List (ChD), Court
Number: CR-2024-NCL-000153, and Allan Kelly and Steven Philip Ross
of FRP Advisory Trading Limited were appointed as administrators on
Nov. 5, 2024.
Eslington Villa, trading as Eslington Villa, is into the hotel and
restaurant business.
Its registered office is at 53 William Wailes Walk, Gateshead, NE9
5EW (to be changed to Suite 5, 2nd Floor, Bulman House, Regent
Centre, Newcastle Upon Tyne, NE3 3LS). Its principal trading
address is at 8 Station Road, Low Fell, Gateshead, NE9 6DR.
The joint administrators can be reached at:
Allan Kelly
Steven Philip Ross
FRP Advisory Trading Limited
Suite 5, 2nd Floor, Bulman House
Regent Centre, Newcastle Upon Tyne
NE3 3LS
For further details, contact:
The Joint Administrators
Tel No: 0191 605 3737
Alternative contact:
Sarah Dorkin
Email: cp.newcastle@frpadvisory.com
GRANITE SEARCH: FRP Advisory Named as Joint Administrators
----------------------------------------------------------
Granite Search and Selection Ltd was placed in administration
proceedings in the High Court of Justice, Court Number:
CR-2024-006208, and Glyn Mummery and Martin Weller of FRP Advisory
Trading Limited were appointed as administrators on Oct. 30, 2024.
Granite Search engages in the letting and operating of own or
leased real estate.
Its registered office is at New Baltic House, 65 Fenchurch Street,
London, EC3M 4BE to be changed to Jupiter House, Warley Hill
Business Park, The Drive, Brentwood,CM13 3BE. Its principal
trading address is at New Baltic House, 65 Fenchurch Street,
London, EC3M 4BE.
The joint administrators can be reached at:
Glyn Mummery
Martin Weller
FRP Advisory Trading Limited
Jupiter House
Warley Hill Business Park
The Drive, Brentwood
Essex, CM13 3BE
For further information, contact:
The Joint Administrators
Tel No: 01277 50 33 33
Alternative contact:
Jason Catley
Email: cp.brentwood@frpadvisory.com
INDOOR CLIMATE: Opus Restructuring Named as Joint Administrators
----------------------------------------------------------------
Indoor Climate Systems (UK) Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Insolvency and Companies List (ChD),
Court Number: CR-2024-006433, and Frank Ofonagoro and Trevor John
Binyon of Opus Restructuring LLP were appointed as administrators
on Oct. 28, 2024.
Indoor Climate is into business support service activities.
Its registered office is at Lumaneri House Blythe Gate, Blythe
Valley Park, Solihull, West Midlands, B90 8AH. Its principal
trading address is at Suite 8, Malvern House, New Road, Solihul,
B91 3DL.
The joint administrators can be reached at:
Frank Ofonagoro
Opus Restructuring LLP
2nd Floor, 3 Hardman Square
Spinningfields, Manchester
M3 3EB
-- and --
Trevor John Binyon
Opus Restructuring LLP
322 High Holborn
London, WC1V 7PB
For further details, contact:
The Joint Administrators
Tel No: 020 3326 6454
Alternative contact:
Ben Ekbery
Email: ben.ekbery@opusllp.com
LOK DEVELOPMENTS: Leonard Curtis Named as Joint Administrators
--------------------------------------------------------------
Lok Developments 05 Limited was placed into administration
proceedings in High Court of Justice Business and Property Courts
of England and Wales, Insolvency & Companies List County, Court
Number: CR-2024-006491, and Nick Myers and Alex Cadwallader of
Leonard Curtis were appointed as administrators on Oct. 29, 2024.
Lok Developments specializes in the construction of commercial and
domestic buildings.
Its registered office is at Floor 2, Arden House Regent Centre,
Gosforth, Newcastle Upon Tyne NE3 3LZ. Its principal trading
address is at Prospect Hose, Hexham NE46 3NH.
The joint administrators can be reached at:
Nick Myers
Alex Cadwallader
Leonard Curtis
5th Floor, Grove House
248a Marylebone Road
London, NW1 6BB
For further details, contact:
The Joint Administrators
Tel: 020 7535 7000
Alternative contact: Amber Walker
MORTIMER PLC 2024-MIX: Moody's Assigns B1 Rating to Class X Notes
-----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to Notes issued by
Mortimer 2024-MIX PLC:
GBP247.0M Class A Mortgage Backed Floating Rate Notes due
September 2067, Definitive Rating Assigned Aaa (sf)
GBP18.6M Class B Mortgage Backed Floating Rate Notes due September
2067, Definitive Rating Assigned Aa2 (sf)
GBP10.0M Class C Mortgage Backed Floating Rate Notes due September
2067, Definitive Rating Assigned A2 (sf)
GBP4.2M Class D Mortgage Backed Floating Rate Notes due September
2067, Definitive Rating Assigned Baa2 (sf)
GBP5.7M Class E Mortgage Backed Floating Rate Notes due September
2067, Definitive Rating Assigned Ba2 (sf)
GBP3.6M Class X Mortgage Backed Floating Rate Notes due September
2067, Definitive Rating Assigned B1 (sf)
RATINGS RATIONALE
The Notes are backed by a static portfolio of UK buy-to-let and UK
residential mortgage loans originated by LendInvest BTL Limited
(NR) and LendInvest Loans Limited (NR). The securitised portfolio
consists of 1,181 mortgage loans with a current balance of GBP285.5
million as of 30 September 2024 pool cut-off date. The definitive
rating for the Class X notes is different than the previously
assigned provisional rating as a result of higher available excess
spread due to tighter pricing of the overall note margins.
The ratings are primarily based on the credit quality of the
portfolio, the structural features of the transaction and its legal
integrity.
The transaction benefits from a liquidity reserve sized at 1.5% of
the Class A notes initial closing balance which will amortise
together with Class A notes after the step-up date. The liquidity
reserve fund will be available to cover senior fees and costs, and
Class A interest. At closing, the liquidity reserve fund is zero
and will be funded from principal on each Interest Payment Date.
Once the target amount has been reached it will be replenished as
needed from interest proceeds.
LendInvest BTL Limited (NR) and LendInvest Loans Limited (NR) are
the servicers and Citibank, N.A., London Branch (Aa3 (cr)/P-1 (cr))
is the cash manager in the transaction. In order to mitigate the
operational risk, Law Debenture Corporate Services Limited (NR)
will act as the back-up servicer facilitator. To ensure payment
continuity over the transaction's lifetime the transaction
documents incorporate estimation language whereby the cash manager
can use the three most recent servicer reports to determine the
cash allocation in case no servicer report is available.
Moody's determined the portfolio lifetime expected loss of 1.7% and
MILAN Stressed Loss of 10.90% related to borrower receivables. The
expected loss captures Moody's expectations of performance
considering the current economic outlook, while the MILAN Stressed
Loss captures the loss Moody's expect the portfolio to suffer in
the event of a severe recession scenario. Expected loss and MILAN
Stressed Loss are parameters used by Moody's to calibrate its
lognormal portfolio loss distribution curve and to associate a
probability with each potential future loss scenario in the ABSROM
cash flow model to rate RMBS.
Portfolio expected loss of 1.7%: This is in line with the UK RMBS
sector average and is based on Moody's assessment of the lifetime
loss expectation for the pool taking into account: (i) the
portfolio characteristics, including a weighted-average current LTV
of 71.3%; (ii) the good performance of the seller's precedent
transactions to date, (iii) benchmarking with comparable
transactions in the UK RMBS market; and (iv) the current economic
conditions in the UK.
MILAN Stressed Loss for this pool is 10.9%, and follows Moody's
assessment of the loan- by-loan information, taking into account
(i) the portfolio characteristics including the weighted-average
current LTV of 71.3%; (ii) top 20 borrowers constituting 9.5% of
the pool; (iii) the portfolio comprising of 67.0% BTL loans and
33.0% owner occupied loans; (iv) 26.7% of the pool are HMO/MUFB
loans; and (v) benchmarking with comparable transactions in the UK
RMBS market.
The principal methodology used in these ratings was "Residential
Mortgage-Backed Securitizations" published in October 2024.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors that may cause an upgrade of the ratings of the notes
include significantly better than expected performance of the pool
together with an increase in credit enhancement of Notes.
Factors that would lead to a downgrade of the ratings include: (i)
increased counterparty risk leading to potential operational risk
of servicing or cash management interruptions; and (ii) economic
conditions being worse than forecast resulting in higher arrears
and losses.
MYA CLINICS: Auker Rhodes Named as Joint Administrators
-------------------------------------------------------
Mya Clinics Ltd was placed in administration proceedings in the
High Court of Justice, The Business and Property Courts in Leeds,
Court Number: CR-2024-LDS-001050, and Frazer Ulrick of Auker Rhodes
Accounting was appointed as administrators on Oct. 22, 2024.
Mya Clinics engages in aesthetic/cosmetic surgery.
Its registered office is at Devonshire House, 32-34 North Parade,
Bradford, BD1 3HZ. Principal trading address is at 1 Cardale Park,
Beckwith Head Road, Harrogate, United Kingdom, HG3 1RY.
The administrators can be reached at:
Frazer Ulrick
Auker Rhodes Accounting
Devonshire House
32-34 North Parade
Bradford
BD1 3HZ
For further details, contact:
Auker Rhodes Accounting
Email: david.hodgson@aukerrhodesaccounting.co.uk
Tel No: 01274 299499
PIERPOINT 2024-1: Fitch Assigns BB+sf Final Rating on Two Tranches
------------------------------------------------------------------
Fitch Ratings has assigned Pierpont BTL 2024-1 PLC final ratings.
Entity/Debt Rating Prior
----------- ------ -----
Pierpont BTL 2024-1 PLC
Class A XS2920468712 LT AAAsf New Rating AAA(EXP)sf
Class B XS2920468985 LT AA-sf New Rating AA-(EXP)sf
Class C XS2920469447 LT Asf New Rating A(EXP)sf
Class D XS2920470023 LT BBB+sf New Rating BBB+(EXP)sf
Class E XS2920471344 LT BB+sf New Rating BB(EXP)sf
Class X XS2920471930 LT BB+sf New Rating BB(EXP)sf
Transaction Summary
Pierpont BTL 2024-1 PLC is a securitisation of buy-to-let (BTL)
mortgages originated in England, Wales and Scotland by LendInvest
BTL Limited (LendInvest), and MT Finance (MTF), which entered the
BTL mortgage market in 2017 and 2022, respectively. LendInvest and
MTF are the named servicers for their respective sub-pools (60.6%
of the total pool for LendInvest and 39.4% for MTF) with servicing
activities delegated to Pepper (UK) Limited.
KEY RATING DRIVERS
Prime BTL Underwriting: LendInvest's and MTF's lending policies are
in line with those of prime BTL lenders. All loans require a full
valuation and loan-to-value (LTV) and interest cover ratio (ICR)
tests are applied for underwriting. LendInvest excludes borrowers
with adverse credit while some adverse credit is permitted for MT
Finance's origination. The final pool is clear of arrears. Fitch
has assigned an originator adjustment of 1.1x to the foreclosure
frequency for loans originated by MT Finance to account for the
limited BTL origination performance data history.
Specialist Properties: Around 40% of the properties (by current
balance) are houses in multiple occupation (HMO) or multi-unit
freehold blocks (MUFBs). HMOs are generally higher-yielding and
need active management, so both LendInvest and MTF require
landlords to have at least 12 months' experience when advancing
against such properties. The yield generated supports the
Fitch-calculated ICR and excess spread availability in the
transaction. HMOs or MUFBs attract a steeper foreclosed sale
adjustment discount in Fitch's asset analysis, which affects the
weighted average recovery rate (WARR).
Fixed-Rate Hedging Schedule: The issuer entered into a swap at
closing to mitigate the interest rate risk arising from the
fixed-rate mortgage loans prior to their reversion date. The swap
notional is based on a pre-defined schedule assuming a constant
prepayment rate (CPR) based on past borrower prepayment behaviour
on comparable mortgage products. In the event that loans prepay
ahead of the schedule or default, the issuer will be over-hedged.
The excess hedging is beneficial to the issuer in a rising
interest-rate scenario and detrimental when interest rates are
falling.
No Product Switches Permitted: No product switches may be retained
in the pool and will be repurchased. This mitigates the potential
for pool migration towards lower-yielding assets and the need for
additional hedging.
Fixed-Rate Loans Reversions Affect CPR: The majority of fixed-rate
loans in the final pool have a tenor of five years and the
reversion dates are concentrated in 2029. Fitch therefore expects
prepayment rates to remain low post-closing, particularly given the
high early repayment charges borrowers face within the first few
years from origination. This will help limit potential excess
spread compression and the risk of over-hedging arising from high
CPR in the early years of the transaction.
As a result, Fitch has considered alternative high CPR assumptions
for the first five years of the transaction's life versus the
standard assumptions. In a selected sample of UK RMBS transactions,
Fitch found prepayment rates tended to follow portfolio reversion
schedules. This has formed the basis for deriving the alternative
assumptions run in Fitch's cash flow analysis. The criteria
variation results in a multi-notch difference for all notes in
their model-implied ratings (MIRs) when using the standard high CPR
assumptions.
Unrated Representations and Warranties Provider: LendInvest and MT
Finance are unrated by Fitch and have an uncertain ability to make
substantial repurchases from the pool in the event of a material
breach of representations and warranties (R&Ws). Fitch sees
mitigating factors, principally the materially clean
re-underwriting and agreed-upon procedures (AUP) reports, which
make a significant breach of R&Ws a sufficiently remote risk.
Deviation From MIR: The class B, C and D note ratings have been
assigned at one notch below their respective MIRs, and class E
notes at three notches below their MIR. This is due to the
transaction's reliance on excess spread, which forms the only
source of support for the class E notes, and therefore the class E
notes note ratings have been constrained to 'BB+sf'. The rating
determination for the class E note represents a criteria
variation.
Final Ratings Above Expected Ratings: The margins on the class A
and E and X notes were lower than those provided to Fitch for the
assignment of expected ratings. These lower margins had a positive
effect on the MIRs across the structure and this resulted in Fitch
assigning class E and class X notes final ratings one notch above
the expected ratings.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by changes in market
conditions and the economic environment. Weakening economic
performance is strongly correlated to increasing levels of
delinquencies and defaults that could reduce the credit enhancement
(CE) available to the notes.
In addition, unexpected declines in recoveries could result in
lower net proceeds, which may make certain notes' ratings
susceptible to negative rating action depending on the extent of
the decline in recoveries. Fitch found that increasing weighted
average foreclosure frequencies (WAFF) by 15% and decreasing WARR
by 15% would result in a downgrade of no more than one notch on the
class A and D notes and two notches on the class B, C, and E
notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable-to-improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE and, potentially,
upgrades. Fitch found that reducing the WAFF of 15% and increasing
the WARR of 15% would lead to upgrades up to two notches for the
class B, C, D and X notes and one notch for the class E notes. The
class A notes are rated at the maximum 'AAAsf'.
CRITERIA VARIATION
Fitch applied a criteria variation to the core CPR assumptions in
'high' stresses in the UK RMBS Rating Criteria. This is based on
historical data observed that suggest prepayment rates may remain
low until a loan approaches the contractual reversion rate. As a
result, Fitch amended the CPR assumptions in years one-to-five of
its cash flow modelling projections. The result is a multi-notch
impact on the class A to E notes and on the class X notes, which
forms the basis of Fitch's rating assignment. The largest
difference is for the class B notes at six notches between the MIR
applied with no variation versus the MIR produced applying the
variation to CPR assumptions.
Furthermore, Fitch also applied a criteria variation to the rating
determination described in the UK RMBS Criteria when determining
the final rating for the class E notes. This is due to the class E
notes having no credit enhancement at closing and depending heavily
on excess spread materialising to support the MIR. Therefore the
final rating has been constrained at three notches below the MIR.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch reviewed the results of a third-party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
Fitch conducted a review of a small targeted sample of the
originator's origination files and found the information contained
in the reviewed files to be adequately consistent with the
originator's policies and practices and the other information
provided to the agency about the asset portfolio.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SHELLCO 2021: Kreston Reeves Named as Joint Administrators
----------------------------------------------------------
Shellco 2021 Limited was placed in administration proceedings in
the Court of Justice, Court Number: No 006376 of 2024, and Andrew
Tate and James Hopkirk of Kreston Reeves LLP were appointed as
administrators on Oct. 24, 2024.
Shellco 2021, fka Bakblade Ltd, specializes in the sale and
marketing of back shaving devices, travel bags and cartridges.
Its registered office is at Aldwych House, 71-91 Aldwych, London,
WC2BB 4HN. Its principal trading address is at Caledonian
Stadium, Stadium Road, Inverness, IV1 1FF.
The joint administrators can be reached at:
Andrew Tate
James Hopkirk
Kreston Reeves LLP
Montague Place, Quayside
Chatham Maritime, Kent
ME4 4QU
For further details, contact:
Mansi Thawani
Kreston Reeves LLP
Email: mansi.thawani@krestonreeves.com.
Tel No: 01634 899800
SOLPRO MANUFACTURING: Begbies Traynor Named as Administrators
-------------------------------------------------------------
Solpro Manufacturing Limited was placed in administration
proceedings in the High Court of Justice, Business and Property
Courts of England and Wales, Insolvency and Companies List (ChD),
Court Number: CR- 2024-006441, and Joanne Louise Hammond, Robert
Dymond and Gary Paul Shankland of Begbies Traynor (Central) LLP
were appointed as administrators on Oct. 28, 2024.
Solpro Manufacturing is into manufacturing. Its registered office
is at Royds Mills, Windsor Street, S4 7WB.
The joint administrators can be reached at:
Julie Louise Hammond
Robert Dymond
Begbies Traynor (Central) LLP
3rd Floor, Westfield House
60 Charter Row, Sheffield
S1 3FZ
-- and --
Gary Paul Shankland
Begbies Traynor (London) LLP
31st Floor, 40 Bank Street
London, E14 5NR
For further details, contact:
Marcus Wright
Tel No: 0114 2755033
UNIVERSAL ENVIRONMENTAL: Begbies Traynor Named as Administrators
----------------------------------------------------------------
Universal Environmental (Information) Access Limited was placed in
administration proceedings in the Leeds High Court of Justice,
Court Number: CR-2024-LDS of 1095, and Robert Dymond and Kris
Anthony Wigfield of Begbies Traynor (Central) LLP were appointed as
administrators on Oct. 31, 2024.
Universal Environmental (Information) is a claims management
company.
Its registered office is at 2 Ashgate Road, Chesterfield,
Derbyshire, S40 4AA.
The joint administrators can be reached at:
Robert Dymond
Kris Anthony Wigfield
Begbies Traynor (Central) LLP
3rd Floor, Westfield House
60 Charter Row, Sheffield
S1 3FZ
For Further Details, Contact:
Begbies Traynor (Central) LLP
Email: Sheffield.north@btguk.com
Tel No: 0114 2755033
USURPO LTD: Leonard Curtis Named as Joint Administrators
--------------------------------------------------------
Usurpo Ltd was placed in administration proceedings in the High
Court of Justice Business and Property Courts in Leeds, Company &
Insolvency List (ChD), Court Number: CR-2024-LDS-001030, and
Anthony Milnes and Sean Williams of Leonard Curtis were appointed
as administrators on Oct. 30, 2024.
Usurpo Ltd engages in activities of employment placement agencies.
Its registered office is at currently 100 Berkshire Place,
Winnersh, Wokingham, Berkshire, RG41 5RD and will be changed to 9th
Floor, 7 Park Row, Leeds, LS1 5HD. Its principal trading address
is at 100 Berkshire Place, Winnersh, Wokingham, Berkshire, RG41
5RD.
The joint administrators can be reached at:
Anthony Milnes
Leonard Curtis
1 & 2 Lion Chambers
John William Street, Huddersfield
HD1 1ES
-- and --
Sean Williams
Leonard Curtis
9th Floor, 7 Park Row
Leeds, LS1 5HD
For further details, contact:
The Joint Administrators
Email: recovery@leonardcurtis.co.uk
Tel 0113 323 8890
Alternative contact: Amelia Blythe
VIRTUAL ARTS: Parker Andrews Named as Joint Administrators
----------------------------------------------------------
Virtual Arts Limited was placed in administration proceedings in
the High Court of Justice, Court Number: CR-2024-001431, and Grace
Jones and Rishi Karia of Parker Andrews Limited were appointed as
administrators on Nov. 5, 2024.
Virtual Arts engages in the publishing of computer games & other
information technology service activities.
Its registered office is at St Johns Innovation Centre, Cowley
Road, Cambridge, CB4 0WS to be changed to Parker Andrews Limited,
5th Floor, The Union Building, 51-59 Rose Lane, Norwich, NR1 1BY.
Its principal trading address is at St Johns Innovation Centre,
Cowley Road, Cambridge, CB4 0WS.
The joint administrators can be reached at:
Grace Jones
Rishi Karia
Parker Andrews Limited
5th Floor, The Union Building
51-59 Rose Lane, Norwich
NR1 1BY
For further information, contact:
Laura.Alfs@parkerandrews.co.uk
Tel No: 01603 284284
WICKED VISION: Begbies Traynor Named as Joint Administrators
------------------------------------------------------------
Wicked Vision Limited was placed in administration proceedings in
the High Court of Justice Business and Property Courts, Court
Number: CR-2024-006439, and Stephen Katz and David Birne of
Begbies Traynor (London) LLP were appointed as administrators on
Oct. 28, 2024.
Wicked Vision manufactures games and toys.
Its registered office is at 1 Park Road, Hampton Walk, Kingston
Upon Thames, Surrey, KT1 4AS. Its principal trading address:
162-164 Upper Richmond Road, London, SW15 2SL.
The administrators can be reached at:
Stephen Katz
David Birne
Begbies Traynor (London) LLP
Pearl Assurance House
319 Ballards Lane
London, N12 8LY
For further information, contact: ST-Team@btguk.com
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2024. All rights reserved. ISSN 1529-2754.
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