/raid1/www/Hosts/bankrupt/TCREUR_Public/241212.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, December 12, 2024, Vol. 25, No. 249
Headlines
D E N M A R K
NORDICUS PARTNERS: Acquires Bio-Convert ApS in Stock Purchase Deal
NORDICUS PARTNERS: Alteral Therapeutics ApS Holds 25.75% Stake
NORDICUS PARTNERS: Completes Acquisition Deal With Orocidin A/S
NORDICUS PARTNERS: JE Pitzner Holding ApS Holds 5.87% Stake
SUSTAINABLE PROJECTS: Reports $932,599 Net Loss in Fiscal Q3
G E R M A N Y
PROGROUP AG: Moody's Affirms Ba3 CFR & Alters Outlook to Negative
I R E L A N D
AVOCA CLO XIV: Moody's Hikes Rating on EUR14.8MM F-R Notes to Ba3
AVOCA CLO XV: Moody's Ups Rating on EUR34MM Class E-R Notes to Ba1
DRYDEN 103 2021: Fitch Gives 'B-sf' Final Rating to Cl. F-R Notes
DRYDEN 103 2021: S&P Assigns B- (sf) Rating to Class F-R Notes
I T A L Y
CASTELLO (BC) BIDCO: S&P Rates Sr. Sec. Notes 'B', Outlook Stable
IRCA SPA: Fitch Assigns 'B+' Final Rating to Senior Secured Notes
R U S S I A
UZBEKNEFTEGAZ JSC: S&P Affirms 'B+' ICR, Alters Outlook to Stable
U N I T E D K I N G D O M
BAKELITE UK: S&P Affirms 'B' ICR on Dividend Recap, Outlook Stable
CD&R GALAXY: Moody's Appends 'LD' Designation to PDR
HICKORY (SCOTLAND): Opus Named as Joint Administrators
HNVR MIDCO: Moody's Affirms 'B2' CFR & Alters Outlook to Positive
HOMESLICE CANNON: Begbies Traynor Named as Administrators
HOMESLICE LIMITED: Begbies Traynor Named as Administrators
HORIZON MIDCO 2: Fitch Assigns 'BB-' LongTerm IDR, Outlook Stable
INEOS ENTERPRISES: Fitch Puts 'BB-' LongTerm IDR on Watch Negative
LANDMARK MORTGAGE NO.2: Fitch Alters Outlook on BB-sf Rating to Neg
LUMOS TELECOM: Interpath Named as Joint Administrators
TYPHOO TEA: Kroll Advisory Named as Administrators
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D E N M A R K
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NORDICUS PARTNERS: Acquires Bio-Convert ApS in Stock Purchase Deal
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Nordicus Partners Corporation disclosed in a Form 8-K Report filed
with the U.S. Securities and Exchange Commission that the Company
and the shareholders of Bio-Convert ApS, a Danish stock
corporation, entered into a Stock Purchase and Sale Agreement,
under which the Sellers sold to the Company 595,400 shares of the
capital stock of Bio-Convert, representing 100% of Bio-Convert's
outstanding shares of capital stock. In exchange, the Company
issued 12,000,000 restricted shares of its common stock to the
Sellers.
About Bio-Convert ApS
Bio-Convert ApS, a Denmark-based clinical-stage biopharmaceutical
company, is aiming to revolutionize the treatment of oral
leukoplakia, by minimizing or removing oral leukoplakia lesions,
that further reduces the risk of patients developing oral cancer
from it.
Bio-Convert has initiated new activities in the field of oral
cancer, which involves developing a new drug formulation for the
treatment of oral leukoplakia. This is achieved through a
proprietary mucoadhesive oral formulation that delivers the drug
without any systemic absorption. The aim of the treatment is
therefore to eliminate the lesions or to reduce the malignant
conversion rate of oral leukoplakia to oral cancer. The effect on
oral cancer may improve the surgical removal procedure should this
be needed for the oral cancer patients.
Bio-Convert's current plan is to conduct a pilot efficacy study in
patients with oral leukoplakia. For more information about
Bio-Convert, please visit: www.bio-convert.com
About Nordicus Partners
Headquartered in Beverly Hills, Calif., Nordicus Partners
Corporation is a financial consulting company specializing in
providing Nordic companies with the best possible conditions to
establish themselves in the U.S. market. The Company leverages
management's combined 90+ years of experience in the corporate
sector, serving in various capacities both domestically and
globally. Additionally, Nordicus operates as a business incubator,
offering support resources and services such as office space, legal
and accounting services, and marketing expertise to facilitate a
smooth transition for companies entering the U.S. marketplace.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2023, issued a "going concern"
qualification in its report dated July 2, 2024, citing that the
Company has an accumulated deficit, net losses, and minimal
revenue. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.
Nordicus Partners reported a net loss of $298,202 for the year
ended March 31, 2024, compared to a net loss of $8.47 million for
the year ended March 31, 2023. As of June 30, 2024, Nordicus
Partners had $20,800,789 in total assets, $65,155 in total
liabilities, and $20,735,634 in total stockholders' equity.
NORDICUS PARTNERS: Alteral Therapeutics ApS Holds 25.75% Stake
--------------------------------------------------------------
Alteral Therapeutics ApS disclosed in a Schedule 13D/A filed with
the U.S. Securities and Exchange Commission that as of May 14,
2024, it beneficially owned 12,652,279 shares of Nordicus Partners
Corporation's common stock, constituting 25.75% of the 49,132,248
Shares outstanding as of May 14, based on inquiry of the Company's
transfer agent.
On May 13, 2024, the Company and certain shareholders of Orocidin
A/S, a Danish stock corporation, entered into a Stock Purchase and
Sale Agreement, under which the Sellers sold to the Company 525,597
shares of the capital stock of Orocidin, representing 95.0% of
Orocidin's outstanding shares of capital stock. In exchange, the
Company issued 38,000,000 restricted shares of its common stock to
the Sellers. The transaction was consummated on May 13, 2024. In
that transaction, Alteral Therapeutics ApS sold 175,000 Orocidin
shares and received in exchange therefor 12,652,279 Company
Shares.
The purpose of all of these transactions was to make a long-term
investment in the Company.
Alteral Therapeutics ApS may be reached at:
Allan Traugott Wehnert
sole owner and officer
Dyrehavevej 3B
DK-2930 Klampenborg
Denmark
Tel: (+45) 53 84 27 43
A full-text copy of Alteral Therapeutics' SEC Report is available
at:
https://tinyurl.com/4dbksvb5
About Nordicus Partners
Headquartered in Beverly Hills, Calif., Nordicus Partners
Corporation is a financial consulting company specializing in
providing Nordic companies with the best possible conditions to
establish themselves in the U.S. market. The Company leverages
management's combined 90+ years of experience in the corporate
sector, serving in various capacities both domestically and
globally. Additionally, Nordicus operates as a business incubator,
offering support resources and services such as office space, legal
and accounting services, and marketing expertise to facilitate a
smooth transition for companies entering the U.S. marketplace.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2023, issued a "going concern"
qualification in its report dated July 2, 2024, citing that the
Company has an accumulated deficit, net losses, and minimal
revenue. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.
Nordicus Partners reported a net loss of $298,202 for the year
ended March 31, 2024, compared to a net loss of $8.47 million for
the year ended March 31, 2023. As of June 30, 2024, Nordicus
Partners had $20,800,789 in total assets, $65,155 in total
liabilities, and $20,735,634 in total stockholders' equity.
NORDICUS PARTNERS: Completes Acquisition Deal With Orocidin A/S
---------------------------------------------------------------
Nordicus Partners Corporation entered into an agreement with
Orocidin A/S to acquire the remaining approximately 5% of its
outstanding shares for 200,000 of the Company's restricted common
shares in an all stock-transaction to the selling shareholders.
Upon closing of the acquisition, Orocidin became a 100% wholly
owned subsidiary of Nordicus.
About Orocidin A/S
Orocidin A/S, a Denmark-based clinical-stage biopharmaceutical
company, is aiming to revolutionize the treatment of aggressive
periodontitis, making it safer, more effective, and efficient to
prevent and cure those who are affected by periodontitis. For more
information about Orocidin, please visit: www.orocidin.com
About Nordicus Partners
Headquartered in Beverly Hills, Calif., Nordicus Partners
Corporation is a financial consulting company specializing in
providing Nordic companies with the best possible conditions to
establish themselves in the U.S. market. The Company leverages
management's combined 90+ years of experience in the corporate
sector, serving in various capacities both domestically and
globally. Additionally, Nordicus operates as a business incubator,
offering support resources and services such as office space, legal
and accounting services, and marketing expertise to facilitate a
smooth transition for companies entering the U.S. marketplace.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2023, issued a "going concern"
qualification in its report dated July 2, 2024, citing that the
Company has an accumulated deficit, net losses, and minimal
revenue. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.
Nordicus Partners reported a net loss of $298,202 for the year
ended March 31, 2024, compared to a net loss of $8.47 million for
the year ended March 31, 2023. As of June 30, 2024, Nordicus
Partners had $20,800,789 in total assets, $65,155 in total
liabilities, and $20,735,634 in total stockholders' equity.
NORDICUS PARTNERS: JE Pitzner Holding ApS Holds 5.87% Stake
-----------------------------------------------------------
JE Pitzner Holding ApS disclosed in a Schedule 13D/A filed with the
U.S. Securities and Exchange Commission that as of May 14, 2024, it
beneficially owned 2,885,858 Shares of Nordicus Partners
Corporation's common stock, constituting 5.87% of the 49,132,248
Shares outstanding as of May 14, based on inquiry of the Company's
transfer agent.
In September and October 2023, the JE Pitzner Holding ApS acquired
a total of 500,000 Shares in a private transaction at a price of
$0.97 per share.
On May 13, 2024, the Company and certain shareholders of Orocidin
A/S, a Danish stock corporation, entered into a Stock Purchase and
Sale Agreement, under which the Sellers sold to the Company 525,597
shares of the capital stock of Orocidin, representing 95% of
Orocidin's outstanding shares of capital stock. In exchange, the
Company issued 38,000,000 restricted shares of its common stock to
the Sellers. The transaction was consummated on May 13, 2024. In
that transaction, JE Pitzner Holding ApS sold 33,000 Orocidin
shares and received in exchange therefor 2,385,858 Company Shares.
The purpose of all of these transactions was to make a long-term
investment in the Company.
JE Pitzner Holding ApS may be reached at:
Johannes Ejnar Pitzner
Sole owner and officer
Pilevej 4,
DK-4180 Sorø
Denmark
Tel: (+45) 40 70 11 24
A full-text copy of JE Pitzner's SEC Report is available at:
https://tinyurl.com/mttdy6td
About Nordicus Partners
Headquartered in Beverly Hills, Calif., Nordicus Partners
Corporation is a financial consulting company specializing in
providing Nordic companies with the best possible conditions to
establish themselves in the U.S. market. The Company leverages
management's combined 90+ years of experience in the corporate
sector, serving in various capacities both domestically and
globally. Additionally, Nordicus operates as a business incubator,
offering support resources and services such as office space, legal
and accounting services, and marketing expertise to facilitate a
smooth transition for companies entering the U.S. marketplace.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2023, issued a "going concern"
qualification in its report dated July 2, 2024, citing that the
Company has an accumulated deficit, net losses, and minimal
revenue. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.
Nordicus Partners reported a net loss of $298,202 for the year
ended March 31, 2024, compared to a net loss of $8.47 million for
the year ended March 31, 2023. As of June 30, 2024, Nordicus
Partners had $20,800,789 in total assets, $65,155 in total
liabilities, and $20,735,634 in total stockholders' equity.
SUSTAINABLE PROJECTS: Reports $932,599 Net Loss in Fiscal Q3
------------------------------------------------------------
Sustainable Projects Group Inc. filed with the U.S. Securities and
Exchange Commission its Quarterly Report on Form 10-Q reporting a
net loss of $932,599 for the three months ended September 30, 2024,
compared to a net loss of $843,734 for the three months ended
September 30, 2023.
For the nine months ended September 30, 2024, the Company reported
a net loss of $2,382,506, compared to a net loss of $2,006,459 for
the same period in 2023.
As of September 30, 2024, the Company had $2,557,550 in total
assets, $3,514,450 in total liabilities, and $956,900 in total
stockholders' deficit.
The Company has limited revenue and has sustained operating losses
resulting in a deficit. The Company has accumulated a deficit of
$5,742,263 since inception and has yet to achieve profitable
operations and further losses are anticipated in the development of
its business. The Company's ability to continue as a going concern
is in substantial doubt and is dependent upon obtaining additional
financing and/or achieving a sustainable profitable level of
operations.
A full-text copy of the Company's Form 10-Q is available at:
https://tinyurl.com/3scr6tu7
About Sustainable Projects
Aalborg, Denmark-based Sustainable Projects Group Inc. is a
pure-play lithium company focused on supplying high-performance
lithium compounds to the fast-growing electric vehicle and broader
battery markets.
Going Concern
The Company cautioned in its Form 10-Q Report the quarter ended
March 31, 2024, that there is substantial doubt about its ability
to continue as a going concern. According to the Company, it has
limited revenue and has sustained operating losses, resulting in a
deficit. The Company said the realization of a major portion of its
assets is dependent on its continued operations, which in turn is
dependent upon its ability to meet financing requirements and the
successful completion of the Company's planned lithium production
facility.
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G E R M A N Y
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PROGROUP AG: Moody's Affirms Ba3 CFR & Alters Outlook to Negative
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Moody's Ratings has affirmed the Ba3 long term corporate family
rating of the German paper-based packaging producer Progroup AG
(Progroup) and its Ba3-PD probability of default rating.
Concurrently, Moody's affirmed the Ba3 instrument rating of the
EUR300 million backed senior secured notes due 2029 and the EUR450
million backed senior secured notes due 2031. The outlook has been
changed to negative from stable.
RATINGS RATIONALE
The rating action reflects the fact that key credit metrics are
currently outside of Moody's expectations for the Ba3 rating
category and Moody's concern that Progroup will be challenged to
reach Ba3 credit metrics within the next 12-18 months.
While Moody's had anticipated an additional leverage increase in
2024 due to not only an increased debt load but also a likely
continued downward trend in earnings on a rolling 12-month basis
for several more quarters the actual results currently seen are
below Moody's prior expectations: For the twelve months period to
September 2024 Moody's calculate an EBITDA margin of 10.6%, a
retained cash flow coverage of net debt of 7.6% and a leverage
ratio of 7.0x Debt/EBITDA, all on a Moody's-adjusted basis. Key
drivers identified for the underperformance were (i) unplanned
downtime of 2 weeks at Progroup's paper mill PM3 and at its power
plant as well as (ii) market conditions below expectations.
Progroup adheres to a fairly aggressive growth strategy, expanding
its capacity and investing significantly beyond its maintenance
capex needs notwithstanding that these investments make strategic
sense and will strengthen the company's business profile and
competitive position over time. Progroup is currently seen as
weakly positioned in its current rating category with limited room
for underperformance versus Moody's recovery expectations.
Looking ahead, Progroup will benefit from the production ramp-up at
its new corrugated sheet feeder plant PW15 in Petersberg / Germany,
which commenced operations in August. In 2025 completion of the new
corrugated board plant PW16 in Cessalto / Italy and its second
waste-to-energy power plant in Sandersdorf / Germany – production
start at both is scheduled for mid 2025 -, might support the
company's recovery.
The rating is primarily constrained by (1) the company's modest
scale, narrow product range and geographical diversification
compared to its larger peers, such as Smurfit Westrock plc (Baa2
positive); (2) some degree of operational risk because its own
containerboard products come from three mills in Germany; (3)
volatility in its credit metrics because of significant swings in
input costs and selling prices, reflecting cyclical demand,
exacerbated by periods of oversupply; and (4) the risk of leverage
remaining at a high level because of aggressive growth strategy
that is partially debt-funded.
Despite of the current weakness, the rating is supported by (1) the
company's track record of high profitability as Moody's adjusted
EBITDA margin was around 21.6% on average over the last five years,
which is above industry standards and even ahead of that of market
leaders; (2) cost-efficient asset base that is technically advanced
and conveniently located to limit transport costs; (3) a financial
policy that targets maintaining a long-term net leverage ratio
below 3.0x (Progroup definition, 6.6x as of September 2024), which
is largely commensurate with a Ba rating; and (4) a track-record of
swift deleveraging after capex-driven leverage spikes.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the fact that Progroup's key credit
metrics are currently outside of Moody's expectations for the Ba3
rating category and Moody's concern that the company will be
challenged to improve its credit metrics back into the expected
range over the next 12 – 18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure could arise if:
-- Moody's-adjusted gross debt/ EBITDA below 3x on a sustained
basis;
-- Moody's-adjusted retained cash flow/ debt above 20% on a
sustained basis;
-- Moody's-adjusted EBITDA margin above 20% on a sustained basis.
Conversely, negative rating pressure could arise if:
-- Moody's-adjusted gross debt/ EBITDA above 4x on a sustained
basis;
-- Moody's-adjusted retained cash flow/ debt below 10% on a
sustained basis;
-- Moody's-adjusted EBITDA margin below 15% on a sustained basis;
-- Negative FCF over several years leading to deterioration in
liquidity profile.
LIQUIDITY
Progroup's liquidity profile is solid. The company reported EUR133
million of cash on balance sheet at September 30, 2024. In
addition, in 2023 Progroup has replaced its EUR50 million revolving
credit facility (RCF) with a new EUR200 million 5-year
sustainability linked RCF that remained fully undrawn this year.
The RCF contains two annual extension options and a springing
covenant in form of a minimum reported EBITDA amount tested
quarterly in case more than 40% of the facility is in use.
Progroup claims that its maintenance capex is very low at around
EUR20-30 million p.a. However, its growth capex varies greatly and
leads to periods of materially negative free cash flow as in
2018-20 during the construction of the PM3. While having been
positive since then, Moody's expect high investments in 2024 to
result in a negative FCF of around EUR200 million, prefunded
through the notes issuance in March 2024. Moody's assume that lower
investments in 2025-26 will lead to positive FCF once again,
stabilizing Progroup's liquidity.
STRUCTURAL CONSIDERATION
The backed senior secured notes issued in March 2024 are rated Ba3,
in line with the CFR. This is primarily because backed senior
secured debt constitutes most of the company's outstanding
liabilities, and the EUR200 million senior secured revolving credit
facility is ranking pari passu with the bonds. The guarantor pool
is strong and consist of all material subsidiaries representing 88%
of revenue, 98% of EBITDA and 95% of assets as of December 2023.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Paper and
Forest Products published in August 2024.
COMPANY PROFILE
Headquartered in Landau, Germany, Progroup AG (Progroup) is one of
the leading European paper-based packaging companies focusing on
the production of containerboard and its conversion into corrugated
sheet board. The company owns three containerboard mills in Germany
and 13 corrugated sheet board plants across six European countries,
as well as one combined heat and power plant in Eisenhüttenstadt,
Germany. During the twelve months to September 2024, Progroup
generated approximately EUR1.3 billion of revenue and employed
around 1,720 people. The company was founded by Juergen Heindl in
1992 and remains family owned with the son of the founders,
Maximilian Heindl acting as its current CEO since the beginning of
2023.
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I R E L A N D
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AVOCA CLO XIV: Moody's Hikes Rating on EUR14.8MM F-R Notes to Ba3
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Moody's Ratings has upgraded the ratings on the following notes
issued by Avoca CLO XIV Designated Activity Company:
EUR18,000,000 Class C-1R Deferrable Mezzanine Floating Rate Notes
due 2031, Upgraded to Aaa (sf); previously on Apr 11, 2024 Upgraded
to Aa3 (sf)
EUR15,000,000 Class C-2R Deferrable Mezzanine Floating Rate Notes
due 2031, Upgraded to Aaa (sf); previously on Apr 11, 2024 Upgraded
to Aa3 (sf)
EUR25,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2031, Upgraded to A1 (sf); previously on Apr 11, 2024 Upgraded
to A3 (sf)
EUR25,700,000 Class E-R Deferrable Junior Floating Rate Notes due
2031, Upgraded to Baa3 (sf); previously on Apr 11, 2024 Affirmed
Ba2 (sf)
EUR14,800,000 Class F-R Deferrable Junior Floating Rate Notes due
2031, Upgraded to Ba3 (sf); previously on Apr 11, 2024 Affirmed B1
(sf)
Moody's have also affirmed the ratings on the following notes:
EUR274,400,000 (Current outstanding amount EUR134,824,966) Class
A-1R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa
(sf); previously on Apr 11, 2024 Affirmed Aaa (sf)
EUR25,000,000 (Current outstanding amount EUR12,283,616) Class
A-2R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa
(sf); previously on Apr 11, 2024 Affirmed Aaa (sf)
....EUR16,300,000 Class B-1R Senior Secured Fixed Rate Notes due
2031, Affirmed Aaa (sf); previously on Apr 11, 2024 Affirmed Aaa
(sf)
EUR48,500,000 Class B-2R Senior Secured Floating Rate Notes due
2031, Affirmed Aaa (sf); previously on Apr 11, 2024 Affirmed Aaa
(sf)
Avoca CLO XIV Designated Activity Company, issued in June 2015 and
reset in November 2017, is a collateralised loan obligation (CLO)
backed by a portfolio of mostly high-yield senior secured European
loans. The portfolio is managed by KKR Credit Advisors (Ireland)
Unlimited Company. The transaction's reinvestment period ended in
January 2022.
RATINGS RATIONALE
The rating upgrades on the Class C-1R, C-2R, D-R, E-R and F-R notes
are primarily a result of the significant deleveraging of the most
senior notes following amortisation of the underlying portfolio
since the last rating action in April 2024.
The Class A-1R and A-2R notes have paid down by approximately
EUR113.0 million (37.8% of the closing balance) since the rating
action in April 2024 and EUR152.3 million (50.9% of the closing
balance) since closing. As a result of the deleveraging,
over-collateralisation (OC) has increased across the capital
structure. According to the trustee report dated October 2024 [1]
the Class A/B, Class C, Class D, Class E and Class F OC ratios are
reported at 162.72%, 140.80%, 127.76%, 116.65% and 111.09% compared
to February 2024 [2] levels of 141.30%, 128.30%, 119.90%, 112.40%
and 108.50%, respectively.
The deleveraging and OC improvements primarily resulted from high
prepayment rates of leveraged loans in the underlying portfolio.
Most of the prepaid proceeds have been applied to amortise the
liabilities. All else held equal, such deleveraging is generally a
positive credit driver for the CLO's rated liabilities.
The affirmations on the ratings on the Class A-1R, A-2R, B-1R and
B-2R notes are primarily a result of the expected losses on the
notes remaining consistent with their current rating levels, after
taking into account the CLO's latest portfolio, its relevant
structural features and its actual over-collateralisation ratios.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR345.4m
Defaulted Securities: none
Diversity Score: 49
Weighted Average Rating Factor (WARF): 3013
Weighted Average Life (WAL): 3.4 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.73%
Weighted Average Coupon (WAC): 4.39%
Weighted Average Recovery Rate (WARR): 45.46%
Par haircut in OC tests and interest diversion test: none
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporate these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in October 2024. Moody's concluded
the ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
AVOCA CLO XV: Moody's Ups Rating on EUR34MM Class E-R Notes to Ba1
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Moody's Ratings has upgraded the ratings on the following notes
issued by Avoca CLO XV Designated Activity Company:
EUR29,000,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2031, Upgraded to Aaa; previously on Feb 3, 2022 Upgraded to
Aa3
EUR26,500,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2031, Upgraded to A1; previously on Feb 3, 2022 Upgraded to
Baa1
EUR34,000,000 Class E-R Deferrable Junior Floating Rate Notes due
2031, Upgraded to Ba1; previously on Feb 3, 2022 Affirmed Ba2
Moody's have also affirmed the ratings on the following notes:
EUR309,500,000 (Current outstanding amount EUR205,869,254) Class
A-R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa;
previously on Feb 3, 2022 Affirmed Aaa
EUR9,000,000 Class B-1R Senior Secured Fixed Rate Notes due 2031,
Affirmed Aaa; previously on Feb 3, 2022 Upgraded to Aaa
EUR44,500,000 Class B-2R Senior Secured Floating Rate Notes due
2031, Affirmed Aaa; previously on Feb 3, 2022 Upgraded to Aaa
EUR13,500,000 Class F-R Deferrable Junior Floating Rate Notes due
2031, Affirmed B1; previously on Feb 3, 2022 Upgraded to B1
Avoca CLO XV Designated Activity Company, issued in November 2015
and reset in February 2018, is a collateralised loan obligation
(CLO) backed by a portfolio of mostly high-yield senior secured
European loans. The portfolio is managed by KKR Credit Advisors
(Ireland) Unlimited Company. The transaction's reinvestment period
ended in April 2022.
RATINGS RATIONALE
The rating upgrades on the Class C-R, D-R and E-R notes are
primarily a result of the significant deleveraging of the Class A
notes following amortisation of the underlying portfolio since the
payment date in October 2023.
The affirmations on the ratings on the Class A-R, B-1R, B-2R and
F-R notes are primarily a result of the expected losses on the
notes remaining consistent with their current rating levels, after
taking into account the CLO's latest portfolio, its relevant
structural features and its actual over-collateralisation ratios.
The Class A-R notes have paid down by approximately EUR92.3million
(29.8% of original balance) in the last 12 months and EUR103.6
million 33.5% since closing. As a result of the deleveraging,
over-collateralisation (OC) has increased across the capital
structure. According to the trustee report dated October 2024 [1]
the Class A/B, Class C, Class D, Class E and Class F OC ratios are
reported at 151.30%, 136.10%, 124.70%, 112.50% and 108.30% compared
to October 2023 [2] levels of 138.80%, 128.20%, 119.90%, 110.60%
and 107.30%, respectively.
The deleveraging and OC improvements primarily resulted from high
prepayment rates of leveraged loans in the underlying portfolio.
Most of the prepaid proceeds have been applied to amortise the
liabilities. All else held equal, such deleveraging is generally a
positive credit driver for the CLO's rated liabilities.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on Moody's published methodology
and could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR395.41m
Diversity Score: 54
Weighted Average Rating Factor (WARF): 3079
Weighted Average Life (WAL): 3.53 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.77%
Weighted Average Coupon (WAC): 4.30%
Weighted Average Recovery Rate (WARR): 44.77%
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporate these default and recovery
characteristics of the collateral pool into Moody's cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in October 2024. Moody's concluded
the ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
Moody's other analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
DRYDEN 103 2021: Fitch Gives 'B-sf' Final Rating to Cl. F-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned Dryden 103 Euro CLO 2021 DAC reset notes
final ratings, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Dryden 103 Euro
CLO 2021 DAC
A XS2552865367 LT PIFsf Paid In Full AAAsf
A-R XS2932818748 LT AAAsf New Rating
B-1 XS2552865524 LT PIFsf Paid In Full AAsf
B-1-R XS2932818821 LT AAsf New Rating
B-2 XS2552865870 LT PIFsf Paid In Full AAsf
B-2-R XS2932819043 LT AAsf New Rating
C XS2552866092 LT PIFsf Paid In Full Asf
C-R XS2932819555 LT Asf New Rating
D XS2552866258 LT PIFsf Paid In Full BBB-sf
D-R XS2932819639 LT BBB-sf New Rating
E XS2552866415 LT PIFsf Paid In Full BB-sf
E-R XS2932819803 LT BB-sf New Rating
F XS2552866688 LT PIFsf Paid In Full B-sf
F-R XS2932820058 LT B-sf New Rating
Transaction Summary
Dryden 103 Euro CLO 2021 DAC is a securitisation of mainly (at
least 90%) senior secured obligations with a component of senior
unsecured, mezzanine, second lien loans and high-yield bonds. Note
proceeds has been used to purchase a portfolio with a target par of
EUR400 million. The portfolio is actively managed by PGIM Loan
Originator Manager Limited and the CLO has 5.1-year reinvestment
period and a 7.5-year weighted average life (WAL) test.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 23.9.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is 62%.
Diversified Asset Portfolio (Positive): It has various
concentration limits, including a maximum exposure to the three
largest Fitch-defined industries in the portfolio at 40%. These
covenants ensure that the asset portfolio will not be exposed to
excessive concentration.
WAL Step-Up Feature (Neutral): The transaction can extend the WAL
by 1.5 years on or after the step-up date, which is 1.5 years after
closing. The WAL extension is at the option of the manager but
subject to conditions, including passing the collateral-quality
tests, portfolio-profile tests, coverage tests and meeting the
reinvestment target par, with defaulted assets at their collateral
value.
Portfolio Management (Neutral): The transaction has four matrices.
Two are effective at closing, corresponding to a 7.5-year WAL and
two effective six months after closing, corresponding to a
seven-year WAL with a target par condition at EUR400 million. Each
matrix set corresponds to two different fixed-rate asset limits at
10% and 20%. All matrices are based on a top-10 obligor
concentration limit at 25%.
The transaction a reinvestment period of around 5.1 years and
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.
Cash-flow Modelling (Positive): The WAL used for the transaction's
stressed-case portfolio and matrices analysis is 12 months less
than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period, including passing the coverage tests, the
Fitch WARF test and the Fitch 'CCC' bucket limitation test after
reinvestment, as well as a WAL covenant that progressively steps
down, before and after the end of the reinvestment period. Fitch
believes these conditions would reduce the effective risk horizon
of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would lead to a downgrade of no more than one notch for
the class B-R, D-R, and E-R notes, to below 'B-sf' for the class
F-R notes, and would have no impact on the class A-R and C-R
notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B-R, C-R, D-R, E-R and F-R
notes each have a two-notch cushion, while the class A-R notes have
no rating cushion. Should the cushion between the identified
portfolio and the Fitch-stressed portfolio be eroded due to manager
trading or negative portfolio credit migration, a 25% increase of
the mean RDR and a 25% decrease of the RRR across all ratings of
the Fitch-stressed portfolio would lead to downgrades of up to four
notches for the notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to two notches, except for the 'AAAsf' rated notes.
During the reinvestment period, upgrades, based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
transaction's remaining life. After the end of the reinvestment
period, upgrades may result from stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread available to cover losses in the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Dryden 103 Euro CLO
2021 DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
DRYDEN 103 2021: S&P Assigns B- (sf) Rating to Class F-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Dryden 103 Euro CLO
2021 DAC's class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R notes.
There are unrated subordinated notes outstanding from the original
transaction.
The transaction is a reset of the already existing transaction
which closed in December 2022. The issuance proceeds of the
refinancing notes were used to redeem the refinanced notes (the
original transaction's class A to F notes). The ratings on the
original notes (the class B to F notes) have been withdrawn. S&P
did not rate the original transaction's class A notes.
Under the transaction documents, the rated notes pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will permanently switch to semiannual payments.
The portfolio's reinvestment period will end approximately five
years after closing, while the non-call period will end two years
after closing.
The ratings assigned to the notes reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings weighted-average rating factor 2,678.59
Weighted-average life (years) 4.67
Weighted-average life (years) extended
to match reinvestment period 5.11
Obligor diversity measure 99.46
Industry diversity measure 21.56
Regional diversity measure 1.20
Weighted-average rating B
'CCC' category rated assets (%) 0.71
Target 'AAA' weighted-average recovery rate 37.52
Target weighted-average spread (net of floors; %) 4.12
Target weighted-average coupon (%) 3.63
S&P said, "We consider that the target portfolio is
well-diversified, primarily comprising broadly syndicated
speculative-grade senior secured term loans. Therefore, we have
conducted our credit and cash flow analysis by applying our
criteria for corporate cash flow CDOs."
The issuer may purchase loss mitigation obligations using either
interest proceeds or principal proceeds. The use of interest
proceeds to purchase loss mitigation obligations is subject to all
the interest coverage tests passing by at least 25% following the
purchase, and the manager determining there are sufficient interest
proceeds to pay interest on all the rated notes on the upcoming
payment date, including senior expenses.
The use of principal proceeds to purchase loss mitigation
obligations is subject to the following conditions:
-- The aggregate collateral balance remaining above reinvestment
target par. However, given that defaulted obligations are carried
at par (rather than at recoveries), S&P has looked to the other
mitigants assuming that the reinvestment target par condition is
not met.
-- The par coverage tests passing following the purchase, other
than the class F par coverage tests. As a result, S&P has assumed
no credit given to the class F par coverage or reinvestment
overcollateralization tests in its cash flow modeling.
-- The obligation meeting the restructured obligation criteria.
-- The obligation ranking pari passu or senior to the obligation
already held by the issuer.
-- Its maturity falling before the rated notes' maturity date.
-- It not being purchased at a premium.
S&P said, "In our cash flow analysis, we modelled the EUR400
million target par amount, the covenanted weighted-average spread
of 4.05%, and the covenanted weighted-average coupon of 3.50% as
indicated by the collateral manager. We have assumed
weighted-average recovery rates in line with those of the target
portfolio presented to us, except for the 'AAA' level, where we
have modeled a 36.50% covenanted weighted-average recovery rate as
indicated by the collateral manager. 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.
"Our credit and cash flow analysis shows that the class B-1-R to
F-R notes benefit from break-even default rate and scenario default
rate cushions that we would typically consider to be in line with
higher ratings than those assigned. However, as the CLO is still in
its reinvestment phase, during which the transaction's credit risk
profile could deteriorate, we have capped our ratings on the notes.
The class A-R notes can withstand stresses commensurate with the
assigned rating.
"Until the end of the reinvestment period on Jan. 19, 2030, the
collateral manager can 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 compares that with the
default potential of the current portfolio 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.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"The transaction's legal structure is bankruptcy remote, in line
with our legal criteria.
"The CLO is managed by PGIM Loan Originator Manager Ltd. Under our
operational risk criteria, the maximum potential rating on the
liabilities is 'AAA'.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for each class
of notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A-R to E-R
notes based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F-R notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit or restrict assets from
being related to the following industries: production of
controversial weapons; trade of illegal drugs or narcotics;
production of civilian firearms; predatory lending; extraction of
thermal coal and fossil fuels from unconventional sources;
production of or trade in pornography, adult entertainment, or
prostitution; production of tobacco or tobacco products, trade or
production in non-sustainable palm oil; speculative transactions of
soft commodities; opioid marketing and distribution; and the sale
or promotion of marijuana. Accordingly, since the exclusion of
assets related to these activities does not result in material
differences between the transaction and our ESG benchmark for the
sector, no specific adjustments have been made in our rating
analysis to account for any ESG-related risks or opportunities."
Ratings list
Amount Credit
Class Rating* (mil. EUR) Interest rate§ enhancement (%)
A-R AAA (sf) 248.00 3M EURIBOR + 1.30% 38.00
B-1-R AA (sf) 22.40 3M EURIBOR + 2.20% 27.50
B-2-R AA (sf) 19.60 5.15% 27.50
C-R A (sf) 24.00 3M EURIBOR + 2.65% 21.50
D-R BBB- (sf) 30.00 3M EURIBOR + 4.00% 14.00
E-R BB- (sf) 17.00 3M EURIBOR + 6.55% 9.75
F-R B- (sf) 13.00 3M EURIBOR + 8.58% 6.50
Sub. Notes NR 26.90 N/A N/A
*The ratings assigned to the class A-R, B-1-R, and B-2-R notes
address timely interest and ultimate principal payments. The
ratings assigned to the class C-R, D-R, E-R, and F-R notes address
ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
3M--Three month.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
=========
I T A L Y
=========
CASTELLO (BC) BIDCO: S&P Rates Sr. Sec. Notes 'B', Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings assigned its 'B' long-term ratings to Italian
High-Complexity PCB Manufacturer Castello (BC) Bidco SpA and its
senior secured notes, with a recovery rating of '3', reflecting its
estimate of about 60% recovery in the event of a payment default.
The stable outlook reflects S&P's expectation that the consolidated
entity will generate organic revenue growth of about 16% in 2024
and about 8% annually thereafter, with the high-margin Korean
business helping EBITDA margins approach 35% in 2025, translating
into free operating cash flow to debt close to 5% next year and
leverage of 5.0x or lower in 2024-2025.
S&P said, "The ratings are in line with our preliminary ratings,
which we assigned on Oct. 29, 2024. There were no material
changes to the financial documentation compared with our original
review, and the company's operating performance has been in line
with our previous forecast.
"In our base case, we assume that the AT&S Korea transaction will
close during the second quarter of 2025. We note that, out of the
EUR550 million senior secured notes issued, EUR200 million of the
proceeds are earmarked for the AT&S Korea acquisition. Until the
acquisition closes, those funds are kept in a separate escrow
account. In the unlikely event that the transaction does not
materialize, those funds would be returned to lenders; in such an
event, we expect that Somacis' leverage would remain the same,
given a proportional reduction in EBITDA and debt, and hence have
no impact on our rating.
"The stable outlook reflects our expectation that the consolidated
entity will generate organic revenue growth of about 16% in 2024
and about 8% annually thereafter. We also expect the inclusion of
the high-margin Korean business will help EBITDA margins approach
35% in 2025. This will translate into free operating cash flow to
debt approaching 5% in the same year, with leverage remaining at
5.0x or lower in 2024-2025."
Upside scenario
S&P said, "We could raise our rating if free operating cash flow
reached 10% of debt on a sustainable basis, while leveraged is
sustainably below 5.0x. This would likely stem from a continuous
improvement in operating performance, including steady growth of
revenue, EBITDA, and cash flows, as well as a smooth integration of
recent acquisitions."
Downside scenario
S&P said, "We could lower our rating if free operating cash flow
turned negative, for example from increased competitive pressures.
Alternatively, we could lower our rating if leverage increased and
exceeded 7.0x, likely stemming from large debt-funded acquisitions
or shareholder distributions."
On Nov. 26, 2024, financial sponsor Bain Capital closed the
acquisition of Italian high complexity printed circuit board (PCB)
maker Somacis (including the recently announced Dyconex
acquisition) for EUR630 million; in turn, Somacis will acquire PCB
manufacturer AT&S Korea for EUR415 million in the second quarter of
2025.
The total transaction value of EUR1.1 billion was funded with
EUR550 million of senior secured notes issued by Castello (BC)
Bidco SpA (Castello Bidco), Somacis' top-level holding company, and
EUR535 million of equity contributed by the owners, financial
sponsors Bain Capital (64% ownership) financial sponsor Chequers,
(15%) and minority shareholders consisting primarily of management
(21%).
Somacis benefits from long-standing relationships with its
customers, exposure to end markets with solid growth prospects, a
diversified supply chain, and stable margins and cash flows; these
strengths are balanced by the company's relatively small scale, no
diversification outside PCB manufacturing, and lack of a market
leading position.
IRCA SPA: Fitch Assigns 'B+' Final Rating to Senior Secured Notes
-----------------------------------------------------------------
Fitch Ratings has assigned IRCA Group Luxembourg Midco 3 S.a r.l's
(IRCA) EUR1,115 million senior secured notes, issued by Irca
S.p.A., a final rating of 'B+' with a Recovery Rating of 'RR3'.
The final rating is in line with the expected rating that Fitch
assigned on 25 November 2024, as pricing of the instruments and
receipt of the final documentation mainly conform to the
information already received.
The 'B' rating reflects IRCA's high initial leverage of 7.4x in
2024 with robust mid-scale operations, supported by its strong
value-added proposition with a specialised customised product
portfolio and global commercial capabilities. IRCA's EBITDA margins
are strong for the sector and Fitch expects healthy free cash flow
(FCF) from 2025 as capacity investments normalise.
The Stable Outlook reflects its expectations of leverage moderating
to 5.5.x by 2026, driven by growth opportunities from business
additions with mid-single-digit organic growth and EBITDA margin
improvement.
The expected ratings that are no longer expected to be converted to
final ratings (on the EUR400 million and EUR700 million bonds) are
being withdrawn as there is only one issue of EUR1,115 million
instead of two.
Key Rating Drivers
High Initial Leverage, Deleveraging Capacity: The rating is
constrained by a high debt burden, with EBITDA leverage projected
at 7.4x at end-2024, following the recent refinancing transaction.
Fitch expects this to drop to 5.5x by 2026, a level consistent with
the 'B' IDR. Fitch views execution risks related to EBITDA-driven
deleveraging as moderate, reflected in the Stable Outlook. Fitch
also notes IRCA's highly acquisitive record, with six transactions
completed since 2022. Further multiple or sizeable debt-funded
acquisitions could disrupt deleveraging and pressure the rating.
Risks to Growth, Mature Market: Fitch forecasts mid to high-single
digit organic growth, supported by the recent acquisitions,
leveraging on recent capacity expansion and cross-selling
opportunities aided by now global production capabilities and
innovation provided to clients, which is key for the food
ingredient industry. Fitch views these levels of growth as high for
the sector, but achievable given IRCA's product proposition and its
business model traits.
Fitch recognises that IRCA operates in the mature confectionery
market. Despite its resilience due to consumer indulgence and
steady demand even during economic downturns, this market may
experience constrained growth due to increasing demand for
healthier alternatives, a segment where the company currently has
only an incipient presence.
Leading Food Ingredients Producer: IRCA is a leading specialty food
ingredients supplier with a wide portfolio of highly customised
products, from chocolate to decorations, including creams,
toppings, inclusions, chocolate, decorations, providing an
integrated one-stop-shop solution with limited competition. Its
scale is somewhat limited measured by EBITDA around EUR200 million
(pro forma for acquisitions and synergies). However, Fitch
acknowledges the progress made towards a more balanced customer
base with higher outreach to faster-growing food manufacturers.
Global Commercial Capabilities: The business model benefits from
global commercial capabilities, with two well-established channels:
own commercial network for large food manufacturers (58% of sales)
and long-term partnership distributors for the gourmet channel. It
has a loyal and diversified customer base where Fitch sees limited
replacement threat, with the top 10 accounting for 25% of revenue.
After Kerry's acquisition in the US, its capabilities are
particularly relevant to serve global food manufacturers and
enhance geographical diversification, although Fitch notes some
concentration on the Italian market.
Differentiated Value-Added Positioning: IRCA has limited exposure
to the volatile dynamics of commodity traders, as its products are
differentiated and tailor-made. It has strong innovation
capabilities with solid R&D capabilities that allow close
cooperation and co-development with its clients' innovation teams,
key aspect for industrial food producers. IRCA benefits from
premiumisation trends that favour speciality positioning, but also
covers lower price points, including private label ingredients for
trading down consumers.
Strong Profitability: The group generates strong profitability for
the sector, with EBITDA margins projected at 15%-16%. These
profitability levels reflect IRCA's customised product offerings
with certain switching costs, at the same time being economically
more attractive than in-sourcing by food manufacturers. IRCA has
also proven its ability to pass through high inflation via frequent
price updates in contracts. Key inputs are hedged. However,
elevated costs for cocoa, oils, and sugar, together with margins
subject to operating leverage, still pose a challenge to
maintaining current margins.
Solid FCF Generation: Fitch estimates the group's FCF will turn
positive from 2025 with healthy mid- to high-single-digit FCF
margins, as capex normalises. IRCA's modern and flexible facilities
do not require major maintenance capex after recent investments and
integrated acquisitions. Fitch assumes cash conversion will remain
high, supported by contained working capital growth as the
portfolio benefits from demand throughout the year, including ice
creams.
Derivation Summary
IRCA has smaller scale, lower operating margins and significantly
higher leverage than peers in the confectionery sector such as
Ulker Biskuvi Sanayi A.S. (BB/Stable), Mondelez International, Inc.
(NR) or Sammontana Italia S.p.A. (B+/Stable).
Its business profile is stronger than that of private label food
processor La Doria S.p.A (B/Positive), due to its wider and more
specialised portfolio, more balanced customer base and wider
geographical footprint.
IRCA is rated above Platform Bidco Limited (Valeo Foods;
B-/Stable), being both exposed to the sweet market trends and
comparable in terms of scale, while IRCA's B2B focus makes it more
profitable and cash generative.
Key Assumptions
- Organic revenue CAGR at around 8.3% in 2024-2028
- EBITDA margin at 14.1% in 2024, gradually increasing towards
16.4% by 2028
- Capex at EUR53 million in 2024, mainly due to higher expansion
capex, followed by around EUR20 million on average in 2025-2028
- Remaining payments for Kerry acquisition of EUR6 million in 2024,
EUR20 million in 2025 and EUR5 million in 2026
- Restricted cash of EUR30 million for daily operations
Recovery Analysis
The recovery analysis assumes that IRCA will be considered as a
going concern (GC) rather than liquidated in bankruptcy.
Fitch assumed a 10% administrative claim, which is unavailable
during restructuring and hence deducted from the enterprise value
(EV).
The estimated GC EBITDA of EUR160 million reflects the level of
earnings required for the company to sustain operations as a GC in
unfavourable market conditions of shrinking volumes and with an
inability to pass on cost increases.
Fitch has assumed a 5.5x distress EV/EBITDA multiple, reflecting
IRCA's healthy underlying operating and FCF margins. This EV/EBITDA
multiple is below Sigma Holdco BV's of 6.0x due to the latter's
larger scale and well-recognised brand and is in line with Valeo
Foods, which has similar scale and operates in related packaged
food categories, with some brand recognition.
Post-refinancing, Fitch assumes local bank liabilities of around
EUR33 million together with the super senior EUR150 million
revolving credit facility (RCF) are structurally prior-ranking to
senior secured EUR1,115 million notes.
Fitch has assumed the EUR100 million factoring line will remain
available during and post-distress, given the company's blue-chip
clients with higher credit quality (e.g. Univeler, Mondelez,
Nestle). Following its criteria, these factoring facilities are
included in the financial debt calculations, but excluded from the
recovery analysis.
Based on these assumptions, its waterfall analysis generates a
ranked recovery for the senior secured debt in the Recovery Rating
'RR3' band, leading to a senior secured rating of 'B+', one notch
above the IDR, with a waterfall-generated recovery computation of
55%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Operating challenges and weak execution of strategy leading to
decelerating revenue progression
- EBITDA margin deteriorating towards 13%
- Volatile FCF as a result of aggressive financial policy
- EBITDA leverage above 6.5x on a sustained basis
- Interest coverage below 2.0x
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Record of sustained high-single digit revenue growth as IRCA
successfully integrates the new industrial capacity and levers new
commercial capabilities
- EBITDA margin consolidating above 15%
- FCF margin sustainably above 3%
- EBITDA leverage decreasing below 5.5x
- Interest coverage above 3.0x
Liquidity and Debt Structure
Fitch estimates a freely available cash balance of EUR41 million at
end-2024 (after restricting EUR30 million for ongoing operational
needs, which Fitch assumes will not be available for debt
service).
Fitch projects a continuous build-up of cash as a result of high
profitability, optimised working capital management with lower
seasonality thanks to improved product diversification, and minimal
capex requirements after recent acquisitions and capacity
expansion. Fitch expects this to lead to sustained positive FCF
generation and year-end freely available cash in excess of EUR100
million from 2026.
Following the completion of the recent refinancing transaction,
most maturities are concentrated in 2029. Fitch treated off balance
sheet non-recourse factoring as debt (EUR52.9 million as of
December 2023, in addition to the recourse factoring of EUR27.6
million as of September 2024) and recognise the company's working
capital could be adversely affected in the absence of these
facilities. Fitch projects the proposed EUR150 million RCF remains
fully undrawn through to 2028.
Issuer Profile
The IRCA Group is an Italy-headquartered manufacturer of specialty
ingredients for food manufacturers and gourmet customers (including
pastry shops, bakeries, foodservice chains and others).
Date of Relevant Committee
21 November 2024
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Irca S.p.A.
senior secured LT WD Withdrawn B+(EXP)
senior secured LT B+ New Rating RR3 B+(EXP)
===========
R U S S I A
===========
UZBEKNEFTEGAZ JSC: S&P Affirms 'B+' ICR, Alters Outlook to Stable
-----------------------------------------------------------------
S&P Global Ratings revised the outlook on Uzbekneftegaz JSC (UNG)
to stable from negative and affirmed the long-term issuer credit
rating and senior unsecured debt rating at 'B+'.
S&P said, "The stable outlook reflects our expectation that the
company will address all upcoming refinancing needs and will
gradually improve its ratio of sources to uses of liquidity through
better cash flows, diversifying of the funding base, and
improvements in the maturity profile.
"We think that the liquidity situation at UNG is no longer
deteriorating, justifying the stabilization of the outlook.
Although the ratio of sources to uses remains at 0.6x, a level
comparable to a year ago, we do not expect further deterioration of
this number. UNG's performance is improving slightly, which will
result in gradually better cash flow generation. Importantly, we
think that the approach to liquidity management is changing with
better oversight of the liquidity situation. The company is also
trying to address refinancing needs more proactively. UNG has
obtained waivers for the potential covenant breaches for the next
few quarters, thus minimizing the risk of a default event occurring
(like a year ago). We also understand that the government is
monitoring the situation and might provide support to cover
liquidity gaps.
"Higher gas tariffs and dividends received from joint ventures
(JV)'s will result in higher EBITDA and funds from operations (FFO)
in 2024-2026. We expect that the UNG's EBITDA will reach
Uzbekistani sum (UZS) 15 trillion-UZS16 trillion in 2024, an
improvement from UZS12.1 trillion in 2023. On top of the higher gas
tariffs, we expect UNG to begin receiving about UZS3 trillion of
dividends from its JV's, notably Uz-Kor Gas Chemical LLC and
Uztransgaz. UNG received 46.2% in Uztransgaz, the national gas
pipeline operator, as part of the restructuring of
receivables/payables and guarantees between UNG, Uz-Kor Gas
Chemical, and Uztransgaz. The restructuring, called the Debt
Remedial Plan, has also resulted in the discontinuation of close to
UZS11 trillion of financial guarantees that UNG provided to
Uztransgaz and which we previously added to UNG's debt. We expect
further EBITDA improvements of UZS17.5 trillion-UZS18.5 trillion in
2025, and UZS20 trillion-UZS21 trillion in 2026. We expect that the
Uzbekistan gas-to-liquid (GTL) plant, which is currently under
maintenance, will restart at the end of the first quarter of 2025,
gradually adding to EBITDA. We do not incorporate a fast ramp up in
our base case, given the operational history of the plant since it
started operations. We expect gas tariffs to grow in line with
inflation beginning in 2025, the 2025 tariffs should be approved in
spring next year and should become effective in June (following the
same timeline as in 2024)."
More tariff hikes might be needed to ensure UNG can invest
sufficiently to stabilize production. In June 2024, the government
increased the gas tariffs UNG receives for selling gas to
Uzgaztrade, the national gas trading company, by 30% to $48 per
thousand cubic meters from $37 previously. This should boost EBITDA
by about UZS1.5 trillion-UZS2.0 trillion annually. S&P said, "We
understand that there are discussions about further tariff
increases in 2025 and beyond, but there is no regulatory framework
to predict the hikes. Therefore, we incorporate future tariff hikes
in line with inflation in June annually. We note that the current
price for UNG remains very low compared with prices in most of the
world's regions. This price allows UNG to cover cash costs but does
not generate enough cash to invest in upstream. UNG's gas output
has fallen from about 34 billion cubic meters (bcm) in 2021 to an
estimated 28 bcm in 2024, and without substantial investments this
will continue to decline. We understand that UNG plans to invest
about UZS10 trillion-UZS11 trillion annually, much of it in
upstream, to reverse the decline of output, but we do not exclude
the possibility that higher investments will be required. The other
option for Uzbekistan could be further expansion of gas imports,
which is now agreed with Russia for up to 10 bcm annually. The
drawback of this option is that import gas is more expensive than
domestically produced gas, therefore we think that there are
incentives to stimulate domestic productions, UNG tariffs being one
of the options."
With better EBITDA and FFO, UNG's FFO to debt should improve to
about 20% in 2025-2026. The reasonable distributions policy toward
the state, with expected dividends of no more than 50% of annual
net income and no material distributions in any other form, should
support this improvement. S&P also expects that the annual capital
expenditure (capex) will not exceed UZS11 trillion, although it
thinks that bigger investments might be required to ensure recovery
of production. Still, if the gas tariff hikes are higher than its
assumptions, UNG should be able to allow higher capex while also
improving its leverage metrics.
S&P said, "The stable outlook reflects our expectation that UNG
will continue to gradually improve its operating and financial
performance, with EBITDA gradually moving to the UZS20 trillion
mark and FFO to debt improving to about 20%.
"At the same time, we expect that the company's still weak
liquidity ratios will gradually improve through better cash flows
and maturity management. We understand that the Ministry of Finance
of Uzbekistan is aware of the company's maturities and will provide
certain support in arranging the refinancing of specific loans.
"We could lower the rating on UNG if its operating performance is
affected by a major drawback, resulting in materially lower cash
flows and FFO to debt consistently below 12%, coupled with a
further deterioration of liquidity.
"We could also lower the rating if, under improving performance,
liquidity still deteriorated because of large distributions in any
forms, and acquisitions or excessive capex materially above our
forecast.
"We could upgrade the rating to 'BB-' if UNG's stand-alone credit
profile were to be upgraded by two notches to 'bb-' from 'b'
currently. Such an upgrade could become possible if liquidity
materially improved, the ratio of sources approached 1.2x, and FFO
to debt improved to about 30%."
===========================
U N I T E D K I N G D O M
===========================
BAKELITE UK: S&P Affirms 'B' ICR on Dividend Recap, Outlook Stable
------------------------------------------------------------------
S&P Global Ratings affirmed its 'B' issuer credit rating on
phenolic specialty resins producer Bakelite UK Holding Ltd. S&P
also assigned its 'B' issue-level rating and '3' recovery rating
(rounded estimate: 60%) to the secured debt issued by subsidiary
Bakelite US Holdco Inc.
The stable outlook reflects S&P's view that the company will
generate sufficient credit measures for the ratings through
operational discipline and lower raw material costs.
In spite of the dividend recapitalization transaction, the
affirmation and rating assignment reflect credit measures that are
likely to remain appropriate for the ratings. Bakelite US Holdco,
the debt-issuing subsidiary of Bakelite, is issuing a new secured
term loan to refinance existing secured debt and to allow for a
$240 million distribution to shareholders. S&P said, "We expect the
new loan to accrue at SOFR +375 basis points instead of the current
accrual, in which the applicable rate depends on the first-lien net
leverage ratio (either 325 basis points or 350 basis points). The
company is also seeking to extend the maturity on its unrated $100
million asset-based revolving facility to December of 2029 from May
of 2027. Pro forma for the transaction, the company will have an
$825 million secured term loan due 2031. We anticipate the loan
tranche will be assigned a new CUSIP, and we intend to withdraw our
ratings on the existing secured term loan when the transaction is
completed. We believe the Atlanta-based producer of phenolic
specialty resins and engineering thermoset- and molding-compounds
will generate EBITDA that yields satisfactory credit measures for
the ratings. This would be indicated by weighted-average S&P Global
Ratings-adjusted debt to EBITDA of 5.0x-6.5x. We estimate the
figure was just under 5.0x as of Sept. 30, 2024, and will rise to
5.7x by Dec. 31, 2024, with the addition of the incremental debt.
Its funds from operations (FFO) to debt and EBITDA to interest
coverage ratios are also likely to be appropriate for the ratings
by year-end, at roughly 11% and 2.5x, respectively. We also expect
its free cash flow to be in good shape at over $40 million."
Bakelite's margins are improving on better material spending and
productivity gains. Bakelite's profitability has improved this
year, with its margins now up to the 11% area from 9% as of Dec.
31, 2023. They are still low relative to those of other specialty
chemical producers, though. S&P expects the company to continue
expanding profitability in spite of tepid top-line growth as it
achieves productivity gains and maintains its ongoing focus on
operational cost discipline. Roughly 20% of the company's sales
come from Europe, and the slow-growth environment there has
affected the company's revenue. Contract renegotiations with
effective pricing, good customer retention, better materials
procurement, and strategic portfolio management away from
lower-margin accounts have all benefited the company's margins.
Bakelite estimates its material margin has improved in each of its
wood adhesives, performance materials, and chemical intermediates
and other product lines by a CAGR of 9%-11% over the past two
years. Synergies have come from better procurement on key raw
materials such as methanol, phenol, and urea, which accounted for
over 80% of Bakelite's raw material spending, along with headcount
reductions.
Bakelite's financial policy discipline remains key to the ratings.
Bakelite is owned by financial sponsors Black Diamond and
Investindustrial. S&P recognizes the owners donated a sizable
equity contribution to the capital structure, but events like the
upcoming dividend recapitalization demonstrate that some
uncertainty as to the longevity of the owners' commitment to a
prudent financial policy is justified. Typically, financial
sponsors have finite holding periods, and it is common for them to
maximize shareholder returns via debt-increasing dividend
recapitalization transactions. In this situation, Bakelite's
financial decisions are controlled by two equal partners instead of
one sole owner, which adds uncertainty. Until the financial
sponsors' control of the company is lowered to less than 40%
consistently or we become certain interim dividend distributions
and the exit of the Bakelite investment would not see the company's
debt leverage exceed 5x, the company's financial risk profile may
continue to be designated as highly leveraged despite its
relatively strong credit measures.
S&P said, "The stable outlook on Bakelite reflects our belief that,
despite the increase in debt from this upcoming dividend
recapitalization, the company's S&P Global Ratings-adjusted debt to
EBITDA will satisfy the 5.0x-6.5x range we consider appropriate for
the current rating. Under our base-case scenario, we assume S&P
Global Ratings-adjusted leverage of roughly 5.7x this year,
improving to 4.6x in 2025 absent any other debt-funded
transformative acquisitions or shareholder rewards. Supportive
factors include stable economic conditions, an absence of
destocking, easing raw material costs, rational competitive
industry dynamics, good operational execution, and realizing
procurement synergies. Our outlook recognizes that Bakelite may
engage in tuck-in acquisitions but does not envision its financial
sponsors will take actions that hurt its credit quality over the
next year, such as a large dividend recapitalization."
S&P could lower its ratings over the next 12 months if Bakelite's
operating performance deteriorates. This could occur if:
-- Housing starts and repair/remodeling activity remain muted and
business conditions in the building materials, construction, and
industrial markets are weak, reducing the demand for Bakelite's
resins such that its EBITDA declines more than 10%, its S&P Global
Ratings-adjusted debt leverage exceeds 6.5x, or its EBITDA interest
coverage falls to 1.5x;
-- The company experiences unexpected delays or large headwinds to
its input costs that it cannot offset with increased pricing, which
hurts its margins and credit metrics;
-- Unforeseen integration-related risks associated with
acquisitions depress Bakelite's profitability or cash flow
generation, causing credit measures to weaken below S&P's
expectations;
-- It employs more-aggressive financial policies (e.g., additional
dividend payouts or an unexpectedly large debt-financed
acquisitions) that cause it to sustain S&P Global Ratings-adjusted
leverage of more than 6.5x absent clear prospects for recovery; or
-- The company's liquidity becomes constrained.
Bakelite's majority ownership by private-equity firms constrains
S&P's rating over the next 12 months due to the potential for
aggressive policies. However, S&P could raise the rating if:
-- Black Diamond and Investindustrial reduce their control of the
company to less than 40%;
-- The company develops a track record of abiding by conservative
financial policies and S&P views the risk of increasing leverage
again as low;
-- S&P believes there is a strong, explicit commitment from
management and shareholders to sustain S&P Global Ratings-adjusted
leverage of less than 5x at all times; and
-- The company reduces the potential volatility in its earnings
and cash flow.
CD&R GALAXY: Moody's Appends 'LD' Designation to PDR
----------------------------------------------------
Moody's Ratings appended a limited default ("/LD") designation to
CD&R Galaxy UK Intermediate 3 Limited's (d/b/a "Vialto Partners" or
"Vialto") probability of default rating, revising it to Ca-PD/LD
from Ca-PD. There is no change to the company's Caa3 corporate
family rating, the Caa3 ratings on the existing senior secured
first-lien revolver and term loan issued under subsidiary Galaxy US
Opco Inc. ("Galaxy"), and the stable outlook. The /LD designation
appended to the PDR will be removed in three business days.
Vialto Partners recently amended the terms of Galaxy's unrated $400
million senior secured second-lien term loan due April 2030. Under
the amended terms, affiliates of HPS Investment Partners, LLC
("HPS"), which own this loan, granted the company a grace period
(to November 12, 2024) on the interest payment due on October 31,
2024. The lenders also amended the terms of this debt instrument to
allow for the payment of interest as a payment in kind. The
second-lien term loan will be fully equitized by HPS upon closing
of a distressed debt recapitalization which was announced shortly
thereafter and is scheduled to be completed in early 2025. Moody's
view the amendments to avoid missing the original October 31, 2024
due date of the cash interest payment as a limited default under
Moody's definition.
Vialto Partners' Caa3 CFR is constrained by the company's elevated
leverage (debt to EBITDA of nearly 14x LTM adjusted EBITDA as of
June 30, 2024 based on Moody's calculations prior to the
recapitalization) and currently 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 29 April 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.
Vialto Partners, controlled by affiliates of private equity sponsor
Clayton, Dubilier & Rice (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. The company's business is primarily focused 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 (ending June).
HICKORY (SCOTLAND): Opus Named as Joint Administrators
------------------------------------------------------
Hickory (Scotland) Limited was placed into administration
proceedings in the Edinburgh Sheriff Court, No EDI-B1658 of 2024,
and Mark Harper and Charles Hamilton Turner of Opus Restructuring
LLP, were appointed as joint administrators on Nov. 20, 2024.
Hickory (Scotland) Limited offers events catering services.
Its registered office is at Stuart House, Eskmills Park, Station
Road, Musselburgh, EH21 7PQ. Its principal trading address is at 8
Walker Street, Edinburgh, EH3 7LA.
The joint administrators can be reached at:
Mark Harper
Opus Restructuring LLP
9 George Square
Glasgow G2 1QQ
-- and --
Charles Hamilton Turner
Opus Restructuring LLP
322 High Holborn, London
WC1V 7PB
Further Details Contact:
The Joint Administrators
Email: glasgow@opusllp.com
Alternative contact: Nadia Cowden
HNVR MIDCO: Moody's Affirms 'B2' CFR & Alters Outlook to Positive
-----------------------------------------------------------------
Moody's Ratings has affirmed the B2 long term corporate family
rating, the B2-PD profitability of default rating of HNVR Midco
Limited and the B2 ratings of the backed senior secured revolving
credit facility (RCF) and backed senior secured term loans issued
by HNVR Holdco Limited (collectively HBX Group or the company). The
outlook of all entities has been changed to positive from stable.
RATINGS RATIONALE
The rating action reflects HBX's solid performance in recent years
following the pandemic, as well as Moody's view that the company's
financial policy could be supportive of a higher rating.
The company's performance led to an improvement in the company's
business profile supported by increasing scale, with both total
transaction value and room nights well above 2019 levels. As a
result of solid performance, debt reduction in 2023, and Moody's
forecast of continued growth, Moody's estimate that credit metrics
will improve to levels commensurate with a higher rating level
during the next 12 to 18 months, although some execution risks
remain.
The outlook change to positive also balances Moody's view that
financial policy could be supportive of a higher rating with risks
associated with potential of debt-funded distributions or
acquisitions that may alter the forecast trajectory of debt
metrics. Establishing a financial policy track record that is
commensurate with a higher rating level is thus an important factor
to further upward rating changes.
HBX Group's rating is also supported by its leading market position
in a fragmented industry; and diversification in terms of
customers, hotel suppliers, and source and destination geographies.
Concurrently, the B2 CFR is constrained by the company's still
relatively weak credit metrics; a competitive accommodation
distribution market and risks of disintermediation; risks from
exogenous shocks (for example, pandemics and terrorism); and
cybersecurity threats and system disruptions.
RATING OUTLOOK
The positive outlook balances Moody's expectation that credit
metrics can improve further to within the B1 rating guidance, with
the need to establish a financial policy track record that is
commensurate with a higher rating level. The outlook assumes no
material increase in leverage from future debt-funded acquisitions
or shareholder distributions, as well as the company maintaining at
least an adequate liquidity profile.
LIQUIDITY
HBX Group has good liquidity. As of September 30, 2024, the company
had EUR843 million of liquidity, consisting of EUR686 million of
cash on balance and a fully undrawn EUR157 million backed senior
secured revolving credit facility (RCF). FCF generation of above
EUR200 million in fiscal years 2025 and 2026 support the rating
agency's liquidity assessment. Liquidity sources are ample to cover
the expected intra-year working capital swings (estimated below
EUR350 million) and ensure compliance with a EUR75 million minimum
liquidity covenant.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS
Moody's assessment that the company's financial policy can be
supportive of a higher rating was an important governance
consideration for the rating action.
STRUCTURAL CONSIDERATIONS
HBX Group's capital structure consists of a fully undrawn EUR157
million backed senior secured RCF maturing in September 2026; a
EUR947 million backed senior secured term loan D maturing in
September 2027; and a EUR760 million backed senior secured term
loan B3 maturing in September 2028. The term loans and the RCF are
rated in line with the CFR, reflecting the first-lien-only
structure and the pari passu ranking of the facilities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure could develop if the company delivers
revenue and EBITDA growth, such that Moody's-adjusted leverage
improves further towards 4.0x; Moody's-adjusted FCF/debt remains
above 10%; and Moody's-adjusted EBITA/ interest expense remains
above or around 3.0x, all on a sustained basis. Any positive rating
action would also consider a review of market dynamics and
financial policy clarity.
Negative rating pressure could develop if the company's revenue and
EBITDA development is weaker than expected, or financial policy
decisions are such that Moody's-adjusted leverage weakens to above
5.5x; Moody's-adjusted FCF/debt falls below 5%; or Moody's-adjusted
EBITA/ interest expense weakens to below 2.0x, all on a sustained
basis; or if the company's liquidity deteriorates.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
HBX Group is a leading independent business-to-business (B2B)
travel tech company with a strong global footprint. The company
offers a network of interconnected travel tech products and
services to partners such as travel agencies, tour operators, or
hotels. Through its accommodation business, the company distributes
hotel rooms to the travel industry across more than 170 countries.
Additionally, the company also distributes mobility and experiences
(e.g., transfers, car rentals and activities) on a B2B basis, and
operates a range of travel tech related ventures (e.g., Hoteltech,
Fintech). The company is owned by funds advised by Cinven and
Canada Pension Plan Investment Board.
In the 12 months that ended December 31, 2023, HBX Group reported a
gross operating profit (GOP) of EUR656 million and company-adjusted
EBITDA of EUR369 million, according to unaudited financials.
HOMESLICE CANNON: Begbies Traynor Named as Administrators
---------------------------------------------------------
Homeslice Cannon Street Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Insolvency & Companies List (ChD),
Court Number: CR-2024-005923, and Dominik Thiel-Czerwinke and
Louise Donna Baxter of Begbies Traynor (Central) LLP, were
appointed as administrators on Nov. 28, 2024.
Homeslice Cannon operates licensed restaurants.
Its registered office is at 1066 London Road, Leigh On Sea, Essex,
SS9 3NA.
The administrators can be reached at:
Dominik Thiel-Czerwinke
Louise Donna Baxter
Begbies Traynor (Central) LLP
1066 London Road, Leigh-on-Sea
Essex, SS9 3NA
Fo further information, contact:
Rosie Thurwood
Begbies Traynor (Central) LLP
Email: Southendteamd@btguk.com
Tel No: 01702 467255
HOMESLICE LIMITED: Begbies Traynor Named as Administrators
----------------------------------------------------------
Homeslice Limited was placed into administration proceedings in the
High Court of Justice Business and Property Courts of England and
Wales, Court Number: CR-2024-005895, and Dominik Thiel-Czerwinke
and Louise Donna Baxter of Begbies Traynor (Central) LLP, were
appointed as administrators on Nov. 28, 2024.
Homeslice Limited operates in the Leisure - Bars and Restaurants
industry.
Its registered office is at 1066 London Road, Leigh On Sea, Essex,
SS9 3NA.
The administrators can be reached at:
Dominik Thiel-Czerwinke
Louise Donna Baxter
Begbies Traynor (Central) LLP
1066 London Road, Leigh-on-Sea
Essex, SS9 3NA
For further information, contact:
Rosie Thurwood
Begbies Traynor (Central) LLP
E-mail: Southendteamd@btguk.com
Tel No: 01702 467255
HORIZON MIDCO 2: Fitch Assigns 'BB-' LongTerm IDR, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has assigned Horizon Midco 2 Limited (The Travel
Corporation, or TTC) a Long-Term Issuer Default Rating (IDR) of
'BB-'. The Rating Outlook is Stable. Fitch has also assigned a
rating of 'BB' with a Recovery Rating of 'RR3' to USD650 million
senior secured amortising term loan, for which TTC's subsidiary
Horizon U.S. FinCo, L.P. is one of the borrowers. The loan has been
issued to finance TTC's acquisition by Apollo.
The rating reflects TTC's niche position in guided tours and luxury
river cruises with meaningful execution risks related to the
intended operational and commercial improvements of the business
following the acquisition. It is balanced by TTC's conservative
leverage and positive FCF generation capacity, although Fitch
assumes that accumulating cash balances are likely to be reinvested
in growth rather than used for debt reduction.
The rating does not account for any potential debt-funded M&A,
which TTC may pursue as there is no committed leverage target.
Fitch will assess its impact on the rating if such transaction
happens.
Key Rating Drivers
Niche Market Position: TTC holds a small market share in the global
travel industry but benefits from its niche position in guided
tours and luxury river cruises. The company primarily focuses on
offering tours and cruises from the US to Europe, targeting
individuals aged 55 and older. This growing target demographic in
the US has relatively more resilient finances and spending
profiles, which Fitch expects to support TTC's revenue growth over
the medium term.
Undermanagement Under Previous Ownership: Markets where TTC
operates are mature and competitive, which requires ongoing
investments in marketing, brand positioning, and product innovation
and effectiveness of the business model to remain successful. This
was not managed properly under the founding family ownership,
resulting in slower revenue recovery to pre-pandemic levels, low
levels of direct-to-consumer sales, reduced differentiation of some
brands, and weakened net promoter scores. There are also
operational inefficiencies in the organizational structure and
reporting and reservation systems, which need to be addressed for
the business to stay competitive.
Meaningful Execution Risks: Fitch expects TTC will benefit from
intended operational and commercial improvements under Apollo
ownership as these will ensure long-term sustainability of the
business model, competitiveness and growth. Nevertheless, Fitch
sees meaningful execution risks, which Fitch reflects in its
forecast being more conservative than management's on the time
necessary to achieve targeted savings and the effectiveness of
marketing spend.
Fitch believes that some of the initiatives, especially those
linked to streamlining and driving greater coherence across the
group and transitioning between IT systems, may be particularly
disruptive. Materialisation of such risks may lead to a negative
rating action.
Marketing to Weigh on EBITDA: Fitch projects EBITDA to fall in 2025
to around USD170 million from estimated around USD190 million in
2024 due to significant investments in marketing following cuts in
the past. In addition, management plans to sacrifice contribution
margin by growing prices below cost inflation. This would allow to
increase attractiveness of TTC's customer offer.
Conservative Leverage: The 'BB-' rating is supported by
conservative starting leverage compared to other leveraged buyout
transactions. Fitch projects leverage to peak at 4x in 2025 on
EBITDA reduction but decrease gradually towards 3x over 2026-2028
as efficiency initiatives drive profitability improvements. Fitch
believes such leverage levels would be consistent with TTC's 'BB-'
rating, considering its business profile and volatility of the
sector where it operates.
Positive FCF: The business is highly cash generative due to low
capex needs and negative working capital position. Fitch expects
TTC to retain its ability to generate positive FCF over 2025-2028,
despite increased interest payments from new debt and one-off costs
necessary to drive operational improvements.
Cash Reinvestment in Growth: Fitch focuses on gross leverage ratios
when assessing TTC's credit profile, as Fitch believes that
accumulating cash is likely to be used to fund business growth.
This could be achieved either through bolt-on M&A, as many assets
disrupted by the pandemic are coming up for sale, or through
investments in new ships. The latter would be necessary to retain
market share in river cruises, as competitors may consider
expanding their fleets as they recover from the pandemic.
No Dividends, Debt-Funded M&A: Fitch does not project dividends in
its rating case, as TTC's shareholders are more interested in
generating value through growth rather than dividend distribution.
At the same time, the ratings do not account for any material M&A,
which would require drawing under the USD225 million revolving
credit facility (RCF) or raising new debt. If the RCF were fully
and permanently drawn, Fitch would expect TTC's leverage to be no
longer consistent with 'BB-' rating.
Growing but Cyclical Demand: TTC operates in the travel industry,
which benefits from secular demand growth but remains inherently
cyclical. In addition, its revenue and profitability are sensitive
to exogenous events, such as acts of terrorism, geopolitical
conflicts, and pandemics. As an intermediary within this industry,
changes in airlines, hotels, and transportation companies may also
influence TTC's revenue. These risks are factored into TTC's
ratings by lowering its debt capacity compared with peers operating
in less volatile sectors. However, the ratings do not assume any
escalation of the ongoing conflicts in Ukraine and the Middle East,
which could materially disrupt travel to Europe.
Derivation Summary
TTC is materially smaller in scale and market position in the
travel market than Expedia Group, Inc. (BBB-/Positive), which is
one of the largest online travel agents globally. Material
differences in business profile, as well as TTC's higher leverage
and weaker financial flexibility drive three notch difference in
ratings.
TTC is rated higher than eDreams ODIGEO S.A. (B/Positive), a travel
subscription platform, due to a more established and mature
business model, lower leverage and greater scale.
TTC's cruise segment represented by Uniworld river cruises is
comparable with TUI Cruises GmbH (BB-/ Stable) and Carnival
Corporation (BB/Positive), although there are few differences.
Carnival and TUI Cruises specialise primarily in ocean cruises,
which are operated by larger vessels and offer a wide range of
amenities and entertainment options.
From the operational standpoint, river cruises are dependent on
river water levels, which may affect ships ability to sail, and
availability of docking rights in popular cities. Both TUI Cruises
and Carnival are materially larger than TTC, with Carnival being
the largest cruise operator in the world present across multiple
brands and customer segments. Nevertheless, TTC is rated at the
same level as TUI Cruises as its lower leverage offsets smaller
scale and greater execution risks.
Key Assumptions
- Low single digit revenue growth resulting from a combination of
mid-single digit growth of Trafalgar and Uniworld and weaker growth
of other brands;
- EBITDA reduction in 2025 as a result of greater marketing
spending and contribution margin sacrifices;
- Cost savings at 80% of management plan;
- One-off cash costs related to business improvement initiatives of
around USD50m over 2025-2026;
- Gradual unwinding of COVID-related travel credits leading to
slight outflows under working capital;
- Capex of USD54 million in 2025; not exceeding USD21 million a
year thereafter;
- RCF remains undrawn over 2024-2028;
- No debt-funded M&A or dividends;
- Deferred consideration payments of USD10 million a year (paid
over five years).
Recovery Analysis
Fitch rates USD650 million senior secured a term loan, following
its generic approach for 'BB' rating category issuers. The term
loan is rated at 'BB'/RR3, one notch higher than TTC's IDR,
reflecting a lower collateral quality in an asset-light business
model compared with other senior secured instruments, for which
Fitch gives two-notch instrument rating uplift.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Business disruptions from execution of commercial and operational
improvement initiatives or smaller-than-expected benefits, leading
to EBITDA staying below 2024 level;
- EBITDA leverage above 3.5x on a sustained basis;
- EBITDA interest coverage below 3.5x on a sustained basis;
- No visibility of FCF margin improvement to mid-single digits.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Successful execution of commercial and operational improvement
initiatives, leading to retaining or improving market position, and
revenue and profit growth;
- EBITDA leverage below 2.5x on a sustained basis, supported by a
consistent financial policy with committed leverage target;
- FCF margin in high single digits.
Liquidity and Debt Structure
Strong Liquidity: At end-2024, Fitch expects TTC to have strong
liquidity position with more than USD200 million of cash and fully
undrawn USD225 million RCF. Fitch expects liquidity to be further
supported by positive and growing FCF over 2025-2028.
Under new capital structure, near-term debt maturities will be
limited only to 1% annual amortisation under USD650 million term
loan.
Issuer Profile
TTC operates in a niche market of escorted tours from US and
Australia to Europe and runs a luxury river cruise company
Uniworld.
Criteria Variation
Fitch's Country-Specific Treatment of Recovery Ratings Criteria
does not have a country group for Guernsey, where TTC generates
most of its EBITDA. Fitch considered Guernsey as Group A, in line
with its treatment for UK and France, as Fitch believes there are
similarities in terms of courts view on contractual creditor
ranking and insolvency procedures.
Date of Relevant Committee
06-Dec-2024
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery
----------- ------ --------
Horizon U.S.
FinCo, L.P.
senior secured LT BB New Rating RR3
Horizon Midco 2
Limited LT IDR BB- New Rating
INEOS ENTERPRISES: Fitch Puts 'BB-' LongTerm IDR on Watch Negative
------------------------------------------------------------------
Fitch Ratings has placed INEOS Enterprises Holdings Limited's (IE)
Long-Term Issuer Default Rating (IDR) of 'BB-' on Rating Watch
Negative (RWN). Fitch has affirmed INEOS Enterprises Holdings II
Limited's euro term loan B (TLB) and INEOS Enterprises Holdings US
Finco LLC's US dollar TLB at 'BB+'. The Recovery Ratings on the
TLBs are 'RR2'.
This follows the announcement by IE to sell its composites business
for EUR1.7 billion. IE will use the proceeds and cash to repay most
of its debt comprising its EUR1.8 billion TLBs due 2030.
Fitch expects IE's scale, market position and business
diversification to weaken post-disposal, which may lead to a
single-notch downgrade. However, clarity around efforts to
strengthen the business profile post disposals while maintaining a
conservative capital structure and policy may lead to the rating
being affirmed.
Fitch will resolve the RWN on deal completion, which may take
longer than six months.
Key Rating Drivers
Composites Disposal Weakens Business Profile: Post disposal, IE
will be smaller, aligning it with 'B' category peers with around
EUR300 million through-the-cycle EBITDA. It will also weaken its
global leadership in composites, while raising its exposure to more
volatile commodity chemicals. Its business diversification will
also worsen as Fitch expects around two thirds of EBITDA on a
mid-cycle basis to come from its pigments segment, which is driven
mainly by construction and used home sales, as opposed to
composites' more various product applications across construction,
transportation, and marine.
Debt-Free: IE will use the total proceeds and cash on balance sheet
to repay its outstanding long-term debt of EUR1.8 billion, leaving
minimal working capital and revolver debt. Fitch understands from
management that there is no clarity at present on its future plan
regarding the financial structure. Fitch believes the repayment of
its entire debt load provides flexibility to define a new
capital-allocation framework within its strategic objectives.
Weaker EBITDA: IE's 9M24 last-12 month (LTM) Fitch-defined EBITDA
was around EUR260 million, down from EUR275 million in 2023 and by
around 60% from the 2020-2022 average. All segments, except
composites, have struggled. Pigments were down 30% from the
2020-2022 average as high US interest rates weighed on demand for
paints and coatings, its main end-market. In solvents, weak demand
in China has led to oversupply and increased competition for IE's
butanediol products, resulting in break-even EBITDA.
Pigments Positive in Long Term: Fitch believes the current
challenges for pigments are temporary and forecast earnings in this
segment to return to mid-cycle levels by 2026 of around EUR150
million (excluding Tyssedal/KOH) as interest-rate cuts stimulate
the housing market. The recent acquisitions of the pigments value
chain of Tyssedal and KOH should also support margin stability.
Other Businesses Challenged: Fitch believes solvents and chemical
intermediaries face more structural challenges that could impair
their long-term profitability. For solvents, higher energy costs in
Europe and weak demand in China have led to increased competition,
especially in the commoditised butanediol division. In chemical
intermediaries, IE took an impairment charge in 2023 of EUR21
million on continued weak trading conditions in its Joliet
division. Fitch forecasts this segment to generate EUR30 million by
2026-2027, supported by the remaining divisions of compounds and
Calabrian.
Derivation Summary
IE, INEOS Group Holdings S.A. (BB/Stable) and INEOS Quattro
Holdings Limited (BB-/Stable) are independently managed
subsidiaries of INEOS Limited. All three companies have good
operational, regional and product diversification. IE is smaller
than INEOS Group and Quattro, and is only a regional leader in
niche chemical markets, but with modestly higher margins.
IE's direct pigments peer is US-based Kronos Worldwide, Inc.
(B+/Stable). Following the disposal of composites, IE will be
broadly similar in business scale to Kronos but more diversified
owing to its solvents and chemical intermediates segments. However,
Kronos's capital structure has historically been more conservative
than IE's. Fitch expects Kronos's EBITDA leverage to decline to
around 3.0x in 2024 on a moderate rebound in EBITDA, before it
trends to its historical range of 2.0x-3.0x to 2027.
H.B. Fuller Company (BB/Stable) is a producer of adhesives with
comparable size to IE (pre-disposals), but has more stable
earnings, as demonstrated by EBITDA growth of 8% in 2023 and an
EBITDA margin of 15%. Fitch forecasts H.B. Fuller's EBITDA net
leverage to remain at or below 3.5x in 2024-2025.
IE and Synthos Spolka Akcyjna (BB/Negative) have similar scale, but
the latter's diversification is weaker, with its main assets
located in central Europe, whereas IE has meaningful exposure to
the US. However, Synthos benefits from stronger vertical
integration in energy and butadiene. Fitch expects Synthos's EBITDA
net leverage to peak at 3.8x in 2024 before it falls to below 3x in
2025-2026.
Key Assumptions
Fitch's Key Assumptions within Its Rating Case for the Issuer
- Composites sale completed in 1H25 and TLBs repaid in 2025
- Revenues to remain stable in 2024, to grow at 13% on average in
2025-2026, adjusted for the deconsolidation of composites, and at
1%-2% in 2027-2028
- Fitch-defined EBITDA including composites in 2024 slightly up at
EUR310 million (2023: EUR275 million) on improvements in pigments
- Fitch-defined EBITDA in 2025 at EUR260 million, including one
quarter of composites consolidation. EBITDA of EUR300
million-EUR320 million by 2027-2028 on the recovery of solvents and
chemical intermediates
- Capex averaging at 2.9% of revenues in 2024-2028
- Dividends averaging around EUR100 million a year in 2025-2028
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Completion of the composites disposal, leading to a weaker
business profile with no material improvements in credit metrics
over the medium term
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The ratings are on RWN, so Fitch does not expect positive rating
action at least in the short term. However, failure to complete the
disposal or clarity on the group's efforts to strengthen the
business profile, post disposal, while maintaining a strong
financial profile could lead to the removal of the RWN and
affirmation of the rating.
Liquidity and Debt Structure
IE has no immediate external debt needs. Its cash on balance sheet
was EUR265 million at end-September 2024, covering comfortably its
minimal short-term debt of EUR2 million and EUR93 million of
securitisation due in January 2027. Its EUR1.8 billion equivalent
secured term loans mature in 2030 with minimal amortisation of
around EUR8 million a year and have no maintenance financial
covenants. Its USD60 million (EUR38 million drawn) revolving
working capital facility at Tyssedal also expires in 2027.
IE has a subordinated related-party loan (EUR68 million at
end-September 2024) to INEOS Limited. Fitch treats the loan as
non-debt under its Corporate Rating Criteria as the loan is
unsecured and subordinated under an intercreditor agreement for
IE's secured term loans. In addition, interest on the loan may be
accrued and can only be paid if it complies with covenants and the
loan only matures one year after the latest maturity of the term
loans. Fitch treats any voluntary payments of capital and interest
as dividends.
Issuer Profile
IE is a chemical company involved in the production of intermediate
chemicals. IEHL is organised into five operating segments:
pigments, composites, solvents, chemical intermediates and
hygienics.
Summary of Financial Adjustments
- Fitch reclassifies interest on lease liabilities of EUR4.9
million and right-of-use assets depreciation of EUR22.5 million as
cash operating expenses, and excludes lease liabilities in the
calculation of financial debt in 2023
- Fitch treats the subordinated related-party loan of EUR211.2
million as of end-2023 as non-debt
- Fitch adds EUR37.5 million of debt issue costs back to financial
debt in 2023
- Fitch adds EUR30.4 million of non-recurring expenses back to
EBITDA in 2023
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
INEOS Enterprises
Holdings US Finco LLC
senior secured LT BB+ Affirmed RR2 BB+
INEOS Enterprises
Holdings Limited LT IDR BB- Rating Watch On BB-
INEOS Enterprises
Holdings II Limited
senior secured LT BB+ Affirmed RR2 BB+
LANDMARK MORTGAGE NO.2: Fitch Alters Outlook on BB-sf Rating to Neg
-------------------------------------------------------------------
Fitch Ratings has affirmed the Landmark Mortgage Securities UK RMBS
series and revised the Outlook on Landmark Mortgage Securities No.
2 Plc's (LMS2) class D notes to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
Landmark Mortgage
Securities No.3 Plc
A XS1110731806 LT AA-sf Affirmed AA-sf
B XS1110738132 LT A+sf Affirmed A+sf
C XS1110745004 LT A-sf Affirmed A-sf
D XS1110750699 LT BBBsf Affirmed BBBsf
Landmark Mortgage
Securities No.2 Plc
Class Aa XS0287189004 LT AAAsf Affirmed AAAsf
Class Ac XS0287192727 LT AAAsf Affirmed AAAsf
Class Ba XS0287192131 LT A+sf Affirmed A+sf
Class Bc XS0287193451 LT A+sf Affirmed A+sf
Class C XS0287192214 LT BBBsf Affirmed BBBsf
Class D XS0287192644 LT BB-sf Affirmed BB-sf
Landmark Mortgage
Securities No.1 Plc
Class B XS0260675888 LT AAAsf Affirmed AAAsf
Class Ca XS0258052165 LT A+sf Affirmed A+sf
Class Cc XS0261199284 LT A+sf Affirmed A+sf
Class D XS0258052751 LT B+sf Affirmed B+sf
Transaction Summary
The transactions are securitisations of UK non-conforming
owner-occupied (OO) and buy-to-let mortgages, originated by Amber
Home Loans, Infinity Mortgages, and Unity Homeloans for Landmark
Mortgage Securities No.1 Plc (LMS1) and LMS2 and by GMAC-RFC
Limited, Infinity Mortgages, and Unity Homeloans for Landmark
Mortgage Securities No. 3 Plc (LMS3).
KEY RATING DRIVERS
Increasing Arrears: Early and late-stage arrears have increased
since the last review. High prepayments exacerbate the effect
increasing arrears have on the transactions. The reported total
arrears (one month plus) have increased to 35.7% from 28.3% (LMS1),
33.3% from 27.7% (LMS2) and 23.3% from 19.4% (LMS3) since the last
review. Fitch expects performance to continue to deteriorate as
borrowers already in arrears roll to later stages and has affirmed
LMS3's class D notes at four notches below the model-implied rating
(MIR) to account for this risk.
Tail Risk: The transactions are exposed to significant tail risks
in light of pro-rata payments and interest-only (IO) exposure. LMS1
has breached its switch-back trigger whereby the outstanding pool
factor has fallen below 10%. Consequently, the transaction will
amortise sequentially until maturity. LMS2 mitigates pro-rata
amortisation risk with the same switch-back trigger but LMS3 lacks
this mitigating feature.
LMS3's class A notes' rating remains constrained by the account
bank provider's rating (HSBC Bank plc; AA-/Stable/F1+), where the
reserve fund is held. This could be the only source of credit
enhancement (CE) in scenarios where the collateral performance
deteriorates but remains within the conditions for pro-rata
payments. Fitch has affirmed the ratings below their MIR and will
not upgrade LMS3's notes beyond the rating achievable in a full
pro-rata scenario.
Decreasing Pool Granularity: The pool size continues to decrease,
with 175, 540 and 647 loans remaining for LMS1, LMS2 and LMS3
respectively. On average 86 loans are backing the junior notes in
LMS1 with 168 loans backing the junior notes in LMS2. This
represents a significant concentration risk, especially in light of
deteriorating asset performance. To account for this risk, Fitch
has capped the class C and D notes in LMS1 and class B, C and D
notes in LMS2 at 'A+sf'. Fitch will not upgrade these notes beyond
this cap.
Sensitivity to Lower Recoveries: Fitch has observed lower recovery
rates than projected by its ResiGlobal model: UK in non-conforming
transactions. Consequently, Fitch tested a 15% reduction in the
weighted average recovery rate (WARR) in its analysis. Fitch has
revised the Outlook on LMS2's class D notes to Negative due to
their high sensitivity to recovery rate stresses.
Performance Adjustment Factor: The pools have high IO OO
concentrations. During 2030-2032, a majority of the OO loans in the
portfolios mature and must make principal payments. Fitch has
floored its performance adjustment factor assumptions to account
for the significant back-loaded risk profile that arises for the
high percentage of IO OO loans. Fitch has also constrained its
performance adjustment factor assumptions to prevent weighted
average foreclosure frequency (WAFF) volatility due to increasing
arrears, which are likely to lead to future increases in defaults.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transactions' performance may be affected by changes in market
conditions and the economic environment. Weakening economic
performance is strongly correlated with increasing levels of
delinquencies and defaults that could reduce CE available to the
notes.
Additionally, unanticipated declines in recoveries could also
result in lower net proceeds, which may make certain notes
susceptible to negative rating action depending on the extent of
the decline in recoveries. Fitch conducts sensitivity analyses by
stressing the transactions' base-case WAFF and WARR assumptions,
with a 15% increase and a 15% decrease across the series, which
resulted in downgrades of one notch for the class C notes and up to
six notches for LMS2's class D notes and had no impact on LMS1 and
LMS3.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch tested an additional rating sensitivity scenario by applying
a separate decrease in the WAFF of 15% and an increase in the WARR
of 15%.
Fitch observed upgrades of up to one notch for LMS1's class D
notes, up to one notch for the class B notes, three notches for the
class C notes and six notches for LMS2's class D notes; up to three
notches for the class A notes, up to four notches for the class B
notes, up to six notches for the class C notes and up to seven
notches for LMS3's class D notes prior to accounting for any caps.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pool[s] and the transaction[s]. Fitch has not reviewed the results
of any third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided about
the underlying asset pools ahead of the transactions' initial
closing. The subsequent performance of the transactions over the
years is consistent with the agency's expectations given the
operating environment and Fitch is therefore satisfied that the
asset pool information relied upon for its initial rating analysis
was adequately reliable.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
All three transactions have an ESG Relevance Score of '4' for
customer welfare - fair messaging, privacy & data security due to a
material concentration of IO loans, which has a negative impact on
the credit profiles, and is relevant to the ratings in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
LUMOS TELECOM: Interpath Named as Joint Administrators
------------------------------------------------------
Lumos Telecom Limited was placed into administration proceedings in
the Court of Session, Court Number: P1078 of 24, and Geoffrey Isaac
Jacobs and Alistair McAlinden of c/o Interpath Ltd, were appointed
as joint administrators on Nov. 21, 2024.
Lumos Telecom operates in the telecommunications industry.
Its registered office is at c/o Interpath Ltd, 5th Floor, 130 St
Vincent Street, Glasgow, G2 5HF.
The joint administrators can be reached at:
Geoffrey Isaac Jacobs
Alistair McAlinden
c/o Interpath Ltd
5th Floor, 130 St Vincent Street
Glasgow, G2 5HF
Further Details Contact:
Connor Griffin
Email: connor.griffin@interpath.com
Tel No: 0131 385 7922
TYPHOO TEA: Kroll Advisory Named as Administrators
--------------------------------------------------
Typhoo Tea Limited was placed into administration proceedings in
the High Court of Justice Business and Property Courts at Bristol,
Insolvency and Companies List (ChD), Court Number:
CR-2024-BRS-000131, and Philip Dakin, Janet Elizabeth Burt and
Benjamin John Wiles of Kroll Advisory Ltd, were appointed as
administrators on Nov. 27, 2024.
Typhoo Tea specializes in tea processing.
Its registered office and principal trading address is at 470 Bath
Road, Bristol, BS4 3AP.
The administrators can be reached at:
Philip Dakin
Janet Elizabeth Burt
Benjamin John Wiles
Kroll Advisory Ltd
The Shard, 32 London Bridge Street
London, SE1 9SG
Further Details Contact:
Josh Guest
Email: Josh.Guest@kroll.com
Tel No: 0207 089 4896
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2024. All rights reserved. ISSN 1529-2754.
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