/raid1/www/Hosts/bankrupt/TCREUR_Public/241127.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 27, 2024, Vol. 25, No. 238
Headlines
A U S T R I A
INNIO GROUP: Fitch Hikes LongTerm IDR to 'B+', Outlook Positive
INNIO GROUP: Moody's Ups CFR & Sr. Sec. First Lien Term Loan to B1
F I N L A N D
FROSN-2018: Fitch Lowers Rating on Cl. D Notes to Bsf, Outlook Neg.
F R A N C E
ALTICE FRANCE: $2.50BB Bank Debt Trades at 15% Discount
ALTICE FRANCE: EUR1.72BB Bank Debt Trades at 19% Discount
CASINO GUICHARD: EUR1.41BB Bank Debt Trades at 20% Discount
COOPER CONSUMER: Moody's Affirms B3 CFR, Outlook Remains Stable
ETNA FRENCH: Fitch Assigns First-Time 'B' LT IDR, Outlook Stable
EURO ETHNIC: Moody's Affirms 'B2' CFR, Outlook Remains Stable
FINANCIERE LABEYRIE: EUR455MM Bank Debt Trades at 20% Discount
FOUNDEVER GROUP: EUR1.00BB Bank Debt Trades at 36% Discount
G E R M A N Y
GHD VERWALTUNG: EUR360MM Bank Debt Trades at 39% Discount
SUMMIT PROPERTIES: Moody's Affirms Ba1 CFR, Outlook Remains Stable
H U N G A R Y
WIZZ AIR: Moody's Affirms 'Ba1' CFR & Alters Outlook to Negative
I R E L A N D
AVOCA STATIC I: Moody's Assigns Ba3 Rating to EUR13.8MM E-R Notes
JUBILEE 2024-XXIX: Fitch Assigns 'B-sf' Final Rating to Cl. F Notes
I T A L Y
BFF BANK: Moody's Cuts LT Issuer, Sr. Unsecured Debt Ratings to Ba3
K A Z A K H S T A N
KCELL JSC: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
L U X E M B O U R G
ARDAGH METAL: Moody's Lowers CFR to B3 & Alters Outlook to Stable
EOS US FINCO: $534.7MM Bank Debt Trades at 29% Discount
R O M A N I A
MAS PLC: Fitch Lowers LongTerm IDR to 'BB-', On Watch Negative
S P A I N
BBVA CONSUMO 12: Moody's Ups Rating on EUR150MM Cl. B Notes to Ba3
S W E D E N
INTRUM AB: Fitch Lowers LongTerm IDR to 'D' on Chap. 11 Filing
S W I T Z E R L A N D
PEACH PROPERTY: Fitch Puts 'B-' Sr. Unsec Rating on Watch Negative
T U R K E Y
ODEA BANK: Fitch Keeps 'B-' LongTerm IDR on Watch Positive
SEKERBANK T.A.S: Fitch Affirms 'B' LongTerm IDR, Outlook Positive
VESTEL ELEKTRONIK: Fitch Cuts LT Local-Curr. IDR to B+, Outlook Neg
U N I T E D K I N G D O M
ARCHITECTURAL PANEL: FRP Advisory Named as Joint Administrators
ASHFORD COLOUR: Quantuma Advisory Named as Administrators
BOPARAN HOLDINGS: Fitch Rates GBP390M Sr. Sec. Notes Final 'B'
BUSINESS MORTGAGE 5: Moody's Affirms 'Ca' Rating on 2 Tranches
CALDER PEEL: McCambridge Duffy Named as Administrators
CONSTELLATION AUTOMOTIVE: GBP325MM Bank Debt Trades at 19% Discount
DECHRA MIDCO: Moody's Assigns First Time 'B2' Corp. Family Rating
N E C SERVICES: Leonard Curtis Named as Joint Administrators
RUSTINGTON RECRUITMENT: Quantuma Advisory Named as Administrators
SHERWOOD FINANCING: Fitch Assigns B+(EXP) Rating to Sr. Sec Notes
- - - - -
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A U S T R I A
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INNIO GROUP: Fitch Hikes LongTerm IDR to 'B+', Outlook Positive
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Fitch Ratings has upgraded INNIO Group Holding GmbH's (INNIO)
Long-Term Issuer Default Rating (IDR) to 'B+' from 'B'. The Outlook
is Positive. Fitch has also upgraded its senior secured ratings to
'BB-' from 'B+'. The Recovery Rating is 'RR3'.
The upgrade reflects improvements in profitability, cash flows and
leverage, surpassing its prior positive sensitivities. This was
driven by stronger pricing and reduction of costs as share of
revenues. INNIO's rating is supported by its strong market position
in supplies to gas-fired power generation, geographic & end-market
diversification and significant contribution from long-term service
contracts. However, the rating is constrained by INNIO's
medium-scale, niche market position and limited product
diversification as well as a lack of strict financial policy.
The Positive Outlook reflects its expectation that INNIO will
maintain its high operating margins of 23% on average and continue
deleveraging to debt/EBITDA of around 4x at end-2025.
Key Rating Drivers
Continuous Improvement of Profitability: INNIO has successfully
increased its EBITDA margins to 22% in 2023 from 17% in 2020,
reflecting its ability to pass on costs inflation, the resilience
of its subscription-based services and its cost-reduction
programmes. Fitch expects INNIO to continue improving its EBITDA
margins, to close to 24% in 2027, on better pricing conditions and
an enhanced product mix. This improvement will also benefit from
the significant contribution of higher-margin services.
Deleveraging Momentum: INNIO's gross EBITDA leverage fell to 4.6x
at end-2023 from a peak of 8.0x at end-2020, driven by improved
margins. Fitch expects INNIO to continue its deleveraging path to
reach a gross leverage of close to 4x in its forecast horizon,
underpinned by sustained organic and inorganic EBITDA margin
improvement and a conservative cash-deployment policy. While Fitch
views the expected leverage as strong for the rating, a further
upgrade would depend on a financial policy supporting a stronger
capital structure in the long term.
Strong Cash Flow: Fitch expects free cash flow (FCF) to be negative
in 2024, driven by ongoing inventory build-up that is only partly
offset by cash collection, capex for capacity expansion, and an
extraordinary EUR150 million dividend payment. However, Fitch
projects a rebound to positive FCF between 2025 and 2027 as the
company collects outstanding cash, releases inventory, and
gradually reduces capex.
Strong Niche Market Position: INNIO is the number one global
manufacturer in power generation and number two in gas compression
engines, a sector with high barriers to entry. Its market-leading
positions are protected by proven technology and reliability, low
lifecycle costs, fuel efficiency and a comprehensive service
offering. INNIO's good diversification by end-customer and
geography is offset by a narrow product range in a niche, albeit
growing, market.
Acquisitions to Improve Business Profile: Since its carve-out from
GE Vernova, INNIO has acquired and integrated complementary
businesses to strengthen its business profile. In September 2023,
it acquired NES-WES, an important distributor of Jenbacher products
in the U.S., boosting its market penetration in North America,
which represented 23% of revenue in 2023. Fitch expects INNIO to
continue acquiring small companies to support growth, focusing on
higher-growth geographies and enhancing vertical integration
through complimentary distribution capabilities.
Cash Funding Likely for Acquisitions: Fitch expects aggregate
acquisitions of EUR100 million-EUR110million over the next three
years, with the bulk of them likely to be funded by FCF.
Material Contribution from Services: INNIO's EBITDA margin and
business stability are positively influenced by the material
contribution of services, which inherently have a higher
contribution margin (CM) than new equipment. The CM of services is
45%, versus new equipment's around 30%. In the last four years,
services contributed about 70% of the total CM, which Fitch expects
to be maintained in the next four years, supporting the gradual
improvement of its EBITDA margin.
Derivation Summary
INNIO's closest competitors by product are Rolls-Royce Power
Systems (owned by Rolls-Royce plc, BBB-/Positive) and Caterpillar
Inc. (A+/Stable), both of which have stronger business and
financial profiles than INNIO.
Similarly rated diversified industrials companies, such as Dynamo
Midco B.V. (Innomotics) (B/Positive) and Project Grand Bidco (UK)
Limited (Purmo) (B+/Stable), have higher leverage and lower FCF
margins. However, INNIO's lower product diversification constrains
its rating compared with overall industrial peers'. Compared with
German gearboxes and generators manufacturer Flender International
GmbH (B/Stable), INNIO has a superior profitability and cash flow
profile and lower leverage, but lacks diversification versus
Flender.
Key Assumptions
- Revenue to grow 3% on average over the next four years,
underpinned by growth in services
- EBITDA margin to rise towards 24% in 2027, due to services
contribution and higher prices
- Working-capital outflow in 2024 and inflows for 2025 and 2026
- Capex at 6.7% of revenue in 2024, before gradually decreasing
towards 6% by 2027, due to capacity increase
- Extraordinary dividend payout of EUR150 million in 2024
- Bolt-on acquisitions in the next four years totaling around
EUR100 million
Recovery Analysis
- The recovery analysis assumes that INNIO would be considered a
going concern (GC) in bankruptcy and that it would be reorganised
rather than liquidated. This is driven by its long-term proven
robust business model, long-term relationship with customers and
suppliers, and existing barriers to entry in the market
- Fitch has revised INNIO's GC EBITDA to EUR230 million from EUR209
million, given its expanded installed base and contributions from
acquisitions
- Fitch assumes 10% of administrative claim
- Fitch uses an enterprise value (EV) of 6x EBITDA to calculate a
post-reorganisation valuation, which is slightly above that of some
diversified industries peers rated by Fitch, such as Dynamo Midco
and Nova Alexandre III. The 6x EBITDA multiple reflects INNIO's
strong position in a niche market, good geographical & end-market
diversification and long-term relationship with customers and
suppliers
- The EV available for claim is EUR1,077 million, assuming drawdown
of its EUR165 million of factoring, administrative claims are
assumed at 10% of EV
- The waterfall analysis is based on 3Q24 debt, which consist of
all equally ranking EUR201 million equivalent US dollar revolving
credit facility (RCF), a EUR533 million equivalent USD term loan B
(TLB), a EUR1,100 million TLB and EUR75 million of reverse
factoring. Its waterfall analysis generated a ranked recovery in
the 'RR3' band, indicating a 'BB-' rating for the senior secured
debt. The waterfall analysis output percentage on current metrics
and assumptions is 56% for the senior secured debt
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA leverage consistently above 5.5x
- EBITDA margin below 18%
- FCF margin below 5%
- Services revenue contribution below 40%
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA leverage below 4.5x for a sustained period, supported by a
financial policy commitment
- FCF margin above 7%
- Enhanced business diversification through an expansion of the
product portfolio and/or successful transition to hydrogen
technologies
Liquidity and Debt Structure
INNIO had readily available cash of EUR248 million at end-2023.
Fitch expects it to have a cash balance of EUR159 million at
end-2024, after an extraordinary dividend of EUR150 million. Fitch
restricts EUR25 million of reported cash for working-capital
fluctuations, similar to other industrial peers. Fitch believes the
business will remain highly cash-generative and be able to build
satisfactory cash balances over the next three years, reaching up
to EUR400 million by 2027.
Additionally, INNIO has an RCF of EUR201 million equivalent, which
Fitch expects to remain undrawn throughout its forecast horizon.
Together with forecast positive FCF from 2025 and no immediate debt
repayments, this will contribute to a strong liquidity position.
Issuer Profile
Austrian-based INNIO (formerly known as AI Alpine) is a
manufacturer and services provider of mission-critical solutions
for power generation and gas compression. It operates under two
well-known brands, Jenbacher that manufactures reciprocating gas
engines, and Waukesha, that produces gas compression engines.
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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INNIO Group
Holding GmbH LT IDR B+ Upgrade B
senior secured LT BB- Upgrade RR3 B+
INNIO GROUP: Moody's Ups CFR & Sr. Sec. First Lien Term Loan to B1
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Moody's Ratings upgraded INNIO Group Holding GmbH's (INNIO or the
company) corporate family rating to B1 from B2 and probability of
default rating to B1-PD from B2-PD. Concurrently, Moody's upgraded
to B1 from B2 the instrument ratings of the backed senior secured
first lien term loan B and the backed senior secured first lien
revolving credit facility (RCF) issued by INNIO as well as the
instrument ratings to the backed senior secured first lien term
loan B issued by INNIO North America Holding Inc, a subsidiary of
INNIO. The outlooks for INNIO and INNIO North America Holding Inc
remain stable.
RATINGS RATIONALE
The upgrade to B1 reflects INNIO's continued track record of strong
and improving operating performance and good FCF generation, which
Moody's expect to continue in 2025. This is backed by the
constructive mid-term trends in INNIO's end-markets as well as the
company's sizeable and profitable service business. The rating
action also reflects Moody's expectation of the absence of
debt-funded M&A activity and shareholder distributions that
re-leverage the company in the next 12-18 months.
INNIO's operating performance and credit metrics continued to
improve in the last twelve months to September 2024. Its
Moody's-adjusted EBITA margin increased to 18% from 17% in 2023,
while Moody's-adjusted Debt/EBITDA decreased to around 5.0x from
5.5x in 2023. The increase in earnings was supported by successful
pricing initiatives and continued solid demand for independent and
decentralized power generation following general growth in energy
consumption with higher renewable energy share. The operating
performance was also backed by INNIO's service division, which
supports an installed base of around 40,000 engines, represents
around 60% of INNIO's revenues and 70% of its contribution margin
and has grown by 7% CAGR since 2012. This provides good revenue
visibility together with the strong order backlog of around EUR3.5
billion as of September 2024, which increasingly also includes a
higher share of data center customers.
The solid operating performance has translated into significant FCF
generation of around cumulative almost EUR400 million since 2021
(excluding dividends). Moody's expect the trading to continue with
INNIO successfully maintaining its profitability in 2025 to current
levels, supporting FCF generation around 5% of debt (around 5% in
LTM September 2024) and gross leverage remaining at or below 5.0x.
INNIO distributed a EUR150 million dividend in 2024 out of cash,
which Moody's perceive as a non-recurring transaction. Any
debt-funded M&A activity or shareholder distributions, which
re-leverage INNIO's balance sheet, will put negative pressure on
the rating.
INNIO's B1 CFR is further supported by the company's leading market
positions and history of reliable product offering; barriers to
entry with mission-critical nature of its products; and its
well-invested asset base. The CFR is further constrained by the
company's high debt burden; cyclical new equipment business,
especially through its brand Waukesha in the oil and gas upstream
business; volatile path of energy transition to renewables
dependent on regulation and policy changes; and some geographical
and product revenue concentration.
RATIONALE FOR THE STABLE OUTLOOK
Moody's expect that over the next 12-18 months INNIO will continue
to grow in scale while maintaining its solid profitability levels
around high double-digit percentage (Moody's-adjusted EBITA margin)
supported by the strong end market trends of distributed power
generation and data center growth as well as by the company's
sizeable installed base. This will lead to gross leverage at or
below 5.0x and FCF generation remaining around mid-single digits
range (FCF/Debt).
Moody's do not expect debt-funded dividend distributions or M&A in
the stable outlook, which could put pressure on the current rating
positioning.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if INNIO's Moody's-adjusted EBITA
margins improves to around 20%, gross debt/EBITDA falls sustainably
towards 4.0x and the company generates strong FCF as indicated by
FCF/debt towards high single digit percentage levels, while
liquidity remains good. An upgrade would require a commitment of
the company's ownership towards financial policy and leverage
targets consistent with these stronger credit metrics.
The ratings could be downgraded if: INNIO's profitability declines
towards mid double-digit percentage levels (Moody's-adjusted EBITA)
on a sustained basis reflective of deteriorating operating
performance including a loss of market share or weakening service
segment profitability; the company's leverage sustainably exceeds
5.5x debt/EBITDA or interest cover falls below 2.0x EBITA/interest;
as well as the company's FCF generation capacity deteriorates
reflected in FCF/debt significantly below 5% on a sustained basis
and weakening liquidity. Indications of a move towards a more
shareholder-friendly financial policy or re-leveraging transaction
could also trigger a negative rating action.
LIQUIDITY
INNIO has good liquidity. As of September 2024, the company's
liquidity comprises EUR151 million in cash supported by the fully
undrawn $225 million RCF maturing in 2028. Moody's expect the
company's strong FCF generation in 2025 of around EUR100 million to
also support liquidity, cover potential working capital swings as
well as working cash of around EUR60 million (3% of annual sales).
INNIO relies on factoring and reverse factoring programs that
support its cash position (but Moody's treat as debt). No
significant debt repayments are due until 2028 when the company's
backed senior secured first-lien term loan and RCF mature following
the completed amend and extent transaction in Q4 2023.
The available RCF is subject to a springing senior secured net
leverage covenant of 9.0x, to be tested if drawings exceed 40% of
the facility. Moody's expect the company to comply with its
covenant.
STRUCTURAL CONSIDERATIONS
The ratings of INNIO's EUR1,100 million backed senior secured
first-lien term loan B and $225 million RCF, as well as INNIO North
America Holding Inc's $600 million backed senior secured first-lien
term loan B rank pari passu and are rated in line with the CFR at
B1. The credit facilities are complemented by a pari passu $120
million first-lien multicurrency guarantee facility. All facilities
mature in 2028.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
INNIO Group Holding GmbH (INNIO), headquartered in Austria, offers
mission-critical solutions for power generation and gas compression
under two well-known brands. Jenbacher offers reciprocating gas
engines for distributed power generation for industrial, utility
and data center customers. Waukesha offers engines for the
production and transmission of natural gas and on-site power
generation for oil and gas producers.
In the 12 months ended in September 2024, the company generated
around EUR1.9 billion of revenue and company-adjusted EBITDA of
around EUR470 million (25% company-adjusted EBITDA margin). It is
owned by funds of Advent International with a minority stake
indirectly held by the Abu Dhabi Investment Authority (ADIA).
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F I N L A N D
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FROSN-2018: Fitch Lowers Rating on Cl. D Notes to Bsf, Outlook Neg.
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Fitch Ratings has downgraded six classes of FROSN-2018 DAC's notes,
as detailed below.
Entity/Debt Rating Prior
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FROSN-2018 DAC
Class A1 XS1800197664 LT A-sf Downgrade A+sf
Class A2 XS1800197748 LT BBBsf Downgrade Asf
Class B XS1800198126 LT BBB-sf Downgrade A-sf
Class C XS1800200476 LT BBsf Downgrade BBBsf
Class D XS1800200559 LT Bsf Downgrade BBsf
Class E XS1800201011 LT CCCsf Downgrade Bsf
Class RFN XS1800197235 LT AAAsf Affirmed AAAsf
Transaction Summary
At closing in April 2018, the transaction securitised 87.9% of a
EUR577.0 million commercial real estate loan as well as 47.5% of a
EUR13.9 million capex loan (which has since been fully drawn and
spent), secured on a secondary quality, largely office portfolio in
Finland (comprising 63 properties). The originators retain an
additional 5% of the securitised liabilities through a vertical
risk retention loan, which pro rata with the class RFN notes, also
finances an issuer liquidity reserve.
25 properties have been sold, causing the senior and capex loan to
amortise to EUR290.7 million and EUR12.7 million. As at the 31
March 2023 valuation date, the remaining 38 properties reported
market value (MV) of EUR337.0 million, of which 78% is in office,
17% in retail and 5% in storage assets. The portfolio is let to a
diverse array of 379 tenants, paying total annual rent of EUR38.8
million. While granular, the top five tenants, which include
government-related entities, account for 22.6% of rent.
There have been no new valuations since March 2023. In December
2023, there was a comprehensive restructuring of the then-defaulted
loan, as part of which the requirement for the servicer to obtain
annual valuations (at the borrower's expense) was replaced with a
right for any individual noteholder to request a valuation
(provided none had been conducted in the prior 12 months). This
right has yet to be exercised.
Vacancy across the portfolio is in excess of 50%. Over the past
year, only five properties have been sold (representing less than
2% of portfolio MV as at the loan restructuring date), reflecting a
general lack of investment interest in secondary properties in the
Finnish office market. Following the loan restructuring and until
the balance of the cash trap account reaches EUR10 million,
proceeds from property disposals are being trapped to fund capex
works and ongoing borrower expenses such as property taxes, asset
management fees (capped at EUR1.5 million per year) and legal
costs.
Given the paucity of disposals in 2024, the cash trap account
balance (as last reported) stands at EUR7.4 million and no loan
repayments have been made, reflecting slow progress against the
borrower's restructuring business plan (to which Fitch gives no
credit).
KEY RATING DRIVERS
Limited Pricing Visibility: The Finnish secondary office market
remains subdued. At the latest reporting period, the interest
coverage ratio of 1.01x shows how little headroom against increased
vacancy there is before the loan would fall back into default.
Should default occur, loan workout would likely need to strike a
balance between portfolio sales at a discount and a continuation of
the granular, time-consuming approach to disposals. In either
scenario, there is significant uncertainty regarding achievable net
property sales proceeds due to the idiosyncratic, non-core nature
of the properties.
Weak Amortisation Prospects: If property disposals continue at the
current slow pace, the medium-term prospects of amortisation from
cash flow are poor (at least while the loan performs), given the
EUR10 million minimum required balance on the cash trap account
before surplus cash flow can be swept towards principal. Fitch does
not give recovery credit to trapped cash given ongoing leakage
towards operating costs.
Accounting for EUR10 million further collateral depletion (as
borrower expenses for the restructured loan term) as well as a EUR5
million reduction in net operating income (roughly 50% of income
contracted before the pandemic) results in investment-grade debt
yields no lower than 9%, which Fitch views as reasonable.
Existing Vacancy Appears Structural: Vacancy has continued to
increase and now stands at approximately 52%, much of it
well-distributed across the portfolio and persistent. New leases
have been signed for some properties since the last rating action,
reflecting the short-term leasing profile in the rent roll. A
minority of offices are (almost) fully vacant and have little
prospect of attracting tenants, in its view, and therefore face
meaningful obsolescence risk. The downgrades (and Negative
Outlooks) reflect the portfolio's ongoing performance
deterioration, the slow pace of liquidation and limited visibility
on property values.
Fitch reflects the valuer's (2023) estimate of capex requirements
by modelling a two-year period in which property income is entirely
reinvested into the portfolio to stabilise net operating income.
Fitch has also increased its structural vacancy assumptions across
the portfolio, reflecting the erosion of occupational demand for
secondary offices (even those that have been recently refurbished).
The underlying portfolio has a weighted average score of 4.4 in its
analysis, among the lowest scoring portfolio across Fitch's EMEA
CMBS coverage.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Further increases in vacancy, or a reduction in estimated rental
value (ERV).
The change in model output that would apply with a 15pp increase in
structural vacancy would imply the following ratings (excluding the
RFN):
'BB+sf' / 'B+sf' / 'B+sf' / 'B-sf' / 'CCCsf' / 'CCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increases in collateral value, driven by lower property yields.
The change in model output that would apply with a 1pp reduction to
cap rate assumptions would imply the following ratings (excluding
the RFN):
'Asf' / 'BBB+sf' / 'BBBsf' / 'BBB-sf' / 'BB-sf' / 'B+sf'
KEY PROPERTY ASSUMPTIONS (all weighted by ERV)
Fitch ERV: EUR65.1 million
Fitch non-recoverable costs: EUR17.9 million
Assumed income diversion for capex: two years
Depreciation: 8.3%
'Bsf' weighted average (WA) cap rate: 6.1%
'Bsf' WA structural vacancy: 40.3%
'Bsf' WA rental value decline: 2.7%
'BBsf' WA cap rate: 6.6%
'BBsf' WA structural vacancy: 45.8%
'BBsf' WA rental value decline: 5.3%
'BBBsf' WA cap rate: 7.2%
'BBBsf' WA structural vacancy: 51.7%
'BBBsf' WA rental value decline: 9.7%
'Asf' WA cap rate: 7.8%
'Asf' WA structural vacancy: 57.4%
'Asf' WA rental value decline: 15.2%
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
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.
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F R A N C E
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ALTICE FRANCE: $2.50BB Bank Debt Trades at 15% Discount
-------------------------------------------------------
Participations in a syndicated loan under which Altice France SA is
a borrower were trading in the secondary market around 85.4
cents-on-the-dollar during the week ended Friday, November 22,
2024, according to Bloomberg's Evaluated Pricing service data.
The $2.50 billion Term loan facility is scheduled to mature on
August 14, 2026. About $580.0 million of the loan has been drawn
and outstanding.
Altice France provides wireless telecommunication services. The
Company offers fiber optic network solutions for all type of media.
Altice France serves customers in France.
ALTICE FRANCE: EUR1.72BB Bank Debt Trades at 19% Discount
---------------------------------------------------------
Participations in a syndicated loan under which Altice France SA is
a borrower were trading in the secondary market around 81.4
cents-on-the-dollar during the week ended Friday, November 22,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR1.72 billion Term loan facility is scheduled to mature on
August 31, 2028. About EUR1.70 billion of the loan has been drawn
and outstanding.
Altice France provides wireless telecommunication services. The
Company offers fiber optic network solutions for all type of media.
Altice France serves customers in France.
CASINO GUICHARD: EUR1.41BB Bank Debt Trades at 20% Discount
-----------------------------------------------------------
Participations in a syndicated loan under which Casino Guichard
Perrachon SA is a borrower were trading in the secondary market
around 80.1 cents-on-the-dollar during the week ended Friday,
November 22, 2024, according to Bloomberg's Evaluated Pricing
service data.
The EUR1.41 billion Term loan facility is scheduled to mature on
March 30, 2027. The amount is fully drawn and outstanding.
Casino Guichard-Perrachon SA operates a wide range of hypermarkets,
supermarkets, and convenience stores. The Company operates stores
in Europe and South America. The Company's country of domicile is
France.
COOPER CONSUMER: Moody's Affirms B3 CFR, Outlook Remains Stable
---------------------------------------------------------------
Moody's Ratings has affirmed the B3 long term corporate family
rating and B3-PD probability of default rating of Cooper Consumer
Health S.A.S. (Cooper or the company), a leading European
over-the-counter (OTC) pharma manufacturer and distributor.
Concurrently, Moody's have affirmed the Caa2 ratings on the total
outstanding EUR347 million senior secured second-lien term loan
maturing in 2029 and the B2 instrument ratings on the company's
total EUR2,075 million senior secured first-lien term loan B (TLB)
maturing in 2028 and on the EUR295 million senior secured revolving
credit facility (RCF) maturing in 2028. Moody's have also assigned
a B2 instrument rating to the EUR100 million proposed add-on to the
senior secured term loan B maturing in 2028. The outlook remains
stable.
The rating action follows the company's decision to repay part of
second-lien debt with the issuance of an additional first-lien TLB
tranche. The proposed transaction, which also includes the
repricing of the current B2 tranche of the TLB, is expected to
result in an annual interest cost savings of about EUR9 million.
However, the repayment of the junior debt with new senior debt
weakens the recovery prospects of the senior debtholders within the
capital structure and further switches from junior to senior debt
might result in the senior debt losing the current rating uplift
compared to the CFR. The current uplift of the senior debt rating
could also disappear in case of failure to further improve the
company's credit quality and reduce leverage.
RATINGS RATIONALE
Cooper's B3 rating reflects the company's solid market position in
the European fragmented self-care market, with improved scale,
product portfolio and geographic diversification following the
acquisition of Viatris Inc. OTC Portfolio. The rating also factors
the company's solid track record of profitable growth, both
organically and through bolt-on acquisitions, and the sound market
fundamentals for OTC products, with demand constantly growing over
the last five years at an average annual rate of around 2.5%-3.0%.
Cooper's strong cash flow generation capacity, stemming from its
asset-light business model, is also supporting the rating.
However, the rating is constrained by the company's very high
leverage and by the execution risk associated with the ongoing
integration of the Viatris OTC portfolio. The acquisition was
completed in July 2024 and Cooper has already started selling the
acquired brands through its own distribution network in some key
markets. While the process has so far been smooth, a certain degree
of execution risk remains, because Cooper is still relying on
Viatris for product distribution in some markets and will need to
change the distribution model by the first half of 2025. Viatris is
also providing Cooper with other services such as IT systems and
regulatory functions, under Transition Service Agreements (TSA)
that are likely to terminate by year-end 2025.
Following a solid performance in 2023, the results in the first
nine months of 2024 have been weaker, with like-for-like revenue
(excluding the impact of the consolidation of the Viatris
portfolio) declining by 6.5%. Sales weakness was largely due to
non-recurring issues, including the termination of some
distribution contracts and the inventory destocking within the
distribution channel, and Moody's expect revenue decline to be only
temporary. Moody's forecast that the company's revenue will resume
growing at low-single-digit rates from 2025, and its
Moody's-adjusted EBITDA will increase to approximately EUR340
million in 2025 from around EUR290 million in 2024 pro-forma for
the acquisition.
Cooper's leverage is high following the acquisition, and Moody's
expect its Moody's-adjusted debt/EBITDA to be close to 9.0x in
2024. However, Moody's forecast that Cooper will reduce its gross
leverage, on a Moody's-adjusted basis, to 7.3x in 2025, supported
by a gradual improvement in EBITDA as one-off costs and
dis-synergies are phased out, which would position the company more
comfortably in the B3 rating category.
The high leverage is partially offset by the company's solid FCF
and interest coverage. Moody's forecast that, despite the one-off
integration costs, Cooper will generate positive FCF of around
EUR12 million in 2024, on a pro forma basis, and EUR94 million in
2025. Once the integration costs are phased out, FCF will improve
to close to EUR130 million in 2026, supported by the company's
asset-light business with limited capital spending. Moody's expect
EBITA/interest expense to improve from 1.5x this year to 2.0x in
2026, which is supportive of the rating.
LIQUIDITY
Cooper's liquidity remains good, supported by a cash balance of
EUR141 million as of September 2024 and a fully available EUR295
million RCF maturing in 2028. Moody's expect the company to
maintain positive FCF generation, despite one-offs, of around EUR94
million in 2025.
The RCF has a maximum senior secured net leverage springing
covenant of 9.75x, to be tested if it is drawn by more than 40%.
Moody's do not expect the covenant to be tested over the next 12-18
months. Even if it is tested, Cooper would have ample capacity
under this covenant.
STRUCTURAL CONSIDERATIONS
Cooper's B3-PD probability of default rating is in line with the
CFR and reflects the use of a 50% family recovery rate, consistent
with an all-loan debt structure with a springing covenant.
The B2 instrument ratings on the TLB and the RCF are one notch
above the company's CFR, reflecting the senior position of these
instruments compared with the junior instruments in the capital
structure, the second-lien TLB, which are rated Caa2. However, the
refinancing of part of the second-lien with an additional tranche
of senior debt limits the loss protection provided by the junior
debt. Thus, any further switches from junior to senior debt could
lead to a loss of the current rating uplift relative to the CFR.
The debt facilities are secured by pledges over shares, key bank
accounts and intercompany receivables and guarantees by certain
subsidiaries representing at least 80% of the group's EBITDA.
Moody's do not include in Moody's adjusted debt calculations the
EUR500 million shareholder loan, maturing in 2030, borrowed by
Cooper and indirectly lent by its majority shareholders because
this instrument is eligible to receive equity credit under Moody's
criteria.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook on the rating reflects Moody's expectation that
Cooper will continue to record revenue and EBITDA growth post-
acquisition, alongside a decrease in leverage to below 7.5x in
2025. The outlook does not factor in any large debt-funded
acquisitions or shareholder distributions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure could arise if (1) Cooper's Moody's-adjusted
debt/EBITDA falls towards 6.5x; and (2) the company maintains
sustained profit growth and positive FCF, along with continued
strong liquidity.
Negative rating pressure would be exerted on the rating if (1)
Cooper's Moody's-adjusted gross debt/EBITDA remains sustainably
well above 7.5x beyond 2025; (2) free cash flow turns negative on a
sustained basis; (3) liquidity deteriorates including a potential
reduction in headroom under financial covenants; (4) the company
embarks upon a large debt funded acquisition prior to the recovery
of credit metrics.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Consumer
Packaged Goods published in June 2022.
COMPANY PROFILE
Cooper Consumer Health S.A.S. (Cooper) is a leading European
self-care company that provides a range of over-the-counter (OTC)
pharma products, food supplements, medical devices and active
pharmaceutical ingredients. The company has pan-European presence,
with solid market positions in key markets, including France, the
Netherlands, Italy, Iberia and Belgium. Over time, the company has
expanded its product portfolio and geographical reach through
several acquisitions. Notably, the acquisition of Viatris's OTC
division in 2024 significantly increased its scale.
In March 2021, CVC Capital Partners Fund VII (CVC) acquired the
majority stake in Cooper's capital. Meanwhile, Charterhouse, the
founders of Vemedia, and the company's management retained minority
shares. In 2023, Cooper generated revenue of EUR573 million and a
company-adjusted EBITDA of EUR170 million.
ETNA FRENCH: Fitch Assigns First-Time 'B' LT IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has assigned Etna French BidCo SAS, Exclusive
Networks SA, and Everest SubBidCo SAS (collectively, Exclusive)
first-time Long-Term Issuer Default Ratings (IDR) of 'B'. The
Outlooks are Stable.
Fitch has also assigned a 'B+(EXP)'/RR3 rating to the planned ca.
EUR1.5 billion (equivalent) of senior secured term loans, including
the EUR235 million delayed draw term loan (DDTL, undrawn at close).
The proceeds, along with cash on the balance sheet and equity, will
be used for the acquisition of Exclusive Networks by a consortium
led by CD&R and Permira for approximately EUR2.2 billion. An
exceptional dividend distribution of EUR480 million will also be
paid to the current shareholders, and the existing debt at
Exclusive Networks will be refinanced.
Exclusive's ratings are supported by its strong position as a
cybersecurity specialist and value-added distributor for more than
200 vendors globally. The rising need for data security and
management due to increasing cyberattacks and complex regulatory
environments, along with high customer retention rates support its
credit profile. The company is well positioned to capitalise on
positive market trends in the growing end market, particularly as
it increases its presence in North America.
Fitch-defined EBITDA leverage is excessive at over 7.5x pro-forma
for the transaction. However, Fitch expects leverage to gradually
improve, albeit remaining above 5.5x, with cash flow from
operations (CFO) minus capex)/total debt remaining above 5%, which
is adequate for the rating.
Key Rating Drivers
Elevated Leverage Profile, Deleveraging Capacity: Fitch expects
Exclusive's Fitch-defined EBITDA leverage to be above 7.5x at the
end of 2024 (post buyout), but forecast it to decline to below 6x
by 2026 through revenue and EBITDA growth. EBITDA will benefit from
operating leverage and some cost savings. Fitch's leverage
calculation includes EUR300 million of off-balance sheet factoring
receivables in its debt calculation. Fitch expects limited
deleveraging as Exclusive's private equity ownership will likely
prioritise return on equity maximisation over debt prepayment. This
strategy could include acquisitions to broaden its market
position.
Recurring Revenue with High Retention: About 75% of Exclusive's
revenue is recurring (software and maintenance services), with high
net retention rates of over 110%. The remaining 25% comes from the
sale of complementary cybersecurity-related hardware products,
including firewalls, routers, and access point names. The strong
revenue retention implies mission-criticality of the cybersecurity
products and repeatable demand, solidifying its market position.
Fitch expects continuing growth in underlying demand for security
products and the need for specialised, expert distributors to
bridge the geographical gap for vendors to lead to resilient market
growth.
Strong Cash-flow Conversion: Exclusive has a strong EBITDA-to-free
cash flow (FCF) generation model due to recurring revenue, stable
EBITDA, and minimal capex requirements. Fitch expects FCF margins
to be near mid-single digits, and the (CFO-capex)/ debt ratio to be
5%-6% through the forecast period, which is consistent with
Fitch-rated 'B' peers in the technology space. FCF margins are
driven by some operating leverage and cost savings from public
listing savings and NextGen synergies.
Vendor Concentration: Exclusive's vendors/original equipment
manufacturers have deep coverage across the full security
landscape, such as network security, endpoint security and identity
& access management globally. Exclusive's two largest vendors,
Fortinet and Palo Alto represented 37% and 15% of 2023 gross sales,
respectively. Fitch believes that Exclusive's role is crucial for
vendors to efficiently expand their global reach, especially since
most of these vendors are based in the US.
The risk of losing a big vendor is less likely due to mutual
benefit and co-dependency between the vendors and the company.
Exclusive is also the major value-added distributor for its two
biggest vendors, who need this channel to reach out to customers,
particularly in two-tier markets. Exclusive works with over 200
vendors and serves customers in 170 countries, with no single
vendor representing more than 10% of the total share in any one
country.
Cybersecurity Specialist in Fragmented Industry: Exclusive has
demonstrated its leadership in the cybersecurity value chain with a
record of strong revenue growth and market share gains. Gross sales
have had about 25% CAGR over the past 10 years. Fitch views this as
reflective of the strength of the business and the company's
operating discipline, particularly given the highly-fragmented
industry and competitive landscape. The IT distribution business is
relatively dominated by Ingram and TD SYNNEX, which represent a
significant share of the market. However, their portfolios are more
concentrated on IT hardware (servers, storage, PCs) and less on
software or services.
Exclusive's portfolio consists of 90-92% of cybersecurity
offerings, and it competes more with regional specialists such as
Westcon and Infinigate. While the reseller industry is both
competitive and low-margin due to vibrant competition among IT
distributors, Exclusive adds value through its expertise in the
security space and strategic partnership with leading cybersecurity
vendors.
Secular Tailwinds Supports Growth: Exclusive benefits from the
growing cybersecurity industry, which Fitch forecasts would have
CAGR in the low teens in a normal economic environment. The global
spend on cybersecurity products and services is expected to reach
approximately USD300 billion by 2027, from the current market size
of about USD200 billion. The importance of cybersecurity has risen
in recent years and high-profile cybersecurity breaches have
heightened awareness of the need for more comprehensive
cybersecurity solutions. Fitch believes this will benefit
cybersecurity specialists and distributors such as Exclusive that
will be part of the overall solution to these issues.
Bolt-on Acquisitions: Fitch expects Exclusive will remain
acquisitive in the cybersecurity distributor space, given the still
considerable industry fragmentation and with the aim of deepening
its penetration in the US and APAC regions. The company has made
around 20 acquisitions in the past 10 years, including Ingecom,
Consigas and NextGen group in the recent years.
M&A Strategy: Fitch believes M&A remains a central growth strategy
to drive organic revenue through cross-selling opportunities. Fitch
expects Exclusive's organic revenue to grow in the high-single
digits, in line with the growth rates of the end market.
Acquisitions may increase operational risks and cause a temporary
leverage increase, but Exclusive has a solid record of integrating
acquired companies and de-leveraging within a reasonable time.
Significant Customer Diversification: Exclusive serves over 100,000
customers across diverse industry verticals, including financial
services and banking in various geographies. The diverse customer
base effectively minimises the idiosyncratic risks associated with
individual end-markets and should reduce revenue volatility. Fitch
believes that customer and geographical diversification also
mitigate potential risks associated with particular vendors.
Derivation Summary
The enterprise security market has been growing in the teens,
supported by greater awareness of security breaches, the increasing
complexity of IT networks and applications, and tightening
regulatory requirements. Fitch believes that Exclusive exhibits the
characteristics of both a cybersecurity specialist and a
value-added distributor.
Fitch compares Exclusive with cybersecurity software peers, such as
Leia Finco US LLC (Darktrace, B/Stable), Sophos Intermediate I
Limited (Sophos, B/Stable), Proofpoint, Inc (B+/Stable) and Ivanti
Software, Inc (B/Stable). Exclusive's revenue scale, business
model, recurring revenue profile and strong retention rates compare
favourably with these peers. Exclusive has been growing at rates
similar to the industry average, but its profitability, as measured
by EBITDA margins, is lower than software industry peers since it
is a cybersecurity value-added distributor and does not benefit
from operating leverage like that of software companies.
Fitch expects Exclusive's (CFO-capex)/debt to be about 5%, which is
consistent with Fitch-rated peers in the 'B' category. Fitch
expects Exclusive's leverage to reach 6x in the next two years,
which is also in line with the peer range (4x-7x).
To a lesser degree, Fitch also compares Exclusive with wholesale
distributors. Within the IT distribution market, peers include TD
Synnex Corporation (BBB-/Stable), and Ingram Micro Holding
Corporation (BB/ Stable). TD Synnex and Ingram are primarily
wholesale IT hardware distributors, with much lower leverage than
Exclusive.
Exclusive is a cybersecurity specialist and value-added
distributor, with less than a quarter of hardware distribution. The
company generates EBITDA margins of approximately 10%,
significantly higher than the low-to-mid single-digit EBITDA
margins typical of wholesale IT distributors. Additionally, its FCF
margin ranges from 3% to 5%, surpassing the usual low-single-digit
FCF margins of its investment-grade peers, and its FCF is less
volatile, due to higher proportion of recurring revenues. Fitch
calculates EBITDA and FCF margins over net revenues.
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer:
- Organic revenue growth in high-single digits
- Fitch-defined EBITDA margin expands approximately 150bp through
2027
- Capex intensity of 0.4% throughout forecast
- Debt repayment limited to mandatory amortisation
- Euribor rate average of 3.20% in 2024, 2.50% in 2025, and 2.00%
thereafter
- Factored receivables debt adjustment assumed to grow from EUR300
million at 2024 to EUR330 million by end-2027
- Aggregate acquisitions of EUR200 million assumed through 2027
with a 5x EV/EBITDA multiple
KEY RECOVERY RATING ASSUMPTIONS
- The recovery analysis assumes that Exclusive would be recognised
as a going concern in bankruptcy rather than liquidated
- Fitch has assumed a 10% administrative claim
Going-Concern (GC) Approach
In the event of a bankruptcy reorganisation, Fitch expects
Exclusive would suffer higher churn due to increased competition in
the industry and loss of some of its vendors, pressuring the
revenue and compressed EBITDA margins on lower revenue scale.
Fitch assumes a GC EBITDA of EUR200 million, approximately 20%
below the projected level of 2025 EBITDA, plus additional EBITDA of
EUR25 million as a result of acquisitions made through the DDTL
draw, resulting in a GC EBITDA of EUR225 million
Fitch assumes an EV/EBITDA multiple of 6.5x. The estimate considers
several factors, including the mission-critical nature of products
and services offered, recurring nature of majority of revenues,
high net retention, secular growth drivers for the sector and
industry technical expertise. The enterprise value (EV) multiple is
supported by:
- The historical bankruptcy case study exit multiples for
technology peer companies ranged from 2.6x to 10.8x, with 5.9x
median;
- Of these companies, only three were in the Software sector: Allen
Systems Group, Inc., Avaya, Inc. and Aspect Software Parent, Inc.,
which received recovery multiples of 8.4x, 8.1x and 5.5x,
respectively;
- Exclusive is getting acquired at approximately 11x pro forma
EBITDA by sponsors;
- The recurring nature of Exclusive's revenue and mission critical
nature of the product and solutions support the high-end of the
range, supported by high cash conversion.
Fitch arrived at an EV of EUR1.46 billion. After applying the 10%
administrative claim, adjusted EV of EUR1.32 billion is available
for claims by creditors. Assuming the EUR235 million revolving
credit facility (RCF) would be fully drawn upon default, its
assumptions result in a Recovery Rating of 'RR3' for the planned
senior secured debt with an instrument rating of 'B+(EXP)'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Fitch's expectation of EBITDA leverage sustained below 5.5x;
- (CFO-capex)/debt sustained above 7%;
- Organic revenue growth above high-single digits.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Fitch's expectation of EBITDA leverage sustained above 7.5x;
- (CFO-capex)/debt sustained below 3%;
- EBITDA interest coverage sustained below 1.25x;
- Deterioration in operating performance due to increased
competition or reduced net retention rate, leading to organic
revenue growth approaching 0%.
Liquidity and Debt Structure
Adequate Liquidity: Exclusive maintains an adequate liquidity
position, supported by an expected cash balance of about EUR165
million post transaction, EUR235 million of undrawn RCF and EUR235
million of DDTL availability. In addition, Fitch forecasts the
company to generate positive FCF through its forecast period.
Pro forma for the transaction, Exclusive's debt maturity profile
will be adequate with no meaningful maturities due before 2031.
Parent-Subsidiary Approach: Fitch rates the IDRs of the parent
(Etna French BidCo SAS) and its subsidiaries (Exclusive Networks
SA, and Everest SubBidCo SAS) on a consolidated basis using the
weak parent/strong subsidiary approach with open access and
control, and open ring-fencing factors based on Fitch's Parent and
Subsidiary Linkage Rating Criteria. As such, Fitch assumes all
entities will operate as a single enterprise with strong legal and
operational ties.
Summary of Financial Adjustments
Fitch has adjusted 2021 gross sales and cost of goods sold to
reflect change in accounting treatment for the recognition of
revenue from resale of software licenses under IFRS 15, where
Exclusive is now considered as an agent. The amount of adjustment
in revenue was balanced in COGS, resulting in gross margins
remaining same, resulting in no change to EBITDA.
In addition, Fitch has adjusted reported debt and financing cash
flow to include the balance of receivables sold and the annual
changes related to such balances, respectively, in connection with
off balance sheet factoring programmes.
Fitch has also adjusted historical cap structure to remove
'non-controlling interests put options' related to the group's
minority interest holdings in former subsidiaries, and 'third party
agreements' that are treated as related-party transactions. Both
these items are excluded from debt calculation historically and do
not form part of the new cap structure.
Date of Relevant Committee
06 November 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
----------- ------ --------
Exclusive Networks SA LT IDR B New Rating
Everest SubBidco SAS LT IDR B New Rating
senior secured LT B+(EXP) Expected Rating RR3
Etna French Bidco SAS LT IDR B New Rating
senior secured LT B+(EXP) Expected Rating RR3
EURO ETHNIC: Moody's Affirms 'B2' CFR, Outlook Remains Stable
-------------------------------------------------------------
Moody's Ratings has affirmed Euro Ethnic Foods Bidco S.A.S.' (EEF
or the company) corporate family rating of B2 as well as the
probability of default rating of B2-PD. Concurrently, Moody's
affirmed the B2 ratings of the EUR565 million senior secured first
lien term loan B and the EUR50 million senior secured revolving
credit facility (RCF), both issued by EEF. The outlook remains
stable.
The rating actions reflects EEF's solid financial performance in
recent years and Moody's expectation that the company will continue
to grow its revenue and EBITDA. The rating actions also take into
consideration EEF's historical appetite for shareholder-friendly
actions as evidenced by the dividend recapitalization in January
2024, which has delayed deleveraging.
RATINGS RATIONALE
The B2 CFR reflects the company's stable margins and steady revenue
growth despite changing macroeconomic backdrop; presence within the
Grand Frais fresh food store, which grows faster than the
traditional French grocery market because of the ongoing customer
preference for fresh and healthy products; positive free cash flow
(FCF) generation; and high profitability, with a Moody's-adjusted
EBITDA margin of around 23% in the financial year that ended March
31, 2024 (financial year 2024).
At the same time, the company's rating is constrained by its high
leverage, with Moody's adjusted (gross) debt/EBITDA around 5.7x in
fiscal 2024, resulting from a shareholder friendly financial
policy; its small size compared with that of traditional grocers
and that of Grand Frais, which could limit its pricing power; its
credit link with and dependence on the success of the fruits and
vegetables (F&V) business controlled by ZF Invest (Prosol, B3
positive), which is a key attraction for Grand Frais' customers;
and the concentration of its earnings in one country, France (Aa2
negative).
EEF has performed strongly in financial 2024, reporting a 12.4%
revenue growth. Of this, approximately 8% stem from the retail
business like-for-like growth, driven by both an increase in
footfall and a higher average basket size. New store openings and
the ramp-up of non-mature stores also contributed to sales growth.
Moody's-adjusted EBITDA grew broadly in the same proportion than
revenue, thanks to sustained margin with full cost inflation
pass-through. EEF's resilience reflects the growth in Grand Frais
attendance driven by consumer preference for fresh and locally
sourced food, successful marketing campaigns, as well as EEF's
differentiated product offerings with limited direct price
competition with other grocers. Moody's anticipate that EEF's
revenue growth to remain in the mid to high single-digit range,
consistent with the company's historical track record. As such,
Moody's expect Moody's-adjusted (gross) debt/EBITDA to gradually
decrease towards 5x during the same period. However,
shareholder-friendly actions such as dividend recapitalisations or
debt-funded acquisitions could delay leverage reduction.
LIQUIDITY
EEF's liquidity is good, supported by around EUR51 million of cash,
a EUR50 million undrawn revolving credit facility (RCF) and
overdraft facilities, which should cover its short-term working
capital needs.
Seasonal variations in working capital are substantial, with a cash
outflow during October-December and a cash inflow during
January-March. There is some, although limited, seasonality in the
top line, with revenue peaking over the February-April period
because of major annual events such as Easter holidays and
Ramadan.
Because of its high margins, Moody's expect EEF to maintain an
interest cover above 2.0x and generate positive FCF over the next
12-18 months, such that FCF/debt hovers around 5%. Moody's expect
capital spending excluding lease repayments to be around 4% of
revenue and some negative working capital movements (around EUR10
million).
The RCF is subject to a springing covenant with a 40% capacity
against opening leverage. The company does not have any short-term
maturities other than around EUR20 million per year of local debt,
and its first large maturity is in 2028 when the term loan B comes
due.
STRUCTURAL CONSIDERATIONS
The EUR565 million senior secured Term Loan B issued by EEF and the
EUR50 million senior secured revolving credit facility issued by
EEF are rated B2 reflecting their pari passu ranking and the
presence of upstream guarantees from material subsidiaries of the
group.
The B2-PD probability of default rating, in line with the CFR,
reflects the hypothetical recovery rate of 50%, which Moody's
believe is appropriate for a capital structure comprising bank debt
and with a single springing covenant under the RCF with significant
headroom.
RATING OUTLOOK
The stable rating outlook reflects Moody's expectation that EEF
will maintain its Moody's-adjusted (gross) debt/EBITDA above 5.0x
over the next 12-18 months while continuing to generate positive
FCF and maintaining its (EBITDA-capex)/interest expense above
2.0x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the ratings could arise in case of a sustained
decline of the Moody's-adjusted (gross) debt/EBITDA ratio
comfortably below 5.0x, a significant rise in Moody's-adjusted free
cash flows as well as a track record of prudent financial policy,
with no dividends and no debt-funded acquisitions. A positive
rating action would also necessitate a continued increase in
penetration rate, significantly above 60%, among Grand Frais
customers, as well as a robust performance of the sister company,
Prosol.
Downward pressure on the ratings could arise if Moody's-adjusted
(gross) debt/EBITDA increases above 6.0x, for instance, because of
a downturn in the fresh food market or a material leveraging
transaction, for if (EBITDA-capex)/interest expense falls below
1.5x on a sustained basis. A deterioration of the company's
liquidity profile, as shown for example by an inability to generate
positive Moody's-adjusted free cash flow, could also prompt a
negative rating action. Moody's could also consider downgrading the
ratings in case of material underperformance of Grand Frais'
partners, particularly Prosol's fruits and vegetable business, if
this were to lead to a disruption in footfall in Grand Frais
stores.
The principal methodology used in these ratings was Retail and
Apparel published in November 2023.
COMPANY PROFILE
Headquartered in Lyon, France, Euro Ethnic Foods Bidco S.A.S. (EEF)
is a member of the Grand Frais brand, a store network focused on
fresh quality products. Each Grand Frais store spans around 1,000
square meters and sells five different types of products: grocery
products, which are managed by EEF; and F&V, fish, meat and dairy
products, which are managed by third-party companies.
EEF holds a 25% stake in Grand Frais, while the remainder is split
among three private companies: Despinasse, controlling 25%; and
Prosol Gestion and Cremerie Exploitation, both controlled by the
private equity fund Ardian, together holding a 50% stake in Grand
Frais.
EEF generated revenue of EUR629 million in financial year 2024,
with 314 stores as of June 30, 2024. Each Grand Frais store is set
up as a groupement d'intérêt économique (GIE), made of four
legal entities (F&V and fish, dairy, meat, and grocery),
collectively liable for the debt of the GIE, but independent from
each other. Therefore, EEF does not have direct financial exposure
to its partners.
EEF is owned by PAI Partners, a private equity group. EEF was
founded in 1929 by the Bahadourian family, who remain minority
shareholders through their company Norkorz Capital.
FINANCIERE LABEYRIE: EUR455MM Bank Debt Trades at 20% Discount
--------------------------------------------------------------
Participations in a syndicated loan under which Financiere Labeyrie
Fine Foods SASU is a borrower were trading in the secondary market
around 80.1 cents-on-the-dollar during the week ended Friday,
November 22, 2024, according to Bloomberg's Evaluated Pricing
service data.
The EUR455 million Term loan facility is scheduled to mature on
July 30, 2026. The amount is fully drawn and outstanding.
Financiere Labeyrie Fine Foods sells seafood products. The Company
prepares shrimp, duck items, salmon, sushi, trout, and foie gras.
Labeyrie Fine Foods serves customers worldwide. The Company's
country of domicile is France.
FOUNDEVER GROUP: EUR1.00BB Bank Debt Trades at 36% Discount
-----------------------------------------------------------
Participations in a syndicated loan under which Foundever Group SA
is a borrower were trading in the secondary market around 64.0
cents-on-the-dollar during the week ended Friday, November 22,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR1 billion Term loan facility is scheduled to mature on
August 28, 2028. The amount is fully drawn and outstanding.
Foundever Group S.A., domiciled in Luxembourg, is a leading global
provider of CX products and solutions. Foundever generated $3.7
billion revenue for the twelve months ended March 31, 2024. The
company is owned by the Creadev Investment Fund (Creadev), which is
controlled by the Mulliez family of France.
=============
G E R M A N Y
=============
GHD VERWALTUNG: EUR360MM Bank Debt Trades at 39% Discount
---------------------------------------------------------
Participations in a syndicated loan under which GHD Verwaltung
Gesundheits GmbH Deutschland is a borrower were trading in the
secondary market around 61.4 cents-on-the-dollar during the week
ended Friday, November 22, 2024, according to Bloomberg's Evaluated
Pricing service data.
The EUR360 million Term loan facility is scheduled to mature on
August 17, 2026. The amount is fully drawn and outstanding.
GHD Verwaltung Gesundheits GmbH Deutschland provides healthcare
services. The Company offers rehabilitation, wound care,
orthopedics, pediatrics, pain management, and other services. GHD
Verwaltung Gesundheits conducts its business in Germany.
SUMMIT PROPERTIES: Moody's Affirms Ba1 CFR, Outlook Remains Stable
------------------------------------------------------------------
Moody's Ratings has affirmed the Ba1 long term corporate family
rating of Summit Properties Limited (Summit) and its existing
EUR300 million senior unsecured notes maturing in 2025. The outlook
remains stable.
RATINGS RATIONALE
The affirmation with a stable outlook reflects the declining
leverage and Summit's overall strong credit metrics for the rating
with a track record of long-term cyclical investment success. Solid
credit metrics and moderate dividend payouts are offset by an
investment strategy with elevated risk appetite albeit historically
successful, high integration into a higher leveraged parent entity,
and weaker operating performance in the last year than anticipated
by us.
Summit's Ba1 corporate family rating (CFR) benefits from the
company's solid cash flow generation, good interest coverage and
moderate leverage. Summit has sold assets at high prices and
reinvested in the US market with higher market liquidity, which it
partially sells again with disposals in the mall segment. Its US
residential assets provide for a steadily increasing cash flow with
unquestioned demand. The Summit owns a diversified pool of assets
across the US and Germany and across asset types.
At the same time the company exhibits an opportunistic investment
approach where it is comfortable investing in and holding assets
with relatively high vacancy rates in new countries with good
liquidity. The company also acquired shares in a listed oil retail
company in Israel alongside its parent company for less than 5% of
its asset base. The rating also incorporates the relatively smaller
scale and greater portfolio concentration compared to higher rated
European and US peers, alongside foreign exchange rate risk.
Moody's anticipate a repayment of the bond maturing in January 2025
that will reduce gross leverage, even if Moody's contemplate some
moderate value declines for 2024 and a flat valuation assumption in
2025. Moody's-adjusted debt/gross asset is set to decline below 30%
from 35.9% in H1 2024. This projection includes a moderate amount
of potential acquisitions in 2025 that the company could facilitate
with debt on a relatively large unencumbered asset base and
potential disposal proceeds from its US business.
Net debt/EBITDA is expected to remain low on the back of around
stable to slightly declining EBITDA pre potential disposals and
declining interest income. Moody's assume net debt to be largely
stable but allowed for moderate debt-funded purchases. Moody's
expect fixed charge cover to improve from the 3x as of H1 2024 as
the company will repay the bond and refinanced some of its
expensive debt on US malls, despite allowing for a moderate amount
of debt-funded acquisitions in 2025.
RATIONALE FOR THE OUTLOOK
The stable rating outlook balances Moody's expectation that the
company continues to operate with a moderate financial leverage, a
continuation of its opportunistic investment approach and weaker
asset quality in larger parts of the portfolio. The rating doesn't
factor in rising payouts to its shareholder.
STRUCTURAL CONSIDERATIONS
Moody's caution that in the case of the company's predominant class
of debt shifting sustainably towards secured debt as a consequence
of future acquisitions over the next six to 18 months, Moody's
could notch down the rating of the existing and planned new senior
notes, to reflect a weaker position of unsecured creditors post
investments into secured assets. A minimum of at least 1.5x
unencumbered property asset coverage ratio for unsecured creditors
and weighted towards stable or liquid asset classes will be
required for maintaining rating of the notes at the same level of
the long-term corporate family rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The below rating guidance is calibrated on the company's current
business profile, including a relevant footprint in Germany. Should
the company's portfolio mix materially change in the light of
future acquisition activity, guidance will need to be revisited.
FACTORS THAT COULD LEAD TO AN UPGRADE
-- an increase in scale
-- Moody's-adjusted debt/gross assets remaining below 40% and net
debt/EBITDA below 6.0x while achieving a fixed-charge coverage
(FCC) ratio of above 3.5x, with a commitment for leverage below
this level
-- A return to a predictable and long-term-oriented business
strategy, combined with positive operational results, such as
increasing occupancy, net operating income (NOI) and values
-- Continued low outflows to the company's shareholder
FACTORS THAT COULD LEAD TO A DOWNGRADE
-- Failure to return to positive operating growth
-- High volumes of opportunistic, high asset risk acquisitions
-- Increased leverage or liquidity needs of the parent increase
the risk of cash leakage from Summit Properties
-- Moody's-adjusted debt/gross assets increasing above 45% or net
debt/EBITDA above 7x
-- fixed charge cover declining below 3.0x
-- Deterioration of the quality or quantity of the unencumbered
asset pool could weaken the position of the senior unsecured
noteholders
LIQUIDITY
Liquidity is adequate. The company started the year with a
comfortable buffer to repay its bond, and has utilised some of the
cash to buy into Paz and provided further loans to the parent that
will become due before bond maturity.
The company had EUR174.5 million of liquidity on balance sheet as
of June 2024 and has no revolving credit facilities. The main next
cash needs stem from the remaining EUR182 million January 2025
maturity of its bond. Moody's expect a complete paydown of the bond
with existing cash on balance sheet, repayments of the loan from
its shareholder and liquidity from existing shares in Paz if need
be. In Moody's view the liquidity position provides less buffer for
any unforeseen events as the company does not have any revolving
credit facility.
The company has access to above EUR700 million of unencumbered
property assets, which Moody's consider a valuable source to
generate mid-term funding. Most of the assets are in its German
portfolio.
STRUCTURAL CONSIDERATIONS
The majority of Summit's debt is secured by mortgages, hence
Moody's CFR refers to a secured rating. Given Summit's large
position of unencumbered property assets and cash on balance sheet
compared to its unsecured debt, the unsecured debt rating remains
aligned with the CFR despite its subordination to secured
creditors. A potential for notching of future unsecured debt
issuance will depend on the ongoing coverage with high quality,
well performing bankable real estate assets.
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in February 2024.
COMPANY PROFILE
Summit Properties Limited (Summit) is a private commercial real
estate company, with a portfolio of EUR487 million commercial real
estate assets (59% offices, 32% logistics and 9% retail) in or
around Germany's top seven markets and EUR1.2 billion US real
estate assets, including EUR489 million residential properties in
New York City (Aa2 Stable) and EUR601 million retail assets, as of
June 30, 2024. It is fully owned by Summit Real Estate Holdings
Ltd, an Israel-listed company, controlled by Zohar Levy.
=============
H U N G A R Y
=============
WIZZ AIR: Moody's Affirms 'Ba1' CFR & Alters Outlook to Negative
----------------------------------------------------------------
Moody's Ratings has affirmed Wizz Air Holdings plc's (Wizz Air) Ba1
long-term corporate family rating and its Ba1-PD Probability of
Default rating. Concurrently, Moody's affirmed Wizz Air Finance
Company BV's backed senior unsecured and backed senior unsecured
medium term note program ratings at Ba1 and (P)Ba1, respectively.
The outlook on both entities changed to negative from stable.
RATINGS RATIONALE
The rating action mainly reflects the company's ongoing weak
point-in-time credit metrics with slower than expected recovery
driven by the high level of groundings from the GTF engine issue
that lead to higher costs beyond the agreed compensation levels,
further cost pressure from staff costs and inefficiencies in flight
operations, which are beyond the company's control.
Moody's furthermore expect a moderation of the strong yield
environment although market capacity remains constraint from
limited number of new aircraft deliveries. Moody's expect a higher
level of competition going forward given redeployment of routes due
to the geopolitical situation in several regions. Whilst Wizz Air
is expected to return to growth in F26, the high level of
groundings will depress capacity expansion and related
EBITDA-growth which in Moody's view will, together with the
beforementioned market pressure, delay its deleveraging in the next
12-18 months.
Moody's expect its Moody's adjusted debt/EBITDA to improve below
5.0x from 6.4x in LTM September 2024 within the next 12 months.
Such improvements will be driven by the discontinuation of wet
lease costs and expansion of its fleet, although in the longer term
the deliveries are dependent on Airbus SE's (A2 positive) ability
to ramp up production rates, which has proven difficult so far. The
fleet expansion leads to pressure on free cash flow generation,
although Wizz Air benefits from high proceeds from sale-and-lease
back transactions that support the company's liquidity. The company
benefits from its firm orders with Airbus that can be utilized to
support liquidity.
Wizz Air's rating remains supported by the company's superior cost
base, very efficient fleet and strong liquidity profile. The
company's expansionary strategy remains unchanged and will benefit
from these supportive factors, although it will require some time
for new routes to become profitable and Moody's cannot rule out a
margin of error as Wizz Air executes this growth strategy.
Wizz Air's rating is also well supported by the company's strong
liquidity profile. The company had around EUR1.8 billion available
cash on balance sheet as per September 30, 2024 or 35% of LTM
September 2024 revenue. Liquidity is deemed more than sufficient to
maneuver through a 12-month period of weak operating conditions if
market conditions deteriorate. Wizz Air faces one debt maturity of
EUR500 million backed senior unsecured notes in January 2026,
issued by Wizz Air Finance Company BV.
OUTLOOK
The negative outlook reflects Moody's expectation that the recovery
of Wizz Air's credit metrics in line with Moody's requirement for a
Ba1 rating (e.g. Debt/EBITDA below 4.5x) will be delayed with a
risk of not achieving such guidelines over the next 12 to 18
months.
STRUCTURAL CONSIDERATIONS
Wizz Air Finance Company BV's backed senior unsecured notes are
rated Ba1, at the same level of the corporate family rating, in
line with Moody's Loss Given Default for Speculative-Grade
Companies (LGD) methodology published in December 2015. This
reflects the fact that all the financial debt of Wizz Air is senior
unsecured and issued by a finance subsidiary backed by the parent
company of Wizz Air.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure could develop if on a Moody's adjusted
basis (i) Wizz Air reduces its Debt/EBITDA sustainably below 3.5x,
(ii) its EBIT margin exceeds 15% on a sustained basis, (iii)
retained cash flow (RCF)/debt is in excess of 20%, and (iv) its
strong liquidity profile is maintained.
Moody's could downgrade Wizz Air if over the next 12 to 18 months
the company does not demonstrate an ongoing positive trajectory of
metrics, and (i) gross adjusted debt to EBITDA remains sustainably
above 4.5x, (ii) RCF/net debt stays below 15%, and (iii) adjusted
EBIT margin stays sustainably below 10%.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATION
Wizz Air is exposed to carbon transition and social risk factors
that could result into pressure the rating over time. Wizz Air has
moderately negative corporate governance practices. Pre-pandemic,
Wizz Air maintained generally conservative financial policies but
its track record of maintaining a low leverage has deteriorated in
recent quarters as a consequence of the high level of groundings.
The company has ruled out to raise equity to support its credit
profile, which is in contrast with other rated airlines. On a
positive note Wizz Air has always very high liquidity buffer, which
served them well during the early stages of the pandemic. Wizz Air
has an ambitious growth strategy with material capital investment
plans for the purchase of new aircraft over the next 3 to 5 years
at least.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Passenger
Airlines published in August 2024.
COMPANY PROFILE
Wizz Air Holdings plc (Wizz Air), the parent of Wizz Air Hungary
Ltd, is the largest low-cost airline in CEE and one of Europe's
leading ultra-low-cost airlines that provide short- and medium-haul
point-to-point routes. Established in 2003, Wizz Air has grown
significantly and carried around 62.0 million passengers in 2024
(40 million in 2019).
The company has 32 operating bases (-2 y-o-y) and serves around 180
airports (-14 y-o-y) in 54 countries (+1 y-o-y), with an A320/321
family fleet of about 232 aircraft (+43 y-o-y). Its core markets
include Poland, Romania, Hungary and Bulgaria, which the company
links to other CEE and Western European destinations, especially
the UK. In fiscal 2024, Wizz Air generated revenue of around EUR5.1
billion (+30.1% y-o-y), while the company reported EBITDA of
EUR1,193 million (EUR134 million in 2023).
=============
I R E L A N D
=============
AVOCA STATIC I: Moody's Assigns Ba3 Rating to EUR13.8MM E-R Notes
-----------------------------------------------------------------
Moody's Ratings announced that it has assigned the following
definitive ratings to refinancing notes issued by Avoca Static CLO
I Designated Activity Company (the "Issuer"):
EUR186,300,000 Class A-R Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
EUR20,800,000 Class B-R Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aa1 (sf)
EUR18,300,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2035, Definitive Rating Assigned A2 (sf)
EUR14,500,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2035, Definitive Rating Assigned Baa3 (sf)
EUR13,800,000 Class E-R Deferrable Junior Floating Rate Notes due
2035, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in Moody's methodology.
The Issuer is a static cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. The portfolio will be 100% ramped as of the
closing date.
KKR Credit Advisors (Ireland) Unlimited Company ("KKR") may sell
assets on behalf of the Issuer during the life of the transaction.
Reinvestment is not permitted and all sales and unscheduled
principal proceeds received will be used to amortize the notes in
sequential order.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
In addition to the five classes of notes rated by us, the Issuer
has originally issued EUR32.89 million of Subordinated Notes which
remain outstanding and are not rated.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Moody's
methodology.
Moody's used the following base-case modeling assumptions:
Performing par: EUR275.20 million
Defaulted Par: none
Diversity Score: 49
Weighted Average Rating Factor (WARF): 3008
Weighted Average Spread (WAS): 3.87%
Weighted Average Recovery Rate (WARR): 45.19%
Weighted Average Life (WAL): 3.80 years
Further details regarding Moody's analysis of this transaction may
be found in the related new issue report, available soon on
Moodys.com.
JUBILEE 2024-XXIX: Fitch Assigns 'B-sf' Final Rating to Cl. F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Jubilee CLO 2024-XXIX DAC final ratings,
as detailed below.
Entity/Debt Rating
----------- ------
Jubilee CLO 2024-XXIX DAC
Class A – Loan LT AAAsf New Rating
Class A - Notes XS2899589753 LT AAAsf New Rating
Class B-1 XS2899589910 LT AAsf New Rating
Class B-2 XS2899590173 LT AAsf New Rating
Class C XS2899590256 LT Asf New Rating
Class D XS2899590504 LT BBB-sf New Rating
Class E XS2899590769 LT BB-sf New Rating
Class F XS2899590926 LT B-sf New Rating
Subordinated Notes XS2899591148 LT NRsf New Rating
Transaction Summary
Jubilee CLO 2024-XXIX DAC is a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans, first-lien last-out loans
and high-yield bonds. Note proceeds were used to fund a portfolio
with a target par of EUR400 million. The portfolio is actively
managed by Alcentra Limited. The transaction has a 4.6-year
reinvestment period and an 8.7-year weighted average life (WAL)
test.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors to be in the 'B' category. The
Fitch weighted average rating factor (WARF) of the identified
portfolio is 24.3
High Recovery Expectations (Positive): At least 90% of the
portfolio comprise senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is 62.4%.
Diversified Asset Portfolio (Positive): The transaction includes
six Fitch matrices. Two are effective at closing, corresponding to
an 8.7-year WAL; two are effective one year after closing,
corresponding to a 7.7-year WAL with a target par condition at
EUR425 million, and another two effective 1.5 years after closing,
corresponding to a 6.2-year WAL with a target par condition at
EUR398 million. Each matrix set corresponds to two different
fixed-rate asset limits at 7% and 15%. All matrices are based on a
top-10 obligor concentration limit at 20%.
The transaction has a maximum exposure to the three-largest
Fitch-defined industries in the portfolio at 40%, among others.
These covenants ensure the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction has a 4.6-year
reinvestment period, which is governed by reinvestment criteria
that are similar to those of other European transactions. Fitch's
analysis is based on a stressed-case portfolio with the aim of
testing the robustness of the transaction structure against its
covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL Fitch modelled is 12 months
less than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period. These include passing both the coverage tests
and the Fitch 'CCC' maximum limit, as well as a WAL covenant that
progressively steps down over time, both before and after the end
of the reinvestment period. Fitch believes these conditions would
reduce the effective risk horizon of the portfolio during stress
periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no impact on the class A and B
notes, and would lead to a downgrade of one notch for the class C,
D and E notes and to below 'B-sf' for the class F notes.
Downgrades, which are based on the identified portfolio, may occur
if the loss expectation is larger than initially assumed, due to
unexpectedly high levels of default and portfolio deterioration.
Due to the better metrics and shorter life of the identified
portfolio than the Fitch-stressed portfolio, the class B to F notes
display a rating cushion of two notches.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
across all ratings and a 25% decrease of the RRR across all ratings
of the Fitch-stressed portfolio would lead to a downgrade of three
notches for the class A and D notes, four notches for the class B
and C notes, and to below 'B-sf' for the class E and F notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings of Fitch-stressed portfolio
would result in an upgrade of no more than four notches across the
structure, apart from the 'AAAsf' notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
remaining life of the transaction. After the end of the
reinvestment period, upgrades may result from stable portfolio
credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for JUBILEE CLO
2024-XXIX DAC. In cases where Fitch does not provide ESG relevance
scores in connection with the credit rating of a transaction,
programme, instrument or issuer, Fitch will disclose any ESG factor
that is a key rating driver in the key rating drivers section of
the relevant rating action commentary.
=========
I T A L Y
=========
BFF BANK: Moody's Cuts LT Issuer, Sr. Unsecured Debt Ratings to Ba3
-------------------------------------------------------------------
Moody's Ratings has confirmed BFF Bank S.p.A.'s (BFF) long-term
(LT) and short-term (ST) deposit ratings of Baa3/Prime-3
respectively.
All other ratings and assessments were downgraded, including its:
LT issuer and senior unsecured debt ratings to Ba3 from Ba2,
preferred stock non-cumulative rating to B3(hyb) from B2(hyb), LT
and ST Counterparty Risk Ratings (CRR) to Baa3/Prime-3 from
Baa2/Prime-2, LT and ST Counterparty Risk (CR) Assessments to
Baa3(cr)/Prime-3(cr) from Baa2(cr)/Prime-2(cr) as well as BFF's
Baseline Credit Assessment (BCA) and Adjusted BCA to ba3 from ba2.
The outlook on the LT deposit ratings and LT issuer and senior
unsecured debt ratings are stable. Previously, the ratings were on
review for downgrade.
The rating action concludes the review for downgrade initiated on
May 22, 2024 and extended on August 15, 2024 following the bank's
announcements on May 9 and 10, 2024 that its supervisor, the Bank
of Italy, took several temporary measures including the suspension
of dividends on 2024 profits.
RATINGS RATIONALE
DOWNGRADE OF THE BASELINE CREDIT ASSESSMENT
The one-notch downgrade of the BCA to ba3 reflects BFF's solvency
position deterioration following the Bank of Italy's inspection,
which resulted in the implementation of stricter rules on past due
loans (eight times higher between December 2023 and September 2024)
that led to a material increase in the bank's risk-weighted
assets. Consequently, BFF's Common Equity Tier 1 (CET1) ratio
significantly dropped to 12.3% as of September 2024, down from
14.2% as of December 2023. In Moody's view, the bank will operate
over the medium term with this reduced capital buffer due to its
high dividend policy.
In downgrading the bank's BCA, Moody's have also considered the
remediation plan that BFF has introduced following the actions
taken by the Italian supervisor. However, upon reevaluating its
overdue loans, mainly from public administrations, BFF shows a
higher risk concentration compared to the broader and more varied
loan portfolios typically seen in Italian and European banks.
BFF will continue to benefit from a strong profitability, albeit
slightly declining. Additionally, a slight delay in implementing
the bank's growth strategy could affect revenue generation.
However, BFF's liquidity will remain good, improving marginally as
the level of asset encumbrance decreases in alignment with secured
financings.
BFF's BCA of ba3 also reflects the recent misalignment of BFF's
risk management practices and procedures with domestic regulations
as well as weaknesses in corporate governance. BFF has not yet
received authorization to lift the above mentioned precautionary
measures mandated by the Bank of Italy.
--- DOWNGRADE OF THE LT ISSUER AND SENIOR UNSECURED DEBT RATINGS
The downgrade of BFF's BCA by one notch has led to a corresponding
downgrade of its LT issuer and senior unsecured debt ratings to
Ba3. This continues to reflect a moderate loss given failure under
Moody's Advanced Loss Given Failure (LGF) analysis, and a low
probability of support from the Government of Italy (Baa3 stable)
due to the bank's small size, leaving the bank's ba3 Adjusted BCA
without any uplift.
--- CONFIRMATION OF THE DEPOSIT RATINGS
BFF's Baa3 LT deposit ratings were confirmed despite the downgrade
of the bank's BCA. This results from a reduction in the expected
loss for depositors following the issuance of a senior unsecured
debt in October 2024, which occurred earlier than anticipated, that
has increased the volume of outstanding bail-in-able debt. This
translates into three notches of uplift from BFF's Adjusted BCA
from two notches previously under Moody's Advanced LGF analysis.
BFF's deposit ratings do not benefit from any further uplift due to
Moody's unchanged low probability of government support.
OUTLOOK
The stable outlook on the bank's LT deposit ratings as well as on
the LT issuer and senior unsecured debt ratings reflects Moody's
view that the bank will continue to operate with a lower level of
capital compared to year-end 2023 while profitability is
progressively trending down as interest rates are normalizing.
The stable outlook also reflects Moody's anticipation that the
volume of both senior unsecured debt and subordinate instruments
will stay roughly the same, supporting BFF's limited growth
strategy. This consistency ensures that Moody's Advanced LGF
analysis loss given failure estimation will not change over the
outlook period.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
BFF's ratings may be upgraded in case of an upgrade of its BCA.
Potential factors for an upgrade of the bank's BCA include a
sustained recovery of its solvency, principally its capital
position and improved asset diversification, less dependence on
market funding and online deposits, along with a lower
concentration on deposits from financial institutions related to
securities and payment services activities.
Additionally, addressing governance risks could eliminate the
negative corporate behaviour adjustment, potentially resulting in a
BCA upgrade for BFF. However, it is unlikely that this adjustment
will be reversed soon because Moody's usually consider a consistent
track record.
An increase in the pool of loss-absorbing liabilities subject to
bail-in could also result in an upgrade of the LT issuer and senior
unsecured debt ratings due to lower loss given failure.
Conversely, BFF's ratings could be downgraded following a downgrade
of the bank's BCA. BFF's BCA could be downgraded if the bank's
creditworthiness were to weaken, illustrated by, among other
things, increased asset risk, lower capital or profitability, or
increased funding or liquidity pressures.
The maintenance of supervisory measures may further impact Moody's
assessment of BFF's creditworthiness.
Additionally, a decrease in the pool of liabilities subject to
bail-in could also result in a downgrade of the LT deposit as well
as LT issuer and senior unsecured debt ratings due to an increased
loss given failure. This scenario could unfold should the bank
undergo substantial growth, further complicated by BFF's
refinancing risks due to bond maturities.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published
in November 2024.
===================
K A Z A K H S T A N
===================
KCELL JSC: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed Kcell JSC's Long-Term Issuer Default
Rating (IDR) at 'BB+' with a Stable Outlook.
Kcell's ratings benefit from its moderate to strong linkage to its
parent, Kazakhtelecom JSC (Kaztel; BBB-/Stable). Kcell has a
Standalone Credit Profile (SCP) of 'bb'.
The SCP is supported by the company's strong mobile market
positions and relatively low leverage, but it also reflects its
heavy dependence on infrastructure sharing, smaller size versus
higher-rated mobile-only peers and market share pressures resulting
in gradually declining market shares. Fitch expects the company's
credit metrics to deteriorate on the back of high capex
requirements and increased interest payments, which will lead
Fitch-defined EBITDA net leverage to increase to 2.4x-2.6x in
2025-2027 from 0.9x in 2023. This is still below the negative
sensitivity of 3.1x, but with limited headroom.
Key Rating Drivers
Increasing Leverage: Fitch projects Kcell's EBITDA net leverage to
rise to 1.5x in 2024 from 0.9x in 2023 due to substantial capex,
increased debt and lower EBITDA. Fitch expects leverage to rise
further to 2.4x-2.6x in 2025-2027 as the company continues the
development of 4G infrastructure alongside the rollout of its 5G
network. Net leverage remains below the negative sensitivity of
3.1x, albeit with limited headroom.
High Capex Constrains FCF: Following the purchase of 5G spectrum
and the associated capex requirements, coupled with 4G
infrastructure upgrade needs, Fitch forecasts capex to remain high
at 36%-48% of revenue in 2024-2025 before declining to 20% in
2027.
This, together with increased interest payments, will result in
negative free cash flow (FCF) generation in its base case. Fitch
expects interest payments to increase as a result of higher debt to
fund enlarged capex requirements and high interest rates. The
interest rates are, however, lower than its previous expectations
following the launch of a new bond programme and decreasing policy
rates. As of 9M24, the company's debt had an interest rate of
14.75%-16.25%.
EBITDA Margin Pressures: Fitch-defined EBITDA margin declined to
30% in 9M24 from 39% in 2023 due to a full impact of increased fees
for spectrum and cost inflation, in particular, personnel expenses.
Fitch expects EBITDA margin will remain at 30% in 2024-2025 due to
the company's limited ability to reduce personnel costs before
gradually improving to 31% in 2027 on the back of economies of
scale and cost optimisation, including from network sharing with
Mobile Telecom-Service LLP(MTS).
Market Structure Changes: Following the sale of MTS by Kaztel,
Kazakhstan's telecom market will transition to three from two
independent operators potentially increasing competitive pressures.
However, Kcell and MTS have historically operated independently.
Also, post-transaction, there will be a three-year moratorium on a
new round of a 5G spectrum auction according to the regulator's
public comments, effectively delaying a potential entry of any new
telecom operators. Fitch also expects Kcell to benefit from
expanding mobile plus fixed bundled offerings, a strategy
previously employed by MTS under the Kaztel ownership.
Strong Market Position, Some Attrition: Kcell remains the
second-largest mobile operator in Kazakhstan with a subscriber
market share of about 30% at end-3Q24. However, its market share
has been gradually declining for at least the past six years,
mainly driven by the company's underinvestment in 4G. As of
end-3Q24, its 4G/LTE coverage was 74% of Kazakhstan's population,
compared with 88% for VEON (mobile market leader in Kazakhstan).
Significant investments in the network upgrade as well as 5G
roll-out after receiving the corresponding spectrum in 2022 should
support the company's market positions.
PSL-Driven Rating: Under Fitch's Parent-Subsidiary Linkage (PSL)
Rating Criteria, Fitch rates Kcell using a top-down approach, with
one notch below Kaztel's consolidated credit profile. Fitch
assesses the overall parent-subsidiary linkage between Kcell and
Kaztel as 'Moderate' to 'Strong', with the parent as the stronger
entity, given Kcell's 'bb' SCP.
'High' Strategic Incentive: Fitch views the strategic incentive (as
defined by its PSL Rating Criteria) for Kaztel to support Kcell as
'High'. Following the sale of MTS, expected to be completed by
end-2024, Kcell will contribute about 50% of Kaztel's consolidated
revenue and control over Kcell allows Kaztel to be present on the
Kazakh mobile market. Fitch expects the mobile segment to be one of
Kaztel's major growth drivers.
'Medium' Operational, 'Low' Legal Incentives: Fitch assesses the
operational incentive for support from Kaztel as 'Medium'. This is
underpinned by considerable cost savings at the group level,
counterbalanced by the absence of common management and brand
sharing. Fitch views legal incentives as 'Low', given the lack of
parental guarantees on a significant amount of Kcell's debt. Any
intercompany loans to the parent would need approval from Kcell's
independent directors, which limits the parent's ability to tap its
subsidiary's cash flow.
Derivation Summary
Kcell's peer group includes Turkish mobile-focused operator
Turkcell Iletisim Hizmetleri A.S. (Tcell; BB-/Stable) and German
mobile operator Telefonica Deutschland Holding AG (TEF DE;
BBB/Stable).
Kcell's ratings benefit from a single-notch uplift to its 'bb' SCP
for its moderate-to-strong PSL to Kaztel. Like Tcell and TEF DE,
Kcell has a sound mobile market position, low leverage and good
cash flow generation outside the peak of its investment cycle.
However, Kcell is far smaller than its peers, lacks a proprietary
backbone network infrastructure and has limited access to
international capital markets.
Kcell operates in a more stable operating environment and is not
exposed to FX risks, unlike Tcell, whose ratings are constrained by
Turkiye's Country Ceiling. However, Tcell also offers fixed-line
services in Turkiye, and owns its fixed-line infrastructure.
Key Assumptions
- Revenue growth of 8% in 2024 and medium single digits in
2025-2027.
- Fitch-defined EBITDA margin at 30% in 2024-2025, gradually
improving to 31% in 2027.
- Working-capital cash inflows of KZT9 billion in 2024 and KZT3
billion a year in 2025-2026.
- Cash capex at 36% of revenue in 2024, 48% in 2025 and 20%-25% in
2026-2027.
- No M&A to 2027.
- Dividend payments of KZT10 billion per year in 2026-2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Kaztel, provided PSL is unchanged.
- Weaker linkage to Kaztel, including due to a decline in Kaztel's
ownership in Kcell or from higher EBITDA net leverage sustained
above 3.1x without a clear path for deleveraging and no commitment
by the parent to provide financial support.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action for the SCP but Not Necessarily Kcell's IDR
- Weakening operating profile with slower revenue growth and
profitability due, for example, to intensifying competitive
pressures following the sale of MTS by Kaztel.
- EBITDA interest cover below 3.5x on a sustained basis, and
negative pre-dividend FCF generation outside the peak of the
investment cycle.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of Kaztel, provided PSL is unchanged.
- Stronger linkage to Kaztel, including through shareholder funding
or guarantees provided by Kaztel on a large amount of Kcell's
debt.
Liquidity and Debt Structure
Weakened Liquidity: Kcell had KZT8.5 billion of cash and cash
equivalents at end-September 2024 and KZT73.5 billion undrawn
revolving credit facilities with maturities in June-September 2025
compared with KZT40 billion of short-term debt. Fitch expects the
company will need to raise additional debt to finance its negative
FCF, which Fitch estimates at about KZT130 billion in 2024-2026,
due to high capex.
In 2024, Kcell launched a new local bond program and raised KZT85
billion as of end-October 2024. The bonds are held by Sovereign
Wealth Fund Samruk-Kazyna JSC, a state wealth fund and a direct
parent of Kaztel.
Issuer Profile
Kcell is the second-largest mobile-only operator in Kazakhstan.
Public Ratings with Credit Linkage to other ratings
Kcell's ratings are linked to Kaztel's.
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 Prior
----------- ------ -----
Kcell JSC LT IDR BB+ Affirmed BB+
Natl LT AA(kaz) Affirmed AA(kaz)
senior
unsecured LT BB+ Affirmed BB+
senior
unsecured Natl LT AA(kaz) Affirmed AA(kaz)
===================
L U X E M B O U R G
===================
ARDAGH METAL: Moody's Lowers CFR to B3 & Alters Outlook to Stable
-----------------------------------------------------------------
Moody's Ratings has downgraded Ardagh Metal Packaging S.A.'s (AMP
or the company) long term corporate family rating to B3 from B2 and
its probability of default rating to B3-PD from B2-PD. AMP is a
Luxembourg-based manufacturer of metal containers for the beverage
industry.
Concurrently, Moody's have downgraded the rating on the $1,700
million equivalent backed senior secured notes due 2027 and 2028 to
B2 from Ba3 and the rating on the $1,600 million equivalent backed
senior unsecured notes due 2029 to Caa2 from Caa1, all notes issued
by Ardagh Metal Packaging Finance plc and co-issued by Ardagh Metal
Packaging Finance USA LLC, wholly owned subsidiaries of AMP. The
outlook on all rated entities has changed to stable from negative.
"The downgrade to B3 reflects Moody's expectation that the
company's deleveraging trajectory will be slower than anticipated
owing to modest volume growth in 2025-2026 and increased debt, and
its free cash flow will continue to remain negative during this
period," says Donatella Maso, a Moody's Ratings Vice President –
Senior Credit Officer, and lead analyst for AMP.
"The action also reflects the recent downgrade of the rating of
AMP's ultimate parent company, ARD Finance S.A., to Caa2 negative
given its unsustainable capital structure and the risks that this
may pose to AMP's refinancing capabilities", adds Ms Maso.
RATINGS RATIONALE
During the first nine months of 2024, while AMP's revenue increased
by only approximately 1% as positive volume developments and
product mix were offset by lower prices, its reported EBITDA went
up by 15% because of an improved sales mix and input cost recovery,
resulting in higher profitability margins for the company. These
results led AMP to slightly improve its EBITDA guidance for the
current financial year.
However, AMP's leverage based on LTM September 2024 Moody's
adjusted EBITDA of approximately $580 million after start-up costs,
remains elevated at 8.2x, which is well above the maximum leverage
tolerance of 6.5x for the previous B2 rating category.
Although Moody's expect the company to continue to improve its
EBITDA in 2025-2026 owing to modest volume growth because of
improving market conditions and to higher fixed cost absorption,
its deleveraging trajectory will be slower than previously
anticipated. This is also because of additional facilities recently
raised in order to improve its liquidity. As a result, its Moody's
adjusted gross leverage will remain above 7.0x until 2026. Under
Moody's forecasts, the company will not be able to meet its public
net leverage target of 3.75x-4.0x over this period.
The downgrade also reflects Moody's expectation of persistent
negative free cash flow (FCF). Despite management's efforts to
significantly decrease growth investments over the next two years,
the company's FCF will continue to suffer from high interest
expense and its commitment to distributing a 10 cents quarterly
dividend to its shareholders, thus reducing its liquidity headroom
over time.
Furthermore, the action also considers the recent downgrade of
AMP's ultimate parent company, ARD Finance S.A., to Caa2 with
negative outlook reflecting its increased probability of default.
Despite AMP's debt is ring-fenced from the rest of Ardagh group,
there are several related party transactions between the company
and its parent and a potential default of ARD Finance S.A. may pose
challenges to AMP's access to the capital markets in case of
refinancing needs.
AMP's B3 rating also reflects the business concentration in terms
of products, end-markets and customers; the commoditized nature of
its products in the context of the competitive beverage can
industry; and a degree of exposure to fluctuating input prices and
currencies, although mitigated by pass-through clauses in most of
its customer contracts, hedging and the debt being issued in
different currencies matching cash flows.
The B3 rating remains supported by the company's leading market
position as the world's third-largest beverage can manufacturer in
a consolidated industry with some barriers to entry; its
geographically diversified and well-invested footprint; its
exposure to stable end markets; and the long-term positive
fundamentals of the metal beverage can industry, driven by
sustainability trends and the emergence of new drink categories.
LIQUIDITY
Moody's consider AMP's liquidity as adequate for its near-term
requirements, despite Moody's expectation of negative FCF at least
until 2026. The liquidity is supported by $393 million of cash on
balance sheet at the end September 2024; full availability of its
$415 million under its asset-based loan facility (ABL) due 2026 and
its $90 million equivalent credit facility with Banco Bradesco S.A.
in Brazil which is available for drawings until September 2025; and
access to uncommitted non-recourse factoring arrangements. The
nearest debt maturity is in 2027, when the $600 million backed
senior secured notes become due.
The ABL facility is subject to a springing financial covenant that
would require AMP to maintain a 1.0x fixed charge coverage ratio,
tested quarterly, if 90% or more of the facility is drawn. Moody's
expect AMP to maintain adequate flexibility under the covenant over
the next 12 to 18 months.
STRUCTURAL CONSIDERATIONS
The B3-PD PDR on AMP is in line with the CFR. This is based on a
50% recovery rate assumption, as is typical for capital structures
that include both bonds and bank debt.
The B2 rating on the backed senior secured notes is one notch above
the CFR, mainly reflecting the significant amount of debt ranking
junior to the notes. These notes rank pari passu with the EUR269
million senior credit facility provided by Apollo and due in 2029.
The Caa2 rating on the backed senior unsecured notes is two notches
lower than the CFR, reflecting their subordination to the sizeable
amount of senior secured debt that ranks ahead.
The senior secured notes are secured by share pledges and floating
charges over assets in certain jurisdictions. The senior secured
notes rank junior with respect to the ABL facility's collateral.
Both senior secured and senior unsecured notes are guaranteed by
the parent guarantor (AMP) and its subsidiaries, which accounted
for 76% of AMP's aggregate assets and 68% of its consolidated
EBITDA as of March 31, 2022.
The notes issued within the AMP restricted group are ring fenced,
with no cross-default provisions with the debt sitting at its
parent company (Ardagh Group S.A.) and there are no upstream or
downstream guarantees.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectation that AMP's
operating performance and leverage will gradually improve over the
next 12 to 18 months and the company will maintain an adequate
liquidity profile. The stable outlook also incorporates Moody's
view that the risks affecting AMP due to its parent company's
financial challenges are consistent with the current rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure could develop overtime if AMP's EBITDA
significantly increases as a result of improved demand, if it
develops a track record of consistent and prudent financial
policies, and its parent company restores a more sustainable
capital structure. Quantitively, an upgrade would be considered if
AMP's Moody's adjusted leverage falls below 6.5x; its Moody's
adjusted EBITDA/interest cover ratio stays around 3x; and its free
cash flow (FCF) turns positive on a sustained basis.
Negative rating pressure could arise if the company's Moody's
adjusted leverage does not reduce comfortably below 8.0x; or its
liquidity weakens because of persistent negative FCF. A more
aggressive financial policy or a deterioration in its parent
company's financial profile could also add pressure on its rating.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Packaging
Manufacturers: Metal, Glass and Plastic Containers published in
December 2021.
COMPANY PROFILE
AMP is a global manufacturer of metal cans for the beverage
industry. AMP operates through 23 plants located in 9 countries
across Europe, North America and Brazil. For the last twelve months
ending September 30, 2024, AMP generated approximately $4.8 billion
of revenue and approximately $580 million of EBITDA, as adjusted by
Moody's.
AMP is a Luxembourg based company, listed on the New York Stock
Exchange since August 2021. AMP is majority owned by Ardagh Group
S.A. with a 76% stake.
EOS US FINCO: $534.7MM Bank Debt Trades at 29% Discount
-------------------------------------------------------
Participations in a syndicated loan under which EOS US Finco LLC is
a borrower were trading in the secondary market around 71.4
cents-on-the-dollar during the week ended Friday, November 22,
2024, according to Bloomberg's Evaluated Pricing service data.
The $534.7 million Term loan facility is scheduled to mature on
October 9, 2029. The amount is fully drawn and outstanding.
EOS US Finco LLC is a hardware technology company based in the
United States. The Company’s country of domicile is Luxembourg.
=============
R O M A N I A
=============
MAS PLC: Fitch Lowers LongTerm IDR to 'BB-', On Watch Negative
--------------------------------------------------------------
Fitch Ratings has downgraded MAS PLC's Long-Term Issuer Default
Rating (IDR) to 'BB-' from 'BB' and its senior unsecured rating to
'B+'/RR5 from 'BB'/RR4. All ratings remain on Rating Watch Negative
(RWN).
The RWNs reflect MAS's limited liquidity ahead of its EUR173
million bond maturing in May 2026, aggravated by EUR72 million of
undrawn capital commitments for PKM Development (DJV) at 30 June
2024 (FYE24). Fitch expects to resolve the RWN as the company
procures reliable liquidity sources ahead of its main debt
maturity. The previous RWNs related to MAS's announcement of DJV's
potential acquisition of 60% of DJV's ordinary equity from Prime
Kapital (PK). This proposal has been withdrawn.
MAS's ratings reflect the stable operational performance of its
Romania-focused portfolio of 21 wholly owned shopping centres
valued at around EUR1.0 billion at FYE24. The assets, mainly in
secondary locations with limited competition in their catchment
areas, have high occupancy of over 97% at FYE24 and rental growth
driven by indexation and rent reversions. Fitch-calculated FY24 net
debt/EBITDA (including cash-paid coupons from preferred shares in
DJV) was 6.1x and Fitch expects it to remain below 7.5x by FYE28.
Key Rating Drivers
Liquidity Challenges: MAS has focused on liquidity ahead of the
main May 2026 EUR173 million bond maturity. MAS has suspended its
dividends, planned new debt and other initiatives, such as asset
disposals. At FYE24, MAS had signed an additional EUR41 million of
secured debt and is negotiating another EUR69 million. Including a
EUR72 million capital commitment towards DJV, the Fitch-calculated
liquidity gap to May 2026 remains about EUR95 million. Fitch
considers that MAS's availability of unsecured funding from the
capital markets is limited.
Complicated Corporate Structure: The company has a 40% stake in
DJV, which provides MAS with property developments. MAS must
provide DJV with 7.5% yielding preferred equity to finance the
projects and a revolving credit facility (RCF) of EUR30 million.
FYE24's remaining undrawn commitment was EUR72 million due by March
2030, assuming a fully drawn RCF. Its DJV partner, PK, manages the
development pipeline and provides construction services. MAS does
not control DJV, but it may exercise significant influence as it
can appoint directors to DJV's board.
MAS's cash flow from DJV are common stock dividends and proceeds
from its invested capital (preference shares), tied to the
operational performance of DJV. The coupon on the preference shares
may be accumulated if DJV's funds are insufficient. MAS discloses
that DJV has used part of the preferred equity to purchase MAS's
shares (an 18.7% stake at FYE24). Fitch assumes it would be
disadvantage to DJV to request the EUR72 million of additional
capital from MAS, which would limit its liquidity headroom and
jeopardise DJV's equity investments in MAS.
Romania-Focused Retail Portfolio: MAS's portfolio is concentrated
on the Romanian market with 17 assets (73% of income-producing
value, 72% of net rental income (NRI)) with a net rental income
yield of around 7.3%. The remainder is represented by two assets in
Bulgaria (14% of NRI), one in Poland (10%) and one remaining asset
in Germany (4%). The portfolio includes enclosed malls (46% of NRI)
and open-air malls (54%), mostly in secondary locations, however
dominated by international retail brands (around 80% of gross
leasable area).
Good Operational Outcomes: The issuer maintains good operational
performance fuelled by accelerating private consumption in Romania
from increasing real disposable income. In FY24, footfall and
tenants' sales increased by 7% and 8% on a like-for-like basis with
a stable occupancy cost ratio of 11%. Like-for-like passing net
rents rose by around 7% driven by an average inflation-linked
increase of 4% and 9% rent reversion. Occupancy remains robust at
97% but the weighted average lease expiry to earliest break remains
short at 3.6 years with around 40% of leases maturing by FYE27.
Robust Financial Performance: MAS funded an additional EUR119
million of capital to DJV in FY24 and repurchased part of its May
2026 bond with EUR73 million cash consideration (for EUR81 million
par value). That was funded by new secured loans of total EUR136
million, proceeds from the disposal of UK assets EUR23 million and
disposal of shares in NEPI Rockcastle N.V. (BBB+/Stable) for EUR38
million. A higher coupon (6.5%) private placement due in April 2029
funded an additional EUR40 million exchange of May 2026's bond.
MAS has moderate Fitch-calculated net debt/EBITDA leverage of 6.9x
in FY26. Fitch-adjusted EBITDA (which includes only cash preferred
shares' income and dividends from DJV) was EUR59 million. Fitch's
forecasts assume no cash from DJV and expect net debt/EBITDA to
remain below 7.5x by FYE28, with EBITDA net interest coverage
staying above 2.2x.
Derivation Summary
One of MAS's closest peers is NEPI. The founders of PK set up New
Europe Property Investments, the predecessor of NEPI, and MAS had
significantly invested in NEPI's shares. NEPI is larger and more
diverse than MAS with a retail portfolio of EUR6.9 billion assets
across eight central and eastern European (CEE) countries with a
focus on destination malls. MAS concentrates more on
convenience-led shopping in secondary locations.
AKROPOLIS GROUP, UAB (BB+/Stable) owns and operates a retail
portfolio valued at around EUR1 billion, concentrated in five
assets in Lithuania and Latvia, which means it has higher asset and
geographic concentration than MAS.
MAS differs from other rated EMEA real estate companies in its
complex corporate structure, where new properties are exclusively
developed and held through the 40%-owned DJV but financed with 7.5%
yielding preferred equity. Peers typically directly develop and own
their assets or through a JV structure.
All three let space to a variety of well-known international and
regional brands. Regional retailers experienced higher retail sales
growth than western European peers, as other jurisdictions tend to
have higher and increasing e-commerce shares, and sometimes an
oversupply of retail space. This provides some buffer against the
risk of a decline in consumer demand, raising staff salaries or
inventories prices in CEE retail markets.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Fitch analyses MAS's financial profile on a standalone basis.
Only dividend and cash-paid preference share coupons received from
the DJV (generated from recurring, rental-derived, post-interest
expense profits) are included - assumed nil in the forecast period
- in MAS's Fitch-adjusted EBITDA.
- Like-for-like net rental income growth of 2.2% in FY25 and
1.5%-2% thereafter due to indexation of 2.3% in FY25 and 2%
thereafter.
- EUR91 million of secured bank debt drawn in FY25 and EUR60
million in FY26.
- No dividends in FY25 and FY26 and 90% of funds from operations
thereafter.
- No disposals assumed.
- No acquisitions, except EUR22 million for three small extensions
still being held by DJV and subject to a put option available to
DJV.
- Remaining commitments to DJV of EUR42 million preference shares
and EUR30 million of RCF paid in FY25.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to the
Removal of Rating Watch and Rating Affirmation
- Successfully refinancing, or liquidity to refinance, May 2026's
bond
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Failure to address the May 2026 bond maturity by at least end-May
2025
- A 12-month liquidity score below 1x on a sustained basis
- Material deterioration in operating metrics, such as occupancy
below 90%
- Net debt/EBITDA (including cash-paid preference share coupons)
exceeding 8.5x
Liquidity and Debt Structure
MAS liquidity is moderate. At FYE24, MAS has EUR69 million of
readily available cash and access to fully undrawn revolving credit
facility of EUR20 million maturing in November 2025. Additionally,
MAS signed EUR41 million of secured debt, fully available, with
EUR69 million under negotiations. These amounts cover its FY25 debt
amortisations and undrawn capital commitments of EUR72 million
towards DJV. Significant maturities and amortisation of more than
EUR200 million will take place in FY26, mainly the EUR173 million
unsecured bond maturing in May 2026. MAS may use multiple
strategies to address adequate liquidity, including additional
secured debt, asset disposal and unsecured debt.
MAS is not a REIT and has no regulatory obligation to pay a regular
cash dividend. The company suspended its cash dividend until
repayment of the May 2026 bond.
At FYE24, the company had EUR223 million of unencumbered assets,
excluding asset pledged as collateral of the signed new EUR41
million secured loan, or 22% of the group's total income-producing
assets. This resulted in unencumbered asset cover of around 1x.
This ratio will decrease as additional secured debt is signed. This
decline in the unencumbered investment property asset/unsecured
debt cover ratio led to the notching down of the unsecured rating
relative to MAS's IDR.
Issuer Profile
MAS is a real estate company that owns and operates a portfolio of
retail assets, mainly in Romania, but also Bulgaria and Poland. The
shopping centres are largely in secondary locations with a slant
towards convenience-led stores. MAS has exposure to asset
development exclusively through the DJV.
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
MAS has an ESG Relevance Score of '4' for Group Structure due to
the group's complexity, which includes disclosed related-party
transactions (including preference shares, a previous property
disposal transaction to MAS) and cross-holdings (such as the
unusual circumstance of DJV owning shares in MAS). This has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
MAS has an ESG Relevance Score of '4' for Governance Structure due
to the potential for conflicts of interest and related-party
transactions. While common management between MAS and the DJV has
been significantly reduced, at FYE24 MAS had disclosed that DJV
owned around 19% of MAS. MAS's majority-independent board members
scrutinising most dealings and transactions, mitigating the risk of
conflicts of interest. This governance structure has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
MAS PLC LT IDR BB- Downgrade BB
senior unsecured LT B+ Downgrade RR5 BB
MAS Securities B.V.
senior unsecured LT B+ Downgrade RR5 BB
=========
S P A I N
=========
BBVA CONSUMO 12: Moody's Ups Rating on EUR150MM Cl. B Notes to Ba3
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of BBVA CONSUMO 12, FT.
The rating action reflects increased levels of credit enhancement
for the affected Notes.
EUR2850M Class A Notes, Upgraded to Aa1 (sf); previously on Jan
16, 2024 Upgraded to Aa2 (sf)
EUR150M Class B Notes, Upgraded to Ba3 (sf); previously on Jan 16,
2024 Affirmed B1 (sf)
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement
for the affected tranches.
Increase in Available Credit Enhancement
Sequential amortization led to the increase in the credit
enhancement available in these transactions. The credit enhancement
for the Class A Notes increased to 15.72% from 12.15% since last
rating action. Credit enhancement for the Class B Notes increased
to 7.86% from 6.07% since last rating action.
The reserve fund is at its target of EUR150 million and it will
start amortizing in two payment dates if certain performance
triggers are satisfied down to a floor equal to EUR75 million. The
reserve fund is not available to cover interest on Class B as long
as the Class A is outstanding. Interest payments for Class B are
dependent on any excess spread left after covering senior expenses,
interest on Class A notes and defaults. In Moody's analysis,
Moody's have reassessed the likelihood of an interest shortfall on
Class B in light of current yield in the transaction and the speed
of the expected amortization of the Class A Notes.
Key Collateral Assumptions
As part of the rating action, Moody's reassessed the default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date.
The performance of the transaction deteriorated slightly over the
last twelve months. 90 days plus arrears currently stand at 0. 33%
of current pool balance, still at a low level but increased from
0.22% one year ago. Cumulative defaults as percentage of original
pool balance increased by 1.18% in one year.
The current default probability assumption is 4.5% of the current
portfolio balance, which translates into a default probability
assumption on original balance of 4.0%. Moody's also maintained the
assumption for the fixed recovery rate at 15% and PCE at 17%.
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in July
2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement, (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
===========
S W E D E N
===========
INTRUM AB: Fitch Lowers LongTerm IDR to 'D' on Chap. 11 Filing
--------------------------------------------------------------
Fitch Ratings has downgraded Intrum AB (publ)'s Long-Term Issuer
Default Rating (IDR) to 'D' from 'C'.
The rating action follows the announcement that Intrum has filed a
voluntary petition for reorganisation pursuant to Chapter 11 of the
United States Bankruptcy Code.
Key Rating Drivers
Chapter 11 Process: Intrum announced on 15 November 2024 that it
had initiated a court process in the US for its Chapter 11
reorganisation plan. Intrum expects approval for the plan from the
US Bankruptcy Court before end-2024. Subject to court approval, the
debt restructuring would become effective in 1Q25.
Debt Restructuring: The restructuring includes an extension of the
maturity of Intrum's outstanding senior unsecured notes currently
maturing in 2025 and beyond by around two years as well as a 10%
discount to its face value. In exchange, bondholders will receive
10% of the company's equity, an improved security package
(including a dividend prohibition until December 2028) and certain
upfront fees.
Improved Post-Transaction Funding Profile: Upon closing of the
transaction, Intrum's nearest material debt maturity will be
extended to September 2027 (20%, or around EUR600 million of the
restructured notes) with further maturities staggered out to
September 2030. However, increased interest expenses will weigh on
Intrum's interest coverage ratio, which Fitch expects to remain
weak at 2x-2.5x in 2025-2026.
Leverage to Remain High: While the transaction will lead to some
improvement in Intrum's leverage, post-transaction leverage will
remain high. Under its forecast, Fitch expects Intrum's gross
debt/adjusted EBITDA ratio to stand at 4.5x-5x in 2025-2026, which
is close to a 'ccc' leverage score under Fitch's Non-Bank Financial
Institutions Criteria.
Business Plan Implementation Risks: Execution risks related to
implementation of Intrum's business plan following the transaction,
combined with restricted access to debt capital markets, will
constrain its assessment of Intrum's credit profile. This is
despite its position as Europe's leading credit management company
with an equivalent of about EUR185 billion (at notional value) of
serviced third-party debt at end-3Q24.
After completion of the debt restructuring, Fitch will likely
re-rate Intrum in the 'CCC' or lower end of the 'B' rating
categories, driven largely by increased interest expenses that
would weaken its debt coverage ratio, given Intrum's still high
leverage post-debt restructuring. Fitch forecasts that Intrum's
gross debt/adjusted EBITDA ratio (pro forma for the restructuring)
will be 4.9x at end-2024 and 4.8x at end-2025 (end-2023: 5.1x), and
its adjusted EBITDA/interest expense ratio will weaken and remain
below 3x until 2026 (2023: 3.4x).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- As the company is rated 'D' it cannot be downgraded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Positive rating action is likely after the proposed debt
restructuring process has been completed and Intrum exits the
Chapter 11 process.
- At that point, Fitch will reassess Intrum's credit profile with a
particular focus on the sustainability of its leverage and
liquidity profile. Based on its projections of Intrum's
post-closing EBITDA and outstanding gross debt, Fitch expects its
gross debt/EBITDA ratio to remain at about 5x in 2025-2026. This
will likely constrain Intrum's post-transaction Long-Term IDR to
the 'CCC' or lower end of 'B' rating categories.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
Fitch's criteria uses bespoke recovery analysis for issuers with
Long-Term IDRs of 'B+' and below. The bespoke recovery analysis
assumes that Intrum would be considered a going concern in
bankruptcy and that the company would be reorganised rather than
liquidated. There is significant uncertainty about Intrum's future
adjusted EBITDA and gross debt levels, but its assumptions result
in a 'RR4' Recovery Rating and 'C' long-term rating for its senior
unsecured debt.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
Intrum's senior unsecured debt rating is primarily sensitive to
changes to the Long-Term IDR and recovery assumptions.
ADJUSTMENTS
The 'd' Standalone Credit Profile (SCP) is below the 'ccc+' implied
SCP due to the following adjustment reason: weakest link - funding,
liquidity & coverage (negative).
The 'b' business profile score is below the 'bb' category implied
score due to the following adjustment reason: business model
(negative).
The 'b' earnings & profitability score is below the 'bb' category
implied score due to the following adjustment reason: historical
and future metrics (negative).
The 'd' funding, liquidity & coverage score is below the 'b'
category implied score due to the following adjustment reason:
funding flexibility (negative).
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
----------- ------ -------- -----
Intrum AB (publ) LT IDR D Downgrade C
ST IDR D Downgrade C
senior unsecured LT C Affirmed RR4 C
=====================
S W I T Z E R L A N D
=====================
PEACH PROPERTY: Fitch Puts 'B-' Sr. Unsec Rating on Watch Negative
------------------------------------------------------------------
Fitch Ratings has affirmed Peach Property Group AG's Long-Term
Issuer Default Rating at 'CCC+', while placing its 'B-' senior
unsecured rating on Rating Watch Negative (RWN). The unsecured
rating has a Recovery Rating of 'RR3'.
Following the portfolio disposal announced on 16 November 2024 and
net disposal receipts of EUR120 million due to be received in cash,
and Peach's end-2024 EUR120 million underwritten equity raise,
Fitch expects Peach's leverage and interest cover to improve.
However, this liquidity still does not quite cover 2025's total
EUR355 million of unsecured debt maturities.
The RWN reflects a potential decline in Peach's unsecured debt
recovery estimate due to the sale of unencumbered assets as part of
the disposal. The recovery estimate may also worsen because
liquidity raised is not expected to be used immediately to prepay
scheduled debt maturities for 2025. Fitch would seek certainty and
specificity that cash proceeds received are designated for debt
reduction before resolving the Rating Watch.
Key Rating Drivers
Portfolio Disposal to GTC: Peach has sold 5,200 of its residential
units to Globe Trade Centre (GTC), valued at EUR448 million by GTC.
After also transferring some assets' attached secured debt and
other adjustments, Peach is expected to receive net cash proceeds
of EUR120 million.
Recovery Prospects May Change: Fitch believes that recovery
prospects for Peach's EUR479 million of unsecured debt could be at
or below 50%. Its calculation includes end-June 2023 reported
unsecured debt, comprising the equally ranking EUR55 million
promissory notes, a EUR300 million bond, an assumed fully-drawn
revolving credit facility (RCF) and a EUR49 million convertible
bond. This total debt amount is measured against 1H24 unencumbered
properties reported at EUR368 million before the disposal.
Fitch does not include any residual value of assets within secured
financings, as the timing of each entity's monetisation is
controlled by the relevant secured creditors. However,
loan-to-value (LTV) ratios at Peach's secured-funded entities
average 31%, suggesting that these residual values can be
meaningful.
Peach's Retained Portfolio: The disposal enables Peach to
concentrate on its core clusters and improve occupancy rates
through capex. Peach is now strongly focused on assets in North
Rhine-Westphalia, where nearly all of its top 10 locations are
situated, following the sale of properties in Kaiserslautern,
Heidenheim, and Helmstedt to GTC. By retaining the sold portfolio's
asset management functions, Peach ensures operational continuity
for GTC while also generating additional income for itself.
Recreating Financial Headroom: Peach's management has emphasised
that, after retaining the post-disposal "strategic portfolio", some
cash proceeds should be allocated to reducing pockets of stubborn
vacancies, enhancing asset quality, and meeting remunerative ESG
requirements. This would increase Peach's rents over time and
reduce remaining void costs, but would need re-investment and take
two to three years to show results. Fitch expects annual capex to
be lower than the EUR30 million-EUR35 million per year that
management previously communicated, given the reduced size of the
portfolio.
Leverage Improving: Despite the expected 19% decline in the group's
rents due to the EUR448 million (19% of the portfolio) disposal,
Fitch expects Peach's net debt/EBITDA to improve to around 18x by
end-2025 (end-2023: 22.6x). Interest cover is also expected to
improve back to 2023's levels of around 1.5x by end-2025, aided by
lower policy interest rates and lower levels of debt. In its
calculation, Fitch assumes hybrid bond interest is not deferred but
paid at a 9.25% margin plus the policy rate.
Personnel Capacities Allocation: Peach will continue to manage the
assets sold to GTC, which Fitch expects to contribute minimally to
Peach's revenue from FY25 onwards. This strategy utilises existing
headcount, as Peach would otherwise have fewer assets to manage
following the sale of around 20% of its investment properties.
Derivation Summary
Peach's portfolio, which Fitch expects to amount to around EUR1.9
billion at end- 2024, is materially smaller than Fitch-rated German
residential-for-rent peers Vonovia SE's (IDR: BBB+/Stable) EUR81
billion and Heimstaden Bostad AB's (BBB-/Negative) EUR28.8 billion.
Peach's portfolio is more comparable to D.V.I. Deutsche Vermogens-
und Immobilienverwaltungs GmbH's (DVI, BBB-/Stable) EUR2.9 billion
at end-2023.
The Peach portfolio's average end-2023 in-place rent was EUR6.2 per
sqm per month, indicating lower-quality assets and locations than
Vonovia's German portfolio, which had rent of EUR7.74 per sqm, and
DVI's Berlin-weighted portfolio rent of EUR8.9 per sqm. The
difference in these portfolios' qualities is also reflected in
their respective vacancy rates, at a reported 7.4% for Peach at
end-2023, above 1.6% at DVI and 1.5% at Vonovia at end-2023.
Peach's interest cover, forecast at around 1.2x in 2024, is lower
than Heimstaden Bostad's 1.4x, which will increase thereafter. The
interest cover of DVI and Vonovia is both forecast to remain at or
above 2.3x over the next three years. Peach's end-2023 remaining
average debt maturity was low at 2.9 years, compared with Vonovia's
6.9 years, and at or above eight years for Heimstaden Bostad and
DVI, putting Peach's liquidity and rating under significant
pressure.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Annual rental growth around 3.5%, comprising 1.5% for phased
indexation/re-lettings and 2% for reletting of refurbished units
- Hybrid bond interest not deferred but paid at 9.25% margin plus
policy rate
- Dividends at 50% of cash from operations (CFO) from 2026 onwards
- Fitch assumes around EUR20 million of renovation and development
capex per year during 2024-2027 (2023: EUR13 million). This should
help keep vacancies stable at around 7%-8%
- Completion of Peach's Swiss residential-for-sale development in
2025 with net sale proceeds of EUR30 million
- Interest costs on euro-denominated variable-rate debt to rise
based on Fitch's Global Economic Outlook policy rate assumptions
(2024: 3.25%; 2025: 2.5% and thereafter: 2.0%)
Recovery Analysis
Its recovery analysis assumes that Peach would be liquidated rather
than restructured as a going concern (GC) in a default.
Fitch uses the EUR368 million in unencumbered assets as of end-June
2024 to which it applies a standard 20% discount. Fitch assumes no
cash is available for recoveries and that the EUR75 million RCF is
fully drawn (end-June 2024: undrawn). Additionally, a standard 10%
deduction is made for administrative claims.
The resulting amount is compared against unsecured debt, which
comprises its equally ranking EUR55 million promissory notes, a
EUR300 million bond, an assumed fully drawn RCF and a EUR49 million
convertible bond.
Fitch's principal waterfall analysis generates a ranked recovery
for the senior unsecured debt at 'RR3' (a waterfall generated
recovery computation output percentage of 51%-70%). However, the
'RR3' may change as unencumbered assets are sold as part of the
disposal.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A material likelihood of a debt restructuring on terms that would
constitute a distressed debt exchange
- Senior unsecured rating: reductions in the unencumbered property
portfolio relative to unsecured debt, adversely affecting recovery
estimates
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Execution of a plan to address 2025's refinance risk that is not
viewed by Fitch as a distressed debt exchange
- Twelve-month liquidity score above 1.0x combined with a
sustainable capital structure with limited funding risks
Liquidity and Debt Structure
Peach's liquidity remains under pressure. Management has been
focussed on the near-term refinance risk of EUR55 million of
promissory notes maturing in March 2025 and the EUR300 million
Eurobond maturing in November 2025. It also has around EUR223
million of secured bank debt maturities in 2025, but Fitch expects
these to be rolled over, if not already repaid or transferred
through the portfolio disposal to GTC.
By end-2024, Fitch expects Peach to have received additional equity
injections of EUR120 million and the GTC net disposal proceeds of
EUR120 million. This is projected to increase cash on the balance
sheet to approximately EUR260 million from EUR22 million at
end-2023. This figure accounts for a cash outflow of EUR8 million
after capex and the repayment of drawn amounts under the RCF.
Its liquidity calculation does not include any drawdown under
Peach's EUR75 million RCF as it expires in April 2025. It could
also raise additional debt in some sub-optimal LTV secured
financings, which Fitch believes can potentially add the necessary
amount of liquidity to help cover 2025 unsecured debt maturities.
Alternatively, Peach could seek bondholder consent to part-repay
November 2025's EUR300 million bond and issue a EUR100 million (or
more) longer-dated, higher-coupon bond. However, the size of the
bond will be non-benchmark, with limited unencumbered assets for
this class of creditor.
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
----------- ------ -------- -----
Peach Property
Group AG LT IDR CCC+ Affirmed CCC+
senior unsecured LT B- Rating Watch On RR3 B-
Peach Property
Finance GmbH
senior unsecured LT B- Rating Watch On RR3 B-
===========
T U R K E Y
===========
ODEA BANK: Fitch Keeps 'B-' LongTerm IDR on Watch Positive
----------------------------------------------------------
Fitch Ratings has maintained Odea Bank A.S.'s 'B-' Long-Term
Foreign-Currency (LTFC) and Local-Currency (LTLC) Issuer Default
Ratings (IDRs) IDR on Rating Watch Positive (RWP). The bank's
Viability Rating (VR) has been affirmed at 'b-'.
Key Rating Drivers
VR Drives IDRs: Odea's IDRs are driven by its standalone strength,
as reflected in its VR. The VR reflects the bank's weak core
capitalisation, concentration in the Turkish operating environment,
limited franchise and weak but stabilising asset quality. It also
reflects the bank's adequate funding and liquidity profile and
limited refinancing risks. The bank's IDRs are in line with its VR
despite a qualifying junior debt buffer above 10% due to the its
high leverage and high level of unreserved problem loans.
RWP Reflects Potential Acquisition: The RWP on the LT IDRs and the
National Long-Term Rating, reflects the potential shareholder
support from Odea's new owner, Abu Dhabi Developmental Holding
Company PJSC (ADQ; AA/Stable). Fitch expects to assign a
Shareholder Support Rating (SSR) to Odea once the acquisition is
finalised to reflect its view of potential shareholder support.
Once assigned, Odea's LT IDRs would be driven by its SSR, which
would be capped by country risk considerations. Fitch expects to
resolve the RWP on completion of the acquisition, including the
necessary regulatory approval from the authorities, which may take
more than six months.
Improving but Challenging Operating Environment: Odea's operations
are concentrated in the improving but challenging Turkish operating
environment. The normalisation of monetary policy has reduced
near-term macro-financial stability risks and external financing
pressures but banks remain exposed to high inflation, potential
further lira depreciation, slowing economic growth, and multiple
macroprudential regulations, despite simplification efforts.
Limited Franchise: Odea's market shares of sector assets, deposits
and loans were below 1% at end-3Q24. The bank functions
independently of its current 76% Lebanese owner, Bank Audi SAL, and
has no exposure to Lebanese risk.
Ongoing De-risking: Odea has contracted its loan book on a foreign
exchange (FX)-adjusted basis every year since 2017 in line with its
de-risking plan and also due to limited capital that has restricted
growth. Single-name obligor and sector concentrations remain high
due to its focus on corporate and commercial customers, but have
been falling. FC lending (end-1H24: 54% of gross loans) remains
significant.
Asset Quality Risks: Odea's non-performing loans (NPL) ratio
improved to 3.9% at end-3Q24 (end-2023: 4.2%), supported by tighter
underwriting standards, collections and low NPL inflows. Specific
NPL reserve coverage was moderate at 64%, reflecting reliance on
collateral. Stage 2 loans (25%), mostly restructured, remain higher
than peers, partially reflecting concentrations and limited loan
growth. Stage 2 reserves coverage was 16%.
Credit risks remain amid sensitivity to slowing economic growth,
high inflation, still high FC lending (given lira weakness) and
loan concentrations. Fitch expects the impaired loans/gross loans
ratio to remain at around its current levels at end-2025.
Weakened Profitability: Odea made an operating loss in 9M24, 2.0%
of its RWAs at end-3Q24 (annualised), mainly due to tight margins
due to rising cost of deposit funding and slow asset repricing.
Fitch expects the bank to make an operating loss for the full year
in 2024, and profitability to remain weak in 2025. It remains
sensitive to asset quality weakening and potential macro and
regulatory developments.
Weak Core Capitalisation: Odea's common equity Tier 1 (CET1) ratio
declined to 8.3% (7.0% excluding forbearance) at end-3Q24
(end-2023: 10.3%), relative to a regulatory minimum of 7%, due to
operating losses and an increase in risk-weighted assets (RWAs)
density driven by the tightening of forbearance. The bank also
operated within regulatory buffers for its Tier 1 ratio (8.5%
minimum, including the capital conservation buffer of 2.5%) as
reflected in its Tier 1 capital ratio of 8.3%. Equity/assets has
also worsened to 6.9% (end-2023: 7.3%).
Fitch believes prospects for improving capital in the short term
could remain under pressure from weak profitability, and limited
loan growth. Fitch expects the CET1 ratio to improve slightly above
8.5% by end-2024 and increase to around 10% at end-2025, if the
acquisition by ADQ is completed and the bank has access to fresh
capital.
Adequate FC Liquidity: Odea is mainly customer-deposit funded
(end-1H24: 73% of non-equity funding). The bank's loans/deposits of
63% was below the sector average, but the share of FC deposits
remains high (52%) and an additional 5% was in FX-protected lira
deposits. FC wholesale funding (20% of total funding) largely
comprises subordinated debt due in 2027, and USD50 million funding
from Bank Audi SAL.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The RWP on the bank's Long-Term IDRs and National Long-Term Rating
could be removed if the announced acquisition does not proceed or
Fitch views ADQ's propensity to provide support to be insufficient
notwithstanding its ability.
Until completion of the acquisition, the IDRs will remain sensitive
to a downgrade of the VR and the National Long-Term Rating remains
sensitive to a change in the bank's creditworthiness in LC relative
to that of other Turkish issuers. The VR could be downgraded if one
or more of the bank's capital ratios were sustained below the
respective minimum regulatory capital requirements, including 2.5%
capital conservation buffer without remedial action.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch expects to resolve the RWP and upgrade the Long-Term IDRs and
National Long-Term Rating on completion of the acquisition and if
Fitch assesses ADQ to have sufficient propensity to provide support
to Odea upon completion of the acquisition.
Prior to the completion of the acquisition, the IDRs remain
sensitive to an upgrade of the VR. The VR could be upgraded if
there is a sustained and material improvement in Odea's
capitalisation, FC liquidity and earnings performance, combined
with a strengthening in the bank's business profile.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Odea's subordinated notes' rating is 'CCC' with a Recovery Rating
of 'RR6', and is notched down twice from the VR anchor rating for
loss severity, reflecting its expectation of poor recoveries in
case of default.
The bank's 'B' Short-Term IDRs are the only possible option mapping
to the Long-Term 'B' IDR category.
Odea's Government Support Rating of 'no support' (ns) reflects
Fitch's view that support from the Turkish authorities cannot be
relied upon, given the bank's small size and limited systemic
importance.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The subordinated debt rating is sensitive to a change in Odea's VR
anchor rating. The debt rating is also sensitive to a change in
Fitch's assessment of non-performance risk.
The Short-Term IDRs are sensitive to changes in the bank's
Long-Term IDRs.
An upgrade of the GSR is unlikely given Odea's limited systemic
importance and franchise.
VR ADJUSTMENTS
The operating environment score of 'b+' for Turkish banks is lower
than the category implied score of 'bb', due to the following
adjustment reasons: Macroeconomic stability (negative).
ESG Considerations
Odea has an ESG Relevance Score for Management Strategy of '4',
reflecting an increased regulatory burden on all Turkish banks.
Management's ability across the sector to determine their own
strategy and price risk is constrained by the regulatory burden and
also by the operational challenges of implementing regulations at
the bank level. This has a moderately negative impact on banks'
credit profiles and is relevant to banks' ratings in combination
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Odea Bank A.S. LT IDR B- Rating Watch Maintained B-
ST IDR B Affirmed B
LC LT IDR B- Rating Watch Maintained B-
LC ST IDR B Affirmed B
Natl LT BBB(tur)Rating Watch Maintained BBB(tur)
Viability b- Affirmed b-
Government Support ns Affirmed ns
Subordinated LT CCC Affirmed RR6 CCC
SEKERBANK T.A.S: Fitch Affirms 'B' LongTerm IDR, Outlook Positive
-----------------------------------------------------------------
Fitch Ratings has affirmed Sekerbank T.A.S.'s Long-Term
Foreign-Currency (FC) and Long-Term Local-Currency (LC) Issuer
Default Ratings (IDRs) to at 'B'. The Outlooks are Positive. Fitch
has also affirmed the bank's Viability Rating (VR) at 'b'.
Fitch has upgraded Sekerbank's National Rating to 'A-(tur)' from
'BBB(tur)', reflecting a strengthening in its creditworthiness
relative to other Turkish issuers in LC, following sustained
improvements in the bank's capitalisation, underlying profitability
and asset quality amid improving operating environment conditions.
The Positive Outlook reflects that on the bank's LTLC IDR.
Key Rating Drivers
VR Drives Ratings: Sekerbank's IDRs are driven by its standalone
creditworthiness, as reflected in its VR. The VR considers the
concentration of its operations in the improving albeit
still-challenging Turkish market, where it has a limited franchise,
albeit a more meaningful presence in Anatolia. It also considers
the bank's adequate capitalisation, asset quality and FC liquidity
relative to its risk profile given material exposure to cyclical
sectors.
The bank's 'B' Short-Term IDRs are the only possible option mapping
to LT IDRs in the 'B' rating category.
Improving but Challenging Operating Environment: Sekerbank's
operations are concentrated in the improving but challenging
Turkish operating environment. The normalisation of monetary policy
has reduced near-term macro-financial stability risks and external
financing pressures but banks remain exposed to high inflation,
potential further lira depreciation, slowing economic growth, and
multiple macroprudential regulations, despite simplification
efforts.
Limited Franchise; Regional Player: Sekerbank comprised about 0.4%
of sector assets, loans and deposits at end-3Q24, resulting in
limited pricing power. It has a more established franchise in the
central Anatolian region given its niche in agro lending (end-3Q24:
12% of gross loans) and rural sustainable finance.
Exposure to Cyclical Sectors: The bank is highly exposed to the
cyclical SME segment (59% of total loans at end-3Q24, including
agro loans) and the riskier tourism (16%), and construction (8%)
sectors. Growth (9M24: 31%; sector: 29%) has resumed following
consecutive years of muted and below-sector-average growth amid
tightened underwriting standards. Impairments in the bank's post
clean-up book remain low, with a non-performing loans (NPL) ratio
of 0.8% at end-3Q24 for SME and agro loans originated after 1H19.
Asset-Quality Risks: The NPL ratio improved to 1.6% at end-3Q24
(end-2023: 2.2%), reflecting collections and only a moderate uptick
in NPL inflows. NPLs were 76% covered by specific reserves. Stage 2
loans comprised 5.6% of loans (69% restructured, 17% average
reserve coverage). Credit risks remain given still-high FC lending
(41%) and exposure to risky segments. Fitch expects the NPL ratio
to increase towards 2% by end-2025, reflecting sector-wide
impairments within the SME segment as economic growth slows.
Above-Sector-Average Margins: Sekerbank's annualised operating
profit/risk-weighted assets (RWAs) ratio weakened to 5% in 9M24
(2023: 6.5%), reflecting high lira deposit costs and lower
CPI-linked gains, as well as continued inflation-led pressure on
operating expenses. The bank's net interest margin (9M24: 10.9%)
remained stable and well above the sector-average (4.6%),
reflecting its high-yielding SME and agro book and widespread
granular retail deposit base. Fitch expects profitability to remain
fairly reasonable in 2025 with an operating profit/RWA ratio of
above 3%, as margin expansion partly offsets higher loan impairment
charges.
Strengthened Capital Buffers: Capitalisation is adequate, given
sensitivity to lira depreciation and asset-quality deterioration.
The common equity Tier 1 (CET1) ratio declined slightly to 22.2%
(20.6% net of forbearance) by end-3Q24 (end-2023: 24.6%),
reflecting fairly rapid loan growth. Capitalisation is supported by
FC Tier 2 debt (USD85 million, maturity extended to 2032), which
provides a partial hedge against lira depreciation, free provisions
(220bp of RWAs) and full total reserves coverage of NPLs (154%).
Adequate FX Liquidity: Sekerbank is mainly funded by granular
deposits (end-3Q24: 71% of non-equity funding), 41% of which were
in FC and a limited 9% in FX-protected deposits. FC wholesale
funding (14%) largely comprises funding from international
financial institutions and subordinated debt, with generally
medium- to long-term tenors, mitigating refinancing risks. FC
liquidity (USD263 million) was sufficient to cover short-term debt
for up to one year and about 26% FC customer deposits at end-3Q24.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sekerbank's Long-Term IDRs are mainly sensitive to a downgrade of
its VR.
The VR is sensitive to a weakening in the operating environment,
although this is not its base case. An erosion in the bank's
capitalisation buffers, likely driven by worse-than-expected asset
quality deterioration or a sharp increase in risk appetite, or
pressure on profitability and FC liquidity could also lead to a
downgrade of the VR.
The Short-Term IDRs are sensitive a multi-notch downgrade of its
IDRs.
Sekerbank's National Rating is sensitive to a negative change in
the entity's creditworthiness relative to other rated Turkish
issuers in LC.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
An upgrade of the bank's ratings would require an upward revision
of its assessment of the operating environment for Turkish banks,
while Sekerbank maintains overall stable risk and financial
profiles.
The Short-Term IDRs are sensitive to positive changes in its IDRs.
The National Rating is sensitive to a positive change in
Sekerbank's creditworthiness in LC relative to other rated Turkish
issuers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The rating on Sekerbank's subordinated notes is notched down twice
from its VR anchor rating for loss severity, reflecting its
expectation of poor recoveries in case of default. The Recovery
Rating of these notes is 'RR6'.
The expected rating on Sekerbank's AT1 notes is three notches below
Sekerbank's 'b' VR, in accordance with Fitch's Bank Rating
Criteria. Fitch has only notched the debt rating three times from
Sekerbank's VR (twice for loss severity and only once for
non-performance risk), instead of the baseline four notches, due to
rating compression, as Sekerbank's VR is below the 'BB-' anchor
rating threshold.
The bank's Government Support Rating of 'no support' reflects
Fitch's view that support from the Turkish authorities cannot be
relied upon, given the bank's small size and limited systemic
importance. Shareholder support, while possible, cannot be relied
upon.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The subordinated debt ratings are mainly sensitive to a change in
Sekerbank's VR anchor rating. They are also sensitive to a revision
in Fitch's assessment of non-performance risk.
An upgrade of Sekerbank's 'ns' GSR is unlikely given its limited
systemic importance.
VR ADJUSTMENTS
The operating environment score of 'b+' for Turkish banks is lower
than the category implied score of 'bb', due to the following
adjustment reasons: macroeconomic stability (negative). The latter
adjustment reflects heightened market volatility, high
dollarisation and high risk of FX movements in Turkiye.
The capitalisation & leverage score of 'b+' has been assigned below
the category implied score of 'bb' due to the following adjustment
reason: risk profile and business model (negative), reflecting the
bank's concentrated operations in Turkiye and exposure to cyclical
sectors.
ESG Considerations
The ESG Relevance Score for Management Strategy of '4' reflects an
increased regulatory burden on all Turkish banks. Management
ability across the sector to determine their own strategy and price
risk is constrained by regulatory burden and also by the
operational challenges of implementing regulations at the bank
level. This has a moderately negative impact on the banks' credit
profiles and is relevant to the banks' ratings in combination with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Sekerbank T.A.S. LT IDR B Affirmed B
ST IDR B Affirmed B
LC LT IDR B Affirmed B
LC ST IDR B Affirmed B
Natl LT A-(tur)Upgrade BBB(tur)
Viability b Affirmed b
Government Support ns Affirmed ns
Subordinated LT CCC+ Affirmed RR6 CCC+
subordinated LT CCC(EXP)Affirmed CCC(EXP)
VESTEL ELEKTRONIK: Fitch Cuts LT Local-Curr. IDR to B+, Outlook Neg
-------------------------------------------------------------------
Fitch Ratings has downgraded Vestel Elektronik Sanayi Ve Ticaret
A.S. (Vestel's) Long-Term Local-Currency (LTLC) IDR to 'B+' from
'BB-'. The Outlook on the LTLC IDR is Negative. Fitch has also
revised the Outlook on its Long-Term Foreign-Currency (LTFC) IDR to
Negative from Positive, while affirming the rating at 'B+'.
Vestel's USD notes are affirmed at 'B+'/'RR4'.
The downgrade reflects Turkiye's challenging market environment and
high inflation, leading to declining demand and lower-than-expected
sold volumes, including in its export markets. Consequently,
Vestel's revenue and margins are under pressure, while
working-capital outflow has increased reliance on short-term debt,
leading leverage metrics to exceed its negative sensitivity.
The Negative Outlooks reflect risks related to Vestel's
working-capital outflows, deleveraging trajectory, and general
lower demand in Turkiye and other markets.
The IDR reflects Vestel's low-cost white goods and electronics
manufacturing base in Turkiye with proximity to export markets in
Europe that are its major revenue source. Rating constraints are
domestic production concentration, limited pricing power,
foreign-exchange (FX) risks and negative free cash flow (FCF).
Key Rating Drivers
Challenging Market Conditions: Persistently high inflation and a
tight monetary policy in Turkiye, alongside increased competition
in European markets, have led to lower-than-expected sold volumes
and a softer demand outlook. Fitch expects domestic market weakness
to persist into Q424, with a slow recovery beginning in 2025.
Vestel generates around 60% of its revenues from exports, mainly to
Europe. Following some signs of improvement in European markets,
ECB rate cuts should further support the recovery. Overall, Fitch
expects Vestel's markets to fully recover during 2026, driven by
stabilising macroeconomic conditions and gradual improvement in
demand.
High Inflation Pressures Export Margins: Hyperinflation in Turkiye
has driven up input costs, and Vestel is finding it challenging to
fully pass on these costs to customers due to increased competition
from Chinese exporters to European markets, particularly in TV and
electronics. Vestel's revenues largely come from low-margin
private-label manufacturing, which relies on cost competitiveness
and thus limits its pricing power. Consequently, Vestel's ability
to pass on cost increases has weakened in Europe but has remained
broadly stable in Turkiye.
Cost Optimisation and Strategic Initiatives: Vestel has initiated a
three-pillar strategy to navigate challenging market conditions,
which Fitch has only partially incorporated into its updated rating
case forecast. It aims to achieve savings from logistics and
procurement, expand its core business to the US and Asian markets,
and focus on its mobility segment. This includes holding a stake in
a leading domestic electric vehicle producer, which offers
significant growth potential.
Significant Working-Capital Outflow: Changes to Vestel's supplier
of white good raw materials - which are now procured from China
instead of Turkiye - have led to significantly shorter average
payment days but better pricing terms. Transportation times have
also increased due to issues surrounding the Red Sea, necessitating
an increase in inventory and leading to a large working capital
outflow during 2024. Fitch expects working-capital outflows to
persist throughout its forecast horizon, although with a declining
net working capital/revenue ratio.
Negative FCF: Fitch expects Vestel to continue reporting negative
FCF due to higher-than-expected working-capital needs and pressured
earnings. This will limit financial flexibility and increase
reliance on short-term funding, further raising leverage and
interest costs. During 9M24, total reported debt increased to about
TRY57 billion, from TRY29 billion at end-2023. The was due mainly
to the USD500 million bonds issued during 1H24 and the additional
issuance of short-term local bonds to fund the working-capital cash
burn.
Increasing Leverage: Fitch forecasts Vestel's leverage to exceed
its negative rating sensitivity and to remain high for a longer
period than previously projected. Fitch estimates Vestel's EBITDA
leverage will reach 4.5x at end-2024 and 4.3x at end-2025, before
returning to 3.5x at end-2027, underlining the downgrade and
Negative rating Outlook.
Deteriorating Interest Cover: Fitch forecasts Vestel's EBITDA
interest coverage to average 1.7x throughout its forecast period
due to increased borrowings, higher local interest rates, and a
decreased EBITDA forecast. As of end-9M24, the company had
significant short-term debt totaling TRY37 billion, which is around
68% of total debt, with around 40% denominated in local currency,
both higher than its prior expectation.
Derivation Summary
Vestel's through-the-cycle EBITDA and EBIT margins of 12% and 9%
per year on average are similar to that of higher-rated peers like
Whirlpool Corp. (BBB-/Negative) and LG Electronics Inc.
(BBB/Stable). However, this strength is offset by Vestel's weaker
FCF margin, due to the sharp devaluation of the Turkish lira and
unfavourable working-capital management from a longer payable cycle
relative to receivables days.
Unlike Vestel, Arcelik A.S. (BB-/Negative), a Turkish-based peer,
focuses solely on more profitable white goods and benefits from the
geographical diversification of its production base. Additionally,
Arcelik's stronger brand portfolio and pricing power explain the
one-notch rating differential. Similar to Vestel, Uzbekistan-based
Artel Electronics LLC (B/Stable) manufactures within its local
market; however, it lacks the geographical sales diversification of
Vestel and Arcelik.
Although Vestel's leverage metrics are not excessive compared with
Arcelik's, financial flexibility is constrained by lower interest
coverage, FX risk due to only partly effective hedging, short-term
debt exposure and weak liquidity.
Key Assumptions
- Revenue to increase on average 20% for 2024-2028, reflecting
improved sold volumes and pricing from 2024 levels
- Improving average EBITDA margin to 13% by end-2027, reflecting
anticipated cost synergies and improved pricing ability
- Capex in line with management forecasts to 2027, with modest
Fitch-assumed dividends
- FCF margin to remain negative until 2027, before turning modestly
positive by 2028, driven by working capital outflows, albeit with a
declining net working capital/revenue ratio
- Continued successful refinancing of upcoming short-term
maturities, albeit at a higher interest rate
Recovery Analysis
- The recovery analysis assumes that Vestel would be reorganised as
a going-concern (GC) in bankruptcy rather than liquidated
- An administrative claim of 10% is used in line with the industry
median and peer group
- The recovery analysis is translated into US dollars from Turkish
liras (using its expected exchange rate for 2024) since the
majority of the capital structure is in US dollars
- Fitch assumes a GC EBITDA of USD255 million in line with Fitch's
previous assessment. This reflects a post-reorganisation EBITDA in
Turkiye's challenging market environment and high inflation,
leading to declining demand and lower-than-expected sold volumes
- An enterprise value (EV) multiple of 4.5x EBITDA is applied to
the GC EBITDA to calculate a post-reorganisation EV, given Vestel's
strong market position in Turkiye and flexible cost structure.
However, this multiple is constrained by industry dynamics
(including Turkish regulations), lack of geographical
diversification (particularly in Asia and North America), lack of
pricing power and the strength of competitors within the market
- The waterfall analysis is based on the new capital structure,
which consists of factoring, senior unsecured USD500 million
Eurobond at a fixed coupon of 9.75% and bank credit facilities.
Debt issued by Vestel's subsidiary Vestel Beyaz Eşya Sanayi ve
Ticaret A.Ş. ranks structurally senior to remaining debt
instruments
- Factoring is not expected to remain available during bankruptcy
following a more conservative approach than the previous assessment
and is thus deducted from EV
- These assumptions result in a recovery rate for the senior
unsecured instrument within the 'RR4' category. The principal and
interest waterfall analysis output percentage on current metrics
and assumptions is 50%
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Gross EBITDA leverage consistently above 4.5x
- EBITDA interest coverage below 1.5x
- Substantial deterioration in liquidity and consistently negative
FCF margins
- Lack of ring-fencing and tighter links with parent Zorlu
- Business profile deterioration with loss of market share and
pricing power
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Gross EBITDA leverage below 3.5x for a sustained period
- EBITDA interest coverage above 2.0x
- Positive FCF margin
- Stronger business profile with geographical diversification of
production base and higher pricing power
Liquidity and Debt Structure
Historically, Vestel has been dependent on short-term bank debt
facilities to meet its financial requirements. The practice of
continuously rolling over these uncommitted bank lines is typical
in the Turkish corporate market and limits its liquidity assessment
of Vestel even after the US dollar bond issue in 2024.
Long-term notes represent around 32% of Vestel's expected end-2024
debt, with short-term bank loans and domestic bonds making up the
balance. Fitch anticipates an increased reliance on short-term
local funding, due to its forecast of continuing negative
working-capital outflows.
Issuer Profile
Vestel specialises in the manufacturing and sales of electronics,
major household appliances, digital and e-mobility solutions in
Turkiye.
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
----------- ------ -------- -----
Vestel Elektronik
Sanayi Ve Ticaret A.S. LT IDR B+ Affirmed B+
LC LT IDR B+ Downgrade BB-
senior unsecured LT B+ Affirmed RR4 B+
===========================
U N I T E D K I N G D O M
===========================
ARCHITECTURAL PANEL: FRP Advisory Named as Joint Administrators
---------------------------------------------------------------
Architectural Panel Solutions Limited was placed into
administration proceedings in the High Court of Justice, Court
Number: CR-2024-006856, and David Hudson and Philip Lewis Armstrong
of FRP Advisory Trading Limited, were appointed as joint
administrators on Nov. 14, 2024.
Trading as Architectural Panel Solutions, the company is a cladding
manufacturer.
Its registered office is at 5 Wainwright Close, St.
Leonards-On-Sea, TN38 9PP, to be changed to C/O FRP Advisory
Trading Limited, 2nd Floor, 110 Cannon Street, London, EC4N 6EU.
Its principal trading address is at 5 Wainwright Close, St.
Leonards-On-Sea, TN38 9PP.
The joint administrators can be reached at:
David Hudson
Philip Lewis Armstrong
FRP Advisory Trading Limited
110 Cannon Street, London
EC4N 6EU
Further Details Contact:
The Joint Administrators
Tel No: 020 3005 4000
Alternative contact:
Ashly Sunny
Email: cp.london@frpadvisory.com
ASHFORD COLOUR: Quantuma Advisory Named as Administrators
---------------------------------------------------------
Ashford Colour Press Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Insolvency & Companies List(ChD),
Court Number: CR-2024-006596, and Nicholas Simmonds and Chris
Newell of Quantuma Advisory Limited were appointed as
administrators on Nov. 14, 2024.
Ashford Colour offers printing services.
Its registered office is at Unit 600 Fareham Reach, Fareham Road,
Gosport, PO13 0FW and it is in the process of being changed to 1st
Floor, 21 Station Road, Watford, WD17 1AP. Its principal trading
address is at Unit 220, Fareham Reach, Fareham Road, Gosport,
Hampshire, PO13 0FW.
The administrators can be reached at:
Nicholas Simmonds
Chris Newell
Quantuma Advisory Limited
1st Floor, 21 Station Road
Watford, Herts, WD17 1AP
For further details, contact:
Clare Vila
Email: Clare.Vila@guantuma.com
Tel No: 01923 954 174
BOPARAN HOLDINGS: Fitch Rates GBP390M Sr. Sec. Notes Final 'B'
---------------------------------------------------------------
Fitch Ratings has assigned Boparan Finance plc's senior secured
GBP390 million fixed-rate notes a final rating of 'B' with a
Recovery Rating of 'RR4'. Fitch has also affirmed Boparan Holdings
Limited's (Boparan) Long-Term Issuer Default Rating (IDR) at 'B'
with a Positive Outlook.
The refinancing has been completed in line with Fitch's
expectation, and together with Boparan's improved operating
performance and moderated leverage, supports the 'B' rating.
The Positive Outlook reflects significant expected headroom under
the 'B' rating, driven by further margin expansion as Boparan
focuses on its UK operations. A further strengthening of its
business model, sustained improved EBITDA margin, and higher free
cash flow (FCF) generation could lead to an upgrade in the next
12-18 months.
Fitch has withdrawn the rating of the company's GBP525 million
November 2025 senior secured notes (SSNs), following the redemption
of GBP398 million and pre-funding of the remaining notes.
Key Rating Drivers
Refinancing Risk Addressed: Boparan's refinancing risk is
manageable, after it prepaid its GBP10 million May 2025 term loan
and redeemed the GBP525 million November 2025 SSNs with the new
GBP390 million SSNs maturing in 2029 and GBP150 million cash
proceeds from its EU poultry asset sale.
Some GBP127 million of its November 2025 SSNs that were not
tendered will be redeemed at end-November with matching funds
deposited in escrow by the group. This lower debt amount will help
reduce leverage to 3.7x by financial year to July 2025 from 4.4x in
FY24, aligning with the higher end of the 'B' category.
Structural Profitability Improvement: Boparan's EBITDA margin
recovered to 5% in FY24 from 3.2% in FY23. This translates into FCF
margins of slightly above 1%, due to the full-year impact of cost
cutting as well as the good performance of its ready-meal segment.
These cost initiatives, together with the group's increased ability
to pass on costs, will support a structurally improved EBITDA
margin of 5%-6% in the medium term. This is key to a potential
upgrade in the next 12-18 months, as underlined in the Positive
Outlook.
Asset Sale Improves Business Profile: The divestment of the EU
poultry asset to Boparan Private Office (BPO) owned by Boparan
Holdings Limited's shareholders, will lift Boparan's margins to
slightly above 6% in FY26 from 5% for FY24. It will also help
improve FCF generation, strengthening Boparan's overall business
profile. Fitch views the European division as less profitable and
more volatile, as it is exposed to low-cost increased imports from
Ukraine.
Excess Cash for Operational Improvements: The disposal also frees
up cash for further operational improvements such as cost cutting,
technological investments and yield improvements, as well as for
funding continued investment in its meals segment in the UK. Fitch
expects cash flow generation to fund increased capex while allowing
FCF margins to remain positive but low at 0.5%-1%.
FCF Key to Further Upgrade: High profitability volatility in the
past means sustained profitability improvements is key to a rating
upgrade. Boparan's operating margins are still vulnerable to
external pressures as wages, energy and packaging costs are not
passed onto customers. However, further investments in cost cutting
will help sustain higher profitability, counter inflationary
pressures and lead to sustained positive FCF. The latter, together
with expected leverage under 4x from FY25, would support an upgrade
in the next 12-18 months.
Leading UK Poultry Producer: Boparan has a leading position in the
UK, with nearly a one-third share of the country's poultry market.
This is supported by its large-scale operations and established
relationships with key customers, including grocery chains, the
food-service channel and packaged-food producers. It also benefits
from an integrated supply chain via its joint venture with PD Hook,
the UK's largest supplier of broiler chicks. This adds to the
stability of livestock supply and ensures sufficient processing
capacity utilisation.
Limited Diversification: The protein business accounts for nearly
80% of Boparan's revenue, with poultry being the core processed
animal protein and the remainder from the ready meals category.
Boparan is exposed to key customer concentration risk in poultry
and ready meals in the UK, particularly with sales to Marks and
Spencer Group plc. The divestiture leaves the group with no
geographical diversification to other European countries. However,
Fitch sees limited rating impact from this change.
Favourable Market Fundamentals: Boparan operates in food categories
with sound fundamental growth prospects. Fitch assumes resilient
low-to-mid single-digit growth in poultry consumption, which is the
fastest-growing protein globally, due to its low cost versus other
proteins, as well as consumer perception that it is a healthier
option than beef and pork. Boparan's large exposure to discount
retailers should support the resilience of its sales volumes during
weaker economic growth.
Derivation Summary
Boparan's credit profile is constrained by the group's modest size,
with EBITDA below USD200 million, and limited FCF generation for
the 'B' rating category under Fitch-rated protein companies, as
well as by its regional focus in the UK. It has lower profitability
than the majority of its peers, such as Minerva S.A. (BB/Stable)
and Pilgrim's Pride Corporation (BBB-/Stable), which Fitch believes
is due to limited self-sufficiency and some operating
inefficiencies that Boparan is addressing. Its profits remain under
potential pressure from energy, distribution, packaging and labour
cost inflation, which may not be fully covered if costs increase.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue declining by 20% and 7% in FY25 and FY26, respectively,
after the European operation divestiture, followed by low
single-digit growth in FY27
- EBITDA margin increasing gradually to 6.2% in FY27
- Net working capital (NWC) inflow in FY25, reflecting improved
credit terms and post-divestiture NWC, followed by broadly neutral
NWC to FY27
- Broadly stable use of the factoring line over FY25-FY27
- Capex to increase to GBP65 million in FY25-FY27, reflecting
further investment in the UK poultry business
- No M&A or dividend payments over FY25-FY27
- Cash pension contribution at GBP18 million-GBP23 million for
FY25-FY27 as reflected in funds from operations
Recovery Analysis
The recovery analysis assumes that Boparan would be reorganised as
a going concern (GC) in bankruptcy rather than liquidated. Fitch
has assumed a 10% administrative claim.
Boparan's GC EBITDA is estimated at GBP80 million, reflecting its
view of a sustainable, post reorganisation EBITDA, on which Fitch
bases the enterprise valuation (EV), excluding the EBITDA
contribution from the disposed EU poultry business.
An EV/EBITDA multiple of 4.5x is used to calculate a
post-reorganisation valuation and reflects a mid-cycle multiple
consistent with the protein business industry and, particularly,
with that of peers with similar market shares and brands.
Fitch views Boparan's receivables factoring as super senior in the
waterfall, which would not be available to the group during and
post-distress and which Fitch expects would be replaced with
alternative funding. In addition, Fitch assumes the supply-chain
finance provided by Boparan's client would remain only partly
available during and post-distress, given the expected drastic
reduction in contract size during financial distress. Fitch assumes
the GBP80 million revolving credit facility (RCF) is fully drawn on
default.
The waterfall analysis generated a ranked recovery for the new
GBP390 million SSNs in the 'RR4' Recovery Rating band, ranking
after its GBP80 million of committed RCF. This indicates a
'B'/'RR4' instrument rating for the new senior secured debt with an
output percentage of 44%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA leverage above 4.5x on a
sustained basis
- EBITDA margin below 5% with volatile, or neutral-to-negative FCF
- EBITDA interest coverage below 2.5x
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA leverage below 4x with comfortable headroom on a sustained
basis
- EBITDA margin maintained above 6% with FCF margins of at least 1%
on a sustained basis
- EBITDA interest coverage above 3x
- Sufficient liquidity to cover 2029 and 2030 pension payments
Liquidity and Debt Structure
4Satisfactory Liquidity: Fitch forecasts that Boparan will have
about GBP25 million cash on its balance sheet at FYE25, after
adjusting for GBP15 million required for operational purposes, and
a fully undrawn GBP80 million RCF available until 2029. Fitch also
expects FCF to remain positive, albeit thin, following lower
pension contributions and profit recovery.
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
----------- ------ -------- -----
Boparan Holdings
Limited LT IDR B Affirmed B
Boparan Finance plc
senior secured LT B New Rating RR4 B(EXP)
senior secured LT WD Withdrawn B
BUSINESS MORTGAGE 5: Moody's Affirms 'Ca' Rating on 2 Tranches
--------------------------------------------------------------
Moody's Ratings has confirmed the rating of the Class M2 notes in
Business Mortgage Finance 5 PLC (BMF 5). The rating action reflects
resolution of the shortfall in interest paid to the Class M2
noteholders on the May 2024 and August 2024 payment dates and
Moody's expectation that the shortfall will not repeat because of
additional procedures put in place by parties to the transaction.
Moody's also affirmed the ratings of the notes that had sufficient
credit enhancement to maintain their current ratings.
GBP27M Class M1 Notes, Affirmed A1 (sf); previously on Aug 23,
2024 Affirmed A1 (sf)
EUR36.5M Class M2 Notes, Confirmed at A1 (sf); previously on Aug
23, 2024 A1 (sf) Placed on Review for Downgrade
GBP12M Class B1 Notes, Affirmed Ca (sf); previously on Aug 23,
2024 Affirmed Ca (sf)
EUR11.5M Class B2 Notes, Affirmed Ca (sf); previously on Aug 23,
2024 Affirmed Ca (sf)
The rating action concludes the review of the Class M2 notes placed
on review for downgrade on Aug 23, 2024 following payments made on
the May 2024 payment date.
RATINGS RATIONALE
The confirmation rating action is prompted by a resolution of the
shortfall in interest paid to the Class M2 noteholders on the May
2024 and August 2024 payment dates and Moody's expectation that the
shortfall will not repeat because of additional procedures put in
place by parties to the transaction.
On the November payment date, the Issuer paid Class M2 noteholders
(with interest on interest) the shortfall in interest suffered by
them on the May and August 2024 payment dates. The failure to pay
full interest to the Class M2 noteholders on those payment dates is
a note Event of Default but does not automatically lead to
enforcement. Enforcement could follow a direction by the Class M
noteholders as controlling class; as of the date of this rating
action, Moody's have no expectation that this will occur.
The interest payment shortfall issue can be traced to a mismatch in
cashflows under the currency hedge. Under current conditions, the
swap is providing less EUR interest amounts than required to
service Class M2 note interest, and this is expected to continue
until the maturity of the notes. Transaction parties have reviewed
the deal's documentation and now agree that any such shortfall
should be made good using funds available to the transaction, such
as remaining available revenue funds, liquidity line or funds in
the transaction's GIC account.
Revision of Key Collateral Assumptions
Given the short time period between the rating action and that of
August 2024, Moody's are maintaining Moody's collateral performance
assumptions for BMF 5 from August 2024.
Moody's expected loss assumption on current balance stands at
22.50% and Moody's portfolio credit enhancement level is at 45%.
This expected loss assumption on current balance corresponds to
lifetime expected loss assumptions as a percentage of original pool
balance of 19.72%, with a corresponding CoV value of 21.40%.
Moody's have incorporated the sensitivity of the ratings to
borrower concentrations into the quantitative analysis. In
particular, Moody's considered the credit enhancement coverage of
large debtors in the BMF 5 transaction as it shows significant
exposure to large debtors. The results of this analysis currently
limit the rating on the BMF 5 Class M1 and M2 Notes to A1 (sf) as
credit enhancement of 49.68% does not cover the exposure to the top
50 debtors.
Counterparty Exposure
The rating actions took into consideration the notes' exposure to
relevant counterparties, such as servicer, account banks or swap
provider.
Moody's considered how the liquidity available in the transaction
and other mitigants support continuity of notes payments in case of
servicer default. The Special Servicer is unrated and is also
acting as Cash/Bond Administrator. The ratings of the Notes are not
currently constrained by operational risk.
The principal methodology used in these ratings was "SME
Asset-backed Securitizations" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement and (3) improvements in the credit quality of
the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
CALDER PEEL: McCambridge Duffy Named as Administrators
------------------------------------------------------
Calder Peel Partnership Limited was placed into administration
proceedings, and Ronan Anthony Duffy of McCambridge Duffy LLP was
appointed as administrator on November 13, 2024.
Calder Peel offers architectural, engineering and other related
services.
Its registered office is at 17 Hanover Square, Mayfair, London, W1S
1HT. Its principal trading address is at Market Court, 20-24
Church Street, Altrincham, WA14 4DW.
The administrators can be reached at:
Ronan Anthony Duffy
McCambridge Duffy LLP
101 Spencer Road, Derry
BT47 6AE
For further details, contact:
Emmet McCloskey
Telephone: 028 7137 7321
E-mail: emccloskey@mccambridgeduffy.com
CONSTELLATION AUTOMOTIVE: GBP325MM Bank Debt Trades at 19% Discount
-------------------------------------------------------------------
Participations in a syndicated loan under which Constellation
Automotive Ltd is a borrower were trading in the secondary market
around 80.7 cents-on-the-dollar during the week ended Friday,
November 22, 2024, according to Bloomberg's Evaluated Pricing
service data.
The GBP325 million Term loan facility is scheduled to mature on
July 16, 2029. The amount is fully drawn and outstanding.
Constellation Automotive Group Limited offers digital used car
marketplace. The Company offers used passenger cars, utility
vehicles, and trucks, as well as provides parts and accessories,
repairs and maintenance, finance, and insurance services. The
Company's country of domicile is the United Kingdom.
DECHRA MIDCO: Moody's Assigns First Time 'B2' Corp. Family Rating
-----------------------------------------------------------------
Moody's Ratings has assigned a first-time B2 Long Term Corporate
Family Rating and a B2-PD Probability of Default Rating to Dechra
MidCo Limited (Dechra or the company). Concurrently, Moody's have
assigned a B2 rating to the backed senior secured term loan B1
issued by Dechra Finance US LLC as well as the backed senior
secured term loan B2 and backed senior secured revolving credit
facility issued by Dechra Pharmaceuticals Holdings Limited. The
outlook for all entities is stable.
RATINGS RATIONALE
The B2 CFR reflects Dechra's established position as one of the
major global Companion Animal Health companies with a top three
position within specialty therapeutics. It also reflects the
company's diversification in terms of products, geographies and
broad marketing capabilities. Furthermore, the company has a long
track record of growing revenue and solid margins over the last
several years, especially through the pandemic.
However, the CFR also reflects the company's limited scale given
its specialisation, some exposure to larger customers and
wholesalers that can lead to pricing pressure and volume movement,
and margin pressure from investments to accelerate growth. The
pharmaceutical market for animals is smaller than the human
pharmaceuticals market and less exposed to the typical risks around
patent expiries, pipeline execution and litigation. Nevertheless,
some research & development investment and strong marketing
capabilities remain important, for example in the competitive US
market.
The rating also reflects an initially high Moody's-adjusted
debt/EBITDA. The company is undergoing significant restructuring
efforts and pipeline growth projects that weigh on profitability
and cash flow generation particularly for fiscal 2025 (ending
June), and Moody's expect leverage only to decline towards 6.5x by
fiscal 2026, through EBITDA growth. While the company's margins are
in line with peers and its underlying cash flow dynamics are solid,
free cash flow will be initially negative for fiscal 2025 given the
restructuring costs.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Dechra's exposure to environmental and social risks are in line
with the sector, such as carbon transition and physical climate
risk, and need to comply with safety standards and regulations in
production plants and product safety risk.
Governance considerations have been a key consideration for this
rating action. Given the tolerance for a highly levered capital
structure, Moody's consider the financial policy as aggressive, but
Moody's also currently expect the company to focus on executing its
organic growth options rather than immediate debt-funded growth or
shareholder returns, although this could change over time. Dechra
is 74% owned by a consortium controlled by EQT and hence has a
concentrated ownership structure. While the company was listed
previously, as a private company disclosure are now more limited.
RATING OUTLOOK
The stable outlook reflects Moody's expectation that Dechra will be
able to strengthen its positioning in the rating category over the
next 12-24 months, with leverage decreasing towards 6.5x by fiscal
2026 and a return to slightly positive free cash flow from fiscal
2026. It also reflects Moody's current expectation that the company
will focus on its in-house opportunities and hence the rating and
outlook do not incorporate any further material acquisition
activity nor any returns to shareholders through, for example,
dividends.
LIQUIDITY
The liquidity profile is good, including GBP143 million of cash and
cash equivalents on the balance sheet as of June 2024 and access to
a committed and fully undrawn GBP215 million revolving credit
facility (RCF). There is a springing covenant, tested once the RCF
is 40% drawn, and Moody's expect the company to maintain full
access to the facility. While the company will be initially free
cash flow negative for fiscal 2025, free cash flow should turn
slightly positive from fiscal 2026. There can be a degree of
working capital volatility at times, linked to demand, but this
should be easily covered by the company's liquidity profile.
STRUCTURAL CONSIDERATIONS
The ratings for the bank facilities, including the term loan B1 and
B2 as well as revolving credit facility, are in line with the CFR,
reflecting that there is only one main class of debt.
Covenants
Moody's have reviewed the marketing draft terms for the new credit
facilities. Notable terms include the following:
Guarantor coverage will be at least 80% of consolidated EBITDA
(determined in accordance with the agreement) and include all
companies representing 5% or more of consolidated EBITDA. Only
companies incorporated in UK, Netherlands, USA, Luxembourg, Denmark
and Australia are required to provide guarantees and security.
Security will be granted over key shares and receivables, plus
floating charges in England & Wales and all assets security in
USA.
Unlimited pari passu debt is permitted up to a first lien leverage
ratio of 0.5x above opening leverage, and unlimited unsecured debt
is permitted subject to a 2.0x fixed charge coverage ratio or a
total net leverage ratio less than 1.5x above opening. Any
permitted indebtedness may be made available as an incremental
facility. Unlimited restricted payments are permitted if the pro
forma first lien net leverage ratio is less than 0.5x above
opening, and unlimited restricted investments are permitted if pro
forma total net leverage is not greater than opening leverage, or
would not be made worse by the transaction. Asset sale proceeds are
only required to be applied in full where total leverage is greater
than opening leverage.
Adjustments to consolidated EBITDA include the full run rate of
cost savings and synergies, with no cap and no deadline for
realization.
The above are proposed terms, and the final terms may be materially
different.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure could materialize over time should Dechra:
-- Accelerated sustained revenue and EBITDA growth; and
-- Moody's-adjusted debt/EBITDA decreasing sustainably below 5.5x;
and
-- Moody's-adjusted EBITA/interest improves above 2.5x; and
-- Sustained material FCF generation
A rating downgrade would be considered if:
-- Inability to deleverage towards 6.5x; or
-- Moody's-adjusted EBITA/interest remains below 2.0x; or
-- failure to turn free cash flow positive by fiscal 2026 and
improve FCF/debt close to 5%; or
-- more aggressive financial policy, for example through dividends
or debt-funded acquisitions
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
Dechra is a global animal health company focused on Companion
Animal Products (CAP) and the subsegment of specialty therapeutics.
The company is 74% owned by a consortium controlled by EQT and 26%
by Abu Dhabi Investment Authority. The company generated GBP796
million of revenue in the fiscal year ending June 2024.
N E C SERVICES: Leonard Curtis Named as Joint Administrators
------------------------------------------------------------
N E C Services Group Ltd was placed into administration proceedings
in the High Court of Justice Business and Property Courts in
Birmingham, Company & Insolvency List (ChD), Court Number:
CR-2024-BHM-000658, and Conrad Beighton and Kirsty Swan of Leonard
Curtis, were appointed as joint administrators on Nov. 12, 2024.
N E C Services specializes in electrical and other construction
installation.
Its registered office is at Cavendish House, 39-41 Waterloo Street,
Birmingham, B2 5PP. Its principal trading address is at Unit 39,
Wildmoor Mill, Mill Ln, Wildmoor, Bromsgrove, B61 0BX.
The joint administrators can be reached at:
Conrad Beighton
Kirsty Swan
Leonard Curtis
Cavendish House
39-41 Waterloo Street
Birmingham, B2 5PP
Further Details Contact:
The Joint Administrators
Email: recovery@leonardcurtis.co.uk
Tel No: 0121 200 2111
Alternative contact: Moiz Khan
RUSTINGTON RECRUITMENT: Quantuma Advisory Named as Administrators
-----------------------------------------------------------------
Rustington Recruitment Limited was placed into administration
proceedings in Business and Property Courts of England and Wales,
Court Number: CR-2024-006886, and Sean Bucknall and Elias Paourou
of Quantuma Advisory Limited, were appointed as administrators on
Nov. 15, 2024.
Rustington Recruitment is a temporary employment agency.
Its registered office is at Unit 1b, Churchhill Court, 112 The St,
Rustington, BN16 3DA and it is in the process of being changed to
3rd Floor, 37 Frederick Place, Brighton, BN1 4EA. Its principal
trading address is at Unit 7b, Churchill Court, 112 The St,
Rustington, BN16 3DA.
The administrators can be reached at:
Sean Bucknall
Elias Paourou
Quantuma Advisory Limited
3rd Floor, 37 Frederick Place
Brighton, BN1 4EA
Further Details Contact:
Adam Stenning
Email: adam.stenning@quantuma.com
Tel No: 01273 322424
SHERWOOD FINANCING: Fitch Assigns B+(EXP) Rating to Sr. Sec Notes
-----------------------------------------------------------------
Fitch Ratings has assigned a 'B+(EXP)' expected long-term rating to
Sherwood Financing Plc's proposed issues of senior secured notes
due 2029, guaranteed by Sherwood Parentco Limited (Arrow) among
other group entities. The assignment of a final issue rating is
contingent on the receipt of final documents conforming to the
information already received.
Arrow is the parent company of Sherwood Acquisitions Limited, a
UK-based entity set up in 2021 by TDR Capital LLC (and owned by
investment funds managed by TDR Capital LLC) to acquire Arrow
Global Group, a UK-based debt purchaser and investor in
non-performing loans (NPLs) and other non-core assets.
Key Rating Drivers
Equal Rank with Existing Notes: The new notes issues will be
accompanied by exchange and tender offers for the group's existing
senior secured notes due 2026 and 2027. Existing notes not
exchanged will remain in place and rank pari passu with the new
notes within the senior secured debt class.
Equalised with Long-Term IDR: Arrow has a GBP285 million
super-senior revolving credit facility, but no material unsecured
debt. As the senior secured notes in aggregate represent the
majority of the company's debt, Fitch has equalised the notes'
ratings with Arrow's Long Term Issuer Default Rating (IDR),
indicating average recoveries for the notes. Fitch expects the
refinancing to have no material net impact on total leverage, but
to extend the average tenor of the group's borrowings.
Shift Towards Capital-Light Model: For several years, Arrow has
been transitioning away from traditional debt purchasing towards
acting primarily as a manager of funds. The funds invest in
non-performing loan (NPL) portfolios and other distressed and
performing assets, with Arrow acting as their servicer.
Leverage Constrains Rating: Arrow's IDR reflects its continued
material leverage, which weighs on its financial metrics amid
current interest rates, while it grows its fund management-based
business model. The IDR also reflects its developing investor
franchise and the longer term benefits expected from shifting to an
asset-light strategy, which differentiates it from traditional debt
purchasers.
Reducing Leverage Expectation: Fitch-calculated gross debt/adjusted
EBITDA ratio was 3.7x at end-3Q24 (net leverage as calculated by
Arrow: 3.6x). Arrow targets net cash flow leverage of 3.0x over the
medium term. Fitch expects leverage to benefit from growing revenue
in the company's integrated fund management segment.
Growing EBITDA: Management-reported EBITDA grew by 8% in 9M24 to
GBP282.5 million, and the company reported an operating profit as
opposed to a loss in the prior year period. The pre-tax result
remained negative, but at a reduced level of GBP36.5 million (9M23:
GBP86.4 million).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Arrow's Long-Term IDR would likely be mirrored in
a downgrade of the senior secured notes. In addition, worsening
recovery expectations, for instance, through a larger layer of
structurally senior debt, could lead Fitch to notch down the notes'
rating from the Long-Term IDR.
- Inability to keep leverage (gross debt/adjusted EBITDA) below
4.5x, or to demonstrate movement towards pre-tax profitability.
- Material collection underperformance, in particular if leading to
meaningful portfolio impairments.
- Material increase in Arrow's risk appetite or weakening of its
corporate governance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of Arrow's IDR would likely be mirrored in an upgrade
of the senior secured notes. In addition, improved recovery
expectations, for instance, through a larger layer of junior debt,
could lead Fitch to notch up the notes' rating from Arrow's
Long-Term IDR.
- Sustained improvement in Arrow's gross leverage ratio to below
3.5x, alongside sound fund performance that facilitates ongoing
investor support for investment in future funds, could lead to an
upgrade of the IDR.
ESG Considerations
Sherwood Parentco Limited has an ESG Relevance Score of '4' for
Financial Transparency due to the significance of internal
modelling to portfolio valuations and associated metrics such as
estimated remaining collections. However, this is a feature of the
debt-purchasing sector as a whole, and not specific to Arrow. This
has a moderately negative impact on the credit profile, and is
relevant to the rating in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating
----------- ------
Sherwood Financing Plc
senior secured LT B+(EXP) Expected Rating
*********
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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Editors.
Copyright 2024. All rights reserved. ISSN 1529-2754.
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