/raid1/www/Hosts/bankrupt/TCREUR_Public/241203.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, December 3, 2024, Vol. 25, No. 242
Headlines
B U L G A R I A
EUROINS: Fitch Affirms 'B+' IFS Rating, Outlook Stable
IEG RE EAD: Fitch Lowers IFS Rating to 'B-', Outlook Stable
F R A N C E
APAVE SA: S&P Assigns 'BB-' Issuer Credit Rating, Outlook Stable
FOUNDEVER GROUP: EUR1.18BB Bank Debt Trades at 34% Discount
G E R M A N Y
GRUNENTHAL GMBH: Moody's Rates New EUR500MM Sr. Secured Notes 'B1'
HSE FINANCE: Moody's Cuts CFR & EUR630MM Sr. Secured Notes to Caa3
TELE COLUMBUS: EUR502.4MM Bank Debt Trades at 18% Discount
I R E L A N D
ARES EUROPEAN VI: S&P Raises Class F-R Notes Rating to 'BB+ (sf)'
JUBILEE CLO 2018-XX: S&P Assigns Prelim 'B-' Rating to F-R Notes
I T A L Y
ARTS CONSUMER 2023: Moody's Affirms Ba1 Rating on EUR27.5MM D Notes
RENO DE MEDICI: Moody's Cuts CFR to B3, Alters Outlook to Negative
L U X E M B O U R G
ACU PETROLEO: Fitch Affirms BB+ Rating on $600MM Sr. Secured Notes
N E T H E R L A N D S
LOPAREX MIDCO: EUR202.4MM Bank Debt Trades at 30% Discount
LOPAREX MIDCO: EUR37.3MM Bank Debt Trades at 28% Discount
OCI NV: S&P Cuts Senior Secured Notes Rating to 'BB+'
R U S S I A
UZBEKISTAN: S&P Affirms 'BB-/B' SCRs, Outlook Stable
S P A I N
GERIAVI SL: EUR110MM Bank Debt Trades at 30% Discount
S W E D E N
DOMETIC GROUP: S&P Affirms 'BB-' LT ICR, Outlook Stable
HEIMSTADEN BOSTAD: Fitch Rates Proposed EUR500M Hybrid 'BB(EXP)'
TRANSCOM HOLDING: Moody's Cuts CFR to Caa1, Alters Outlook to Neg.
S W I T Z E R L A N D
SPORTRADAR GROUP: S&P Alters Outlook to Positive, Affirms 'BB-' ICR
SUNRISE HOLDCO: S&P Affirms 'BB-' ICR Following Spin-Off Completion
U K R A I N E
ARAGVI HOLDING: S&P Ups ICR to 'B' on Completed Notes Refinancing
U N I T E D K I N G D O M
CANARY WHARF: Moody's Affirms 'B3' CFR, Outlook Remains Negative
CD&R GALAXY: Moody's Cuts CFR to Caa3, Alters Outlook to Stable
CLARA.NET HOLDINGS: EUR343.5MM Bank Debt Trades at 22% Discount
CLARA.NET HOLDINGS: GBP110.2MM Bank Debt Trades at 23% Discount
MERLIN ENTERTAINMENTS: S&P Downgrades ICR to 'B-', Outlook Stable
ODFJELL DRILLING: Moody's Affirms 'B2' CFR, Alters Outlook to Pos.
SHERWOOD PARENTCO: Moody's Affirms 'B2' CFR, Outlook Negative
STUDIO 13: Menzies LLP Named as Administrators
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B U L G A R I A
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EUROINS: Fitch Affirms 'B+' IFS Rating, Outlook Stable
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Fitch Ratings has affirmed Insurance Company Euroins AD's (Euroins
Bulgaria) - the main operating entity of Bulgarian Euroins
Insurance Group AD (Euroins) - 'B+' Insurer Financial Strength
(IFS) Rating. The Outlook is Stable.
The rating reflects Euroins's weak capitalisation and reservez
adequacy.
Key Rating Drivers
Weak Capitalisation: Fitch expects Euroins's capitalisation to
remain weak at end-2024. The Prism Global score was at the high end
of the 'Somewhat Weak' category at end-2023, while the group's
Solvency II (S2) ratio was 126% (end-2022: 132%). Fitch expects it
to be at least 125% at end-2024.
Its assessment of Euroins's capitalisation remains constrained by
uncertainty around reserve adequacy after the group's capital
position was heavily hit by claims reserve restatements in 2020.
Stable reserve development would be key to an improvement of
capital while further restatements of claims reserves could result
in the Prism score falling to the 'Weak' category. This would be
detrimental to the credit quality of the group.
Weak Reserve Adequacy: Fitch regards reserve adequacy as weak
because Euroins reported significant restatements in its
consolidated accounts due to reserve deficiencies. Based on S2
reporting, IFRS-accounted technical reserves were 100% of the S2
best estimate reserves (including the risk margin) at end-2023.
However, Euroins has yet to establish a longer record of smaller
reserve deficiencies to demonstrate the robustness of its claims
reserve. Fitch expects reserve adequacy and reserve developments to
improve.
Deteriorated Asset Quality: Fitch-calculated risky assets to
capital ratio was 158% at end-2023 (end-2022: 76%), which Fitch
views as high, albeit commensurate with the rating. The
deterioration was driven by the doubling in size of its investment
portfolio. Fitch expects the asset and investment risk to remain
high.
Strong Franchise in Domestic Market: Its assessment of Euroins
Bulgaria's business profile is driven by its market-leading
position in domestic insurance, which is partially offset by
Euroins's small operating scale by international standards.
Volatile Financial Performance: Euroins' financial performance is
volatile. This was driven by inadequate reserving in 2020, the
insolvency of Euroins Romania in 2022, as well as the partial
disposal of its reinsurer Insurance Company EIG Re EAD (EIG Re) in
2023. Euroins reported a profit of BGN23 million in 2023, versus a
loss of BGN209 million in 2022 and a small profit of BGN 0.1
million for 1H24.
Gross underwriting profitability has improved since 2022, with
gross combined ratios of 90.2% for 1H24, 97.6% for 2023, versus
103.1% in 2022. Uncertainty over reserve adequacy also weighs on
its assessment of Euroins' financial performance.
Majority EIG Re Stake Divested: Euroins accounted EIG Re as
discontinued operations after it agreed to sell about 60% of the
reinsurer to several investors in 2023. The sale was completed in
June 2024. Euroins booked a small profit on the transaction, but
the disposal negatively affected the result of continued
operations. Euroins reported a loss of BGN102 million from
continued operations in 2023, much larger than in 2022.
Romanian Legacy Issue: With the sale of the majority share in EIG
Re, Euroins's balance sheet is no longer exposed to the risk
arising from the court proceedings regarding the insolvency of
Euroins Romania, as the related reinsurance assets and liabilities
are now held at EIG Re. Euroins decided to reinsure Euroins Romania
at EIG Re, including the transfer of assets.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- S2 ratio below 100%
- Negative reserve experience resulting in capital depletion
- Risky assets ratio above 200%
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A record of positive reserve experience combined with an S2 ratio
above 130%
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
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Insurance Company
Euroins AD LT IFS B+ Affirmed B+
IEG RE EAD: Fitch Lowers IFS Rating to 'B-', Outlook Stable
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Fitch Ratings has downgraded Insurance Company EIG Re EAD's (EIG
Re) Insurer Financial Strength (IFS) Rating to 'B-' from 'B+' and
removed it from Rating Watch Negative (RWN). The Outlook is
Stable.
The downgrade reflects EIG Re's continuing weak company profile and
capitalisation, as well as very high investment and asset risks.
Fitch has taken the view that EIG Re is no longer a member of
Euroins Insurance Group AD (Euroins), following the disposal of a
majority share by Euroins to a group of investors. Fitch's analysis
of EIG Re is therefore conducted on a standalone basis.
Key Rating Drivers
Very Small Operating Scale: EIG Re reported BGN519 million net
insurance revenue in 2023, up sharply from BGN22 million in 2022,
due primarily to the transfer of Euroins Romania's business. The
transfer also expanded total assets almost 4x the level at
end-2022. Fitch expects EIG Re's volumes to return to 2022's level
in 2024, as the company will not benefit from one-off revenues.
Weak Capitalisation: EIG Re scored 'Somewhat Weak' in its Prism
Global capital model at end-2023, down from 'Strong' at end-2022.
The decline is driven by the transfer of Euroins Romania's assets
and liabilities via a reinsurance contract prior to Euroins Romania
becoming insolvent in 2023. The Solvency 2 ratio also deteriorated
to 108% at end-2023 from 169% at end-2022. Fitch expects EIG Re's
Solvency 2 to remain low but commensurate with the rating.
Risk from Legacy Reserves: Its view on capitalisation is also
affected by the risks associated with the transfer of the Romanian
business. EIG Re faces the risk of the legacy court proceedings
related to Euroins Romania, as the Romanian regulator ASF questions
the validity of the reinsurance contract between EIG Re and Euroins
Romania. EIG Re has booked a notable amount of liabilities to
service claims from these court proceedings. While Fitch regards
the amount of these liabilities as reasonable, claims may
nevertheless exceed the booked reserves.
Very High Investment Risk: EIG Re's risky assets ratio was a very
high 411% at end-2023 (2022: 42%). The increase in the ratio
reflects rapid growth in equity investments and unrated
fixed-income investments, although investment-grade bonds
investments also increased.
Weak Financial Flexibility: Fitch views EIG Re's financial
flexibility as weak, given its very small size and low
capitalisation. Fitch believes that EIG Re would not be able to
raise the required capital funds for servicing the Romanian legacy
liabilities should they be much higher than the currently booked
reserves.
Ownership Neutral: Fitch sees EIG Re's ownership structure as
neutral to its rating. Following the sale, EIG Re's ownership
structure includes six new shareholders, each owning just below
10%. Euroins remains EIG Re's largest shareholder with a stake of
about 40%, and Fitch believes it will continue to exert some
influence on EIG Re's management decisions. Although no longer a
member of the Euroins group, it represents a strategic investment
for Euroins.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Weakened capitalisation, as reflected in a S2 ratio below 100%
without prospects of recovery
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Stabilisation of EIG Re's credit profile, as demonstrated by
resilient business continuity, while maintaining a S2 ratio above
100%
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
----------- ------ -----
Insurance Company
EIG Re EAD LT IFS B- Downgrade B+
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F R A N C E
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APAVE SA: S&P Assigns 'BB-' Issuer Credit Rating, Outlook Stable
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S&P Global Ratings assigned its 'BB-' issuer credit rating to Apave
S.A., a provider of testing, inspection, and certification (TIC)
services, and its 'BB-' issue rating and '3' recovery rating to the
group's proposed term loan B.
The stable outlook indicates that S&P expects Apave to successfully
integrate IRISNDT, so that adjusted debt to EBITDA stays below 4x
and funds from operations (FFO) to debt remains above 20% by
year-end 2025.
The rating action follows Apave's announcement that it plans to
acquire U.S.-based TIC service provider IRISNDT. To finance the
transaction, Apave plans to issue a EUR450 million senior secured
term loan B maturing in seven years. The proceeds will be used to:
-- Fund the transaction;
-- Repay existing debt at the Apave level;
-- Repay drawings under the current revolving credit facility
(RCF); and
-- Pay transaction fees.
In addition, debt at the Apave level will be rolled over and the
company intends to issue a new EUR160 million senior secured RCF
maturing in 6.5 years.
S&P said, "We assess Apave's financial risk profile as significant.
This is based on our forecast that it will have adjusted debt of
about EUR750 million on Dec. 31, 2025. This comprises the EUR450
million proposed term loan B; EUR22 million of the debt rolled over
at the Apave level (after EUR5 million of the EUR27 million
originally rolled over has been repaid); S&P Global Ratings'
estimate of EUR225 million of operating leases; pension obligations
and noncommon equity instruments held by shareholders. Our debt
calculations exclude EUR15 million of cash that we consider to be
trapped and not available for debt repayment from the total EUR50
million of cash available.
"Based on these figures, we predict that adjusted debt to EBITDA
will be about 3x by end-2025. As EBITDA increases, leverage is
forecast to improve, reaching about 2.6x by the end of 2026.
Issuing the term loan B will significantly increase the cash
interest paid, to EUR43 million including International Financial
Reporting Standards (IFRS) 16 interest in 2025, from EUR15 million
in 2024. That said, we expect FFO to debt to remain solid, at 25%
in 2025 and 29% in 2026, boosted by EBITDA growth.
"Apave's financial policy tolerates leverage up to about 3x (based
on company calculations), which corresponds to about 4x on a S&P
Global Ratings-adjusted basis. That said, we understand that
Apave may allow leverage to temporarily exceed this level for a
large transformational acquisition, which could be funded by a mix
of debt and equity. The company expects to actively pursue mergers
and acquisitions (M&A) to support international expansion over the
coming years.
"We view Apave's business risk profile as fair. The company
operates in growing markets boosted by solid fundamental
megatrends, with good geographic diversification, and has leading
positions in its main markets. Its benefits from a strong
reputation, moderately high barriers to entry, fair size, recurring
revenue based on the critical nature of the services provided, and
excellent end-sector and client diversification. That said, our
view of its business risk profile is constrained by operations in a
fragmented and competitive market, Apave's below-average
profitability and weak historical free cash flow generation, as
well as its relatively rigid cost structure because its employees
are highly skilled. We note that Apave has a degree of exposure to
reputational and legal risks.
"Apave has a leading position in the French market, where it has
operations nationwide. It also ranks in the top 3 in Spain. The
acquisition of IRISNDT will make it the fourth-largest TIC provider
in the U.S. We view as positive the company' strong technical
expertise and engineering culture. It has had a net promoter score
above 35 since 2020, which testifies to the quality of the services
it provides.
"We consider the barriers to entry in the TIC market to be
moderately high. To perform its activities, Apave needed to obtain
and has to maintain more than 400 accreditations, certifications,
and official approvals from state authorities. Some of these can
take years to obtain, which limits the ability of new players to
enter the market.
"Apave operates in an industry that has strong growth prospects,
thanks to fundamentally positive underlying trends. The global
outsourced TIC market is estimated to be worth EUR123 billion and
is growing at a compound annual growth rate (CAGR) of about 4%
(over 2023-2028). We expect numerous fundamental underlying trends,
such as the decarbonation of the economy, increasing
digitalization, and more-stringent regulation to increase demand
for Apave's services in the coming years. For example, clients are
likely to request more audits linked to the EU corporate
sustainability reporting directive and to assessing cyber risk.
"Although Apave mostly operates through spot contracts, we still
classify a relatively high proportion of its revenue as recurring.
It provides essential services and spot contracts allow the group
to regularly update its pricing. The daily rate charged to clients
has increased above staff costs inflation over 2021-2024."
About half of its clients generate turnover of less than EUR50,000
a year each. These smaller businesses pay Apave a daily rate of
EUR800, on average and use daily spot contracts. Rates are higher
in the oil and gas sector. Apave has proven its ability to retain
its small and midsize enterprise (SME) client base by offering
technical expertise, which is key to client satisfaction. Contracts
with large clients benefit from framework agreements that allow it
to increase prices based on specific cost indicators.
Apave is moderately sized, on a par with rated peers like Socotec
and ERM, and has reasonable geographic diversification. However,
it is significantly smaller than more diversified global players
such as Applus and Bureau Veritas. Pro forma the IRISNDT
acquisition, we expect it to achieve EUR1.7 billion in revenue and
EUR213 million in EBITDA (based on our adjustments) in 2024. S&P
said, "We view as positive that the IRISNDT acquisition will reduce
Apave's exposure to France to 60% in 2024 from 71% before. The
acquisition will also bolster the group's exposure to the rest of
Europe (15% of 2024 pro forma revenue), the fast-growing Middle
East region (5%), and the U.S. (15%). We expect the company to
maintain its internal expansion in the coming years through M&A."
Apave benefits from low customer and end-sector concentration.
Its top 20 clients represented 23% of group revenue in France in
2023, which S&P sees as relatively low. Positively, Apave had at
least three separate, but concurrent, contracts with each of these
clients. The end-sectors to which it is most exposed are
construction and infrastructure, where it generated 21% of its 2024
revenue (including IRISNDT); industrial goods (13%); and oil and
gas (7%). This diversification limits the risk that Apave would be
affected by a client- or sector-specific adverse event.
Apave operates in a fragmented and highly competitive market.
Although it benefits from a solid position in its main end-market,
S&P understands that Apave's market share of the global outsourced
TIC market is below 1%. The group has to compete with a myriad of
local, specialist, midsize, and global providers in its different
geographies and end markets; to some extent, this limits its
pricing power.
S&P said, "Apave's profitability is lower than that of
industry-leading peers, although we expect it to improve in the
coming years. EBITDA margins (based on our adjustments) were
about 12% in 2022 and 2023, well below the 16%-17% reported by
industry-leading peers. We attribute this to its ownership by the
French association Gapave since it was established in 1954 and
profitability was not its first priority. Since 2020 and the
arrival of the new CEO, Apave has taken numerous actions to improve
its profitability through price increases, cost-cutting, and
productivity measures (collectively known as the "Boost" plan. We
anticipate that these measures will cause adjusted EBITDA margins
to improve to 15% on a S&P adjusted basis by year-end
2026--significantly closer to the industry average."
Free operating cash flow (FOCF) generation has been subdued in
recent years but should increase from 2024. FOCF, which was
dented by one-off costs linked to the Boost plan, amounted to EUR30
million in 2022 and EUR27 million in 2023. For example, the
migration to new IT systems cause a temporary increase in days of
sales outstanding; similarly, a change to a labor agreement in
France reduced payables. Nevertheless, with capital expenditure
needs of about 4% and normalized working capital requirements
around 7% of revenue, we expect Apave to generate strong FOCF of
more than EUR75 million from 2024 onward. This should mean FOCF to
debt is comfortably above 10%.
Apave operates in a labor-intensive industry that requires highly
skilled employees, mostly engineers. Because such employees are a
scarce resource, the group has limited flexibility to reduce costs
during economic downturns; indeed, talent retention can lead to
high wage inflation when there is labor market tension. Laying off
its workforce would result in a loss of competence and can be
difficult to reverse when activity recovers. Nevertheless, over
2021-2024 Apave has successfully increased the average daily rate
it charges and passed through increases in staff costs.
Apave is exposed to the regulatory and reputation risks typical for
TIC service providers. Although Apave has not yet suffered
significant legal liabilities, they are always a risk. That said,
Apave pays for insurance to cover much of its exposure to this risk
and S&P considers the company's practices and controls to be
adequate.
S&P said, "The stable outlook indicates that we expect Apave to
successfully integrate IRISNDT and deliver on its profitability
improvement plan, so that the adjusted EBITDA margins are about 15%
by year-end 2026, while FOCF after leases are comfortably positive.
This implies that adjusted debt to EBITDA will be below 4x and FFO
to debt above 20% by year-end 2025.
"We could lower the rating if adjusted debt to EBITDA increased
above 4x, FFO to debt fell below 20%, or FOCF to debt below 10%, on
a sustained basis. This could occur if Apave encounters
difficulties in integrating IRISNDT or economic headwinds, or makes
operational missteps. It could also occur If the group funds
additional sizable acquisitions with debt or makes shareholder
returns that increase leverage.
"We could also lower the rating if Apave does not improve its
EBITDA margins and underlying cash flow generation as we expect in
our base case.
"Given our view of the current financial policy, we see an upgrade
as unlikely in the near to medium term.
"We could raise the rating if Apave further improves adjusted
EBITDA margins and underlying cash flow generation. An upgrade
would depend on the company committing to maintaining adjusted debt
to EBITDA below 4x and FFO to debt above 20%, and having a track
record of doing so."
FOUNDEVER GROUP: EUR1.18BB Bank Debt Trades at 34% Discount
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Participations in a syndicated loan under which Foundever Group SA
is a borrower were trading in the secondary market around 66.3
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR1.18 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.
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G E R M A N Y
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GRUNENTHAL GMBH: Moody's Rates New EUR500MM Sr. Secured Notes 'B1'
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Moody's Ratings has assigned a B1 rating to the proposed EUR500
million backed senior secured notes due in 2031 borrowed by
Grunenthal GmbH. The remaining backed senior secured instrument
ratings of Grünenthal GmbH, as well as the long-term corporate
family rating and probability of default rating of Grünenthal
Pharma GmbH & Co. KG (Grünenthal or the company) are not affected
by this rating action and remain unchanged at B1 and B1-PD,
respectively. The outlook is stable.
The transaction will have a neutral effect on the company's
leverage. Grünenthal intends to launch a tender offer on its
existing EUR400 million backed senior secured notes due in 2026
issued by Grünenthal GmbH. Grünenthal intends to refinance its
2026 bond and repay the EUR100 million drawings of its revolving
credit facility (RCF) with the proceeds of this refinancing.
RATINGS RATIONALE
The B1 rating of the new backed senior secured notes issued by
Grünenthal GmbH reflect their pari passu ranking with
Grünenthal's existing backed senior secured debt. Moody's view
positively that the company looks to address its debt maturities
well ahead of maturity.
The B1 rating of Grünenthal continues to incorporate its
diversified product portfolio of established brands, which supports
solid free cash flow (FCF) generation; its good geographical
diversification; its expertise in the therapeutic area of pain; and
its conservative shareholder distributions and liquidity
management.
Grünenthal's rating also takes into account its small size, which
limits economies of scale and increases the risk of earnings
volatility; the large share of its revenue from drugs, which face
revenue loss from generic competition; its limited late-stage
pipeline, because projects under development will not generate
significant earnings over the next three years; and the risk of
debt-funded acquisitions.
OUTLOOK
The stable outlook reflects Moody's expectation that Grünenthal's
sales development in 2024-25 will result in credit metrics that are
commensurate with a B1 rating, although it will be positioned
strongly in this rating category. Moody's also expect Grünenthal
to maintain its prudent operational execution and financial
policies.
LIQUIDITY
Grünenthal has very good liquidity, underpinned by a sizeable cash
position of EUR210 million as of September 30, 2024; access to a
EUR600 million RCF, recently upsized and now maturing in 2029; and
projected Moody's-adjusted FCF of about EUR100-120 million,
annually in the next 12-18 months.
The company's RCF contains a net leverage springing covenant set at
6.5x, which is tested when the RCF is drawn more than 40%.
Following the contemplated financing, the next debt maturity of the
company will be Grünenthal GmbH's EUR550 million backed senior
secured notes due in 2028.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's could upgrade Grünenthal's rating if the company is able
to largely offset the revenue and earnings loss from Palexia with
the growth of Qutenza and its other drugs, and sustain positive
organic revenue growth and an EBITDA margin of around 20% or
higher, while also advancing its late-stage pipeline.
Quantitatively, a positive rating action would require Grünenthal
to maintain Moody's-adjusted debt/EBITDA around 3.5x and robust
FCF, both on a sustained basis.
Conversely, Grünenthal's rating could come under pressure if its
earnings decline for a prolonged period. Moody's could also
downgrade Grünenthal's rating if its Moody's-adjusted debt/EBITDA
increases above 4.5x for a prolonged period, for instance, because
of a debt-financed acquisition.
STRUCTURAL CONSIDERATIONS
Grünenthal's capital structure comprises EUR1,350 million of
backed senior secured notes, pro forma the refinancing, and a
EUR600 million RCF, all issued at the level of Grünenthal GmbH,
the main operating company of the group. The backed senior secured
notes and RCF are guaranteed by Grünenthal GmbH's parent company
and some of the company's subsidiaries. All debt instruments share
the same collateral which essentially comprises share pledges on
Grünenthal GmbH. Moody's rate the backed senior secured notes at
B1, in line with the CFR, and rank them in line with other
financial debts and liabilities. Moody's assume a 50% family
recovery rate and the PDR is therefore aligned with the CFR at
B1-PD.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Pharmaceuticals
published in November 2021.
COMPANY PROFILE
Founded in 1946 and headquartered in Aachen, Germany, Grünenthal
is a family-owned pharmaceutical company focused on pain therapies.
It is one of the world's largest seller of centrally acting
analgesics, which are compounds that inhibit pain by acting on the
central nervous system. For the last twelve months to September
2024, the company generated EUR1,818 million of revenue and EUR422
million of company-adjusted EBITDA. Grünenthal owns a portfolio of
about 100 products that it sells in more than 100 countries.
HSE FINANCE: Moody's Cuts CFR & EUR630MM Sr. Secured Notes to Caa3
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Moody's Ratings downgraded the long term corporate family rating of
HSE Finance S.a r.l. (HSE or the company) to Caa3 from B3. Moody's
also downgraded the probability of default rating to Caa3-PD from
B3-PD and the instrument rating on the EUR630 million backed senior
secured notes due 2026 to Caa3 from B3. The outlook remains
negative.
RATINGS RATIONALE
The downgrade is driven by Moody's concerns regarding the
sustainability of HSE's capital structure given the high leverage
and weak cash flow generation, resulting in high likelihood of a
default (incl. in the form of a debt restructuring or a distressed
exchange) given the upcoming bond maturities in October 2026. A
distressed exchange is considered a default under Moody's
definition if the exchange results in an economic loss to creditors
and allows the company to avoid a bankruptcy or a payment default.
HSE's credit quality has materially deteriorated since 2022 on the
back of Russia-Ukraine conflict, high energy costs, rising freight
costs, high inflation and weak consumer demand. HSE's operational
performance demonstrated slower than anticipated recovery in 2023
and 2024 amid persistently weak consumer sentiment in Germany, the
company's main market. As of the end of the last twelve months
(LTM) ending June 2024, Moody's adjusted debt/EBITDA (leverage)
stood at 9.4x and (EBITDA-Capex)/interest coverage ratio at 1.6x.
Moody's expect the weak operating performance to continue in the
next 12-18 months, with leverage expected to be around 9.5x in 2024
and 9x in 2025. (EBITDA-Capex)/interest expense is expected to
weaken to below 1x and FCF/debt will be negative in 2025 as the
company is likely to pay significantly higher interest rates to
refinance its debt. The weak credit metrics and anticipated higher
cost of debt are concerning as the company faces substantial debt
maturities in October 2026 which will need to be refinanced in 2025
based on 2024 metrics.
Governance is a key rating driver in the rating action, especially
HSE's financial policy and risk management in light of its upcoming
debt maturities.
LIQUIDITY
Moody's consider HSE's liquidity to be adequate for now, supported
by EUR64 million of cash on balance sheet as of June 30, 2024 and
EUR35 million of undrawn revolving credit facility (RCF). Given the
anticipated negative FCF generation, it is likely that the cash
balance will deplete over time, as it will be used to support
operational needs of the business and meet higher interest
payments. The RCF is subject to a springing senior net leverage
covenant, tested quarterly if more than 40% of the facility is
drawn.
RATING OUTLOOK
The negative outlook reflects the possibility of lower recoveries
than those implied by the current rating, in the case of a debt
restructuring. It also captures the risk that HSE's underlying
earnings trajectory remains weak and that its Moody's-adjusted FCF
generation is expected to turn negative in the next 12-18 months
exacerbated by high volume of debt relative to earnings.
STRUCTURAL CONSIDERATIONS
The Caa3 rating of the EUR630 million backed senior secured notes
due 2026 is at the same level as the CFR, and reflects their
presence as the largest debt instrument in the capital structure,
ranking behind much smaller EUR35 million super-senior RCF which is
currently undrawn. The backed senior secured notes and the RCF
benefit from a similar guarantor package, including upstream
guarantees from guarantor subsidiaries. Both instruments are
secured, on a first-priority basis, by share pledges in each of the
guarantors, security assignments over intercompany receivables;
security over material bank accounts; and security over certain
material intellectual property rights. However, the backed senior
secured notes are contractually subordinated to the RCF with
respect to the collateral enforcement proceeds.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if the upcoming refinancing is structured
to ensure greater recoveries for the debtholders. An upgrade could
also be triggered by a substantial improvement in HSE's operating
performance, cash flow generation, and liquidity leading to a more
sustainable capital structure and improved creditors' protection.
Conversely, a downgrade could be triggered if there is a further
deterioration in Moody's recovery estimates in the event of a
default or a distressed exchange.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Retail and
Apparel published in November 2023.
COMPANY PROFILE
Headquartered in Ismaning, Germany, HSE is a multichannel home
shopping operator that offers a wide range of own, exclusive and
third-party brand products on its TV platform, online, via
smartphone and tablet applications, and through smart TV. For the
last twelve months ending June 30, 2024, HSE generated revenue of
EUR616 million and Moody's adjusted EBITDA of EUR73 million. HSE
has been owned by the private-equity firm Providence Equity
Partners since 2012.
TELE COLUMBUS: EUR502.4MM Bank Debt Trades at 18% Discount
----------------------------------------------------------
Participations in a syndicated loan under which Tele Columbus AG is
a borrower were trading in the secondary market around 82.4
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR502.4 million Term loan facility is scheduled to mature on
October 16, 2028. The amount is fully drawn and outstanding.
Tele Columbus AG provides cable services. The Company offers cable
television programming, telephone, and internet connection services
to homeowners and the housing industry. Tele Columbus operates
throughout Germany.
=============
I R E L A N D
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ARES EUROPEAN VI: S&P Raises Class F-R Notes Rating to 'BB+ (sf)'
-----------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Ares European CLO
VI DAC's class B-1-R-R and B-2-R-R notes to 'AAA (sf)' from 'AA+
(sf)', class C-R-R notes to 'AA+ (sf)' from 'AA- (sf)', class D-R-R
notes to 'AA (sf)' from 'A- (sf)', class E-R notes to 'BBB+ (sf)'
from 'BB+ (sf)', and class F-R notes to 'BB+ (sf)' from 'B+ (sf)'.
At the same time, S&P affirmed its 'AAA (sf)' rating on the class
A-R-R notes.
The rating actions follow the application of our global corporate
CLO criteria and its credit and cash flow analysis of the
transaction based on the October 2024 payment report.
Since S&P's previous review in October 2023:
-- The pool factor has decreased to 56.38% from almost 100%.
-- The weighted-average rating of the portfolio remains at 'B'.
-- The portfolio has become less diversified, as the number of
performing obligors has decreased to 83 from 137.
-- The portfolio's weighted-average life has decreased to 3.02
years from 3.33 years.
-- The percentage of 'CCC' rated assets has increased to 8.59%
from 4.32% of the performing balance.
Following the deleveraging of the senior notes, all classes of
notes benefit from higher levels of credit enhancement compared
with S&P's previous review.
Credit enhancement
Current amount
Class (mil. EUR) Current (%) 2023 review (%)
A-R-R 54.02 72.15 40.73
B-1-R-R 39.25 49.34 27.90
B-2-R-R 5.00 49.34 27.90
C-R-R 21.70 38.15 21.61
D-R-R 17.30 29.23 16.60
E-R 20.40 18.17 10.69
F-R 4.70 16.29 9.32
Sub Notes 46.00 N/A N/A
N/A--Not applicable.
The scenario default rates (SDRs) have increased for all rating
scenarios primarily due to a reduction in the obligor
diversification since the previous review and the percentage of
'CCC' rated assets.
Portfolio benchmarks
Current 2023 review
SPWARF 2,684.87 2,476.53
Default rate dispersion 681.03 820.39
Weighted-average life (years) 3.68 3.33
Obligor diversity measure 99.61 100.47
Industry diversity measure 21.33 23.65
Regional diversity measure 1.34 1.27
Defaulted assets (mil. EUR) 0.00 0.00
'AAA' SDR (%) 55.20 51.90
'AAA' WARR (%) 37.35 37.90
SPWARF--S&P Global Ratings' weighted-average rating factor.
SDR--Scenario default rate.
WARR--Weighted-average recovery rate. All figures presented in the
table do not include defaulted assets.
On the cash flow side:
-- The reinvestment period for the transaction ended in April
2021.
-- The class A-R-R notes have deleveraged by EUR154.1 million,
with EUR150 million occurring since our October 2023 review.
-- No class of notes is currently deferring interest.
-- All coverage tests are passing as of the November 2024 payment
report.
The higher credit enhancement available to all classes of notes is
sufficient to mitigate the effect of the increased SDRs. S&P
therefore affirmed its rating on the class A-R-R notes and raised
our ratings on all other classes.
S&P said, "Our credit and cash flow analysis indicates that the
available credit enhancement for the class C-R-R, D-R-R, E-R, and
F-R notes could withstand stresses commensurate with higher rating
levels than those assigned. However, we limited our upgrades, given
the considerable portion of senior notes outstanding and the
current macroeconomic conditions.
"The transaction has amortized the class A-R-R notes on each
interest payment date since our previous review. However, we have
considered that the manager may still reinvest unscheduled
redemption proceeds and sale proceeds from credit-impaired assets.
Such reinvestments (as opposed to repayment of the liabilities) may
therefore prolong the note repayment profile for the most senior
class of notes.
"We consider the transaction's exposure to country risk to be
limited at the assigned ratings, as the exposure to individual
sovereigns does not exceed the diversification thresholds outlined
in our structured finance sovereign risk criteria."
Counterparty, operational, and legal risks are adequately mitigated
in line with S&P's criteria.
Ares European CLO VI is a European cash flow CLO transaction that
securitizes loans granted to primarily speculative-grade corporate
firms. The transaction is managed by Ares European Loan Management
LLP.
JUBILEE CLO 2018-XX: S&P Assigns Prelim 'B-' Rating to F-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to
Jubilee CLO 2018-XX DAC's class A-1-R, A-2-R, B-1-R, B-2-R, C-R,
D-R, E-R, and F-R notes. There are unrated subordinated notes from
the original transaction and the issuer will issue an additional
EUR7.27 million of subordinated notes at closing.
This transaction is a reset of the already existing transaction
which we did not rate. The existing classes of notes will be fully
redeemed with the proceeds from the issuance of the replacement
notes on the reset date.
The preliminary ratings assigned to the reset notes reflect S&P's
assessment of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which we expect to be
bankruptcy remote.
-- The transaction's counterparty risks, which we expect to be in
line with our counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,790.99
Default rate dispersion 690.43
Weighted-average life (years) 4.03
Weighted-average life extended to cover
the length of the reinvestment period (years) 4.99
Obligor diversity measure 117.30
Industry diversity measure 22.79
Regional diversity measure 1.22
Transaction key metrics
Portfolio weighted-average rating derived
from our CDO evaluator B
'CCC' category rated assets (%) 1.92
Target 'AAA' weighted-average recovery (%) 37.06
Target weighted-average spread (%) 4.00
Target weighted-average coupon (%) 3.19
Rating rationale
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments. The portfolio's
reinvestment period will end approximately five years after
closing.
S&P said, "At closing, we expect the portfolio to be
well-diversified, primarily comprising broadly syndicated
speculative-grade senior secured term loans and senior secured
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (3.90%), the
covenanted weighted-average coupon (4.00%), and the target
weighted-average recovery rates calculated in line with our CLO
criteria for all classes of notes. We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"Under our structured finance sovereign risk criteria, the
transaction's exposure to country risk is sufficiently mitigated at
the assigned preliminary ratings."
Until the end of the reinvestment period on Dec. 15, 2029, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
S&P said, "We expect the transaction's documented counterparty
replacement and remedy mechanisms will adequately mitigate its
exposure to counterparty risk under our current counterparty
criteria.
"We expect the transaction's legal structure and framework to be
bankruptcy remote, in line with our legal criteria.
"Our credit and cash flow analysis indicate that the available
credit enhancement for the class B-1-R to F-R notes could withstand
stresses commensurate with higher rating levels than those we have
assigned. However, as the CLO will be in its reinvestment phase
starting from closing, during which the transaction's credit risk
profile could deteriorate, we have capped our preliminary ratings
assigned to the notes.
"Taking the above factors into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that our preliminary ratings are commensurate
with the available credit enhancement for all the rated classes of
notes.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we have also included the
sensitivity of the ratings on the class A-1-R to E-R notes based on
four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F-R notes.”z
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit (and or for some of these
activities there are revenue limits or can't be the primary
business activity) assets from being related to certain activities,
including, but not limited to, the following: coal, speculative
extraction of oil and gas, controversial weapons, non-sustainable
palm oil production, tobacco, hazardous chemicals. Accordingly,
since the exclusion of assets from these industries does not result
in material differences between the transaction and our ESG
benchmark for the sector, no specific adjustments have been made in
our rating analysis to account for any ESG-related risks or
opportunities."
Jubilee CLO 2018-XX is a cash flow CLO securitizing a portfolio of
primarily European senior-secured leveraged loans and bonds. The
transaction is managed by Alcentra Ltd.
Ratings list
Prelim.
Prelim. Amount Indicative Credit
Class rating* (mil. EUR) interest rate (%)§ enhancement (%)
A-1-R AAA (sf) 243.40 3mE + 1.28 39.15
A-2-R AAA (sf) 9.60 3mE + 1.60 36.75
B-1-R AA (sf) 29.00 3mE + 2.05 27.00
B-2-R AA (sf) 10.00 4.95 27.00
C-R A (sf) 24.00 3mE + 2.35 21.00
D-R BBB- (sf) 28.00 3mE + 3.50 14.00
E-R BB- (sf) 18.00 3mE + 5.96 9.50
F-R B- (sf) 11.20 3mE + 8.54 6.70
Sub NR 44.87 N/A N/A
*The preliminary ratings assigned to the class A-1-R, A-2-R, B-1-R,
and B-2-R notes address timely interest and ultimate principal
payments. The preliminary ratings assigned to the class C-R, D-R,
E-R, and F-R notes address ultimate interest and principal
payments. § Solely for modeling purposes--the actual spreads may
vary at the time of pricing. The payment frequency switches to
semiannual and the index switches to six-month EURIBOR when a
frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
=========
I T A L Y
=========
ARTS CONSUMER 2023: Moody's Affirms Ba1 Rating on EUR27.5MM D Notes
-------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of mezzanine Notes in ARTS
Consumer S.r.l. and ARTS Consumer 2023 S.r.l. The rating action
reflects the increased levels of credit enhancement for the
affected Notes.
Moody's also affirmed the ratings of the Notes that had sufficient
credit enhancement to maintain their current ratings.
Issuer: ARTS Consumer S.r.l.
EUR668.2M Class A Notes, Affirmed Aa3 (sf); previously on Jan 18,
2024 Affirmed Aa3 (sf)
EUR14.9M Class B Notes, Affirmed A1 (sf); previously on Jan 18,
2024 Upgraded to A1 (sf)
EUR49.1M Class C Notes, Upgraded to A1 (sf); previously on Jan 18,
2024 Upgraded to A3 (sf)
EUR27.4M Class D Notes, Upgraded to Baa2 (sf); previously on Jan
18, 2024 Upgraded to Ba1 (sf)
Issuer: ARTS Consumer 2023 S.r.l.
EUR669.5M Class A Notes, Affirmed Aa3 (sf); previously on Oct 11,
2023 Assigned Aa3 (sf)
EUR14.9M Class B Notes, Upgraded to A1 (sf); previously on Oct 11,
2023 Assigned A2 (sf)
EUR49.1M Class C Notes, Upgraded to A3 (sf); previously on Oct 11,
2023 Assigned Baa2 (sf)
EUR27.5M Class D Notes, Affirmed Ba1 (sf); previously on Oct 11,
2023 Assigned Ba1 (sf)
Maximum achievable rating is Aa3 (sf) for structured finance
transactions in Italy, driven by the corresponding local currency
country ceiling of the country.
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement
for the affected tranches.
Increase in Available Credit Enhancement
The performance for both transactions is worse than original
expectations and both transactions have not been able to cure Class
E Notes PDL with available excess spread at the respective junior
position in the waterfall. This led to an uncured PDL for the
transactions and resulted in early termination of the revolving
period for ARTS Consumer S.r.l. in Q3 2023 and for ARTS Consumer
2023 S.r.l. in Q3 2024.
Unpaid PDL for ARTS Consumer S.r.l. increased from EUR3.2 million
since previous rating action in January 2024 to EUR15.6 million in
September 2024 (latest available data). Unpaid PDL for ARTS
Consumer 2023 S.r.l. is equal to EUR5.7 million in November 2024.
The increase in PDL is due to amount of defaults recorded in the
transactions but also to the very high coupon on Class E Notes
(unrated) that ranks senior to Class E Notes PDL repayment until
this PDL amounts is equal to 25% of the outstanding amount of Class
E.
Following the early termination trigger breach, principal has been
distributed sequentially in the waterfall.
Due to high total repayment rate observed in the transactions, the
pace of amortization of Class A offset the increase in PDL in both
deals. As a result, the sequential amortisation of the notes led to
an increase in the credit enhancement available in these
transactions.
For instance, the credit enhancement for the most senior tranche
affected by the rating action in ARTS Consumer S.r.l. (Class C
Notes) increased to 23.4% from 18.5% since previous rating action.
The credit enhancement for the most senior tranche affected by the
rating action in ARTS Consumer 2023 S.r.l. (Class B Notes)
increased to 24.7% from 20.7% since closing.
Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed Moody's default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date.
For ARTS Consumer S.r.l., total delinquencies have slightly
increased since last rating action but are still at low levels with
90 days plus arrears currently standing at 1.2% of current pool
balance. Cumulative defaults currently stand at 2.9% of original
pool balance up from 1.0% since previous rating action and are
higher than original expectation.
For ARTS Consumer S.r.l., the current default probability
assumption is 6.5% of the current portfolio balance, which
translates into 5.75% default probability assumption based on the
original portfolio balance up from 5.0% at previous rating action.
The assumption for the fixed recovery rate is unchanged at 10% and
PCE is unchanged at 16.0%.
For ARTS Consumer 2023 S.r.l., total delinquencies increased since
closing with 90 days plus arrears currently standing at 1.0% of
current pool balance. Cumulative defaults currently stand at 2.0%
of original pool balance and are higher than original expectation.
For ARTS Consumer 2023 S.r.l., the current default probability
assumption is 6.5% of the current portfolio balance which
translates into 6.40% default probability assumption based on the
original portfolio balance up from 5.5% at closing. The assumption
for the fixed recovery rate is unchanged at 10% and PCE is
unchanged at 16.5%.
The cash proceeds may be invested in eligible investments rated at
least Baa1. The rating of the Class B and C Notes in ARTS Consumer
S.r.l., as well as the rating of Class B Notes in ARTS Consumer
2023 S.r.l. are constrained by risk from eligible investments.
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.
RENO DE MEDICI: Moody's Cuts CFR to B3, Alters Outlook to Negative
------------------------------------------------------------------
Moody's Ratings has downgraded to B3 from B2 the long term
corporate family rating and to B3-PD from B2-PD the probability of
default rating of the Italian recycled paper board producer Reno De
Medici S.p.A. ("RDM" or "the company"). Concurrently, Moody's also
downgraded to B3 from B2 the instrument rating of the EUR600
million senior secured floating rate notes maturing in 2029. The
outlook has been changed to negative from stable.
RATINGS RATIONALE
The rating action was triggered by RDM's weak operating performance
during H1 2024 leading to a sharp deterioration in the group's key
credit metrics as well as its liquidity profile. The inability of
the company to raise prices (price per ton declined by around 18%
year-on-year in H1 2024) in a context of rising prices for
recovered paper (3.6% increase in raw material cost per ton
year-on-year in H1 2024) led to a material decline in EBITDA and to
negative Free Cash Flow of EUR75 million (Moody's-adjusted) in H1
2024. While Moody's had anticipated lower average prices in 2024
compared to 2023 and a slower recovery in volumes, the actual
results came in materially below Moody's expectations. Point in
time credit metrics of RDM are very weak with Moody's adjusted
Debt/EBITDA of more than 12x and negative EBITA/Interest.
The rating continues to be supported mainly by (1) its leading
market positions as the largest producer of recycled cartonboard
(WLC) in Europe following the recent acquisition of Fiskeby and its
#2 market position in solidboard; (2) resilient demand as a large
share of sales (49% in 2023) is derived from the Food & Beverage
end-market; and (3) sustainability tailwind for recycled
paper-packaging with a substitution potential against plastic
packaging.
However, the rating is constrained by (1) the cyclical and
competitive nature of the paper packaging industry; (2) the
company's exposure to volatile input costs (recycled fiber, energy)
and periods of overcapacity that typically result in significant
swings in profitability and credit metrics; (3) challenging market
conditions with weak volumes and pricing due to subdued
macroeconomic growth and customer consumption; and (4) the negative
FCF generation seen in H1 2024.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the material negative FCF seen in H1
2024 with EUR-75 million (Moody's-adjusted) and the weakening of
the company's liquidity profile as a result thereof as well as
Moody's concern that RDM will be challenged to strengthen
profitability, cash flow generation and key credit metrics to a
level commensurate with Moody's expectations for the B3 rating
category over the next 12-18 months. Any indication that this
might not be achieved could trigger a negative rating action.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A positive rating action would be considered if:
Moody's-adjusted gross debt/ EBITDA falls below 6.0x on a sustained
basis;
Moody's-adjusted EBIT margin rises well above 6%;
Moody's-adjusted EBITDA/ interest expense rises above 2.5x on a
sustained basis;
Sustainably positive free cash flow generation is achieved;
Conversely, a downgrade could be triggered by RDM's inability to
substantially increase profitability and substantially improve its
cash flow profile so that the cash drain stops, or if liquidity
further weakens. In terms of credit metrics, Moody's would expect
RDM to manage Moody's-adjusted gross debt/EBITDA below 7.0x and
Moody's-adjusted EBITDA/interest expense above 2.0x, both on a
sustained basis for the current B3 rating. Any indication that this
might not be achieved could trigger a negative rating action.
LIQUIDITY
Moody's consider the liquidity profile of RDM to be weak. Expected
liquidity needs over the next 12 months include up to EUR50 million
capital expenditures, EUR20 million for the closure of Blendecques
mill, EUR20 million working cash and short-term debt maturities.
Liquidity sources include EUR29 million of cash at end of June
2024, EUR80 million availability under the company's EUR95 million
revolving credit facility (RCF) maturing in 2028 and a reversal of
part of the working capital build up seen in H1 2024.
The RCF contains a springing covenant at 8x senior secured net
leverage ratio (5.3x in Q2 2024) tested quarterly when the facility
is more than 40% drawn. Moody's expect covenant headroom to remain
adequate over the 12-18 months horizon of Moody's liquidity risk
assessment.
STRUCTURAL CONSIDERATION
Moody's rate the EUR600 million senior secured notes issued by Reno
De Medici S.p.A. at B3, in line with the long term corporate family
rating. This is primarily because senior secured debt constitutes
most of the company's outstanding liabilities. While the new EUR95
million super senior revolving credit facility ranks ahead of the
notes, the size of the facility and Moody's current expectation of
utilization is too small to cause the notching of the notes below
the CFR according to Moody's loss given default waterfall. However,
the risk of notching would rise if the company's utilization of the
RCF rises or Moody's believe that the company will need to rely on
higher utilization.
The RCF and the senior secured notes share the same collateral
package, consisting of shares in all material operating
subsidiaries of the group, representing at least 80% of
consolidated EBITDA.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Paper and
Forest Products published in August 2024.
COMPANY PROFILE
Headquartered in Milan, Italy, Reno De Medici S.p.A. is the leading
European producer and distributor of recycled paperboard. The
company operates nine mills across six European countries with a
total capacity of 1.5 million tons per year. In the last 12 months
ended June 2024, RDM generated around EUR776 million of revenue.
Since 2021 the company is owned by the private-equity company
Apollo Global Management.
===================
L U X E M B O U R G
===================
ACU PETROLEO: Fitch Affirms BB+ Rating on $600MM Sr. Secured Notes
------------------------------------------------------------------
Fitch Ratings has affirmed the fixed-rate USD 600 million senior
secured notes issued by Acu Petroleo Luxembourg S.A.R.L. (Acu
Petroleo Luxembourg) at 'BB+'. The Rating Outlook is Stable.
RATING RATIONALE
Açu Petroleo Luxembourg's rating reflects the characteristics of
an operational oil transshipment port with revenue exposure to
contract renewals and volume ramp-up risks. The project expects
volumes to increase due to the development of pre-salt fields,
which depend on long-term oil prices. The rating also reflects a
regulatory model without minimum or maximum pricing restrictions.
Fitch's expects the premium tariff, related to the reliability of
the port's services, to remain stable in the coming years.
The issuance includes a full guarantee from Vast Infraestrutura
S.A. (Vast, previously Acu Petroleo S.A.), which owns and operates
the underlying assets. The structure contemplates a legal and
target amortization schedule that allows the debt to be fully
amortized in 10 years through a target amortization cash sweep
mechanism, partially mitigating future reductions in volumes.
Under the rating case, the project has a loan life coverage ratio
(LLCR) of 1.9x. Although this metric is commensurate with a higher
rating, the rating is constrained by Brazil's country ceiling, as
the transactions is exposed to transfer and convertibility risk
because revenues are collected in local currency and converted to
pay debt service in USD.
KEY RATING DRIVERS
Revenue Risk - Volume - Midrange
Single Cargo Terminal: Vast operates the largest private crude oil
transshipment port in Brazil, facing moderate entry barriers for
new participants. Its business plan includes increasing volumes
over the next few years, driven by the development of pre-salt
fields in the Santos Basin. Vast benefits from a long-term
take-or-pay (ToP) agreement with Shell Brasil, a subsidiary of
Royal Dutch Shell plc (AA-/Stable) and mid-term ToP agreements with
other major international oil companies in Brazil.
A significant portion of Vast's revenue depends on contract
renewals, as they mature before the debt tenure. Long-term oil
prices will influence the development of new fields and contracted
volumes. Additionally, port costs for end users are low relative to
the high value of the cargo.
Revenue Risk - Price - Midrange
Inflation Linked Contract: The regulatory model does not impose
minimum or maximum pricing restrictions. The ToP agreements set
forth annual tariffs readjustments that follows U.S. inflation,
measured by PPI for Industrial Commodities, and have been
readjusted in a timely manner since the port began operations. The
revenues and debt are U.S. dollar-denominated, but some operational
costs and expenses are denominated in Brazilian real (BRL),
exposing the transaction to the risk of BRL appreciation.
Infrastructure Dev. & Renewal - Stronger
Well-Maintained Infrastructure: Vast facilities are modern and well
maintained and likely to have long, useful lives. The capacity is
above Fitch's medium-term volume forecast, and planned investments
are predominantly comprised of channel dredging and widening, in
case volumes ramp-up according to base case projections. The
investments and maintenance capex should be funded with operational
cash generation.
Debt Structure - 1 - Stronger
Target Cash Sweep Mechanism: The rated USD-denominated senior debt
is fully amortizing with a fixed interest rate and guaranteed by
Vast Infraestrutura S.A., which owns and operate the assets. It has
a 10-year amortization schedule with a target amortization cash
sweep mechanism. The structure includes strong covenants: DSCR
above 1.30x for dividend distribution, change of control provision,
and six-month offshore debt service reserve account (DSRA) and a
six-month operations & maintenance reserve account (OMRA). New
senior indebtedness requires rating confirmation. Limited exposure
to foreign currency fluctuations exits as revenues are
USD-denominated but collected onshore, exposing the transaction to
transfer and convertibility risks.
Financial Profile
Fitch reviewed 2024 and 2025 volume projections due to the
Brazilian Environmental Agency (IBAMA) strike, delaying drilling
and extraction authorizations and impacting oil production in
Brazil. Under the updated rating case, Açu Petroleo meets target
amortization yearly. The minimum LLCR is 1.9x, and the average DSCR
from 2024 to 2027 is 2.5x, respectively, considering only mandatory
interest payments. Including principal payments, the average DSCR
is 1.4x. Despite these metrics supporting higher ratings, the
rating is constrained by Brazil's Country Ceiling due to transfer
and convertibility risk.
PEER GROUP
Prumo Participacoes e Investimentos S/A (Prumopar, senior secured
notes; BB+/Stable) and Mersin Uluslararası Liman İşletmeciliği
A.Ş. (Mersin, senior unsecured debt BB-/Stable) are Açu Petróleo
Luxembourg's closest peers.
Prumopar benefits from a long-term ToP contract through the entire
tenor of the debt, which offsets the renewal risk. However,
Prumopar has refinancing risk, mitigated by a cash sweep mechanism.
Açu Petróleo Luxembourg has renewal risk, no refinance risk, and
a cash sweep mechanism to accelerate the amortization of the debt
under the target curve. Under the rating case, Prumopar has a
minimum PLCR of 1.8x, close to Açu Petróleo Luxembourg's, and its
rating is also constrained by Brazil's Country Ceiling.
Mersin is Turkiye's largest export-import port and handles the
highest volume of containerized throughput in the country. Unlike
Açu Petróleo Luxembourg, Mersin's volume mix is diversified but
volatile and has a single-bullet debt structure. However, its
refinancing risk is largely mitigated by a moderate leverage ratio
of 2.0x, measured by net debt/EBITDA. Mersin's rating is also
capped by Turkiye's Country Ceiling of 'BB-' and is aligned with
the sovereign rating due to the port's linkages to the country's
economic and regulatory environment.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A negative rating action on Brazil's sovereign rating that leads
to a deterioration on the Country Ceiling;
- Fitch's expectations of oil prices to be below USD65 per barrel,
leading to a lower uplift on volume projections;
- Substantial changes in the business environment that negatively
impact medium- or long-term volume growth prospects.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A strengthening of the credit profile of the Brazilian sovereign,
particularly the risk of imposing controls on the transfer of
foreign currency as long as the project presents metrics
commensurate with higher rating.
SECURITY
Acu Petroleo Luxembourg S.A.R.L. is a non-operational entity that
is fully owned by Acu Petroleo S.A. and is a special purpose
vehicle created for the notes' issuance. The notes are fully
guaranteed by Vast Infraestrutura S.A., which owns the largest
private crude oil transshipment port in Brazil. The notes are in
the amount of USD 600 million, senior secured, with an annual fixed
rate of 7.5%, issued in 144A/Reg S. The structure includes a legal
and target amortization schedule designed to allow for the debt to
be fully amortized in 10 years, through a target amortization cash
sweep mechanism.
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
----------- ------ -----
Acu Petroleo
Luxembourg S.A.R.L.
Acu Petroleo
Luxembourg S.A.R.L.
/Port Revenues –
First Lien/1 LT LT BB+ Affirmed BB+
=====================
N E T H E R L A N D S
=====================
LOPAREX MIDCO: EUR202.4MM Bank Debt Trades at 30% Discount
----------------------------------------------------------
Participations in a syndicated loan under which Loparex Midco BV is
a borrower were trading in the secondary market around 70.3
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR202.4 million Term loan facility is scheduled to mature on
August 3, 2026. The amount is fully drawn and outstanding.
Loparex is a provider of release liners. Based in the Netherlands,
Loparex Midco B.V. operates as a financial holding company
incorporated in 2019. The majority of the Company's end market
sales come from graphic arts, tapes, industrial, and medical.
Labelstock, hygiene, and composites accounts for a smaller portion
of end market sales.
LOPAREX MIDCO: EUR37.3MM Bank Debt Trades at 28% Discount
---------------------------------------------------------
Participations in a syndicated loan under which Loparex Midco BV is
a borrower were trading in the secondary market around 72.0
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR37.3 million Term loan facility is scheduled to mature on
February 1, 2027. The amount is fully drawn and outstanding.
Loparex is a provider of release liners. Based in the Netherlands,
Loparex Midco B.V. operates as a financial holding company
incorporated in 2019. The majority of the Company's end market
sales come from graphic arts, tapes, industrial, and medical.
Labelstock, hygiene, and composites accounts for a smaller portion
of end market sales.
OCI NV: S&P Cuts Senior Secured Notes Rating to 'BB+'
-----------------------------------------------------
S&P Global Ratings lowered its long-term ratings on OCI N.V. and
its senior secured notes to 'BB+' from 'BBB-'. In addition, S&P
assigned a recovery rating of '3' (65% recovery) to the US$600
million bond maturing in March 2033.
The CreditWatch negative status reflects that S&P could lower its
ratings on OCI and its debt by one notch if the company further
deploys capital for shareholder remuneration, instead of allocating
remaining proceeds from disposals to investing in attractive
assets. If the company provides more clarity on its future strategy
in terms of capital allocation, reinvesting remaining proceeds in
attractive assets, and maintaining a prudent financial policy, S&P
could affirm the 'BB+' long-term issuer credit and issue ratings.
OCI has recently completed the Fertiglobe disposal and announced
further shareholder remuneration, significantly reducing the
remaining proceeds available for asset reinvestment. On Oct. 15,
2024, OCI announced the successful completion of the sale of
majority share stake in Fertiglobe to Abu Dhabi National Oil
Company (ADNOC) for a total consideration of about US$3.62 billion.
Following completion of the transaction, ADNOC's shareholding in
Fertiglobe has formally increased to 86.2%. Moreover, OCI entered
into a binding equity purchase agreement for the sale of 100% of
its equity interests in its Global Methanol Business to Methanex
Corporation, and S&P continues to expect that the sale will be
completed during the first half of 2025 for total proceeds of about
US$2.05 billion. Completion of this transaction would bring OCI's
total gross purchase consideration from disposals to about US$ 11.6
billion over 2024-2025. Following the extraordinary dividend
payment of US$3.32 billion in November 2024, the company has
announced it intends to distribute an additional US$1 billion to
shareholders during the first quarter of 2025, subject to continued
progress on the execution of the announced transactions and the
strategic review. This leaves only about US$2 billion of proceeds
that could be allocated to value accretive investment
opportunities. Debt repayments, transaction fees and expenses, and
capital expenditure (capex) consumed the remaining proceeds. Since
the company is yet to provide clarity on its capital allocation
future strategy, S&P cannot rule out the possibility of further
shareholder remuneration if OCI cannot find attractive investment
opportunities.
S&P said, "We believe that the recent disposals have significantly
reduced the competitiveness, resiliency, scale, and diversification
of OCI's operations. Following recently completed and announced
disposals, OCI's continuing operations comprise only European
Nitrogen and Corporate Entities, while OCI Methanol is now
classified as discontinued operations. In our view, OCI 's
competitiveness, scale, scope, operating efficiency, and
profitability has significantly reduced. Specifically, the
remaining assets in the Netherlands (OCI European Nitrogen
Business), include about 400 kilotonnes (kt) to 500 kt of ammonia
for sale, about 1,150 kt of calcium ammonium nitrate (CAN), about
250 kt of urea ammonium nitrate (UAN), about 115 kt of melamine,
and about 250 kt of AdBlue. These production levels assume OCI runs
its plant at 85%-90% efficiency on an ammonia basis. As of year-end
2023, OCI European Nitrogen Business reported sales of US$950
million and negative EBITDA of US$40.6 million, which was mostly
affected by several nonrecurring items such as gas hedging,
inventory turnover initiatives, and plant turnaround. The average
2013-2023 EBITDA margin for OCI European Nitrogen stood at about
15%, significantly lower than the 20.6% average for OCI Global over
the same period. We also note that, similar to other
nitrogen-producing companies solely based in Europe, OCI European
Nitrogen is highly exposed to the volatility of natural gas prices
in Europe. A mitigating factor is OCI's option to import ammonia
from other countries through its port terminals in the Netherlands
to reduce the impact of higher gas prices in Europe. Nevertheless,
while we view OCI as one of the most efficient nitrogen producers
in Europe, we believe that it remains less cost competitive than
other players with global operations. As such, we believe that OCI
European Nitrogen's cash flow generation will continue to
fluctuate, reflecting its high exposure to volatile natural gas and
fertilizer prices.
"We view OCI's net cash position as a strong supporting factor for
our rating. As of Sept. 30, 2024, OCI achieved a net cash
position of US$1.9 billion, and we project that following the
recent transactions the company will maintain a net cash position
of US$1.2 billion-US$1.4 billion at year-end 2024. Specifically,
OCI repaid US$1.019 billion of short duration debt during the third
quarter of 2024, mostly comprising the revolving credit facility
and bridge facility, and in October 2024 redeemed at par US$698
million of senior secured notes maturing in 2025 . Moreover, US$70
million has been further settled as part of a securitization
program, bringing total debt repayments to date to US$1,787
million. We project that OCI's capital structure at year-end 2024
will include US$600 million of bonds maturing in 2033 and a
securitization program of about $100 million. Overall, the strong
cash balance and overall net cash position are strong credit
positive factors in our analysis. Nevertheless, we acknowledge that
the future capital structure and financial policy is highly
uncertain, as it will depend on OCI's final business scope, which
the company has not detailed at this stage. We continue to
anticipate that the business scope of OCI will evolve over time as
the company finalizes the allocation of the remaining proceeds of
approximately US$2 billion.
"The CreditWatch negative placement reflects that we could lower
our ratings on OCI and its debt by one notch if the company further
deploys capital for shareholder remuneration, instead of allocating
remaining proceeds from disposals to investment in attractive
assets with accretive EBITDA and cash flow generation.
"The CreditWatch negative placement also recognizes the current
absence of clarity in terms of future business scope and scale as
well as the company's future strategy in terms of capital
allocation, reinvesting remaining proceeds in attractive assets,
and new financial policy. Once these elements are available, we
could affirm the 'BB+' long-term issuer credit and issue ratings."
===========
R U S S I A
===========
UZBEKISTAN: S&P Affirms 'BB-/B' SCRs, Outlook Stable
----------------------------------------------------
On Nov. 29, 2024, S&P Global Ratings affirmed its 'BB-/B' long- and
short-term foreign and local currency sovereign credit ratings on
Uzbekistan. The outlook is stable.
The transfer and convertibility assessment remains 'BB-'.
Outlook
The stable outlook balances Uzbekistan's favorable growth prospects
over the next 12 months against risks from a continued increase in
external and public sector leverage.
Downside scenario
-- S&P could lower the ratings if external and fiscal deficits
weaken beyond its expectations due to less favorable terms of
trade, persistently high government spending, or higher borrowing
costs. S&P could also lower the ratings if growth levels slow
significantly, for instance due to lower-than-anticipated benefits
from debt-financed investment projects.
Upside scenario
S&P could raise the ratings if Uzbekistan moderates its budgetary
and current account deficits without impairing economic performance
significantly. S&P could also consider an upgrade if Uzbekistan's
governance quality and institutional settings were to improve--for
example, if governance gaps at government-related entities (GREs)
narrowed.
Rationale
Uzbekistan continues to gradually modernize its economy, a process
that began in 2017 with the liberalization of the exchange rate. To
address issues related to energy security, the high fiscal cost of
subsidies, and rising gas imports, the government started raising
electricity and gas tariffs in October 2023. Authorities plan for
energy pricing to reflect costs by 2027. Lower subsidies and
favorable gold prices should help Uzbekistan slowly reduce its
fiscal deficit to 3.5% of GDP, on average, over 2024-2027, from 5%
in 2023. S&P anticipates that ongoing economic reforms, government
fiscal support measures, and remittance inflows will support
stronger annual growth in real GDP, relative to many similarly
rated peers, through 2027.
Nevertheless, the development plan requires sizable debt-financed
investments. S&P said, "We anticipate that these will continue to
drive up Uzbekistan's net general government and external leverage,
although the speed of the increase may ease. The current account
deficit reached a record high of 7.7% of GDP in 2023, and we
forecast that deficits will remain elevated at 6.8% of GDP a year,
on average, over 2024-2027."
S&P said, "Overall, our ratings on Uzbekistan are supported by the
economy's still-moderate level of net general government debt. We
forecast that this will reach 35% of GDP by the end of 2027. The
sovereign's fiscal and external stock positions have historically
benefited from its policy of transferring some revenue from
commodity sales to the Uzbekistan Fund for Reconstruction and
Development (UFRD; a sovereign wealth fund).
"Our ratings are constrained by Uzbekistan's low economic wealth,
measured by GDP per capita, and its limited monetary policy
flexibility. Although the latter is improving, we still consider
policy responses difficult to predict, given the highly centralized
decision-making process, developing accountability mechanisms, and
the limited checks and balances between institutions."
Institutional and economic profile: Growth momentum predicted to
remain strong, despite balance-of-payment risks
-- S&P forecasts that economic growth will average 5.6% over
2024-2027, after reaching 6.3% in 2023.
-- Economic and governance reforms, including planned hikes to
energy tariffs, will support the country's investment prospects.
-- Decision-making will remain centralized, and despite some
improvements, perception of corruption is likely to be high.
Uzbekistan's economy grew by 6.6% year-on-year during the first
nine months of 2024, boosted by strong performance across a broad
range of sectors, including information and communications,
construction, and trade. From 2021-2023, the country's real GDP
growth was high at about 6.8% a year, on average. S&P predicts that
growth prospects will remain strong. Uzbekistan's growth is heavily
investment-led; it has one of the highest investment-to-GDP ratios
globally, at about 34%. Under the "Uzbekistan 2030" strategy, the
government and public entities are directing investments toward the
energy, transport, telecommunications, agriculture, and tourism
sectors.
The government has also started raising electricity and gas
tariffs. It plans to diversify and modernize the generation of
electricity, particularly green energy. This will mainly be
achieved through public-private partnerships--for instance, Saudi
Arabia's ACWA Power plans to invest in electricity generation
projects worth $7.5 billion (7% GDP) through 2030. Currently, about
20% of the energy consumed in Uzbekistan comes from green sources;
it aims to increase that to 40% by 2030. The government also aims
to expand production of copper, gold, silver, and uranium to boost
the export base.
S&P said, "Despite the increasing energy tariffs and elevated
interest rates, we anticipate an increase in consumption, sustained
by remittance inflows and rising wages, combined with government
measures to stimulate the economy, such as tax exemptions and
regulated prices on certain consumer goods. Government efforts to
strengthen the regulatory framework, privatize certain state-owned
companies, and gain accession to the World Trade Organization
(which is expected to take place in 2026) could also ultimately
support private and foreign investment.
"Despite strong GDP growth, we estimate that GDP per capita will be
$2,900 in 2024, which is still low by global standards. This
constrains our sovereign ratings on Uzbekistan. A quarter of the
population is employed in agriculture, which makes up about 18% of
the economy. That said, the country benefits from favorable
demographics--almost 90% of Uzbekistanis are at or below working
age. The country's relatively young population presents an
opportunity for labor-supply-led growth. Nevertheless, we
anticipate that it will be difficult for job growth to match
demand. Most of Uzbekistan's permanent and seasonal expatriates are
employed in Russia; therefore, the weakness of the Russian economy
could further exacerbate this issue."
The government, with help from the International Monetary Fund
(IMF), recently revised its methodology for measuring activity in
the informal economy, resulting in upward revisions to the GDP
data.
Uzbekistan's economy continues to weather the spillover effects
from the Russia-Ukraine war reasonably well. Remittance inflows
grew by 35% over January-September 2024, compared with the same
period last year, following a large decline in 2023. In S&P's view,
the size of the increase demonstrates that demand for labor in
Russia is rising, as are wages. It also reflects growing
diversification of remittance sources (including the U.S., Germany,
Poland, and South Korea). Nevertheless, 78% of total Uzbekistan's
remittances in 2024 still stem from Russia. In addition, total
trade with Russia increased by about 26% during the first nine
months of 2024. Because of the Western-alliance-led sanctions on
Russia, Uzbekistan has been able to increase its exports to the
country to meet growing demand. In addition, in October 2023,
Uzbekistan signed a two-year deal with Russia's Gazprom to import 9
million cubic meters of gas per day.
Although the government tries to comply with sanction requirements,
we still see a risk that the U.S. and EU could impose further
secondary sanctions on Uzbek companies that do business with
Russia. For example, the U.S. and EU have already sanctioned a few
private Uzbek companies involved in trading electronic and
telecommunications equipment and goods in the defense industry. In
response, the government is implementing enhanced diligence
processes, automated screening measures, and stress testing.
A new constitution adopted in May 2023 lengthened the presidential
term of office to seven years from five and allows the current
president, Shavkat Mirziyoyev, to remain in power until 2037. In
our view, government policy responses can be difficult to predict
in Uzbekistan, considering the centralized decision-making process
and limited checks and balances between institutions. There is
uncertainty regarding future power transfers.
Flexibility and performance profile: Government and external debt
likely to rise further
-- S&P expects net general government debt to reach 35% of GDP by
2027, compared with the net asset position in 2017.
-- Uzbekistan's current account deficits are forecast to average
6.8% of GDP through 2027 and be primarily funded through
concessional external debt and, to a smaller extent, net foreign
direct investment (FDI).
-- Although monetary policy has improved in recent years, S&P
still considers the central bank's operational independence to be
constrained and loan dollarization remains elevated, at over 40%.
In recent years, Uzbekistan has ramped up its investment in energy,
mining sector capacity expansion projects, and other infrastructure
projects, along with social spending. As a result, net general
government debt (including government guaranteed debt) has
increased by an average of 6.3% of GDP a year over 2020-2023,
leading to a rapid rise in government and total external debt
stocks.
S&P said, "From 2024, we expect gradual fiscal consolidation based
on subsidy reforms, better-targeted social spending, and the
removal of some tax exemptions. As the government works to reduce
the gray economy and improve operations at GREs, we expect the tax
base to gradually expand.
"We forecast that the government will achieve its targeted fiscal
deficit of about 4% of GDP this year, down from 5% of GDP in 2023.
Gold prices have risen by about 20% so far in 2024 relative to
end-2023, which supports government revenue through associated tax
receipts. Authorities expect increasing energy and gas tariffs to
deliver savings of about 1 percentage point of GDP in 2024.
"Our projections are subject to downside risks including
potentially higher expenditure on social protection. In addition,
Uzbekistan relies on the sale of commodities such as gold--the
prices of these can be volatile. Social spending, including
government wages, makes up about 50% of government expenditure and
can be difficult to adjust for political reasons.
"Gross government debt (including government-guaranteed debt) is
forecast to increase to 43% of GDP in 2027, from 34% in 2023. We
include government-guaranteed debt with general government debt
because of Uzbekistan's close links with its GREs. The state debt
law approved by the president in April 2023 sets a permanent debt
ceiling of 60% of GDP, and mandates the application of corrective
measures if it breaches 50%.
"We think there is some risk that nonguaranteed GRE debt, which
totaled about 4.6% of GDP in 2024, could crystallize on the
government's balance sheet. In recent years, GRE borrowing has
significantly increased especially borrowing in foreign currencies.
The debt is mainly being incurred to finance energy and
infrastructure projects. Separately, the use of public-private
partnerships (PPP) has seen a rapid increase and comprised about
20% of GDP in 2023. We understand that a new PPP framework will
limit future PPP commitments. In our view, these projects may
struggle to repay their debt if they fare worse than expected, or
if there are lapses in management or supervision."
To reduce exposure to fluctuations in currency movements and build
domestic capital markets, the government is increasing domestic
borrowing. The proportion of domestic debt to total debt stood at
17% on June 30, 2024, up from 11% at year-end 2022. The rising
proportion of domestic and commercial debt, combined with a lagged
effect from the transition to Secured Overnight Financing Rate
(SOFR) from London Interbank Offered Rate, is expected to increase
interest payments by about 83% year-on-year in 2024. However, S&P
expects interest to remain below 5% of revenue over the next three
years.
Uzbekistan maintains a favorable debt profile, with about 86% of
external debt on concessional terms, although commercial external
debt is slowly increasing. In 2023-2024, the government issued
U.S.-dollar-denominated Eurobonds of $1.26 billion and
euro-denominated Eurobonds of EUR600 million ($652 million). The
government also issued external debt in local currency, including
the first green Eurobond in Uzbek sum (UZS), worth UZS4.25 trillion
($331 million), as well as bonds worth UZS3 trillion ($236 million)
that make repayments in U.S. dollars.
The government's liquid assets are estimated at 11% of GDP in 2024,
down from 33% in 2017. Most of these assets are owned through the
UFRD, which was founded in 2006. The UFRD was initially funded with
capital injections from the government, as well as revenue from
gold, copper, and gas sales above certain cut-off prices, until
2019. When calculating government liquid assets, S&P includes only
the external portion of UFRD assets. The domestic portion consists
of loans to GREs and capital injections to banks, and S&P considers
it to be largely illiquid and unlikely to be available for
debt-servicing if needed.
S&P said, "High current account deficits and increasing external
debt could raise balance-of-payment risks for Uzbekistan, in our
view. However, we estimate that the external imbalance will narrow
to about 6.2% of GDP in 2024, from a peak of 7.7% in 2023, thanks
to strong remittance inflows and large one-off imports (like
aircrafts and cars) last year. To slow the growth of imports,
authorities removed import tax exemptions on cars and almost 40
essential food items that it had introduced in 2023. Despite this,
we expect import growth to remain high because of the large
pipeline of investment projects. In addition, Uzbekistan became a
net importer of gas in October 2023 after it started importing
Russian gas via a pipeline through Kazakhstan."
Much of Uzbekistan's exports consist of commodities, particularly
gold, which comprised 43% of goods exports in the first half of
2024. Favorable gold prices will boost exports in 2024, but over
our forecast period to 2027 S&P predicts that prices will decline
to $1,800 per ounce (/oz), from the current high of close to $2,400
this year.
Mirroring the sizable current account deficits, the country's gross
external debt has risen in recent years across the government,
corporate, and financial sectors. A significant portion of future
current account deficit financing will likely still be through
debt. S&P expects FDI inflows to increase gradually as the
government implements its pipeline of privatizations, although the
timeline will depend on market conditions.
S&P said, "We estimate that Uzbekistan's usable foreign exchange
reserves will decline through 2027, partly because of valuation
effects linked to the expected fall in gold prices. However, usable
reserves should still cover about five months of current account
payments in 2027. The Central Bank of Uzbekistan's (CBU's) holdings
of monetary gold constitutes about 90% of total usable reserves.
The CBU has priority rights to purchase gold mined in Uzbekistan.
It purchases the gold with local currency, then sells U.S. dollars
in the local market to offset the effect of its intervention on the
Uzbek sum.
"We exclude UFRD external assets from the CBU's reserves because we
consider that the former are primarily held for fiscal reasons,
rather than to support monetary or balance-of-payments needs. Our
view is supported by the budgetary use of UFRD assets in the
domestic economy over the past four years.
"Uzbekistan's monetary policy effectiveness has improved in recent
years. One of the most significant measures, in our view, was the
liberalization of the exchange rate in September 2017 to a
crawl-like peg. The CBU intermittently intervenes in the foreign
exchange market to smooth volatility and mitigate the increase in
local currency via its large gold purchases.
"In the near term, we expect that ongoing increases in energy
tariffs will keep inflation high. For 2024, we estimate inflation
of 9.8%, compared with a 10.4% average in 2023, but we predict that
it will gradually fall to 6.5% by 2027. In 2020, the CBU adopted
measures to transition to an inflation-targeting mechanism, with a
target of 5%.
"State-owned banks dominate the sector and hold 67% of total
assets. This, combined with preferential government lending
programs (albeit declining), reduces the effectiveness of the
monetary transmission mechanism, in our view. Following the sale of
Ipoteka Bank in 2023, authorities now plan to privatize two more
banks: SQB and Asaka. To address very strong growth in consumer
loans over the past few years, the central bank has implemented
more-stringent lending requirements, including limits on car loan
portfolios for banks and tighter debt service-to-income limits for
retail borrowers. Although dollarization is declining thanks to CBU
policies, it remains high: about 42% of loans and 27% of deposits
were denominated in U.S. dollars, as of September 2024.
"Uzbekistan's banking sector is likely to continue to show
resilience. We consider that favorable economic growth prospects,
strengthening disposable income, and low penetration of retail
lending in Uzbekistan (with household debt to GDP below 10% of GDP)
will remain among the key factors contributing to strong demand for
lending in the next few years. Most Uzbek banks have stable funding
profiles, supported by sizable funding from the state and
international financial institutions, as well as growing corporate
and retail deposits. At the same time, access to long-term funding
in the domestic market remains scarce. We continue to see bank
regulation in Uzbekistan as reactive, rather than proactive.
Regulatory actions are not always predictable and transparent.
However, regulation is gradually improving."
=========
S P A I N
=========
GERIAVI SL: EUR110MM Bank Debt Trades at 30% Discount
-----------------------------------------------------
Participations in a syndicated loan under which GeriaVi SL is a
borrower were trading in the secondary market around 70.1
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR110 million Term loan facility is scheduled to mature on
November 27, 2034. The amount is fully drawn and outstanding.
The Company's country of domicile is Spain.
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S W E D E N
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DOMETIC GROUP: S&P Affirms 'BB-' LT ICR, Outlook Stable
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S&P Global Ratings affirmed its 'BB-' ratings on Sweden-based
manufacturer of outdoor leisure products Dometic Group AB and its
senior unsecured bonds. The recovery rating of '3' is unchanged but
S&P now estimates recovery prospects at 55%, down slightly from 60%
previously.
The stable outlook reflects S&P's expectation that Dometic's
revenue and margins will bottom out in 2025, with adjusted FFO to
debt gradually improving to more than 15%, supported by debt
reduction through sustainably positive FOCF generation.
S&P said, "The difficult market environment in 2024 caused
Dometic's credit metrics to deteriorate, but we anticipate an
improvement from 2025 mainly due to debt reduction. Challenging
market conditions led to a 12% organic decline in net sales in the
first nine months of this year, with revenue dropping across all
segments, particularly in the original equipment manufacturer (OEM)
sales channel. However, we expect pressure from the downturn to
ease during 2025, potentially aided by gradually improving
discretionary consumer spending as interest rates go down and
stocking activities normalized. We anticipate our adjusted EBITDA
margin may remain subdued at approximately 14% in 2025, taking into
account the currently sluggish growth is triggering restructuring
measures for the company. However, we anticipate a gradual
improvement of credit metrics already in 2025 because we believe
the company will use most of its FOCF of SEK2.3 billion–SEK2.5
billion annually to reduce debt, which should also reduce its
interest burden. As a result, we forecast our adjusted debt figure
to decline to about SEK14.4 billion in 2024 from SEK15.9 billion in
2023, and to about SEK13 billion in 2025. We forecast S&P Global
Ratings-adjusted FFO to debt at slightly higher than 15% in 2025,
up from about 12% expected for 2024 and 14.5% in 2023.
"We anticipate gradual market stabilization after an expected 13%
drop in revenue for 2024 to SEK24.1 billion, though the exact
timing of the recovery remains uncertain. Sales in the OEM
channel were particularly affected by the market downturn, showing
a significant revenue decrease of 17% in the first nine months of
2024, primarily due to ongoing weakness in the Americas.
Additionally, Dometic's Service & Aftermarket (SAM) and
Distribution (DIST) segments both reported an 8% decline in revenue
during that period. This was attributed to retailers and
distributors exercising caution in placing new orders, alongside
consumers prioritizing essential repairs and postponing upgrades.
We expect the OEM sector to remain subdued next year, since the
challenging market environment may continue to limit spending on
high-ticket vehicles. Concurrently, we foresee a gradual recovery
in the SAM and DIST segments ahead of the high season during the
second quarter of the year, since we expect an easing of destocking
dynamics by that time.
"We expect 2025 to mark a transitional year, with profitability
potentially dampened by one-time costs but supported by steps
toward future growth and market stabilization. An improved
product mix should favor the higher-margin service segment, but
these gains may be offset by incremental one-time measures to
optimize the cost base. The company has a history of launching
restructuring programs and has recently announced it is assessing a
new one. However, as demonstrated in recent years, such
restructuring initiatives are expected to enhance efficiency and
unlock potential cost benefits, ultimately positioning the company
for more resilient growth and profitability. Between 2020 and 2023,
the company implemented two global restructuring programs,
incurring cumulative costs of approximately SEK950 million and
achieving total annual savings of about SEK400 million as of
midyear 2023 and SEK200 million by the end of 2023. Assuming
similar amounts of restructuring costs and savings in our updated
base case, we expect S&P Global Ratings-adjusted EBITDA margins to
remain stable in 2025 at 14%, after about 14% in 2024 and 15.2% in
2023.
"We anticipate restructuring benefits to become fully visible in
credit metrics in 2026, when we expect FFO to debt to recover to
approximately 20%. We anticipate the EBITDA margin to improve by
about 200 basis points (bps) in 2026 to about 15.9%. This, coupled
with about 3% growth in revenue, should see EBITDA increase by 17%
to about SEK4 billion from SEK3.4 billion in 2025. In addition, we
expect the FFO-to-debt ratio to benefit from decreasing cash
interest expense and stable discretionary cash flow generation of
about SEK1.5 billion, most of which we expect will go toward debt
repayment. As a result, we expect S&P Global Ratings-adjusted FFO
to debt to reach approximately 20% by 2026.
"We understand that management remains committed to strengthening
the balance sheet and prioritizing deleveraging in the coming
quarters. As of Sept. 30, 2024, Dometic's net debt to
EBITDA--based on the company's definition (which excludes items
affecting comparability, as well as leases)--reached 3.0x, compared
with Dometic's policy target of "around 2.5x." However, the company
has clearly communicated its intention of reducing leverage.
Consequently, in our updated base case we have not incorporated any
spending on acquisitions in 2024-2025. Regarding dividends, we note
as positive that the company has opted to reduce its dividend
payout ratio during periods of significant stress, as seen in 2020
when no dividend was paid and in 2023 when the payout was limited
to 23%. However, we do not expect any changes to the company's
policy of distributing at least 40% of net profit, and we forecast
a stable dividend payment of SEK607 million for both 2025 and
2026."
Dometic's has demonstrated robust cash flow generation and an
enhanced product mix in recent years, notwithstanding EBITDA
volatility through the business cycle. The company remains
concentrated in the outdoor, leisure, and hospitality sectors,
making it inherently reliant on consumer confidence and
discretionary spending. However, in recent years, it has
strategically diversified--partly through acquisitions--away from
the OEM sales channel. This has resulted in a significant decrease
in exposure to RVs, from 47% of revenues in 2017 to 21% as of
third-quarter 2024. The company has also demonstrated the
resilience of its cash-generating business, with FOCF to sales at
10% or higher since 2017, except in 2021 and 2022, due to
heightened working capital requirements arising from global supply
chain disruptions. At the same time, S&P regards Dometic's business
as volatile because its EBITDA faces higher-than-average exposure
to changing market conditions.
Outlook
The stable outlook reflects S&P's expectation that Dometic's
revenue and margins will bottom out in 2025 and that the group's
FFO to debt should gradually improve to above 15% in 2025 supported
by debt reduction through sustainably positive FOCF generation.
Downside scenario
S&P could lower the rating on Dometic if FFO to debt falls below
12% with little prospects of a swift recovery. This could happen if
operating performance were to deteriorate, for example because of
persistently weak demand, leading to EBITDA margins lower than 13%,
or, albeit not expected, if the company were to embark on a
materially debt-funded acquisition or the litigation with ACON were
to result in material cash outlays.
Upside scenario
S&P could upgrade Dometic if profitability and credit metrics
strengthened sustainably. This would include both adjusted EBITDA
margins of about 16% or higher and FFO to debt remaining
sustainably well above 20% under any market circumstances, coupled
with management adhering to a more conservative financial policy.
Environmental, social, and governance credit factors have no
material influence on S&P's rating on Dometic. A significant
portion of Dometic's revenue is derived from the RV and marine end
markets. However, Dometic manufactures and sells products that have
limited exposure to risks stemming from electrification trends,
such as refrigerators, coolers, air conditioners, lighting, and
window blinds.
HEIMSTADEN BOSTAD: Fitch Rates Proposed EUR500M Hybrid 'BB(EXP)'
-----------------------------------------------------------------
Fitch Ratings has assigned Heimstaden Bostad AB's proposed EUR500
million perpetual capital securities an expected rating of
'BB(EXP)'. The rating is line with Heimstaden Bostad's existing
subordinated debt rating of 'BB'. The proposed hybrids would
qualify for 50% equity credit.
The proceeds from the hybrid issue will be used to partly refinance
Heimstaden Bostad's existing EUR800 million hybrid bond callable in
November 2024. Of this existing hybrid's nominal amount, EUR589
million remains outstanding and EUR211 million is held by
Heimstaden Bostad. These hybrids, held on its own books, will be
cancelled as part of this transaction.
The final rating is contingent on the receipt of final documents
conforming materially to the preliminary documentation reviewed.
Key Rating Drivers
SECURITIES
Use of Proceeds: Following the hybrid issue, Heimstaden Bostad
plans to make a tender offer for the outstanding EUR589 million
hybrid bond at par value using EUR500 million in proceeds and EUR89
million of its cash-on-hand (plus transaction costs). This implies
a net reduction of outstanding hybrids. Any repurchase is
contingent on completing the hybrid issue.
No Permanence Impact: The proposed transaction does not change
Fitch's view on the permanence of remaining hybrids. Heimstaden
Bostad's management states it remains committed to retain hybrids
as part of its capital structure.
Fixed-to-Reset Coupon: The proposed hybrids will have a fixed
coupon for 5.25 years before resetting to a five-year euro swap
rate plus initial margin and any step-up, if applicable. If the
hybrid is not called ahead of its first step-up date, the margin
will increase by 25bp and by a cumulative total 100bp at its second
step-up date.
Hybrid Notched Off IDR: The proposed perpetual hybrid securities
are rated two notches below Heimstaden Bostad AB's Long-Term Issuer
Default Rating (IDR) of 'BBB-'. This reflects the hybrids' deeply
subordinated status, ranking behind senior creditors and senior
only to equity (ordinary and preference shares), with coupon
payments deferrable at the discretion of the issuer and no formal
maturity date. It also reflects the hybrid's greater loss severity
and higher risk of non-performance than senior obligations.
Equity Treatment: Under Fitch's hybrid criteria, the proposed
securities qualify for 50% equity credit due to deep subordination,
a remaining effective maturity of at least five years, full
discretion to defer coupons for at least five years and limited
events of default. Equity credit is limited to 50%, given the
cumulative interest coupon, a feature that is more debt-like in
nature.
Effective Maturity Date: Although the hybrids are perpetual, Fitch
deems their effective maturity to be 20 years after the first reset
date in accordance with the agency's Corporate Hybrids Treatment
and Notching Criteria. From this date, the issuer will no longer be
subject to replacement language, which discloses the intent to
redeem the instrument with the proceeds from similar instrument or
equity. The instrument's equity credit would change to 0% five
years before the effective maturity date (ie 15 years after the
respective reset date). The coupon step-up remains within Fitch's
aggregate threshold rate of 100bp.
ISSUER
Bond Market More Receptive: The planned hybrid issue follow
Heimstaden Bostad's senior unsecured bond issuance of EUR500
million in October 2024, and SEK1.2 billion and SEK 1.3 billion in
August and September 2024, respectively. These completed issuance
indicate an increasingly receptive bond market.
Derivation Summary
Heimstaden Bostad's portfolio of residential-for-rent assets of
EUR28.6 billion and 161,553 units at end-2023 is materially larger
than those of residential peer UK-based Annington Limited (IDR:
BBB/Negative Outlook; EUR8.9 billion; about 38,000 units) and
Grainger plc (IDR: BBB-/Stable; EUR4.6 billion; 9,692 units). It is
also larger than SCI LAMARTINE (BBB+/Stable) EUR2.1 billion
Paris-focused French residential portfolio and D.V.I. Deutsche
Vermogens- und Immobilienverwaltungs GmbH (BBB-/Stable; EUR3.1
billion Berlin-focused German portfolio. The portfolio of Vonovia
SE (IDR: BBB+/Stable) is larger at close to EUR80 billion in
value.
The geographical diversification of Heimstaden Bostad's portfolio,
which balances out its city-specific developments such as Berlin's
rent regulation, stands out as a material benefit to its ratings
compared with peers'.
The net initial yields (NIYs) on residential-for-rent are lower
than commercial real estate, and reflect their lower risk profile
including stable rents, high occupancy, demand outstripping supply,
and the different interest rates across the countries. Fitch
acknowledges the higher debt capacity of the above
residential-for-rent companies compared with the more volatile
commercial real estate (office, retail, industrial) companies and
adjusts all their rated companies' net debt/recurring
rental-derived EBITDA thresholds for their NIYs and the quality of
each entity's portfolio.
Heimstaden Bostad's net debt/EBITDA leverage of 21.4x in 2023 is
higher than higher-rated Vonovia (end-2023: 18.8x) and Lamartine
(forecast at 16x at end-2024) and also lower-rated DVI
(residential-based measure; end-2023: 16.2x). During this high
interest-rate period, all four have slowed or stopped expansionary
capex and acquisitions to focus capital on deleveraging.
Key Assumptions
- Like-for-like rental growth of 5.2% in 2024, reflecting phased
inflationary catch-ups, followed by 4.4% in 2025, 3.9% in 2026 and
3.5% in 2027
- Privatisation programme asset sales of about SEK7.7 billion in
2024 and SEK11.5 billion in 2025
- No additional equity during the forecast period
- No dividend payments in 2024 and 2025. Dividend payments to
resume in 2026
- No additional acquisitions during 2024 -2027 other than about
SEK3.5 billion for funded projects or forward purchases
- Average cost of debt includes future years' policy rates from
Fitch's Global Economic Outlook, and the benefit of Heimstaden
Bostad's derivatives book, resulting in a Fitch-calculated average
cost of debt (including hybrids and 2025's coupon step-ups) of 3.3%
in 2024, 3.5% in 2025 and 3.3% in 2026 and 2027
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Net debt/EBITDA above 24x
- EBITDA net interest cover remaining below 1.4x
- Unencumbered investment property assets/unsecured debt below
2.0x
- Changes to the governance structure that loosen the ring-fencing
around Heimstaden Bostad
- A 12-month liquidity score approaching 1.0x
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Successful progress with the privatisation (disposal) programme
- During this period of Heimstaden Bostad's constrained access to
capital, a liquidity score of above 1.25x for the first 12 months,
and a liquidity score of above 1.0x for the subsequent 12 months
- Net debt/EBITDA below 22x
- EBITDA net interest cover above 1.4x
Liquidity and Debt Structure
Heimstaden Bostad's cash position of SEK14.4 billion at end-3Q24 is
supplemented by undrawn revolving credit facilities (RCFs) of about
SEK16.3 billion (available for the next 12 months), which
comfortably cover about SEK22.8 billion scheduled debt maturities
within the next 12 months.
In October 2024, Heimstaden Bostad accessed the Eurobond market and
raised an additional SEK5.8billion equivalent (EUR500 million) with
five-year term at a 3.875% fixed coupon. Together with SEK bonds
issued during 3Q24, this bring the total bond issuance in 2H24 to
SEK8.2 billion, demonstrating improved receptiveness of the bond
market. The SEK bonds issued had two- and three-year maturities at
floating STIBOR plus 240bp and 200bp, respectively.
In August 2024, Heimstaden Bostad also signed a EUR725 million loan
secured on part of its Dutch portfolio. The sustainability-linked
credit facility matures in 2031 and replaced an existing bank loan
maturing in 2026, bringing in net proceeds of EUR200 million.
Issuer Profile
Heimstaden Bostad is a pan-European residential-for-rent real
estate company. It is owned by Heimstaden AB, together with other
long-term Nordic institutional investors.
Date of Relevant Committee
20 March 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
----------- ------
Heimstaden
Bostad AB
Subordinated LT BB(EXP) Expected Rating
TRANSCOM HOLDING: Moody's Cuts CFR to Caa1, Alters Outlook to Neg.
------------------------------------------------------------------
Moody's Ratings has downgraded Transcom Holding AB's ("Transcom" or
"the company") long-term corporate family rating to Caa1 from B3
and its probability of default rating to Caa1-PD from B3-PD.
Concurrently, Moody's have downgraded the rating on Transcom's
EUR380 million backed senior secured notes ("senior secured notes")
due 2026 to Caa1 from B3. The outlook has changed to negative from
stable.
"The downgrade to Caa1 reflects Moody's expectation of no EBITDA
growth for the full year 2024 overall, ongoing negative free cash
flow generation and challenges in achieving sustainable and
profitable growth" says Lola Tyl, Moody's Ratings lead analyst for
Transcom.
"The action also takes into account the increasing refinancing risk
related to the 2026 maturities" added Ms Tyl.
RATINGS RATIONALE
The downgrade of Transcom's ratings to Caa1 reflects the challenges
in achieving sustainable growth and the ongoing negative free cash
flow (FCF) generation. The company faces significant refinancing
needs in 2026, when its senior secured notes of EUR380 million
matures. At the current funding rates, a significant improvement in
Transcom's earnings profile would be necessary to support the
refinancing. Additionally, the impact of artificial intelligence
(AI) on the customer relationship management (CRM) industry over
the medium to long term remains unclear, which has reduced the
sector's EV/EBITDA multiples as well as the equity cushion for
Transcom given its high leverage.
Despite Moody's expectation of a stronger fourth quarter of 2024,
largely supported by the comparison with the weak performance in
the final quarter of 2023, Moody's project no Moody's-adjusted
EBITDA growth for the full year 2024 overall. Moody's also expect a
weaker company-adjusted EBITDA margin in 2024, due to the
overcapacity in some European markets, as well as costs to support
growth in 2025.
Moody's therefore anticipate Transcom will exhibit negative
Moody's-adjusted FCF in 2024, with a Moody's-adjusted gross
leverage increasing to around 5.6x, from 5.2x in 2023, excluding
the impact on gross debt of the company's factoring arrangements.
Moody's estimate that Moody's projected Moody's-adjusted gross
leverage would be around 6.0x including this impact.
In 2025, Moody's expect limited EBITDA growth driven by revenue
growth supported by Transcom's current investments in sales and
marketing, combined with the contribution from cost efficiencies.
Moody's forecast FCF to remain negative and therefore the company
would likely have to draw on its revolving credit facility (RCF)
modestly to preserve a comfortable cash position. As a result,
Moody's project limited deleveraging in the next 12-18 months.
Despite the downgrade, Transcom's credit profile continues to
reflect the company's market-leading position in customer
relationship management (CRM) in EMEA and particularly in the
Nordic region; and its global footprint with both offshore and
nearshore activities, which allows the company to serve
international contracts.
The company's rating is constrained by its smaller size than global
peers; its weak Moody's-adjusted free cash flow (FCF) generation,
which Moody's estimate will continue to be negative in the next 12
to 18 months; its also weak EBITA/interest cover ratio of 1.3x in
2023 and 1.1x projected for 2024, which may come under further
pressure given the need to refinance its debt that matures in
December 2026, most likely at higher rates.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS
Governance risk considerations are material to the rating action
owing to Transcom's high tolerance for leverage resulting in
ongoing negative free cash flow generation, which increases the
risk of a debt restructuring. This factor has resulted in the
company's Financial Strategy and Risk Management score moving to 5
from 4, the governance issuer profile score (IPS) to G-5 from G-4
and the Credit Impact Score moving to CIS-5 from CIS-4.
LIQUIDITY
Despite the increasing refinancing risk, Transcom's liquidity is
currently adequate, supported by EUR40 million of cash as of the
end of September 2024 and EUR67 million available under the EUR75
million super senior revolving credit facility (RCF).
The group's super senior RCF is maturing in June 2026 and
Transcom's next significant debt maturity is the senior secured
notes maturity in December 2026, which will likely have to be
refinanced at higher rates.
Moody's project Transcom's Moody's-adjusted free cash flow (FCF) to
continue to be negative in the next 12-18 months, such that Moody's
expect the company to draw moderate amounts on its RCF in 2025 and
2026 to maintain a comfortable cash position.
Transcom's super senior RCF is subject to a springing drawn super
senior leverage ratio financial covenant (set at 2.0x), tested
quarterly when the net drawn amount exceeds 40% of the total RCF
commitments.
STRUCTURAL CONSIDERATIONS
Transcom's Caa1-PD PDR is in line with the CFR, reflecting Moody's
assumption of a 50% recovery rate, as is customary for capital
structures that include bonds and bank debt. The Caa1 instrument
rating on the EUR380 million senior secured notes is in line with
the CFR. The senior secured notes and the company's EUR75 million
super senior RCF benefit from guarantees from operating
subsidiaries and security over shares. However, proceeds from any
recovery from enforcement of security interests will be applied to
satisfy obligations under the super senior revolving credit
facility before being applied to satisfy obligations to holders
under the senior secured notes.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the lack of cash flow generation
because of a combination of low earnings growth and interest
burden. This increases refinancing risk for its upcoming 2026 debt
maturities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure would arise if Transcom successfully
addresses its upcoming debt maturities and if the company delivers
a solid operating performance with sustainable revenue and EBITDA
growth that allows the company to afford higher interest rates.
Downward rating pressure could occur if the risk of default rises
or Moody's assessment of recovery in a default scenario
deteriorates to levels below the expectation for a Caa1 rating.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
Founded in 1995, Transcom ranks among the largest European
providers of outsourced CRM and is the leading provider in Sweden
and Norway. Headquartered in Sweden, the company operates 85
contact center locations in 29 countries, offering services in 33
languages to more than 200 international clients. The company
delivers a broad range of services, including quality, risk, and
compliance management (QRC, request for information, subscriptions,
complaints and technical support), customer acquisition and
onboarding (sales and marketing operations), CRM and retention,
back office, credit and collections, and advisory and analytics. In
2023, Transcom reported EUR738 million of revenues and EUR96
million of company-adjusted EBITDA (excluding EUR18 million of
items qualified by the company as non-recurring).
In April 2017, Altor Fund IV (Altor), completed the take-private of
Transcom for a total consideration of SEK2.3 billion.
=====================
S W I T Z E R L A N D
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SPORTRADAR GROUP: S&P Alters Outlook to Positive, Affirms 'BB-' ICR
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S&P Global Ratings revised its outlook on Sportradar Group AG to
positive from stable and affirmed its 'BB-' long-term issuer credit
rating.
S&P said, "The positive outlook reflects that we could raise the
rating over the next 12 months if Sportradar maintains its current
growth momentum resulting in improving scale and increased
contribution from the U.S., along with margin improvement. The
outlook also reflects our view that the group is unlikely to pursue
material debt-financed acquisitions that would cause its S&P Global
Ratings-adjusted debt to EBITDA to deteriorate materially beyond
2x-3x for a sustained period.
"We expect Sportradar to maintain a higher revenue growth rate than
the industry average over the next 12-18 months. Sportradar's
revenue increased 28% in the first nine months of 2024. This growth
has been fueled by the company's successful execution of its
strategy and leveraging its core competitive advantages: extensive
sports coverage, a diverse product portfolio, innovative product
offerings, and a global distribution network. Notably, Sportradar
has achieved a turning point, demonstrating stronger EBITDA margin
growth, driven by successful monetization of premium sports rights,
including for NBA and ATP. The group's customer net retention
rate--a key indicator of customer loyalty and expansion--increased
to 126% in the third quarter of 2024, reflecting its strength in
cross-selling and upselling, particularly in the rapidly growing
U.S. market. Sportradar is strategically investing in product
innovation, particularly in high-growth areas like live betting and
AI-driven odds. This will spur further revenue growth and margin
expansion in the coming years, underpinned by the strength of its
rest-of-world sports betting services and U.S. markets.
"We expect S&P Global Ratings-adjusted EBITDA margins to improve to
16.2% in 2024 (albeit lower than our previous expectation of
17%-18%) and about 18% in 2025, up from 15.0% in 2023. This
expected improvement can be attributed to several factors,
including operating leverage benefits as Sportradar scales its
business, strategic cost management initiatives (such as the labor
cost reduction plan implemented in late 2023), and an increasing
contribution from higher-margin products. These products include
offerings like Managed Trading Services, which enabled its
sportsbook clients to achieve a margin of approximately 10% on
their managed turnover of approximately EUR35 billion in the 12
months ended Sept. 30, 2024. Additionally, we anticipate that the
rising popularity of live betting, particularly in the U.S., will
enhance Sportradar's operating margins. A 1% shift from pre-match
to live betting translates into approximately EUR1.2 million in
additional revenue for the company with minimal associated costs.
The successful integration of the NBA and ATP rights deals, while
initially causing some margin pressure due to higher sports rights
costs, should ultimately help boost margins over the lifetime of
the contracts.
"Our rating partially incorporates the risk of a releveraging
event, such as a sizable debt-funded acquisition. The group's IPO
prospectus states its near-term strategy is focused on growth and
that it does not intend to pay dividends. Acquisition multiples
within Sportradar's markets can vary depending on the size, growth
profile, and opportunity associated with any given company--but
often reach over 15x. The group has a sizable cash balance of
EUR368 million and full availability under its EUR220 million
revolving credit facility (RCF). However, it has not publicly
stated a leverage policy, so we cannot rule out debt-funded,
strategically important acquisitions that raise debt to EBITDA
materially above 3.0x. In March 2024, Sportradar's board of
directors authorized a $200 million share repurchase program, and
as of Nov. 1, 2024, the company had repurchased approximately $20
million worth of stock. We anticipate that the group will maintain
a similar run-rate for the foreseeable future and do not expect the
group's leverage to spike on account of this program.
"The positive outlook reflects that we could upgrade Sportradar
over the next 12 months if the group maintains its current growth
momentum resulting in improving scale and increased contribution
from the U.S. market, along with operating margin improvement and
considerable FOCF generation. The outlook also reflects our view
that the company is unlikely to pursue material debt-financed
acquisitions that would cause its S&P Global Ratings-adjusted
debt-to-EBITDA ratio to deteriorate materially beyond 2x-3x for a
sustained period."
S&P could revise the outlook to stable in the next 12 months if:
-- The group's organic business competitiveness or operating
margins are pressured by competitive pricing to acquire new
content, sports, and data rights, or operating weaknesses arise
from reduced consumer discretionary spending, leading to low FOCF
after lease payments; or
-- Sportradar adopts a more aggressive financial policy than S&P's
base case through mergers, acquisitions, or shareholder returns
that would increase S&P Global Ratings-adjusted debt to EBITDA
above 3.0x for a sustained period.
S&P could raise the rating if Sportradar continues to leverage its
marquee sports rights and innovative new product offering to
maintain revenue growth of about 10% over the next 12 months, while
improving its S&P Global Ratings operating margin and maintaining
FOCF after lease payments of more than EUR100 million. A positive
rating action would also depend on the group proving financial
discipline and articulating a financial policy aligned with
maintaining S&P Global Ratings-adjusted debt to EBITDA well below
3.0x.
SUNRISE HOLDCO: S&P Affirms 'BB-' ICR Following Spin-Off Completion
-------------------------------------------------------------------
S&P Global Ratings revised up its assessment of Sunrise Holdco IV's
stand-alone credit profile to 'bb-' from 'b+'. S&P affirmed its
issuer credit rating on Sunrise at 'BB-'.
The stable outlook reflects S&P's expectations that Sunrise will
maintain adjusted leverage of 4.5x-5.0x, supported by stable
earnings and cash flow growth and a supportive financial policy.
In the spin-off from Liberty Global group and subsequent listing on
Switzerland's stock exchange (SIX), Sunrise Holdco IV received
Swiss franc (CHF) 1.2 billion of cash from Liberty Global and used
it for debt repayment. S&P expects the company to use its own free
cash flow generated in 2024 to further reduce debt.
S&P anticipates that Sunrise's debt to EBITDA, as adjusted by S&P
Global Ratings, will reduce to roughly 5.0x in 2024 (net of cash)
from around 6.2x in 2023.
S&P said, "Sunrise has defined a financial policy of maintaining
S&P Global Ratings-adjusted leverage of 4.0x-5.0x (3.5x-4.5x per
Sunrise's definition), and we anticipate gradual deleveraging in
the coming years, supported by discretionary cash flows (DCFs) that
will support debt reduction. This leads us to expect adjusted
leverage to improve to around 4.5x by 2026 from about 5.0x in
2024."
As part of the spin-off from Liberty Global and subsequent listing
on the SIX, Sunrise has committed to reducing adjusted leverage
helped by cash from Liberty Global and its own free cash flow
generated in 2024. Liberty Global injected around CHF1.2 billion
(EUR1.29 billion) of cash in Sunrise as it prepared for the
spin-off and subsequent listing on the SIX of Sunrise. This cash
was used to pay down gross debt for Sunrise. S&P said, "We
anticipate that Sunrise would generate free operating cash flow
(FOCF) of EUR200 million–EUR300 million (CHF175 million-CHF275
million) in 2024, which will be used to repay debt. We anticipate
that S&P Global Ratings-adjusted debt to EBITDA, which is net of
cash from 2024 (as cash is mainly used for debt reduction), will
improve to 5.0x in 2024 from 6.2x in 2023."
S&P said, "Sunrise's defined financial policy around debt leverage
supports our 'BB-' rating. Following the public listing on SIX,
Sunrise has defined its financial policy of maintaining debt to
EBITDA of around 3.5x-4.5x (which translates to S&P Global
Ratings-adjusted debt to EBITDA of 4.0x-5.0x). Sunrise's public
guidance indicates the company plans to pay around 70% of its free
cash flow as dividends. DCF (FOCF after dividend payments), which
we expect will be in excess of EUR100 million (CHF90 million)
annually, will be used for net debt reduction to reach
management-defined leverage of 4.0x over the next few years (4.5x
per our definition). Supported by the company's financial policy
and steady operating performance, we anticipate S&P Global
Ratings-adjusted leverage to approach 4.5x by 2026. Our
expectations of adjusted leverage at 4.5x-5.0x for the next few
years supports the 'BB-' rating.
"We expect operating performance to remain steady in 2025 followed
by modest growth thereafter. We expect Sunrise will report 0%-1%
earnings growth in 2024 and 2025, which we expect will improve to
around 1%-3% growth in 2026. We expect Sunrise's mobile and
business to business (B2B) segment will continue to be the growth
drivers while the headwinds on fixed-line services will gradually
ease in coming quarters. The company's strategic decision to
migrate its existing UPC customers to the Sunrise brand led to
upward repricing of some legacy UPC contracts, which led to revenue
generating unit (RGU) losses. This has been a drag on the company's
fixed-line services over the last 12-18 months and we believe it
will continue to remain a headwind at least in the first half of
2025. That said, the migration is close to completion, and we
expect fixed-line revenue to stabilize in second half of 2025,
after being negative for a few years. The mobile segment continues
to be driven by Sunrise's stable main brand and robust growth in
the flanker value brands (Yallo, Lebara, and Swype). Sunrise's
flanker brands, which conclude budget segment, have been a key
driver for growth and we expect them to continue to do so, owing to
increasing budget contracts among Switzerland's growing immigrant
population. B2B is a less competitive segment of the Swiss market,
which is dominated by Swisscom. Sunrise is expanding its product
offerings in B2B, including internet of things, cloud services, and
cyber security solutions, among others. We expect the mobile and
B2B segments will continue to grow by 1%-3% and will remain key
drivers of the business in the next few years.
"We expect the company to gradually improve FOCF thanks to
improving earnings and lower capital expenditure (capex).
Gradually improving earnings and lower capex will help free cash
flow (before vendor financing) to improve to EUR400 million-EUR450
million in 2026, from around EUR250 million in 2024. Capex
intensity was elevated at 17%-18% of sales for the past two years
as the company upgraded its fiber network to DOCSIS 3.1. That said,
the upgrade is largely complete, and the company can offer up to
2.5 Gbps (giga bytes per second) download speeds on its network,
which at this point is among the fastest speeds on offer. Main
competitor Swisscom is gradually rolling out fiber and it will take
several years for that company to significantly overbuild Sunrise's
network. As such, Sunrise has publicly guided lower capex
intensity, at around 15% of sales by 2025, as it plans not to
upgrade to DOCSIS 4.0 or build out fiber.
"The stable outlook indicates our view that Sunrise will report
steady earnings and cash flows over the next few years, supported
by continued growth in the consumer mobile and B2B segments,
partially offset by near-term headwinds in the fixed-line segment.
This should help Sunrise maintain S&P Global Ratings-adjusted
leverage at 4.5x-5.0x, which is also supported by its financial
policy, and FOCF to debt above 5.0% over the next two years.
"We could lower the rating if S&P Global Ratings-adjusted leverage
exceeds 5x or FOCF to debt reduces below 2% on a sustained basis.
This could also stem from fiercer competition, causing higher
customer churn, or price pressure with unchanged shareholder
remuneration.
"We see limited upside potential because Sunrise's current
financial policy targets S&P Global Ratings-adjusted leverage at
around 4.5x over next few years. We could raise the rating if our
adjusted leverage reduces to below 4.5x and FOCF to debt improves
to over 5% on a sustained basis. This would also require Sunrise to
commit to maintaining leverage in the lower end of its financial
policy, which we view as unlikely over the short term."
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U K R A I N E
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ARAGVI HOLDING: S&P Ups ICR to 'B' on Completed Notes Refinancing
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S&P Global Ratings raised its long-term issuer credit rating on
Central and Eastern Europe (CEE)-based agribusiness group Aragvi
Holding International (Aragvi; trading as Trans-Oil Group) to 'B'
from 'B-' and affirmed its 'B' issue rating on the $550 million
senior secured notes due 2029.
The stable outlook indicates that S&P believes that Aragvi should
maintain a stable operating performance and post stable credit
metrics over the next 12 months.
The $550 million senior secured notes issuance in November 2024
materially reduces Aragvi's near-term refinancing risks. Aragvi's
issuance of the new $550 million senior secured notes maturing in
November 2029 demonstrates its ability to access the debt capital
markets. Aragvi was able to fully refinance its $500 million senior
notes due April 2026, by far the largest amount of debt in its
capital structure, well ahead of the maturity date.
S&P said, "In addition, we view positively the group's track record
of accessing bank funding--mostly short-term credit lines--for its
day-to-day operational needs, notably its large working capital
needs, which are a common feature of agribusiness companies. The
group now has a relatively diversified pool of lenders, with a mix
of international commercial banks (notably ING and Trade X), local
lenders (AIK Banka in Serbia), and development banks (notably FMO
and Proparco).
"We project that Aragvi will generate stable cash flows metrics
despite the volatility of some commodities and a rebound in
acquisition spending. In the fiscal year ending June 30, 2025
(fiscal 2025) and fiscal 2026, we project that Aragvi will generate
$200 million-$230 million of adjusted EBITDA annually. We assume
that revenue and EBITDA growth will be limited in fiscal 2025 but
rebound in fiscal 2026. In fiscal 2025, the poor summer harvest
should lead to lower production volumes and profits in the main
geographies except Serbia.
"We believe that the sourcing capabilities of the origination and
marketing department will enable the group to maintain high
productivity, but exports from Moldova and Ukraine could be less
profitable. For the processing activities, we believe that higher
raw material costs will dent profits slightly in 2025, but the
group retains a large industrial customer base worldwide. Despite
the business' inherent working capital intensity, we see Aragvi
generating positive free operating cash flow in 2025 due to limited
total capital expenditure (capex) and stable financing costs
overall.
"We project stable credit metrics and financial covenant headroom
in 2025-2026 despite the higher coupon on the notes and some
acquisition spending. We project that Aragvi will be able to
maintain stable credit metrics despite a slight uptick in debt
leverage in 2025. We project that adjusted debt leverage will be
2.7x-2.9x in 2025, decreasing slightly to 2.6x-2.8x in 2026. We
calculate that adjusted debt will increase slightly versus our
previous base case, given the larger size of the newly issued
notes, as well as a new debt-financed acquisition of a vegetable
oil logistical hub in the port of Constanta, Romania.
"We forecast funds from operations (FFO) to debt of 18%-20% and
EBITDA interest coverage of 2.4x-2.5x in 2025-2026, with higher
EBITDA in 2026 offsetting slightly higher financing costs due to
the higher interest costs on the new notes. We see the group as
being able to maintain adequate headroom under its bank maintenance
financial covenants (a fixed-charge coverage test) over the next 12
months. However, we factor into our rating the fact that the
funding model implies a high reliance on short-term bank lines that
are sometimes uncommitted, while financing costs are elevated
versus those of industry peers in mature markets."
Aragvi's operating performance should continue to derive support
from its well-located asset footprint in the fertile South CEE
region. S&P believes that the group will be able to capitalize on
its sourcing capabilities, vertical integration, and strategically
located assets along the Danube River in southern CEE to benefit
from growth in underlying demand from industrial customers, notably
in the Middle East and Asia, for agricultural commodities such as
sunflower seeds, wheat, and corn, and for refined products, such as
vegetable oil.
Aragvi's investments have helped it to scale up and modernize its
storage and processing facilities and logistical assets, which
should increase productivity in its origination, marketing, and
processing activities and help profitability. S&P sees the benefits
of business diversification, for example into vegetable oil
bottling in Serbia, as this should help smooth the effect of lower
profitability in the trading operations in case of low agricultural
prices. The origination and marketing operations can also switch
between several agri-commodities and source either locally or
internationally.
That said, despite Aragvi's geographical diversification into
Romania and Serbia, its operations in Moldova, which bear high
country risk, still accounted for 56% of its long-term fixed assets
and 30% of group EBITDA last year, notably with a highly profitable
origination and marketing franchise.
S&P said, "The stable outlook reflects our view that Aragvi’s
operating performance should remain stable thanks to its sizable
regional scale, strategic asset footprint in southern CEE, and
improving business and geographical diversity. We project that the
group will be able to maintain stable credit metrics such that its
adjusted debt leverage is 2.5x-3.0x and EBITDA interest coverage is
2.4x-2.5x over the next 12 months.
"We could lower our ratings if we see a decline in operating
performance that would pressurize Aragvi's credit metrics and
liquidity position, especially if the EBITDA interest coverage
ratio decreases to 2.0x or below. We believe that Aragvi may face
liquidity pressures in the event of tight headroom under its bank
maintenance financial covenants or reduced access to bank financing
for its day-to-day business needs, notably for working capital.
"Weaker operating performance could arise if Aragvi faces severe
operating challenges in its major logistical or processing
facilities, particularly in high-risk countries like Moldova and
Ukraine. We would also take a negative view of a sharp decline in
profits from processing activities due to a sharp increase in raw
material and energy costs.
"We could raise our ratings should Aragvi improve its credit
metrics, in particular, if the EBITDA interest coverage ratio rises
to 3.0x on a sustained basis. This could occur on the back of a
combination of better operating performance than we expect and
prudent discretionary spending on acquisitions. It could also occur
due to a strong increase in profits from processing activities
thanks to successful expansion into new markets and improved
productivity, as well as high trading volumes in the profitable
Moldovan business.
"We would also need to see Aragvi strengthening its liquidity
position, for example, by maintaining large cash balances at all
times and significant headroom under its bank financial covenants,
and by improving its financing mix and debt maturity profile."
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U N I T E D K I N G D O M
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CANARY WHARF: Moody's Affirms 'B3' CFR, Outlook Remains Negative
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Moody's Ratings has affirmed Canary Wharf Group Investment Holdings
plc's (CWGIH or the company) Ba3 long term corporate family rating
and B1 senior secured instrument ratings. The outlook remains
negative.
RATINGS RATIONALE
The ratings affirmation comes after the company announced plans to
raise up to GBP610 million in new secured debt by pledging some of
its unencumbered assets to resolve upcoming debt maturities. The
company will establish a new committed debt facility and use it to
repay CWGIH's GBP350 million senior secured notes due in April 2025
and the EUR300 million senior secured notes due in April 2026 in
each case on or before their respective maturity date, removing
major refinancing needs until 2028. The company is seeking consent
from noteholders to incur debt secured on eligible assets to
refinance any of the company's existing notes.
Furthermore, if the consents from the 2026 and 2028 noteholders are
obtained, one of the company's shareholders - Brookfield
Corporation (A3 stable) - will commit via an equity commitment
letter to GBP900 million of new equity, available for drawing to
repay the senior secured notes should they not be refinanced by an
alternative debt instrument and amounts due and payable under
CWGIH's revolving credit facility. This includes the final GBP300
million senior secured notes due in April 2028. The Qatar
Investment Authority (QIA), owned by the Government of Qatar (Aa2
stable) may accede to the equity commitment letter.
Moody's rating action assumes that the 2026 and 2028 noteholders
will provide their consent, enabling the establishment of the new
debt facility by mid-December 2024, and that the shareholders will
execute the new equity commitment letter.
Moody's view the company's plans as materially credit positive
because of the significantly reduced refinancing risk and the new
shareholder commitment, available for repaying the notes if
necessary. Moody's anticipate that the new committed debt facility
will fully repay the notes due in April 2025 and 2026 at their
maturity. This arrangement means that the last remaining GBP300
million note, due in April 2028, faces refinancing execution risk
with a weaker unencumbered asset pool. However, the equity
commitment and the ultimate shareholder's strong credit standing
significantly mitigate those risks. In Moody's view, the company
continues to depend on asset disposals in weak but improving
investment markets to reduce leverage below its financial policy of
maintaining a loan to value (LTV) ratio below 50% and to strengthen
its low interest cover.
The ratings affirmation draws support from the company's ownership
of a well-connected key business district in London, a global
gateway city, and the significant progress the company has achieved
in managing its refinancing risk and retaining key tenants on the
estate. Over the past year, the company successfully rolled over
GBP1.5 billion of ring-fenced, non-recourse secured bank debt.
OUTLOOK
The negative outlook reflects rising funding costs that will strain
the company's already low interest cover, alongside the reduced
demand for office space. Moody's could stabilise the outlook if the
company continues to strengthen its interest cover trajectory and
makes significant progress in asset disposals.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely given the negative outlook.
The ratings could be downgraded if:
-- The new planned debt facility and shareholder commitment are
not in place by mid-December 2024 following noteholder waiver
consent
-- Moody's-adjusted fixed charge coverage ratio does not improve
towards 1.5x or Moody's-adjusted gross debt / total assets remains
elevated well above 55%
-- Shareholders do not continue to provide sufficient and timely
support, if needed
Moody's may downgrade the senior secured notes, which Moody's
consider unsecured, if the quality of the unencumbered pool
deteriorates or if there is a further weakening of unencumbered
asset coverage for unsecured creditors, beyond the anticipated
reduction in unencumbered assets following the introduction of the
new secured debt.
ESG CONSIDERATIONS
Governance considerations Moody's consider include the long track
record of strong shareholder support.
LIQUIDITY
As of June 30, 2024, CWGIH had GBP364 million of cash and cash
equivalents on balance sheet and full drawing capacity under a
GBP100 million bank provided revolving credit facility (RCF). In
addition, the company has access to a further GBP100 million
shareholder-provided RCF that is provided to an affiliate of CWGIH
but with proceeds able to be pushed down into CWGIH if needed.
STRUCTURAL CONSIDERATIONS
Moody's view the senior secured notes as unsecured because they do
not benefit from a direct fixed charge security over any
properties. In line with Moody's REITs and Other Commercial Real
Estate Firms methodology, CWGIH's Ba3 CFR references a senior
secured rating because secured funding forms most of the company's
funding mix. The senior secured notes, which Moody's view as
unsecured, are rated B1 which is one notch below the Ba3 CFR to
reflect the low level of unencumbered assets (excluding land valued
at GBP450 million) that provides weak asset coverage for unsecured
creditors.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in February 2024.
PROFILE
The company develops, manages and currently owns interests in
approximately 9 million square feet of mixed-use space including
over 1,100 build-to-rent apartments situated on the Canary Wharf
Estate. The investment properties, developments, and development
land it owns were valued in aggregate at GBP6.7 billion as of June
30, 2024, with 35 income-producing properties generating around
GBP300 million of gross rental income. The company is the largest
private sector led developer in Europe. The wider Estate consists
of 128 acres of land and includes 30 office buildings, five
shopping malls with over 320 shops and more than 80 cafes, bars,
restaurants, and amenities, and 16.5 acres of green space. In
addition to directly managing its properties, the company also
maintains the roads, car parks, open spaces, gardens and waterfront
promenade and other common areas on the Estate.
CD&R GALAXY: Moody's Cuts CFR to Caa3, Alters Outlook to Stable
---------------------------------------------------------------
Moody's Ratings downgraded CD&R Galaxy UK Intermediate 3 Limited's
(d/b/a "Vialto Partners" or "Vialto") probability of default rating
to Ca-PD from Caa1-PD following the company's recently proposed
distressed debt restructuring of its bank debt issued under
subsidiary Galaxy US Opco Inc. ("Galaxy").
Concurrently, Moody's downgraded Vialto Partners' corporate family
rating to Caa3 from Caa1 as well as the rating on Galaxy's existing
senior secured first-lien revolver and term loan to Caa3 from Caa1.
Vialto Partners' has announced plans to exchange its existing
senior secured first-lien revolver ($200 million, fully drawn as of
October 31, 2024) expiring April 2027 into a new $200 million
first-lien revolver expiring July 2029. The company is also
proposing to exchange its existing senior secured first-lien term
loan ($950 million currently outstanding as of October 31, 2024)
due April 2029 into a new $800 million first-lien term loan due
July 2030.
Affiliates of private equity sponsor Clayton, Dubilier & Rice
("CD&R"), Vialto Partners' principal shareholder, and HPS
Investment Partners, LLC ("HPS"), which will become a significant
shareholder, collectively own $150 million of the first-lien term
loan and plan to equitize this amount as part of the
recapitalization. The other remaining first-lien lenders are not
required to accept a discount or equitize holdings in the
transaction. Vialto Partners' unrated $400 million senior secured
second-lien term loan due April 2029 will be fully equitized as
part of the transaction which is scheduled to close in early 2025.
The substantial economic losses to first-lien and second-lien
lenders which are equitizing their debt ownership contributed to
the determination of the proposed transaction as a distressed debt
exchange. The outlook was changed to stable from negative for both
companies.
Vialto Partners is a worldwide provider of global mobility
solutions with a primary focus on tax preparation services for
employees of its corporate clients.
Prior to the debt exchange, Vialto Partners' debt to EBITDA of
nearly 14x LTM adjusted EBITDA as of June 30, 2024 (based on
Moody's calculations) was highly elevated. While the
recapitalization will result in a significant reduction in the
company's outstanding debt, Vialto Partners will remain highly
levered on a pro forma basis with debt to EBITDA of nearly 8x LTM
adjusted EBITDA as of June 30, 2024 (based on Moody's calculations,
excluding bridge loans). ESG considerations were a key driver of
the rating action and Moody's expect the company will continue to
employ aggressive financial strategies and maintain a tolerance for
high financial leverage.
RATINGS RATIONALE
Vialto Partners' Caa3 CFR is constrained by the company's elevated
leverage and unsustainable capital structure as well as a complex
corporate structure comprised of an array of internationally-based
operating subsidiaries and a high proportion of revenue and
earnings from both non-guarantor and unrestricted subsidiaries.
Since its carveout from former parent PricewaterhouseCoopers
("PwC") on April 29, 2022, the company's business has materially
underperformed Moody's expectations due to weaker than expected
sales, profitability, and cash flow, as well as the inability to
effectively realize planned operating efficiencies as a standalone
company. Moody's believe there remain meaningful execution risks
with respect to Vialto Partners' ability to effectively streamline
its operations and achieve additional planned cost synergies.
Additional credit challenges include Vialto Partners' concentrated
business focus and corporate governance risks related to the
company's concentrated ownership. These credit challenges are
somewhat mitigated by the company's global operating scale, strong
competitive presence, and a highly recurring revenue base which
capitalizes on steady demand for its tax services. Revenue
stability is also supported by Vialto Partners' longstanding
relationships, multi-year contracts, and high client retention
rates with a high-quality set of large enterprise customers.
As part of the recapitalization, Vialto Partners' liquidity has
improved with the commitment of a $225 million bridge facility
(comprised of a $70 million term loan that has been funded and a
$155 million delayed draw term loan) that will be equitized upon
closing. However, excluding the impact of the bridge loan, Moody's
presently consider the company's liquidity profile to be weak as
Moody's expect its $80 million cash balance as of October 30, 2024
(prior to the recapitalization) to materially deteriorate as Vialto
Partners' continues to generate free cash flow deficits through
FY25 (ending June 2025). There is approximately $10 million of
annual senior secured first lien term loan amortization. The
company's term loans are not subject to financial covenants. The
revolving credit facility, which is fully drawn, has a springing
maximum net senior secured first lien leverage ratio covenant of
8.0x (prior to the recapitalization) and Moody's do not expect
Vialto Partners to remain in compliance with this financial
covenant over the next 12-15 months.
The Caa3 rating for the senior secured first lien credit facility
(pre-recapitalization) is consistent with the Caa3 CFR and reflects
Moody's recovery expectations for this class of debt. Moody's model
a deficiency claim of 50% applicable to the secured debts in
Vialto's hierarchy of claims at default due to a high proportion of
the company's revenue and profits coming from non-guarantor
subsidiaries and approximately 25%-30% from unrestricted
subsidiaries.
The stable outlook reflects Moody's recovery expectations in
default for the existing capital structure, which Moody's consider
to be unsustainable as evidenced by the proposed distressed
exchange recapitalization.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Vialto Partners considerably
reduces its outstanding debt and materially improves its liquidity
profile while also establishing a track record of revenue growth
and margin expansion.
The ratings could be downgraded if Moody's recovery expectations in
default diminish. The completion of the recapitalization
transaction as proposed would result in a downgrade of the
probability of default rating from Ca-PD to D-PD.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
Vialto Partners, controlled by affiliates of private equity sponsor
CD&R and HPS on a pro forma basis, is a worldwide provider of
global mobility solutions, providing integrated compliance,
consulting, and technology services to global enterprises with a
primary focus on tax preparation and immigration services for
employees of its corporate clients. Moody's forecast that the
company will generate revenue of approximately of $915 million in
FY25.
CLARA.NET HOLDINGS: EUR343.5MM Bank Debt Trades at 22% Discount
---------------------------------------------------------------
Participations in a syndicated loan under which Clara.Net Holdings
Ltd is a borrower were trading in the secondary market around 78.3
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The EUR343.5 million Term loan facility is scheduled to mature on
July 10, 2028. The amount is fully drawn and outstanding.
Claranet is a medium-sized provider of managed IT services
primarily focusing on cloud-related services for small and
medium-sized companies and the sub-enterprise customer segment. It
also offers cybersecurity, connectivity and workplace solutions.
The Company's country of domicile is the United Kingdom.
CLARA.NET HOLDINGS: GBP110.2MM Bank Debt Trades at 23% Discount
---------------------------------------------------------------
Participations in a syndicated loan under which Clara.Net Holdings
Ltd is a borrower were trading in the secondary market around 77.3
cents-on-the-dollar during the week ended Friday, November 29,
2024, according to Bloomberg's Evaluated Pricing service data.
The GBP110.2 million Term loan facility is scheduled to mature on
July 10, 2028. The amount is fully drawn and outstanding.
Claranet is a medium-sized provider of managed IT services
primarily focusing on cloud-related services for small and
medium-sized companies and the sub-enterprise customer segment. It
also offers cybersecurity, connectivity and workplace solutions.
The Company's country of domicile is the United Kingdom.
MERLIN ENTERTAINMENTS: S&P Downgrades ICR to 'B-', Outlook Stable
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S&P Global Ratings lowered its long-term issuer credit rating on
global theme park operator Merlin Entertainments Ltd. (Merlin) and
its intermediate holding company, Motion Midco Ltd., to 'B-' from
'B', its issue rating on its senior secured debt to 'B' from 'B+',
and on its subordinated debt to 'CCC' from 'CCC+'.
S&P said, "The stable outlook reflects our view that Merlin will
navigate the current macroeconomic environment and return to growth
from 2026, while S&P Global Ratings-adjusted EBITDA margins fall
toward 25% in 2024 and 23% in 2025. We expect S&P Global
Ratings-adjusted debt to EBITDA to remain elevated at around 10x
excluding NCE, and for the group to maintain adequate liquidity."
Merlin's Q3 results show weak year-to-date trading performance.
Competitive pressures, adverse weather, and macroeconomic headwinds
hit discretionary spending in key geographies, causing revenue to
decrease across all divisions. While revenue fell by 2.8% to
GBP1.65 billion for the first nine months of the year, EBITDA was
depressed by strong cost pressures, especially around wages,
falling below GBP500 million and resulting in S&P Global
Ratings-adjusted EBITDA at about 30% (from 34.3% in the equivalent
period in 2023). As a result, S&P now anticipates S&P Global
Ratings-adjusted EBITDA to fall by about 18%-20% in 2024 toward
GBP540 million-GBP550 million versus GBP664 million in 2023,
resulting in EBITDA margins of close to 25% for full-year 2024,
muted by relatively flat revenue performance and high inflationary
pressures on the cost base.
S&P said, "We expect pressures to continue into 2025 and for EBITDA
growth to be eroded by continual weak demand, staff cost inflation,
and restructuring costs. We anticipate the challenging
macroeconomic environment and continual pressure on discretionary
spending will lead to the number of visitors remaining relatively
flat across the portfolio of theme parks, while ticket prices will
remain stable, as we believe Merlin has only limited ability to
continue to pass on price increases to end customers. We understand
that management has put in place measures to enhance its value
proposition, including targeted marketing, and reducing costs.
However, we expect this to lead to higher costs in the short term,
which--together with wage inflation and other cost items--will
result in S&P Global Ratings-adjusted EBITDA remaining depressed at
about GBP520 million-GBP550 million in 2025.
"We now forecast S&P Global Ratings-adjusted debt to EBITDA to
remain at about 10x (excluding NCE) over the next two years. The
group capital structure remains highly leveraged, with S&P Global
Ratings-adjusted debt totalling GBP8.7 billion in 2024, including
GBP1.65 billion of leases and GBP3.1 billion of preference shares
(including accrued interest). While we do not expect any changes to
the capital structure, the weak trading performance has led us to
revise our expectations for leverage for 2024 and 2025 to be close
to 10x excluding NCE (around 16x including NCE). We also note that
the group has a portfolio of long-term leases, which affects the
overall credit metrics but provides long-term visibility on
Merlin's estate.
"Liquidity remains adequate as of September 2024, supported by an
undrawn revolving credit facility (RCF), but further sources of
liquidity may need to be tapped given the continual cash burn. As
of September 2024, the group had GBP291 million of cash, supported
by the seasonality of the business, and GBP398 million available
under the RCF that matures in 2028. We expect this cushion to
support Merlin's liquidity profile over the next 12 months as it
enters Q4 2024 and Q1 2025--the two quarters of large cash burn.
However, we anticipate that weak trading performance, large
interest expenses, and high capex requirements will lead to largely
negative free operating cash flow (FOCF) after leases over the next
two to three years. Also, we are aware that the company has $400
million 5.75% senior notes due 2026, which we expect will be
refinanced well before maturity. We understand from management that
the group has certain options to enhance its liquidity position,
including the reduction of growth capex, and potential review of
operational expenses.
"We also factor in historical shareholder support. This was
demonstrated by the cash injection received from shareholders in
the form of preference shares during the COVID-19 pandemic.
However, we do not include any type of extraordinary support or
liquidity injection at this stage as we expect the company to
resort to the financing and operating levers it has at its disposal
to deal with the current situation.
"Our stable outlook reflects our view that Merlin will be able to
navigate the current macroeconomic environment and return to growth
in 2026 as the value creation measures and cost-saving initiatives
bear fruit. We expect EBITDA margins to drop toward 25% in 2024 and
23%-24% in 2025, resulting in S&P Global Ratings-adjusted leverage
remaining elevated at around 16x (10x excluding the NCE). However,
we expect the group to maintain an adequate liquidity position over
the next 12 months supported by the cash reserves and available RCF
and the timely refinancing of its debt maturing in 2026."
S&P could lower its rating on Merlin in the next 12 months if:
-- The group does not show a path to recovery in earnings that
would stem the continual cash burn;
-- The liquidity profile weakens or the group encounters problems
refinancing its debt in a timely manner;
-- If S&P Global Ratings-adjusted leverage remains elevated
without a clear deleveraging path, such that S&P believes the
capital structure is unsustainable; or
-- S&P sees a heightened risk of a specific default event, such as
a distressed exchange or restructuring, a debt purchase below par,
or a covenant breach.
S&P could raise the rating for Merlin if the group showed a path to
recovery such that:
-- S&P Global Ratings-adjusted debt to EBITDA decreases and
remains below 8.0x (excluding NCE) as a result of improving trading
performance; and
-- FOCF after leases returns to neutral territory such that the
company funds its growth capex initiatives without deteriorating
its liquidity profile or further increasing debt.
A positive rating action would also be contingent on Merlin
refinancing its debt maturities in a timely manner and maintaining
a financial policy coherent with a higher rating level.
ODFJELL DRILLING: Moody's Affirms 'B2' CFR, Alters Outlook to Pos.
------------------------------------------------------------------
Moody's Ratings has affirmed the B2 corporate family rating and the
B2-PD probability of default rating of Odfjell Drilling Ltd. (ODL).
Concurrently, Moody's affirmed the B2 instrument rating of the
backed senior secured notes due 2028 issued by ODL's indirectly
wholly-owned subsidiary Odfjell Rig III Ltd. The outlook for both
entities has changed to positive from stable.
RATINGS RATIONALE
The rating action reflects Moody's expectation that ODL's projected
key credit metrics will continue to improve by the end of 2025.
ODL's firm backlog of $1.9 billion at September 30, 2024 implies
high capacity utilisation at rising day rates, underpinning good
earnings and operating cashflow visibility through to 2026. Capital
expenditure will remain broadly in line with 2024 levels and
shareholder remuneration will substantially rise in 2025.
Nevertheless, ODL's free cash flow (FCF, Moody's-adjusted)
generation and cash availabilities shall suffice to meet scheduled
debt amortisation. This will reduce Moody's-adjusted gross leverage
to 1.5x by the end of 2025, the level Moody's had previous said
could lead to upward rating pressure.
ODL's B2 CFR continues to reflect the company's established
position as an offshore driller with a long operational track
record; high-quality fleet with customer-acknowledged competitive
advantages; good liquidity position; exclusive focus on drilling
services that entails dependence on customers' investment appetite,
notably that of Equinor ASA (Aa2 stable) and Aker BP ASA (Baa2
stable).
Although robust energy prices and increased demand for offshore
rigs have raised day rates and lifted rig values globally since
late 2021, Moody's expect the re-contracting environment to remain
competitive as the offshore industry continues to recover from a
prolonged downturn. Oil and gas prices need to stay high to attract
continued upstream investment and ODL will have to successfully
recontract at higher day rates to sustain and durably improve its
credit profile.
ESG CONSIDERATIONS
ODL has a Credit Impact Score of 3 (CIS-3). This indicates that ESG
considerations have a limited impact on the current credit rating
with potential for greater negative impact over time driven by
risks arising from carbon transition, demographic & societal trends
and health & safety concerns. Governance considerations reflect the
company's conservative financial policies and track record of
abiding by the latter, as well as an ownership structure where
descendants of the company's founder own around 50% of ODL's
equity.
LIQUIDITY
ODL's liquidity is good. Moody's assessment reflects:
-- positive FCF generation over the next 12-18 months, despite
still relatively high capital expenditure and rising dividends in
2025
-- some reliance on the $150 million revolving credit facility due
February 2028
-- good headroom under financial covenants including maintenance
of (i) unrestricted cash balances above $50 million; (ii) equity to
total assets above 30% and (iii) current assets to current
liabilities (excluding those related to financial debt) above 1x
-- absence of meaningful sources of alternate liquidity, because
all owned assets are pledged as security to existing debt
facilities.
RATING OUTLOOK
The positive outlook reflects Moody's expectation that ODL's key
credit metrics will strengthen to levels commensurate with a higher
rating in the next 12-18 months through rising earnings and
cashflows, meaningful deleveraging and disciplined financial
policies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
ODL's ratings could be upgraded if the company:
-- Achieves larger scale as well as longer duration of contracts
in a healthy industry environment
-- Sustains a track record of strong profitability at least in
line with current levels and
-- Maintains a strong balance sheet with leverage trending towards
1.5x, sustained strong positive FCF generation and prudent
shareholder distributions
Conversely, ODL's ratings would be downgraded if the company's:
-- Earnings and backlog deteriorate materially, leading to gross
leverage sustainedly in excess of 3.0x and EBITDA / Interest
expense falls below 3x
-- FCF generation turns negative, as a result of weaker operating
performance or more aggressive than currently anticipated financial
policies or
-- Liquidity weakens
STRUCTURAL CONSIDERATIONS
The B2 instrument rating of the backed senior secured notes issued
by Odfjell Rig III Ltd. is in line with ODL's CFR. This reflects
the notes' first lien claim on the assets of ODL's subsidiaries
that own and operate the Deepsea Aberdeen and the Deepsea Atlantic
semi-submersibles and pari passu ranking with other separate
obligations of the issuer secured by the Deepsea Stavanger and
Deepsea Nordkapp rigs. The B2 instrument rating also reflects the
absence of material claims ranking behind the company's secured
obligations.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Oilfield
Services published in January 2023.
SHERWOOD PARENTCO: Moody's Affirms 'B2' CFR, Outlook Negative
-------------------------------------------------------------
Moody's Ratings has affirmed Sherwood Parentco Limited's (Sherwood)
B2 corporate family rating and Sherwood Financing plc's B2 senior
secured debt ratings. The issuer outlooks remain negative.
On November 21, 2024, Sherwood announced its intention to extend
the maturities of Sherwood Financing plc's bonds through a new
notes exchange offer at current market prices[1]. The company aims
to extend its GBP350 million bond, with a 6% fixed rate due in
November 2026, to at least GBP250 million by December 2029.
Similarly, it plans to extend its EUR400 million bond, with a 4.5%
fixed rate due in November 2026, to at least EUR250 million by
2029, and its EUR640 million floating rate bond due in November
2027 to at least EUR450 million by December 2029. Additionally,
Sherwood aims to refinance its EUR285 million revolving credit
facility (RCF), which matures in April 2026, concurrently with
these extensions.
RATINGS RATIONALE
The affirmation of Sherwood's CFR reflects the company's modest
cashflow generation, its gross Debt/EBITDA leverage at an elevated
level around 4x and modest interest coverage of 2.5x based on its
last twelve-month EBITDA. Further, the company continues to have a
significant tangible equity deficit.
While Moody's positively view the proposed early refinancing and
lengthening of funding maturities, Sherwood's cashflow generation
capacity remains challenged. Whilst Sherwood continues to make
progress in establishing its integrated fund management business,
stronger income contributions from this fee-based business will
only gradually materialize over the coming quarters as the company
continues to deploy the funds raised from investors in its
integrated funds business. This is against the backdrop of higher
financing cost and only a gradual expected reduction in borrowings
in the coming years.
The affirmation of Sherwood Financing plc's B2 senior secured debt
ratings acknowledges their prioritized claims within Sherwood's
liability structure.
OUTLOOK
The negative outlook reflects uncertainties related to Sherwood's
cash flow generation and deleveraging which are largely contingent
upon the pace of growth in its less capital intensive, fee-based
integrated fund management business in the currently challenging
operating environment, characterized by increased funding costs and
stiff competition in the non-performing loan (NPL) investment and
servicing sector.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlook, there is no upward pressure on
Sherwood's ratings.
The outlook for Sherwood could change to stable if the proposed
refinancing is successfully completed and the company's performance
and cash flow generation materially improves over the outlook
horizon. A successful refinancing would assume exchanges of at
least 70% of its bonds without causing economic loss to investors
at current market prices, in combination with a concurrent
extension of the RCF and the refinancing of the remaining debt due
in 2026 at least twelve months before its maturity.
Moreover, a sustained improvement in Sherwood's profitability and
interest coverage levels, alongside the expansion of its integrated
fund management business, could exert positive pressure on the
ratings. This will be dependent on the company achieving a
Debt/EBITDA leverage ratio of roughly 3.5x on a gross debt basis.
An upgrade in Sherwood Financing plc's senior secured debt ratings
could follow an upgrade of the CFR and alterations to the liability
structure that reduce the amount of debt ranked senior to the
notes.
Conversely, Sherwood's CFR could be downgraded if Sherwood fails to
extend the RCF due in April 2026 and the remaining debt maturing in
November 2026 at least 12 months before their maturity, or if the
anticipated maturity extension cannot be processed as planned.
Additionally, the CFR might be downgraded if the company exhibits
continued high earnings volatility coupled with a slower capital
deployment in its discretionary funds, delaying expected
deleveraging.
Sherwood Financing plc's senior secured ratings could be downgraded
if the firm increases its volume of debt that is considered senior
to the notes or if Sherwood's CFR is downgraded.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Finance
Companies published in July 2024.
STUDIO 13: Menzies LLP Named as Administrators
----------------------------------------------
Studio 13 Entertainment Ltd was placed into administration
proceedings in the High Court of Justice, Court Number:
CR-2024-006850, and James Douglas Ernle Money (IP No. 8999) and
Steven Edward Butt of Menzies LLP, were appointed as administrators
on Nov. 13, 2024.
Studio 13 Entertainment operates in the television programming and
broadcasting industry.
Its registered office is at Lynton House, 7-12 Tavistock Square,
London, WC1H 9LT.
The administrators can be reached at:
James Douglas Ernle Money
Steven Edward Butt
Menzies LLP
Lynton House, 7-12 Tavistock Square
London, WC1H 9LT
Further Details Contact:
The Administrators
Email: Chellens@menzies.co.uk
Tel No: 03309 129561
Alternative contact: Catherine Hellens
*********
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