/raid1/www/Hosts/bankrupt/TCREUR_Public/250304.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, March 4, 2025, Vol. 26, No. 45
Headlines
A U S T R I A
SAPPI LIMITED: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
B E L A R U S
LLC EUROTORG: Fitch Affirms B- Foreign Currency IDR, Outlook Stable
G E R M A N Y
TK ELEVATOR: Moody's Rates New Senior Secured Term Loan 'B2'
TUI AG: Moody's Upgrades CFR to 'Ba3' & Alters Outlook to Stable
G R E E C E
PUBLIC POWER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable
I T A L Y
RENO DE MEDICI: Fitch Lowers LongTerm IDR to 'B', Outlook Negative
L U X E M B O U R G
INFRAGROUP BIDCO: S&P Affirms 'B' ICR & Alters Outlook to Positive
R U S S I A
UZBEK METALLURGICAL: Fitch Lowers IDR to 'B+', Outlook Stable
S P A I N
BANCAJA 10: Moody's Upgrades Rating on EUR26MM Class D Notes to B3
GC PASTOR HIPOTECARIO 5: S&P Affirms 'D' Ratings on 3 Tranches
SABADELL CONSUMO 2: Fitch Affirms 'BBsf' Rating on Class F Notes
T U R K E Y
ANADOLUBANK AS: Fitch Rates USD150MM Tier 2 Capital Notes 'CCC+'
U N I T E D K I N G D O M
ACHESON CONSTRUCTION: Grant Thornton Named as Administrators
COREIX LTD: RSM UK Named as Administrators
INKLING LTD: Moorfields Named as Administrators
KECKS LTD: Edge Recovery Named as Administrators
NVAYO LIMITED: Leonard Curtis Named as Administrators
RIPON MORTGAGES: S&P Assigns B-(sf) Rating on Class X-Dfrd Notes
STRATEGIC VALUE: Arafino Advisory Named as Administrators
THAMES WATER: Moody's Lowers Prob. of Default Rating to D-PD
THAMES WATER: S&P Ups ICR to 'CCC' on Completed Debt Restructuring
WESTVALE DEVELOPMENTS: RSM UK Named as Administrators
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A U S T R I A
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SAPPI LIMITED: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
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Fitch Ratings has affirmed Sappi Limited's (Sappi) Long-Term Issuer
Default Rating (IDR) at 'BB+' with a Stable Outlook and Sappi
Papier Holding GmbH's (SPH) unsecured debt rating at 'BB+' with a
Recovery Rating of 'RR4'.
The affirmation and Stable Outlook reflect Fitch's view that
Sappi's transition towards packaging and specialty products and
away from graphic paper, combined with a strong position in
dissolving pulp, will start improving earnings generation from
FY26. The transition, combined with one-off events, led to
temporarily weaker free cash flow (FCF) generation and higher
leverage in FY24 (financial year ending September) that was outside
its negative rating sensitivities. Fitch forecasts key metrics to
remain weak in FY25, but if this continues past FY25, it would lead
to pressure on the rating.
Key Rating Drivers
Cash Flow Temporarily Under Pressure: Sappi's capex has been
elevated in FY24 and FY25, largely due to the USD420 million
conversion and expansion of the Somer Set Mill Paper Machine No.2
(PM2) from graphic paper into packaging and specialty papers.
Additional restructuring costs, closure of two graphic paper mills,
business interruption expenses and damaged timber costs from fire
and snow in FY24 also pressured FCF. With capex and dividend
flexibility, Fitch expects the FCF margin to return to low single
digits. Failure to do so would put pressure on the rating.
Leverage to Peak in FY25: Fitch forecasts EBITDA gross leverage in
FY25 at 2.7x and net leverage at 2.6x from 2.7x and 2.3x in FY24,
respectively. This will be driven by flat EBITDA and negative FCF
eroding cash on the balance sheet. These leverage levels will
exceed its negative sensitivities of 2.5x and 2.0x. However, Fitch
forecasts Sappi will subsequently deleverage, returning to within
sensitivities from FY26.
FY24 EBITDA Better Than Expected: Fitch-adjusted EBITDA margin was
12% in FY24, which exceeded Fitch's and the company's forecasts.
This was led by the dissolving pulp segment, which continued to
have strong results in FY24, with rising prices due to tight supply
and high demand from viscose staple fibre. Graphic paper sales were
flat, although their profitability improved due to cost reductions
and mill closures. Packaging and specialty paper demand grew by 8%
as destocking reversed, with stronger recoveries in North America
and South Africa, but margins were eroded due to lower selling
prices.
Margins Under Pressure in FY25: Fitch forecasts the Fitch-adjusted
EBITDA margin to slightly decrease in FY25 before rising again in
FY26-FY28. EBITDA generation is sensitive to volatile pulp prices
and pressured by structurally declining demand for graphic paper.
Continued weaker demand in Europe, maintenance shutdowns, and
ramp-up of PM2 will weigh on margins in FY25. However, Fitch
expects margins to benefit from the new higher-margin packaging
capacity from PM2, and a falling contribution from the lower-margin
graphic paper in the medium term.
Transition Period: Sappi's transition is well underway, with the
conversion and expansion of PM2, which is set to be complete in
April 2025. Fitch views Sappi's strategy to limit exposure to
graphic paper as a required business adjustment, albeit at the cost
of temporarily weaker FCF and leverage. The strategy has involved
long-term investments and disposals, conversion to other packaging
grades, or closures of graphic paper machines, depending on market
conditions. Fitch views successful execution of the transition as a
key rating factor. FCF taking longer than expected to recover could
hinder deleveraging and lead to negative rating action.
Dividend and Capex Flexibility: Liquidity is comfortable, with
available revolving credit facilities (RCF) offsetting negative FCF
generation in FY25. Fitch continues to assume that Sappi has
flexibility to adjust its dividend payments, as it has done
historically, or revise capex, except for PM2-related capex, to
preserve cash.
Strong Diversification: Sappi's product portfolio is stronger and
typically broader than that of many packaging peers. Its raw
material and end-use offerings have broad applications across many
industries, including textiles, consumer goods, foodstuff,
pharmaceuticals, packaging, automobiles, dye sublimation paper and
magazines. This diversification is slightly offset by the cyclical
nature of the pulp and paper industries, declining demand for
graphic paper and variable consumer discretionary spending.
Instrument Notching: Fitch equalises SPH's senior unsecured debt
rating with Sappi's IDR. SPH issues debt to fund its non-South
African operations and is independently funded from Sappi Southern
Africa Limited (SSA). Fitch sees no material subordination of SPH's
debt to either unsecured debt issued by SSA or secured debt issued
within the Sappi group.
Derivation Summary
Sappi's closest Fitch-rated peers are pulp and paper packaging
producer Stora Enso Oyj (BBB-/Stable), Brazilian paper packaging
producer Klabin S.A. (BB+/Stable), and Italian premium paper
packaging and pressure-sensitive label producer Fedrigoni S.p.A.
(B+/Negative). The business profile also has some similarity to
that of pulp producers Suzano S.A. (BBB-/Positive) and Eldorado
Brasil Celulose S.A. (BB/Stable).
Sappi is better geographically diversified than its higher-rated
peer Stora, which is focused on Europe (70%). Sappi differentiates
more in terms of product offering with more end-use applications
relative to its peers. However, almost half of its revenue comes
from the structurally declining graphic paper segment, and volatile
pulp prices also weigh on profitability compared with its peers.
Fitch expects Sappi to further reduce its exposure to graphic
paper, although its progress is slower than Stora's, which aims to
almost eliminate paper revenue by end-2025.
Fitch expects Sappi's EBITDA margins in FY25-FY26 to be similar to
Stora's but lower than Fedrigoni. Pulp producers Suzano and
Eldorado have structurally different profitability profiles to
Sappi, with strong double-digit margins.
Sappi has strong leverage metrics for its rating, with forecast
EBITDA gross leverage peaking at 2.7x in FY25 before declining to
under 2x in FY27. This is lower than Stora's, which is above 3x. It
is also stronger than that of packaging peers in the 'BB' rating
category, such as Klabin, Silgan Holdings Inc. (BB+/Stable), and
Berry Global Group, Inc. (BB+/Rating Watch Positive).
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue growth averaging around 7% per year from FY25-FY28 due to
higher selling prices in dissolving pulp and increased capacity in
packaging and specialty papers
- Product shift and fixed-cost reduction leading to EBITDA margin
steadily increasing from just under 11% in FY25 to above 13% in
FY28
- Dividend payments to continue, with flexibility supporting
positive FCF
- Capex to average 7% of revenue during FY25-FY28
RATING SENSITIVITIES
Factors that Could Individually or Collectively Lead to Negative
Rating Action/Downgrade
- EBITDA gross leverage above 2.5x and EBITDA net leverage above
2.0x
- EBITDA margin below 10%
- Neutral to positive FCF margin
- Shift in capital-allocation priorities toward debt-financed M&A
or shareholder returns, instead of deleveraging
- Greater volatility in margins due to unfavourable pulp and paper
prices, or a decline in graphic paper revenue not counterbalanced
by other packaging grades
Factors that Could Individually or Collectively Lead to Positive
Rating Action/Upgrade
- EBITDA gross leverage below 2.0x and EBITDA net leverage below
1.5x on a sustained basis
- EBITDA margin above 14% on a sustained basis
- FCF margin above 2%
- Decreasing share of graphic paper revenue leading to improved
business risk and less volatile profitability
Liquidity and Debt Structure
Sappi had comfortable liquidity as of end-September 2024, with
USD208 million of cash available, adjusted by Fitch for intra-year
working capital changes of 2% of sales. Liquidity is also supported
by undrawn committed RCF of EUR515 million at SPH, maturing in
February 2027, and ZAR2 billion at SSA, maturing in August 2027.
Fitch forecasts that FCF will be pressured by higher capex and
dividend payments in FY25. However, from FY26, Fitch expects FCF to
turn positive once large capex projects are complete.
Sappi's refinancing risk is low due to strong leverage and coverage
ratios, broad access to capital markets, and an adequate debt
maturity profile spread across 2026, 2028, and 2032 for senior
unsecured notes.
Issuer Profile
Sappi is a leading global provider of wood fibre-based raw
materials and end-use products. Sappi's operations span three
continents with eight production facilities in Western Europe, four
in North America and five in Southern Africa.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
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Sappi Papier
Holding GmbH
senior unsecured LT BB+ Affirmed RR4 BB+
Sappi Limited LT IDR BB+ Affirmed BB+
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B E L A R U S
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LLC EUROTORG: Fitch Affirms B- Foreign Currency IDR, Outlook Stable
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Fitch Ratings has affirmed LLC Eurotorg's Long-Term
Foreign-Currency (LTFC) Issuer Default Rating (IDR) at 'B-' with
Stable Outlook. Fitch has also affirmed Bonitron Designated
Activity Company's 'B-' senior unsecured bond rating with a
Recovery Rating of 'RR4'.
Eurotorg's IDR continues to reflect its small scale relative to
international peers', limited diversification outside its domestic
market, and persistent risks related to accessing international
payment systems and financing infrastructure. Along with Belarus's
weak operating environment, these factors weigh on its financial
flexibility. These weaknesses are balanced by its conservative
capital structure and a strong, stable position in Belarus's food
retail market.
The Stable Outlook reflects projected resilient trading performance
in 2025, as well as its expectations of sufficient liquidity to
repay remaining outstanding Eurobonds maturing in October 2025.
This is despite projected higher dividend payments in 2025 leading
to mildly negative free cash flow (FCF).
Key Rating Drivers
Resilient Sales, Margin Decline: Fitch estimates that Eurotorg's
like-for-like sales grew around 10% in 2024, outperforming its
projections. Fitch also estimates that it achieved a slight gross
margin improvement by successfully managing regulatory pressure on
price controls.
However, Fitch estimates full-year EBITDAR margin to have fallen to
9.3%, from 9.9% in 2023, as higher personnel costs reported in 1H24
extended into 2H24, on top of higher lease payments. Its forecast
assumes persisting margin pressure from staff costs, although Fitch
acknowledges management efforts to reduce its impact through cost
optimisation.
Continued Leverage Reduction: Eurotorg continued to reduce its
leverage through debt repayment. Fitch estimates debt at end-2024
was slightly above BYN800 million, down from BYN1.06 billion at
end-2023 and BYN1.33 billion at end-2022. Fitch calculates end-2024
EBITDAR leverage at 1.9x, below 2023's 2.1x, on broadly unchanged
EBITDA. This allows for material leverage headroom and is
materially below the majority of Fitch-rated food retail peers.
Continuing proactive debt repayment will reduce the potential
impact of interest rate volatility, which Fitch calculates to have
resulted in healthy EBITDAR fixed charge coverage of 2.7x in 2024,
partially offsetting a sharp increase in lease expenses.
Higher Dividends to Reduce FCF: Fitch expects weaker cash flow
generation for Eurotorg, due to moderate pressure on profitability
from higher personnel expenses and increases in annual dividends to
BYN300 million-BNY350 million in 2025-2028. This will lead to
slightly negative FCF compared with its previous forecast of mildly
positive FCF.
Reduced Foreign-Exchange Risk: Eurotorg's share of debt in hard
currencies fell to below 15% as of June 2024, from around 50% in
2021. After sizeable debt repurchases in 2022, Eurotorg continued
to conduct bond buybacks in the open market, further reducing its
outstanding loan participation notes (LPN) exposure to USD21
million at end-2024 from USD58 million at end-2022. Eurotorg
continues to have access to hard currencies despite its profits
being solely generated in Belarusian roubles.
Largest Food Retailer in Belarus: Eurotorg is the largest food
retailer in Belarus, with a stable market share of around 20% over
the past five years, which is larger than that of its three largest
competitors combined. It continues to grow in line with the
Belarusian retail market at 12% in 2024. The company benefits from
its well-recognised Euroopt brand across the country and from
increased consumer appeal for its discounter banners Hit! and
Groshyk, providing good diversification by store format.
Limited Diversification, Weak Operating Environment: Eurotorg is
concentrated solely in Belarus, which is characterised by a weak
operating environment. While its presence across different formats
and regions of the country puts it in a stronger position than
domestic competitors, including hard discounters, it does not
reduce concentration risk, as Belarus is a small economy. It also
leads to a substantially smaller business scale (EBITDAR of less
than USD250 million in 2023) than other Fitch-rated global food
retailers'.
Derivation Summary
Fitch applies its Food-Retail Navigator framework to assess
Eurotorg's rating and position relative to peers'. Compared with
international retail chains, such as Tesco PLC (BBB-/Stable), or
Russian peers such as X5 or Lenta, Eurotorg has smaller business
scale and more limited geographic diversification, which is partly
offset by stronger growth prospects and structurally greater
profitability in the Belarusian food retail market.
Relative to Bellis Finco plc (ASDA, B+/Stable), Eurotorg is rated
two notches lower as its smaller size and exposure to
foreign-exchange risk are only partially balanced by its stronger
market position and bargaining power, and superior profitability.
Furthermore, Eurotorg's ratings take into consideration the
higher-than-average systemic risks associated with the Belarusian
business and jurisdictional environment versus its international
peers.
Key Assumptions
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Belarusian rouble/US dollar at 3.5 at end-2025, followed by
rouble depreciation of 5% a year to 2028
- CAGR of 2% in selling space in 2025-2028
- Annual sales growth of 5%-6% in 2025-2028
- EBITDAR margins at 8.9%-9.3% to 2028
- Working-capital outflows at 0.2%-0.3% of sales, reflecting
ongoing logistic supply challenges and stricter payment terms
- Capex at BYN85 million-BYN130 million a year over 2025-2028
- Dividends at BYN300 million-BYN350 million a year over 2025-2028
- No M&As in 2025-2028
Recovery Analysis
Its recovery analysis assumes that Eurotorg would be considered a
going concern (GC) in bankruptcy and that it would be reorganised
rather than liquidated. Fitch has assumed a 10% administrative
claim.
Eurotorg's GC EBITDA of USD110 million is below Fitch-estimated
EBITDA of around USD180 million for 2024. It considers the
company's exposure to local price regulation and reflects Fitch's
view of a sustainable, post-reorganisation EBITDA, on which Fitch
based the valuation of the company.
Fitch uses a mid-cycle enterprise value/EBITDA multiple of 4.0x to
calculate a post-reorganisation valuation. This is 0.5x higher than
the enterprise value multiple Fitch uses for Ukrainian poultry
producer MHP SE (CC) and sunflower oil producer and exporter Kernel
Holding A.S. (CCC-). For the debt waterfall assumptions, Fitch used
its estimates of the group's debt at end-June 2024.
Eurotorg's USD151 million of secured debt ranks senior to LPNs in
the waterfall. For the purpose of recovery calculation, Fitch used
all outstanding LPNs that have not been redeemed (USD78 million).
The waterfall analysis generated a full ranked recovery for senior
unsecured LPNs, indicating a higher rating than the IDR as the
waterfall analysis output percentage on current metrics and
assumptions was 100%. However, the LPNs are rated in line with
Eurotorg's 'B-' IDR as notching up is not possible due to the
Belarusian jurisdiction. Therefore, the waterfall analysis output
percentage is capped at 50%/'RR4'.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Loss of access to international transactions infrastructure
leading to an inability to service foreign-currency liabilities
- Difficulties in obtaining sufficient funding 12-18 months ahead
of large debt maturities, or refinancing on more onerous terms
- Operating underperformance, including declining LFL sales and
profitability, leading to EBITDAR leverage at above 5.5x for an
extended period
- EBITDAR fixed charge coverage consistently below 1.5x
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Positive rating action is unlikely unless an improvement in the
operating environment is accompanied by:
- Adequate access to external liquidity
- Growing LFL sales and stable profitability, leading to EBITDAR
leverage at below 4.5x
- EBITDAR fixed charge coverage above 2.0x on a sustained basis
- Slightly positive or neutral FCF and adherence to a consistent
financial policy
Liquidity and Debt Structure
At end-2024, Fitch estimates that Eurotorg had a cash balance of
around BYN220 million (after Fitch's adjustment of BYN20 million
for cash not readily available for debt servicing), and a further
USD13 million of cash held offshore, which was sufficient to cover
2025 debt maturities.
Cash earmarked for repayment of 2025 Eurobond maturities does not
fully cover the outstanding principal held by third parties, but
Fitch does not expect Eurotorg to encounter any difficulties in
accessing the remaining USD8 million out of USD21 million required
to fund repayment of outstanding Eurobonds in 2025. However, access
to new financing in hard currencies in international markets
remains limited for Eurotorg.
Eurotorg has reduced its debt in foreign currencies, with over 50%
of debt now denominated in Belarusian roubles. Debt in Belarus
typically raised on secured terms and for shorter maturities, but
given its low leverage and its established relationships with local
banks, Fitch views refinancing risk for local-currency debt as
manageable.
Issuer Profile
As of 31 December 2024, Eurotorg's retail store portfolio consisted
of 177 rural and 797 urban convenience stores, 129 supermarkets,
and 36 hypermarkets.
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
----------- ------ -------- -----
LLC Eurotorg LT IDR B- Affirmed B-
Bonitron Designated
Activity Company
senior unsecured LT B- Affirmed RR4 B-
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G E R M A N Y
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TK ELEVATOR: Moody's Rates New Senior Secured Term Loan 'B2'
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Moody's Ratings assigned B2 instrument ratings to the proposed
senior secured term loan B borrowed by TK Elevator Midco GmbH and
the proposed senior secured term loan borrowed by TK Elevator US
Newco, Inc. and co-borrowed by TK Elevator Midco GmbH, both due
April 2030. Both entities are subsidiaries of TK Elevator Holdco
GmbH (TKE). Concurrently, Moody's have assigned B2 ratings to the
proposed senior secured revolving credit facility and the proposed
senior secured bank credit facility issued by TK Elevator Midco
GmbH and co-borrowed by TK Elevator US Newco, Inc. due 2030. TKE
intends to use proceeds to repay the existing EUR and $ guaranteed
senior unsecured notes (SUNs) due 2028 issued by TKE and to term
out to April 2030 TK Elevator Midco GmbH's euro-denominated term
loan B due July 2027. Moody's expects to withdraw the Caa1
instrument ratings on TKE's SUNs once the transaction has closed.
RATINGS RATIONALE
The B2 rating to the proposed term loans is aligned with the B2
corporate family rating of TK Elevator Holdco GmbH, the ultimate
parent company, and reflects the preponderance of senior secured
debt in TKE's capital structure once the SUNs will have been
repaid.
The transaction is credit positive as it will result in cash
interest savings, an extended debt maturity and a simpler capital
structure. The effect on net leverage is neutral. After the
concurrent repricing, TKE expects annual interest expense savings
of EUR20 million to EUR30 million after one-off fees of up to EUR30
million in 2025. The debt maturity will be further extended to
2030.
At the same time, TKE has extended the maturities of its EUR992
million senior secured revolving credit facility, issued by TK
Elevator Midco GmbH, and of its EUR908 million guaranteed credit
facility to January 2030. All of TKE's bank debt will then have a
maturity in 2030. With the contemplated repayment of the senior
unsecured notes, TKE's capital structure will be less complex with
only one major class of debt consisting of senior secured debt
instruments.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could downgrade ratings, if TKE (1) failed to progressively
reduce debt to EBITDA to well below 7.0x by FYE24/25; (2) free cash
flow turned negative; (3) EBITA/interest expense fell below 1.5x;
or (4) liquidity started to deteriorate.
Upward pressure on the ratings appears currently unlikely,
considering TKE's still high leverage and the existence of a
substantial amount of PIK notes above the restricted financing
group, reflecting some risk of associated cash leakage over time.
However, TKE's ratings could be upgraded, if (1) debt to EBITDA
fell towards 5.5x; (2) FCF/debt improved to at least 5%; (3) EBITA
to interest expense sustainably exceeds 2.0x; and (4) TKE
established a prudent financial policy, as shown by excess cash
flow being applied to debt reduction and no material shareholder
distributions.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
TK Elevator Holdco GmbH, headquartered in Duesseldorf/Germany, is
an intermediate holding company of the group, a leading
manufacturer of elevators and escalators with a global presence in
more than 60 countries and more than 50,000 employees. The group
derived 38% of its fiscal 2024 revenue of around EUR9.3 billion
from new installations, while its more profitable services and
modernization segments accounted for 47% and 16% of revenue,
respectively. Company-adjusted EBITDA amounted to EUR1.47 billion
(15.8% margin).
TUI AG: Moody's Upgrades CFR to 'Ba3' & Alters Outlook to Stable
----------------------------------------------------------------
Moody's Ratings upgraded TUI AG's (TUI or the company) corporate
family rating to Ba3 from B1 and the probability of default rating
to Ba3-PD from B1-PD. Concomitantly Moody's upgraded the EUR500
million backed senior unsecured notes due 2029 to Ba3 from B1
issued by TUI. The outlook was changed to stable from positive.
"The rating upgrade reflects TUI's better-than-expected results in
fiscal year 2024, leading to improved credit metrics, including a
Moody's adjusted Debt/EBITDA of 2.3x, an adjusted EBITA margin of
6.5%, and a positive Moody's adjusted Free Cash Flow (FCF) of
EUR188 million," says Elise Savoye, Vice President Senior Analyst
at Moody's Ratings and lead analyst for TUI. "As of the first
quarter of fiscal year 2025 bookings showed a 2% increase for both
the Winter 2024/2025 and the summer 2025, indicating resilient
customer demand despite challenging macroeconomic conditions in
TUI's main source markets. Combined with TUI's actions to support
profitability, Moody's expects that Moody's adjusted leverage will
remain stable over the next 12 to 18 months, while liquidity will
remain adequate thanks to enhanced cash-flow generation and an
expectation of no aggressive dividend distribution," she adds.
RATINGS RATIONALE
The rating upgrade reflects TUI's better than Moody's expected
results in fiscal year 2024 leading to a positive Moody's adjusted
Free Cash Flow (FCF) of EUR188 million driven by growth across all
business segments. This led to improved credit metrics, with
Moody's adjusted Debt/EBITDA of 2.3x (2.6x in fiscal year 2023) and
a Moody's adjusted EBITA margin of 6.5% up from 5.8% in fiscal year
2023. As of the first quarter of fiscal year 2025 bookings showed a
2% increase for both the Winter and Summer seasons, indicating
resilient customer demand despite challenging macroeconomic
conditions in TUI's main source markets (e.g. Germany, the UK). The
delivery of new vessels, hotel investments and TUI's ongoing
implementation of its asset light and digitalized model will
support TUI's future growth, which Moody's expects to be in the low
single-digits over the next 12-18 months.
Expanded use of hedging instruments to hedge currency and fuel
price risks will support the group's profitability. However,
passing on cost increases in the Markets + Airline segment remains
challenging. Moody's anticipates the Moody's adjusted EBITDA margin
to hover slightly above 9% in the coming 12-18 months.
Thanks to enhanced operating cash-flow, Moody's expects the group
to rely more on its internal cash flow rather than on its Revolving
Credit Facilities (RCF) for managing seasonal fluctuations,
reducing intra-year leverage. This shift is underscored by the
voluntary cancellation of its EUR214 million KfW facility in
January 2025. Over the coming 12-18 months, Moody's expects that
the gross debt will remain stable leading to a Moody's Debt/EBITDA
around 2.3x. However, this year-end leverage projection does not
reflect the intra-year impact of significant fluctuations in
working capital. In a downturn scenario TUI's very significant
negative working capital of close to EUR6 billion on balance-sheet
at year-end 2024 would quickly and substantially worsen leverage
metrics and the group's liquidity profile. Improved base rates,
margin on the group's RCF and lower RCF utilization will further
improve the group's interest coverage (ICR) with a Moody's adjusted
EBITA ICR improving to above 3.0x by end of fiscal year 2026, which
also supports the rating upgrade.
Additional growth investment in new hotels and aircraft fleet
replacement will temporarily weigh on Moody's adjusted FCF in
fiscal year 2026, although Moody's still expects FCF to remain
positive at around 7% to 8% of Moody's adjusted debt, (or EUR360
million to EUR420 million per year) over the coming 12-18 months.
Working capital inflows from customer advance payments, which are
linked to booking growth, and TUI's yet to be defined shareholders
return policy will also impact future FCF generation. Moody's do
not expect any dividend to be paid before the first half of 2027,
except to minorities in amounts of around EUR70 million p.a.
OUTLOOK
The stable outlook reflects Moody's expectations that TUI's
leverage will consistently remain at or below 2.5x by the end of
each fiscal year, with lower seasonal swings due to reduced
dependence on its RCF, thereby enhancing interest coverage metrics.
The outlook also reflects that Moody's expects on-going positive
FCF in the mid-to-high single digits in relation to Moody's
adjusted debt, and that TUI will maintain solid liquidity
throughout the year, ensuring available liquidity at last equals
EUR1.5 billion at all times.
ESG CONSIDERATIONS
Moody's expects TUI to continuously meet its leverage target (net
leverage strongly below 1x). Furthermore, Moody's expects TUI to
not engage into excessive dividends payments while no dividend
payment is expected before 2027.
LIQUIDITY
Moody's views TUI's liquidity as adequate. As of fiscal Q1 2025
(December 31, 2024), TUI had a total liquidity of around EUR1.9
billion consisting in EUR0.9 billion in unrestricted cash and circa
EUR1.1 billion in undrawn RCFs out of EUR1.7 billion total cash
commitments. Due to the high seasonality of its operations, TUI
experiences significant working capital swings during the low
season, historically around EUR2 billion. Consequently, TUI has
traditionally relied on its RCF. However, with improved cash-flow
generation, TUI should draw less on its RCF. Moody's understands
that TUI is proactively working on the refinancing of it RCF
maturing in July 2026, a positive for Moody's liquidity assessment.
The company complies with its financial covenants and Moody's
expects it will continue to do so over the next 12 to 18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure could develop if
-- The company demonstrates resilience in its business model and
improves profitability, achieving a Moody's adjusted EBITA margin
sustainably around 10%
-- Moody's adjusted gross leverage ratio remains sustainably below
2x with more limited intra-year swings resulting from a stronger
cash position
-- EBITA/interest expense improves towards 4x
-- Significant improvement in liquidity, bolstered by
non-aggressive distribution and financial leverage targets
supporting ample liquidity buffers at all times
-- Moody's adjusted FCF/debt ratio sustainably above 10%
Negative pressure could arise if
-- Moody's adjusted EBITA/interest expense remains sustainably
below 3x
-- Available liquidity drops below EUR1.5 billion, and liquidity
deteriorates, with Moody's adjusted FCF/debt ratio remaining
sustainably below 5%
-- Moody's adjusted gross debt/EBITDA exceeds 2.5x on a sustained
basis
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
TUI AG, based in Hannover, Germany, is a leading global tourism
group with divisions in Holiday Experiences and Markets + Airline,
serving more than 20 million customers in around 180 destinations.
With listings on the Frankfurt and Hannover stock exchanges, TUI
reported revenue of EUR23.2 billion and underlying EBIT of EUR1,296
million for the fiscal year ending September 30, 2024.
===========
G R E E C E
===========
PUBLIC POWER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed Greece-based Public Power Corporation
S.A.'s (PPC) Long-Term Issuer Default Rating (IDR) and senior
unsecured rating at 'BB-'. PPC's Standalone Credit Profile (SCP)
remains at 'bb-'. The Outlook on the IDR is Stable. The Recovery
Rating on the senior unsecured debt is 'RR4'.
The affirmation reflects PPC's gradual shift to a more balanced
integrated model of generation and supply, increased low-cost
renewables production, the highly flexible nature of its hydro and
thermal capacity, expanding regulated distribution, and the
unwinding of state receivables. It also factors in its expectation
of consistently negative free cash flow (FCF), due to large capex
and a still developing regulatory framework.
The Stable Outlook is underpinned by PPC's leverage headroom, with
funds from operation (FFO) net leverage averaging 5.2x for
2025-2027, below its revised negative sensitivity of 5.5x, despite
high capex and dividend resumption. Management's strong commitment
to prioritising financial strength over growth further supports the
Stable Outlook.
Key Rating Drivers
Unchanged Long-term Strategy: PPC's updated business plan to 2027
continues to build on its more balanced integration between
generation and supply, also achieved by decommissioning lignite
plants by 2026 and expanding renewables in Greece and nearby
countries. Although capex is upsized and dividends have resumed
from 2024, PPC has reaffirmed the commitment to the financial
target of 3.0x-3.5x company-defined net debt/adjusted EBITDA (not
including trade receivables securitisations and the HEDNO put
option for Macquarie).
Fitch forecasts EBITDA growth to EUR2.4 billion by 2027 from EUR1.8
billion in 2024, driven by integrated margin expansion and, to a
lesser extent, growth in regulated distribution driven by large
investments.
Business Plan Implementation is Key: The expansion of the
integrated margin hinges on PPC's ability to increase renewables
production for its supply activity at a lower cost than market
purchases, and to retain pricing power among high-margin
low-voltage customers. In line with this strategy, PPC targets the
implementation of 5.6GW of new renewables capacity for 2025-2027,
which will replace 1.5GW of loss-making lignite capacity and reduce
the current excess supply volumes in Greece and Romania.
Higher Debt Capacity: In the last four years, management have
consistently outperformed their targets and the company's business
profile has improved sharply since 2020 when Fitch assigned its
rating. The regulatory framework is gradually establishing a track
record, and these factors have contributed to its upward revision
of its debt capacity by 0.5x to 5.5x.
High Capex Visibility: Half of PPC's EUR10.1 billion capex plan
(EUR9.3 billion net of grants and customer contributions) targets
new renewables capacity, up 7pp from the last update. A further 27%
is for distribution and 9% for flexible generation. At
end-September 2024, one-third of the renewables projects was under
construction, with 27% ready to build or in tender, ensuring 60%
visibility over the three-year renewables capex plan. The remaining
2.5GW will be from PPC's 22.5GW project pipeline. Around 40% of the
investments are outside Greece, improving geographical
diversification.
Active in M&A: In 2024 PPC agreed to acquire Evryo Group's Romanian
renewables portfolio (629MW operational, 145MW pipeline) for EUR700
million, enhancing growth in Romania and southeast Europe. PPC also
announced a strategic acquisition of 66.6MW operational and 1.7GW
under development in Greece for EUR176 million. While management
plans no transformational M&A to 2027, Fitch believes selective
acquisitions may be possible to accelerate growth, as seen in
2024.
Regulatory Receivables Unwinding: Fitch estimates working-capital
needs to have peaked at end-2024, due to the increasing stock of
regulatory and government-related entities receivables related to
networks losses, the supply cap mechanism in Romania and public
services obligations (PSO) for non-interconnected Greek islands.
Fitch forecasts a frontloaded reversal of these receivables in
2025-2027, as falling energy prices and growing island
interconnection reduce the need for state subsidies, although the
risk of delayed government payments remains.
FFO Leverage to Rise: Fitch expects FFO net leverage to increase to
5.2x on average for 2025-2027 from 3.9x in 2024, albeit still with
good headroom under the 5.5x revised negative sensitivity. Fitch
forecasts FCF to be deeply negative at EUR1.3 billion on average
for 2025-2027, due to large investments in renewables, progress in
the Alexandropolis CCGT, and investments in electricity networks.
PPC anticipates FCF to improve from 2027-2028 when major renewables
investments are commissioned and start contributing to EBITDA.
WACC Revision for Electricity Distribution: In Greece, the allowed
weighted average cost of capital (WACC) for the new regulatory
period 2025-2028 is expected to be revised to 7.2%-7.4% from 7.7%
for 2023-2024, due mostly to updated borrowing costs and inflation
in the formula. In Romania, the fifth regulatory period will span
2025-2029, with a final WACC of 6.94% and potential 1% increases
for digitalisation projects. Fitch assumes no material deviations
from the current frameworks. Fitch expects the regulatory asset
base (RAB) to grow strongly in Greece and moderately in Romania.
Standalone Approach: Fitch assesses as 'Strong' both the precedent
of support, due to PPC's legacy stock of state-guaranteed debt that
is currently set to materially decrease, and contagion risk, due to
sizable supranational funding and Greek banks' exposure to PPC.
However, Fitch assesses decision-making and oversight, and the
preservation of public role as 'Not Strong Enough', given the
state's 35.3% ownership with no enhanced governing or voting
rights, which is in line with its assessment for most European
utilities. The overall assessment leads to a standalone rating
approach.
Derivation Summary
Domestic peer Metlen Energy & Metals S.A. (BB+/Stable) is smaller
than PPC in market share and scale. Metlen operates in the
metallurgy, construction, and power sectors, with power generation
and supply expected to contribute 37% of EBITDA by 2027. Metlen has
more gas-fired plants and no lignite exposure. Its one-notch higher
rating stems from a lower forecast EBITDA net leverage of 3.2x
(2024-2027) versus PPC's, which is at around 5.0x.
Internationally, PPC's peers include Bulgarian Energy Holding EAD
(BEH; BB+/Positive; SCP: bb) and Societatea Energetica Electrica
S.A. (BBB-/Negative). BEH's FFO net leverage is 1.8x for 2024-2027,
substantially lower than PPC's, resulting in a stronger SCP. BEH
benefits from sovereign support from Bulgaria (BBB/Positive).
Romanian network Electrica boasts a higher regulated EBITDA mix
(80% networks versus PPC's 40%) and lower leverage, averaging 4.0x
for 2024-2026. However, Romania's regulatory environment is less
predictable, with Electrica's Negative Outlook tied to regulatory
risks and subsidy receivables. No notching is applied to
Electrica's or PPC's ratings for support from the state.
PPC's integrated structure and strong domestic market position
align it with central European peers like PGE Polska Grupa
Energetyczna S.A. and ENEA S.A. (both BBB/Stable). These peers
share pollution challenges from coal but benefit from more stable
regulatory environments and lower leverage, explaining their higher
ratings than PPC's.
Key Assumptions
Fitch's Key Assumptions Within its Rating Case for the Issuer
- EBITDA CAGR of 11% over 2024-2027
- Around 33TWh electricity supplied in the free market and around
24.5TWh of electricity production (excluding PSO volumes) by
end-2027 in Greece and Romania, which implies a gradual reduction
of its historically excess supply volume
- Average electricity baseload day-ahead market in Greece and
Romania to remain on average slightly above EUR100/MWh over
2025-2027 (Greece: EUR101.4/MWh and Romania: EUR100.3/MWh in 2024)
- Average unitary electricity selling price in Greece at around
EUR150/MWh for 2025-2027 (EUR153/MWh in 2024)
- Integrated margins at around EUR26/MWh on average over 2025-2027
(2024: EUR24/MWh; 2023: EUR30/MWh excluding low-margin high-voltage
customers)
- Phase-out of existing lignite-fired power plants in 2026
(including Ptolemaida V) and new Alexandroupolis CCGT unit to start
operations in 2026
- Gradual ramp-up of renewables (excluding hydro) capacity by
end-2027 to 8.6GW in Greece, Romania, Bulgaria and Italy, from
3.0GW at end-2024, with output largely sold to PPC's customers in
Greece and Romania
- RAB increasing to EUR4.6 billion in Greece (from EUR3.4 billion
at end-2024) and EUR1.6 billion in Romania (from EUR1.4 billion at
end-2024) by end-2027
- Supply volumes in Greece stable at around 25TWh to 2027
- Sizable unwinding of working capital to 2027, primarily occurring
in 2025
- Cumulative capex net of customer grants of EUR9.2 billion for
2025-2027
- Dividends to shareholders resumed from 2024, based on updated
dividend policy growing to EUR1/share by 2027 from EUR0.4/share in
2024. No new share buyback programme over 2025-2027 (existing
programme cash outflow is slightly above EUR200 million in
2024-2025).
RATING SENSITIVITIES
Factors that Could Collectively or Individually Lead to Negative
Rating Action/Downgrade
- FFO net leverage consistently exceeding 5.5x as a result of a
more aggressive-than-expected financial policy
- FFO interest coverage lower than 2.5x
- Slower-than-expected execution of the business plan to 2027,
including lower renewables or additional delays in lignite
phase-out and/or a worsened operating environment in Greece and
Romania, including failure to improve customer trade and state
receivables collections
- Failure to keep prior-ranking debt at around 2.5x consolidated
EBITDA in 2025-2026, which could lead to a one-notch downgrade of
the senior unsecured rating at PPC
Factors that Could Collectively or Individually Lead to Positive
Rating Action/Upgrade
- FFO net leverage below 4.5x on a sustained basis
- FFO interest coverage higher than 3.5x
- Successful delivery of the 2025-2027 business plan, including
lignite phase-out and renewables expansion as planned, could lead
us to relax rating sensitivities
Liquidity and Debt Structure
At end-September 2024, PPC had EUR1.5 billion of readily available
cash and cash equivalents. It also had a combined EUR3 billion of
unused revolver plus working-capital and capex facilities. This is
sufficient to cover debt maturities of EUR1.3 billion and negative
FCF of around EUR2.1 billion for the 15 months to end-2025. Fitch
estimates at end-2024 a cash balance of around EUR2 billion and
unused credit lines of EUR3.2 billion with maturities beyond 2025.
Business plan execution to 2027 will require additional external
financing for around EUR3 billion, largely funded with EUR2 billion
of syndicated recovery and resilience facilities and EUR0.5 billion
project-financing already committed. Fitch believes PPC will
prioritise holdco funding over subsidiary debt and monitor
structural subordination (through downstreamed intercompany loans).
Prior-ranking debt was EUR3.5 billion or 46% of total debt at
end-2024, around 2.0x consolidated EBITDA.
Issuer Profile
PPC is the incumbent integrated utility in Greece and one of the
largest in Romania. Its generation portfolio consists of lignite
(to be decommissioned by 2026), gas-, oil-fired (regulated) and
hydro power plants, as well as a growing base of wind and solar
plants. PPC is also the majority owner (51%) of HEDNO.
Summary of Financial Adjustments
The EUR1.4 billion fair value of the put option for the 49% stake
sale of HEDNO is treated as financial debt.
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
----------- ------ -------- -----
Public Power
Corporation S.A. LT IDR BB- Affirmed BB-
senior unsecured LT BB- Affirmed RR4 BB-
=========
I T A L Y
=========
RENO DE MEDICI: Fitch Lowers LongTerm IDR to 'B', Outlook Negative
------------------------------------------------------------------
Fitch Ratings has downgraded Reno de Medici S.p.A's (RDM) Long-Term
Issuer Default Rating (IDR) to 'B' from 'B+' and its senior secured
notes to 'B' from 'BB-'. The Outlook on the IDR is Negative. The
Recovery Rating on the notes is 'RR4'.
The downgrade reflects a sharp deterioration of RDM's EBITDA versus
its previous expectations, resulting in credit metrics falling
outside their prior negative sensitivities across 2024-2027. This
is due primarily to softer pricing power stemming from a lack of
direct cost pass-through in contracts and lower volumes. While
Fitch forecasts a demand recovery, coupled with increase in prices
primarily in white lined chipboard (WLC), growth will likely be in
the single digits for 2025.
The Negative Outlook reflects likely pressure on leverage and
negative free cash flow (FCF) in 2025 before turning neutral in
2026, which remains lower than Fitch's earlier expectations. This
will be due to lower EBITDA and increased finance costs on higher
gross debt.
Key Rating Drivers
High Leverage: Fitch estimates RDM's EBITDA gross leverage to have
risen to 14.2x at end-2024, which Fitch expects to remain high at
7.0x-9.0x through to 2026. These revised leverage metrics exceed
its previous sensitivities for an extended period, with leverage
expected to fall below 7.0x only by end- 2027. The delay in
deleveraging is attributed to weaker EBITDA generation, stemming
from its limited ability to pass on input costs, lower volumes on
demand moderation, and the company's strategy to shut down
cost-ineffective plants.
EBITDA Generation Constrained: Fitch estimates RDM's EBITDA margin
to have declined to 6.3% in 2024, before rising to 9.5%-11% during
2025-2026, and to 13% by 2027. This margin profile is below its
previous expectations of 13%-13.5% for 2024-2026, leading to a
variance of EUR40 million-EUR50 million in annual EBITDA for 2025
and 2026, Consequently, this results in weaker FCF and higher
EBITDA gross leverage.
Eroded FCF Margins: Fitch estimates RDM to have generated negative
FCF in 2024, which Fitch projects to extend into 2025 before
turning neutral in 2026, driven by lower EBITDA and higher debt
costs. Capex is expected to be 3.5%-4% of revenue from 2025
onwards, following the completion of the Blendecques capex. Fitch
anticipates that limited capex, EBITDA improvement, and the absence
of acquisitions and dividends will lead to positive FCF in 2027.
Limited Cost Pass-Through Ability: RDM operates with short-term
purchase orders with yearly targets and incentive schemes, but
lacks the cost pass-through mechanisms of long-term agreements at
peers. In 1H24, RDM raised prices in WLC, due to higher recycled
paper costs and demand recovery, before it adjusted prices
following a market share decline. While RDM's pricing power is
moderate, Fitch believes customer retention is bolstered by
long-term relationships and product quality, allowing a 3%-4%
selling price increase in 2025 following an announcement of the
increase in 1Q25.
Moderate Business Profile: RDM's small size and limited
geographical diversification compared with peers constrain its
rating. Packaging peers rated by Fitch are at least twice the size
of RDM and have better pass through ability. However, RDM benefits
from longstanding customer relationships and a strong market
position as a leader in white board and solid board in the European
market.
Derivation Summary
RDM is small in scale compared with other Fitch rated packaging
peers such as Sappi Limited (Sappi: BB+/Stable), CANPACK Group,
Inc. (Canpack: BB-/Positive), Ardagh Metal Packaging S.A. (Ardagh
Metal: B-/Negative), and Fedrigoni S.p.A (B+/Negative). Fitch views
RDM's business profile as slightly weaker than Fedrigoni, due to
its limited geographical diversification.
RDM's forecast EBITDA margin of 9.5%-13% remains lower than
Fedrigoni's 13%-14.5% but is in line with Canpack's. This is due to
its concentrated presence in the European packaging market, while
the others have a presence in American and Asian economies. RDM's
negative and neutral FCF margins in 2025 and 2026, respectively,
are weaker than Fedrigoni's 1.5%-3% and Sappi's of over 2% in the
same period.
Fitch views RDM's financial profile in 2025-2026 as weaker than
Fedrigoni's, due to its higher expected leverage and weaker
coverage ratios. RDM's gross leverage is forecast to reduce to
below 6.5x only in 2027, which is weaker than Fedrigoni's and
Ardagh Metal's at below 6.0x at end-2026.
Key Assumptions
- Revenue to grow 8% in 2025, 6% in 2026 and 3% in 2027, after a 4%
decline in 2024
- EBITDA margin to recover on pricing and operational improvement
to 9.5% in 2025 and 11%-13% in 2026-2027, after a decline to 6.3%
in 2024
- Barcelona mill to be closed by end-2025
- Working-capital outflow across 2024-2027 due to an increase in
factoring utilisation and growth in revenue
- Capex to normalise at 3.5%-4% of sales from 2025 onwards, versus
6% in 2024, due to completed capex on the Blendecques mill
- No dividends or M&As to end-2027
Recovery Analysis
KEY RECOVERY RATING ASSUMPTIONS
- The recovery analysis assumes that RDM would be reorganised as a
going concern (GC) in bankruptcy rather than liquidated
- A 10% administrative claim
- The super senior revolving credit facility (RCF) is fully drawn
in post-restructuring and ranks ahead of senior secured debt.
Factoring facilities backed by receivables also rank super senior
- Fitch's GC EBITDA estimate is EUR90 million, unchanged from its
previous estimate, reflecting its view of a sustainable,
post-reorganisation EBITDA on which Fitch bases the valuation of
the company
- An enterprise value (EV) multiple of 5.5x is applied to GC EBITDA
to calculate a post-reorganisation valuation. It reflects RDM's
leading position in European markets, long-term relationship with
clients with well-invested production assets, and a 60%-70%
exposure to resilient end-markets. This is in line with other
packaging peers like Ardagh and Fedrigoni
- Its debt structure comprises an upsized EUR126.6 million (as of
February 2025) super senior RCF (assumed fully drawn), EUR600
million senior secured notes (SSNs), about EUR42 million factoring
(outstanding value at end-2024), which Fitch views as super senior,
and EUR62 million other debt
- Based on the new capital structure, its waterfall analysis
generates a ranked recovery for the SSN noteholders in the 'RR4'
category, leading to a 'B' rating for the EUR600 million notes. The
waterfall-generated recovery computation output is 49%, down from
52%.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA gross leverage consistently above 7.0x
- Negative FCF margins for an extended period, deteriorating
liquidity position
- EBITDA interest coverage below 2.0x from 2026 onwards
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA gross leverage below 5.5x on a sustained basis
- Neutral FCF margins on a sustained basis
- EBITDA interest coverage above 2.5x
Liquidity and Debt Structure
Fitch expects RDM's liquidity for 2025 to mainly consist of EUR39
million of Fitch-adjusted readily available cash and an upsized
EUR126.6 million RCF (EUR30 million drawn at end-2024), from EUR100
million previously, with maturity in 2029. Fitch believes RDM's
financial flexibility has recently decreased but is still
sufficient to fund its forecast negative FCF in 2025.
It has no major repayment obligations other than the EUR42 million
factoring and EUR47 million other short-term loans at end-2024. Its
debt structure is dominated by long-dated EUR600 million SSNs,
which they refinanced in April 2024, extending their maturity to
April 2029.
Issuer Profile
RDM, founded in 1967 and headquartered in Milan, is a leading
European producer and distributor of recycled paper board mainly
for the packaging industry.
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
RDM has an ESG Relevance Score of '4[+]' for Exposure to Social
Impacts due to consumer preference shift from plastic to paper and
cardboard packaging, which has a positive impact on the credit
profile, and is relevant to the rating in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Reno de Medici S.p.A. LT IDR B Downgrade B+
senior secured LT B Downgrade RR4 BB-
===================
L U X E M B O U R G
===================
INFRAGROUP BIDCO: S&P Affirms 'B' ICR & Alters Outlook to Positive
------------------------------------------------------------------
S&P Global Ratings revised its outlook on Infragroup Bidco Sarl to
positive from stable and affirmed its 'B' long-term issuer credit
rating, as well as the 'B' issue rating and '3' recovery rating on
the term loan B (TLB) issued by Finco Utilitas B.V.
The positive outlook reflects S&P's view that Infragroup will
continue to see good operating performance that is underpinned by
organic revenue growth of around 8.5% annually alongside further
expansion through bolt-on acquisitions. This will support further
deleveraging to 4x and FFO to debt above 12% over the next 12
months, while FOCF is expected to remain positive.
Strong operating performance during fiscal 2024 (ended Sept. 30,
2024) is expected to continue on the back of favorable industry
tailwinds. Infragroup reported revenue growth of about 40% year on
year, with an estimated 15%-20% of organic growth, while the
remainder comes from its nine bolt-on acquisitions that were closed
in fiscal 2024. The strong growth came from all of its geographies,
including Belgium, Germany, the Netherlands, and France. In
particular, the gas and electricity segment has exhibited strong
growth, almost doubling its revenue contribution year on year. The
significant growth has been supported by secular growth trends with
regard to the energy transition and Europe's focus on energy
independence. In addition, the fiber rollout in Belgium and
Germany, where fiber to the home penetration remains below the
European average, added to the growth in fiscal 2024 and is
expected to do so over the coming several years. Overall, S&P
forecasts that Infragroup will see organic revenue growth of 6.5%
to 9.0% annually over the next few years. This is because S&P sees
the business well positioned to further benefit from a positive
market environment underpinned by investment programs from its
utilities clients, such as Elia, which is set to invest EUR5
billion in the high-voltage transmission grid in Belgium, and the
north and east of Germany through its subsidiary 50Hertz, or
Fluxys, the gas transmission and storage operator in Belgium that
expects to invest EUR1.1 billion in hydrogen, and EUR300 million in
carbon dioxide networks in 2025-2032. The anticipated growth is
also reflected in Infragroup's strong order book of EUR1.45 billion
for fiscal 25, with an order book up to 2027 that still covers
roughly 80% of 2024 revenue. With regard to S&P Global
Ratings-adjusted EBITDA margin, we anticipate a gradual expansion
from an estimated 16.0% in fiscal 2024 to above 16.5% over the next
two to three years, thanks to good cost control by management,
better operating leverage as the company is growing in size, and
synergy realization from its acquired companies, such as
procurement gains and central cost rationalizations. For the
acquired companies, S&P assumes EBITDA margins will be broadly
aligned with the existing business as management targets companies
that exhibit solid operating performance rather than require
significant restructuring activities.
S&P said, "The business profile has strengthened in our view thanks
to continued expansion. Infragroup acts as a consolidator in a
fragmented market, while maintaining best-in-class profitability
and sound cash flow generation. As a result, we have revised our
business risk profile assessment to fair from weak. Since fiscal
2020, the company has grown significantly from EUR536 million
reported revenue to an estimated EUR1.3 billion by the end of
fiscal 2025, thanks to its successful bolt-on acquisition strategy
that aims to build out its local networks, increase density, add
new service offerings, and enter new geographies. During fiscal
2024, Infragroup closed 10 transactions, which are expected to add
an incremental EUR11.5 million of annualized EBITDA during fiscal
2025. Supported by the high cash balance of approximately EUR175
million on the back of the EUR130 million fungible TLB add-on and
Infragroup's ability to generate positive FOCF, we anticipate
strong acquisition activity during fiscal 2025, adding annualized
EBITDA of around EUR55 million. While high acquisition activity
exposes the business to integration risk that could lead to
higher-than-expected exceptional costs, we view this risk mitigated
by management's track record of successfully integrating 22 bolt-on
acquisitions in fiscal 2020-fiscal 2023. In addition, acquired
companies usually receive part of the acquisition price in equity,
which supports the two companies' alignment of interests. We
positively view the increase in scale, as well as expected
reduction in geographic concentration away from Belgium to below
50% of total revenue over the next two years from around 70% of
revenue in fiscal 2023. In addition to the greater scale and
geographic expansion outside Belgium, and into Germany, the
Netherlands and France, Infragroup has also added four new
segments, including smart city works, linked to data center-related
works, such as recycling, urban heating and geothermal, as well as
rail works. We believe that the greater scale and enhanced
footprint in geographies like Germany create future growth
opportunities and expose Infragroup to a greater addressable
market, while new service offerings will help Infragroup's role as
a one-stop-shop solution to serve existing clients across borders
and verticals. We anticipate that Infragroup will continue with its
buy-and-build strategy, alongside its organic growth in the coming
years, hence we include net acquisition spend of EUR100 million per
year in our base case, adding around EUR140 million of annualized
revenue from fiscal 2026. Due to the financial sponsor ownership,
we continue to expect that funding for mergers and acquisitions
(M&A) could be largely through debt as indicated by the EUR130
million tap during fiscal 2024. Therefore, a more aggressive
financial policy that funds large acquisitions beyond our
expectation may constrain rating upside.
"We forecast credit metrics will sustainably improve, with leverage
above 5.0x and FFO to debt above 12%, while maintaining positive
FOCF. At the end of fiscal 2024, we estimate leverage was 5.3x
(4.9x pro forma for annualizing the acquisitions during the fiscal
year), with FFO to debt at 8.7%. Leverage is forecast to decrease
to 4.5x by fiscal year-end 2025, while FFO to debt will be around
12%. This will be thanks to continued strong top-line growth, with
about 10% organic growth year over year and significant small
bolt-on M&As supported by a high cash balance of around EUR175
million alongside modest EBITDA margin expansion of 20 basis
points. At the same time, we continue to anticipate positive FOCF
of about EUR50 million, partially offset by working capital
outflows of around EUR20 million-EUR25 million to support the
revenue growth and capital expenditure (capex) investments of EUR45
million. While fiscal 2024 has also seen positive FOCF estimated at
around EUR20 million, capex levels have increased from fiscal 2023
to purchase equipment for new projects in Germany. We anticipate
capex of roughly 3.5% of revenue. FFO cash interest coverage is
forecast to remain well above 2x over the next three years, while
the undrawn revolving credit facility (RCF) of EUR130 million and
EUR175 million of cash on the balance sheet on Sept. 30, 2024,
underpin ample liquidity to support Infragroup's ongoing growth
trajectory. From fiscal 2026, we forecast leverage at about 4x and
FFO to debt close to 15%, albeit we note that sustained
improvements in credit metrics are contingent on a financial policy
that supports credit metrics at those levels.
"The positive outlook reflects our view that Infragroup will
continue to see good operating performance underpinned by organic
revenue growth of around 8.5% annually alongside further expansion
through bolt-on acquisitions. This will support further
deleveraging toward 4.0x and FFO to debt above 12% over the next 12
months, while FOCF is expected to remain positive."
S&P could revise the outlook to stable over the next 12 months if
adjusted leverage remains above 5x and FFO to debt below 12%. This
could be caused by:
-- Integration challenges from its bolt-on acquisitions that could
lead to higher-than-expected one-off costs; or
-- A more aggressive financial policy with large debt-funded
acquisitions or shareholder remunerations.
S&P could raise the rating if the company continues show solid
operating performance with organic growth and successful execution
on its acquisition pipeline alongside a financial policy that
supports credit metrics commensurate with a higher rating. This
implies adjusted leverage below 5x on a sustained basis and FFO to
debt increases above 12% and that the company strategy is
supportive of maintaining credit metrics at those levels.
===========
R U S S I A
===========
UZBEK METALLURGICAL: Fitch Lowers IDR to 'B+', Outlook Stable
-------------------------------------------------------------
Fitch Ratings has downgraded JSC Uzbek Metallurgical Plant's (UMK)
Long-Term Issuer Default Rating (IDR) to 'B+' from 'BB-'. The
Outlook is Stable.
The rating downgrade reflects delays in the company's
transformative flat steel project, which aims to double its size.
These delays coincided with weak steel market conditions, resulting
in high leverage above its previous negative sensitivity of 3x for
a protracted period. While the project nears completion, ramp-up
risks and execution risks might affect the deleveraging pace. Fitch
expects UMK's liquidity to remain tight. This resulted in a
downward revision of UMK's Standalone Credit Profile (SCP) to 'b'
from 'b+'.
Based on Fitch's Government Related Entities (GRE) Rating Criteria,
Fitch rates UMK on a bottom-up basis and apply a single-notch
uplift to the SCP for state support.
UMK's rating incorporates its small scale, exposure to volatile raw
materials and steel prices, operations in one country, and
corporate governance limitations.
Key Rating Drivers
High Leverage Until 2027: Fitch anticipates that deleveraging will
take longer than expected, due to delays in the launch of the
casting and rolling project and weakened margins in the longs
segment. Fitch forecasts EBITDA gross leverage at 5.5x in 2025,
above its new negative rating sensitivity of 3.5x. This is due to a
delayed start to commercial shipments to 2H25 and gradual project
commissioning.
Fitch anticipates EBITDA gross leverage to moderate with the
project ramp-up, but to remain at 3.4x in 2026 before decreasing
below 3x in 2027, when Fitch expects the new complex to operate at
full capacity.
Responsibility to Support: Fitch views UMK's decision-making and
oversight by the government as 'Strong', given the state's 93%
stake ownership and its control over the company's operating
activity and investment programme. Fitch assesses precedents of
support as 'Very Strong' as almost half of external funding for the
casting and rolling project was provided by the state. This is
despite the government not guaranteeing any of UMK's debt.
Incentive to Support: UMK's preservation of government policy role
is 'Strong', as it accounts for 80% of all steel products produced
in Uzbekistan and more than a third of steel products consumed
domestically, which Fitch expects to double after the project's
commissioning. A UMK default would hit the development of the
national steel industry as well as that of the construction and
metals and mining sectors. However, Fitch does not assign UMK any
scores for contagion risk, due to its fairly limited external
debt.
Support Score: UMK's overall support score is 25, which underlines
'Strong' expectations for state support, according to its GRE
Rating criteria and leads to its rating being notched up once from
its SCP.
Project Nears Completion: Execution risks associated with the
casting and rolling project have decreased as the project is now
around 90% completed. However, these risks still persist due to
UMK's limited experience in delivering new projects. If these risks
were to materialise, deleveraging might take longer than forecast.
The project's expected commencement has already been delayed to
mid-2025 from end-2024.
Most Project Financing Received: The project is 80% funded out of
the estimated total cost of EUR775 million. The project financing
so far comprises a EUR140 million equity injection and a EUR110
million loan from state-controlled Uzbekistan Funds for
Reconstruction and Development (UFRD), around EUR90 million loans
from local banks, and the remaining EUR276 million with UMK's own
sources. UMK is in the final stage of obtaining the remaining
funding from international banks.
New Project Increases Scale/Diversification: The project is a
transformative hot-rolled sheet facility for UMK and the country's
steel industry. It will double UMK's steel-making capacity to 2.1
million tons per annum. This provides diversity to its current
output of longs and grinding balls. The company is also considering
the expansion of its grinding balls production capacity. UMK will
become the country's sole large producer of flat steel products,
replacing imports.
Normalising Margins: UMK's margins have remained compressed since
2022, due to higher electricity tariffs, a shift from the purchase
of metallics from Russia to other domestic and imported scrap
sources, and lower sales prices on the domestic market. Fitch
expects that after the project's full ramp-up, margins will recover
towards USD90/tonne, which is lower than Fitch previously
expected.
Raw Material Supply: UMK remains reliant on the purchase of raw
materials, which is mitigated by its exclusive right to purchase
scrap domestically, although this is expected to be revisited in
the course of market reform. In the medium term, supply of domestic
raw materials should improve with the start of the Tebinbulak
pelletising plant expected in late 2025. UMK also plans to build a
direct reduced-iron plant in a joint venture with the state
investment fund. The project is expected to be funded without
recourse to UMK.
Derivation Summary
Fitch rates UMK on a bottom-up basis and give it a single-notch
uplift to its SCP for state support to arrive at the IDR. UMK's 'b'
SCP is below that of JSC Almalyk Mining and Metallurgical Complex
(BB-/Stable; SCP: b+), and on the same level with that of JSC
Uzbekneftegaz (UNG; BB-/Stable; SCP: b).
Almalyk's rating is equalised with that of Uzbekistan due to strong
ties between the two. Almalyk's scale by EBITDA is larger than that
of UMK and its leverage is lower even though Almalyk is also
implementing a transformative growth project (Yoshlik).
UNG's rating is equalised with that of Uzbekistan due to strong
ties between the two. UNG's strong links with the state are
underpinned by a large share of state-guaranteed debt, and also by
UNG's presence in the Eurobond market. Natural gas price increases
in Uzbekistan in 2023 and 2024 have had a positive impact on UNG's
financial profile. Further price liberalisation, coupled with an
improvement in UNG's liquidity position, may have a positive impact
on UNG's SCP.
Key Assumptions
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Volumes to double by 2027, in line with management's guidance,
when the casting and rolling complex project is in full production
- The casting and rolling complex to be commissioned in 2025
- Average EBITDA margin of 13% between 2025 and 2028
- Large capex in 2025, due to investments in the casting and
rolling complex, and normalising from 2026
- UMK to receive EUR290 million in outstanding funding from
international commercial banks in 2025
- No dividend payments in 2025-2026
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Material weakening of ties between the company and the state
- EBITDA gross leverage materially above 3.5x on a sustained basis
- Unremedied liquidity issues
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA gross leverage consistently below 2.5x, along with
expanded scale on project completion
- Improvement in the liquidity profile
- Strengthening ties with Uzbekistan
Liquidity and Debt Structure
UMK's cash balance was USD36 million at end-2024 and has been
bolstered by a committed credit line in 2025.
UMK's liquidity is tight in view of its projected capex-related
negative free cash flow (FCF) of around USD110 million in 2025,
according to Fitch's forecasts, as well as short-term debt of
around USD100 million, some of which can be rolled over. Fitch
expects the liquidity gap to be funded by a EUR170 million project
finance loan from international banks, which UMK is finalising.
Fitch assumes that UMK would receive support from the government
should it require additional liquidity.
Issuer Profile
UMK is Uzbekistan's largest state-owned producer of long steel
products and grinding balls, although it is small on a global
scale.
Public Ratings with Credit Linkage to other ratings
UMK's IDR is notched up by one level from its SCP for state
support.
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
UMK has an ESG Relevance Score of '4' for Financial Transparency
due to below-average quality of financial disclosure (eg. lack of
interim financials), which has a negative impact on the credit
profile, and is relevant to the rating in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
JSC Uzbek
Metallurgical Plant LT IDR B+ Downgrade BB-
=========
S P A I N
=========
BANCAJA 10: Moody's Upgrades Rating on EUR26MM Class D Notes to B3
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of six notes in MBS
BANCAJA 4, FTA and BANCAJA 10, FTA. The rating actions reflect
better than expected collateral performance, increased levels of
credit enhancement for the affected notes and Moody's assessments
of the likelihood of prolonged missed interests in both
transactions.
Moody's affirmed the ratings of the notes that had sufficient
credit enhancement to maintain their current ratings.
Issuer: BANCAJA 10, FTA
EUR500M Class A3 Notes, Affirmed Aa1 (sf); previously on Feb 7,
2024 Affirmed Aa1 (sf)
EUR65M Class B Notes, Upgraded to Baa1 (sf); previously on Feb 7,
2024 Upgraded to Ba3 (sf)
EUR52M Class C Notes, Upgraded to Ba1 (sf); previously on Feb 7,
2024 Upgraded to B2 (sf)
EUR26M Class D Notes, Upgraded to B3 (sf); previously on Feb 7,
2024 Upgraded to Caa3 (sf)
EUR31M Class E Notes, Affirmed C (sf); previously on Sep 22, 2014
Affirmed C (sf)
Issuer: MBS BANCAJA 4, FTA
EUR1182.1M Class A2 Notes, Affirmed Aa1 (sf); previously on Oct
26, 2023 Affirmed Aa1 (sf)
EUR30.5M Class B Notes, Upgraded to Aa1 (sf); previously on Oct
26, 2023 Upgraded to A2 (sf)
EUR18.9M Class C Notes, Upgraded to A3 (sf); previously on Oct 26,
2023 Upgraded to Ba2 (sf)
EUR18.5M Class D Notes, Upgraded to Baa3 (sf); previously on Oct
26, 2023 Upgraded to Ba3 (sf)
EUR23.1M Class E Notes, Affirmed C (sf); previously on Sep 5, 2014
Affirmed C (sf)
Maximum achievable rating is Aa1(sf) for structured finance
transactions in Spain, driven by the corresponding local currency
country ceiling of the country.
RATINGS RATIONALE
The rating action is prompted by decreased key collateral
assumptions, namely the portfolio Expected Loss (EL) assumptions
due to better than expected collateral performance, an increase in
credit enhancement for the affected tranches and Moody's
assessments of the likelihood of prolonged missed interests in both
transactions.
Revision of Key Collateral Assumptions:
As part of the rating action, Moody's reassessed Moody's lifetime
loss expectation for the portfolio reflecting the collateral
performance to date.
The performance of MBS BANCAJA 4, FTA has continued to improve
since April 2024. Total delinquencies have decreased in the past
year, with 90 days plus arrears currently standing at 1.77% of
current pool balance compared to 2.21% in April 2024. Cumulative
defaults currently stand at 6.94% of original pool balance compared
to 6.91% a year earlier.
For MBS BANCAJA 4, FTA, Moody's decreased the expected loss
assumption to 3.76% as a percentage of current pool balance from
4.05% due to improving performance. The revised expected loss
assumption corresponds to 3.41% as a percentage of original pool
balance, down from 3.50%.
The performance of BANCAJA 10, FTA has been stable since February
2024. Total delinquencies have slightly increased in the past year,
with 90 days plus arrears currently standing at 1.45% of current
pool balance compared to 1.30% in February 2024. Cumulative
defaults currently stand at 11.83% of original pool balance
compared to 11.79% a year earlier.
For BANCAJA 10, FTA, Moody's decreased the expected loss assumption
to 3.08% as a percentage of current pool balance from 3.42% due to
stable performance and higher expected future recoveries. The
revised expected loss assumption corresponds to 5.76% as a
percentage of original pool balance, down from 6.95%.
Moody's reassessed loan-by-loan information to estimate the loss
Moody's expects the portfolio to incur in a severe economic stress.
As a result, Moody's have maintained the MILAN Stressed Loss
assumption at 11.9% and 10.2% for MBS BANCAJA 4, FTA and BANCAJA
10, FTA respectively.
Increase in Available Credit Enhancement
Sequential amortization together with a non-amortizing reserve fund
in MBS BANCAJA 4, FTA and a replenishing reserve fund in BANCAJA
10, FTA led to the increase in the credit enhancement available in
both transactions. In MBS BANCAJA 4, FTA the credit enhancement for
the Class B, Class C and Class D notes affected by the rating
action increased to 38.3%, 26.3% and 14.6% from 28.8%, 19.8% and
11.0% respectively since the last rating action. The transaction
includes a reserve fund amortization trigger, which could lead to
an amortization of the reserve fund to its floor if 90 days plus
arrears are below 1.0% of current pool balance; Moody's have
assessed the likelihood of this event and the impact on the notes.
In BANCAJA 10, FTA, the credit enhancement for the Class B, Class C
and Class D notes affected by the rating action increased to 22.3%,
9.8% and 3.5% from 17.7%, 6.9% and 1.5% respectively since the last
rating action.
Assessment of the likelihood of prolonged missed interests
For MBS BANCAJA 4, FTA the interest deferral trigger for Class D
has been hit, but the reserve fund is still available to pay
deferred interest. For Classes B and C, the interest deferral
triggers have not been hit, with still some buffer to reach the
respective levels. Interest payments have been paid timely for all
notes so far. Moody's analysis considers the very low likelihood of
prolonged interest shortfalls on Class B in future, as well as the
low likelihood for Classes C and D.
The interest of Class B, Class C and Class D in BANCAJA 10, FTA
remain subordinated to principal due on Class A given the interest
deferral triggers are hit, however reserve fund, and excess spread
if any, are available to pay subordinated interest for Classes B, C
and D. The upgrade of Classes C and D in BANCAJA 10, FTA has taken
into account the permanent economic loss resulting from the 7.5 and
9.5 years respectively over which interest was deferred without
interest on deferred interest being due. Moody's analysis has also
considered potential future interest deferrals. While all interest
shortfalls have since been recouped, the transaction structure does
not mandate interest-on-interest following non-payment of interest.
Class B only missed a single quarter of interest payments but is
still at risk of interest deferral in the future, even though with
a very high likelihood of full repayment. Moody's have limited
Class B rating's upgrade to Baa1 to reflect the risk of future
deferrals.
The principal methodology used in these ratings was "Residential
Mortgage-Backed Securitizations" published in October 2024.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement, (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
GC PASTOR HIPOTECARIO 5: S&P Affirms 'D' Ratings on 3 Tranches
--------------------------------------------------------------
S&P Global Ratings raised its credit rating on GC Pastor
Hipotecario 5, Fondo de Titulizacion de Activos's class A2 notes to
'A (sf)' from 'BB+ (sf)'. At the same time, S&P affirmed its 'D
(sf)' ratings on the class B, C, and D notes.
The rating actions follow S&P's full analysis of the most recent
information that it has received and the transaction's current
structural features.
S&P said, "Under our global RMBS criteria and since our previous
review in January 2024, our weighted-average foreclosure frequency
assumptions decreased because of the reduction in the
weighted-average effective loan-to-value (LTV) ratio. Our
weighted-average loss severity assumptions have also decreased due
to the lower weighted-average current LTV ratio in the pool and our
decreased repossession market value decline assumptions."
Table 1
Credit analysis results
Rating WAFF (%) WALS (%) Credit coverage (%)
AAA 10.17 2.00 0.20
AA 7.25 2.00 0.15
A 5.86 2.00 0.12
BBB 4.40 2.00 0.09
BB 2.95 2.00 0.06
B 2.60 2.00 0.05
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
The performing pool's loan-level arrears stand at 1.66%. Cumulative
defaults, defined as loans in arrears for a period equal to or
greater than 18 months, represent 11.4% of the closing pool
balance.
The interest deferral triggers for the class B, C, and D notes,
which are irreversible, were breached and interest on these classes
of notes remains unpaid, as they are ranked after the class A2
notes' amortization. S&P therefore affirmed its 'D (sf)' ratings on
these classes of notes.
The transaction's undercollateralization has decreased since our
previous rating action to EUR23.0 million from EUR26.4 million,
resulting in the credit enhancement for the class A2 notes growing
to 9.7%, an increase from 5.01%. The reserve fund has been
effectively depleted since 2010.
S&P said, "Under our cash flow analysis, the class A2 notes could
withstand stresses at a higher rating level than that assigned.
However, the rating assigned reflects the transaction's poor past
performance, the depleted reserve fund, and the steady accumulation
of credit enhancement, which remains dependent on future default
levels. We therefore raised to 'A (sf)' from 'BB+ (sf)' our rating
on the class A2 notes.
"We consider the transaction's resilience in case of additional
stresses to some key variables, in particular defaults and loss
severity, to determine our forward-looking view. As such, we ran
additional scenarios with increased defaults of 1.1x and 1.3x.
"Additionally, we have not given any credit to recoveries on
already defaulted assets. Under these assumptions, the class A2
notes results remain strong.
"Our operational, rating above the sovereign, and legal risk
analyses remain unchanged since our previous review. Therefore,
these criteria do not cap the ratings assigned.
"The swap counterparty is CaixaBank S.A. Considering the remedial
actions defined in the swap counterparty agreement, which are not
in line with our current counterparty criteria, the maximum rating
the notes can achieve in this transaction is 'A+ (sf)',which is
equal to the resolution counterparty rating on the swap
counterparty.
"In our view, the borrowers' ability to repay their mortgage loans
will be highly correlated to macroeconomic conditions, particularly
the unemployment rate, consumer price inflation and interest rates.
Our forecast for unemployment in Spain for 2025 and 2026 are 11.4%
and 11.3%, respectively.
"Furthermore, a decline in house prices typically impacts the level
of realized recoveries. For Spain in 2025 and 2026, we expect them
to increase by 4.5% and 3.5%, respectively."
GC Pastor Hipotecario 5 is a Spanish RMBS transaction that
securitizes a pool of residential mortgage loans originated by
Banco Pastor and is currently serviced by Banco Santander S.A. It
closed in June 2007.
SABADELL CONSUMO 2: Fitch Affirms 'BBsf' Rating on Class F Notes
----------------------------------------------------------------
Fitch Ratings has affirmed Sabadell Consumo 2, FT's and Sabadell
Consumo 3, FT's notes.
Entity/Debt Rating Prior
----------- ------ -----
Sabadell Consumo 2, FT
Class A ES0305622005 LT AAAsf Affirmed AAAsf
Class B ES0305622013 LT AAAsf Affirmed AAAsf
Class C ES0305622021 LT AA-sf Affirmed AA-sf
Class D ES0305622039 LT BBB+sf Affirmed BBB+sf
Class E ES0305622047 LT BBB-sf Affirmed BBB-sf
Class F ES0305622054 LT BBsf Affirmed BBsf
Sabadell Consumo 3, FT
Class A ES0305838007 LT AAsf Affirmed AAsf
Class B ES0305838015 LT AA-sf Affirmed AA-sf
Class C ES0305838023 LT Asf Affirmed Asf
Class D ES0305838031 LT BBB-sf Affirmed BBB-sf
Class E ES0305838049 LT BB+sf Affirmed BB+sf
Class F ES0305838056 LT BB-sf Affirmed BB-sf
Transaction Summary
The transactions are static securitisations of portfolios of fully
amortising general-purpose consumer loans originated by Banco de
Sabadell, S.A. (Sabadell; BBB+/Stable/F2) to Spanish residents. All
the loans have been granted to existing Sabadell clients. The pools
comprise both pre-approved (62.4% and 83.7% of the total pool for
Sabadell Consumo 2 and Sabadell Consumo 3, respectively) and
on-demand loans for general purposes, such as home improvement,
appliances and furniture and vehicle acquisition.
The notes are amortising pro-rata with triggers to switch to
sequential. Credit enhancement (CE) consists of structural
subordination and a reserve fund that amortises with the
collateralised notes' outstanding balance with a defined absolute
floor.
KEY RATING DRIVERS
Unchanged Asset Assumptions: Fitch has maintained its asset
assumptions for both transactions as their performance is in line
with expectations. The base case default assumptions are 4.50% for
Sabadell Consumo 2 and 4.75% for Sabadell Consumo 3, with 'AAA'
default multiples of 4.50x and 4.25x, respectively. Base case
recoveries for Sabadell Consumo 2 are 15% for pre-approved loans
and 20% for on-demand loans, with a blended rate of 16.9%, while
Sabadell Consumo 3 has a recovery rate of 20.0%. The 'AAA' haircuts
are 45% for Sabadell Consumo 2 and 50% for Sabadell Consumo 3, with
'AAA' scenario loss rates at 18.4% and 18.2%, respectively.
CE Trends: Fitch expects CE for Sabadell Consumo 2 to gradually
increase as the reserve fund has reached its absolute floor and is
not amortising while the transaction is amortising pro-rata. Under
the base case scenario, Fitch views the switch to sequential
triggers, including key performance triggers as unlikely to be
breached in the short term. Fitch expects CE for Sabadell Consumo 3
to remain stable in the short to medium term as the reserve fund
continues to amortise in proportion to the collateralised note
balance.
Counterparty Arrangements Cap Ratings: The maximum achievable
rating for Sabadell Consumo 3's notes is 'AA+sf', according to
Fitch's counterparty criteria. The minimum eligibility rating
threshold defined for the transaction account bank (TAB) of 'A-' is
insufficient to support 'AAAsf' ratings.
PIR Mitigated or Immaterial: Fitch views payment interruption risk
(PIR) in the event of a servicer disruption for Sabadell Consumo 2
as mitigated by the liquidity provided by a cash reserve equal to
1.17% of the class A to G notes' outstanding balance, which would
cover senior costs, net swap payments and interest on these notes
for more than two months. Fitch views this period as sufficient to
implement alternative arrangements upon Sabadell being downgraded
below 'BBB-', including the pre-funding of an additional third
month within 14 days or establishing a replacement servicer.
Moreover, the trustee operates as a back-up servicer facilitator.
Fitch assesses PIR as immaterial up to 'AA+sf', in line with its
Global Structured Finance Rating. Fitch assesses PIR as immaterial
for Sabadell Consumo 3 as the maximum achievable rating for the
notes is 'AA+sf' and interest deferability is permitted under
transaction documentation for all rated notes and does not
constitute an event of default.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- For Sabadell Consumo 2's class A and B notes, a downgrade of
Spain's Long-Term Issuer Default Rating (IDR) that could decrease
the maximum achievable rating for Spanish structured finance
transactions. This is because these notes are rated at the maximum
achievable rating, six notches above the sovereign IDR.
- Long-term asset performance deterioration, such as increased
delinquencies or reduced portfolio yield, which could be driven by
changes in portfolio characteristics, macroeconomic conditions,
business practices or the legislative landscape. For instance, a
10% increase of defaults combined with a 10% decrease of recoveries
may lead to downgrades of up to two notches.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Sabadell Consumo 2's class A and B notes are rated at the highest
level on Fitch's scale and cannot be upgraded.
- Sabadell Consumo 3's senior notes' ratings are capped by the
documented counterparty replacement provisions, as per Fitch's
Structured Finance and Covered Bonds Counterparty Rating Criteria.
- For the remaining notes, CE increasing as the transaction
deleverages, able to fully compensate the credit losses and cash
flow stresses commensurate with higher rating scenarios. Positive
rating action on these classes could also be driven by a long-term
performance of the underlying assets, including reduced level of
defaults or an increase in the level of recoveries that is better
than Fitch´s current assumptions.
CRITERIA VARIATION
Fitch has deviated from its Structured Finance and Covered Bonds
Counterparty Rating Criteria in analysing PIR for Sabadell Consumo
2. The agency considers the liquidity coverage of two months
(compared with the coverage of one month as per the criteria),
fully compensates for servicer remedial actions if the Long-Term
IDR was downgraded below 'BBB-' when compared with 'BBB' and 'F2'
under the Criteria. Considering the Global Structured Finance
Rating Criteria, the application of this variation has a rating
impact of up to one notch on the class A and B notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Sabadell Consumo 2, FT, Sabadell Consumo 3, FT
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Prior to the transaction closing, Fitch reviewed the results of a
third party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Prior to the transaction closing, Fitch conducted a review of a
small targeted sample of the originator's origination files and
found the information contained in the reviewed files to be
adequately consistent with the originator's policies and practices
and the other information provided to the agency about the asset
portfolio.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
===========
T U R K E Y
===========
ANADOLUBANK AS: Fitch Rates USD150MM Tier 2 Capital Notes 'CCC+'
----------------------------------------------------------------
Fitch Ratings has assigned Anadolubank A.S.'s (Anadolubank,
B/Positive) USD150 million is Basel III-compliant Tier 2 capital
notes a final rating of 'CCC+'. The Recovery Rating is 'RR6'.
Key Rating Drivers
The Tier 2 notes are rated two notches below Anadolubank's
Viability Rating (VR) of 'b', in accordance with Fitch's Bank
Rating Criteria, for loss severity given the notes' subordinated
status and Fitch's view of a high likelihood of poor recoveries in
a default. Fitch has applied zero notches for incremental
non-performance risk, as it believes that write-down of the notes
will only occur once the point of non-viability is reached, and
there is no coupon flexibility prior to non-viability.
The notes' 'RR6' Recovery Rating reflects poor recovery prospects
in a default.
The notes constitute direct, unsecured, and subordinated
obligations of the bank and rank equally with all its other
subordinated obligations but in priority to junior obligations. The
notes qualify as Basel III-compliant Tier 2 instruments and contain
contractual loss-absorption features, which can be triggered at the
point of non-viability of the bank. According to the terms, the
notes are subject to permanent partial or full write-down, on the
occurrence of a non-viability event (NVE). There are no equity
conversion provisions in the terms.
An NVE is when the bank has incurred losses and has become, or is
likely to become, non-viable as determined by the local regulator,
the Banking and Regulatory Supervision Authority (BRSA). The bank
will be deemed non-viable should it reach the point at which the
BRSA determines its operating license is to be revoked and the bank
liquidated, or the rights of Anadolubank's shareholders (except to
dividends), and the management and supervision of the bank, are
transferred to the Savings Deposit Insurance Fund on the condition
that losses are deducted from the share capital of current
shareholders.
The notes have a 10-year maturity and a call option after five
years.
At end-3Q24, Anadolubank's 15.8% consolidated common equity Tier 1
and Tier 1 ratios (including forbearance) and its 16.1%
consolidated total capital adequacy ratio (including forbearance),
were above their 7% CET1, 8.5% Tier 1 and 12% total capital
regulatory requirements, respectively, including a capital
conservation buffer of 2.5%.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The notes' rating is primarily sensitive to changes to
Anadolubank's VR, from which they are notched.
The notes would be downgraded if Anadolubank's VR is downgraded.
The notes' rating is also sensitive to changes in Fitch's
assessment of the notes' non-performance relative to the risk
captured in the VR. This may result, for example, from a sharp
decline in capital buffers relative to regulatory requirements.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The notes' rating would be upgraded if Anadolubank's VR is
upgraded.
Date of Relevant Committee
February 6, 2025
ESG Considerations
Anadolubank has an ESG Relevance Score for Management Strategy of
'4', reflecting an increased regulatory burden on all Turkish
banks. Management's ability across the sector to determine their
own strategy and price risk is constrained by regulatory burden and
also by the operational challenges of implementing regulations at
the bank level. This has a moderately negative impact on the banks'
credit profiles, and is relevant to the banks' ratings in
combination with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Anadolubank A.S.
Subordinated LT CCC+ New Rating RR6 CCC+(EXP)
===========================
U N I T E D K I N G D O M
===========================
ACHESON CONSTRUCTION: Grant Thornton Named as Administrators
------------------------------------------------------------
Acheson Construction Limited was placed into administration
proceedings in the High Court Of Justice, Business & Property
Courts, Insolvency & Companies List Chd, No 000988 of 2025, and
Alistair Wardell and Richard J Lewis of Grant Thornton UK LLP were
appointed as joint administrators on Feb. 18, 2025.
Acheson Construction specialized in the construction of commercial
& domestic buildings.
Its registered office is at c/o Grant Thornton UK LLP, 11th Floor,
Landmark St Peter's Square, 1 Oxford St, Manchester, M1 4PB.
Its principal trading address is at 2 A Railway Triangle,
Industrial Estate, Dorchester, Dorset, DT1 2PJ.
The joint administrators can be reached at:
Alistair Wardell
Grant Thornton UK LLP
6th Floor, 3 Callaghan Square
Cardiff, CF10 5BT
Tel No: 029 2023 5591
-- and --
Richard J Lewis
Grant Thornton UK LLP
2 Glass Wharf, Temple Quay
Bristol, BS2 0EL
Tel No: 0117 305 7600
For further information, contact:
CMU Support
Grant Thornton UK LLP
2 Glass Wharf, Temple Quay
Bristol, BS2 0EL
E-mail: cmusupport@uk.gt.com
Tel No: 0161 953 6906
COREIX LTD: RSM UK Named as Administrators
------------------------------------------
Coreix Ltd was placed into administration proceedings in the High
Court of Justice, Business & Property Courts of England & Wales,
Insolvency & Companies List (ChD), Court Number: CR-2025-000841,
and Glen Carter and James Hawksworth of RSM UK Restructuring
Advisory LLP were appointed as administrators on Feb. 20, 2025.
Coreix Ltd engaged in wired telecommunications activities, data
processing, hosting and related activities.
Its registered office and principal trading address is at 72-76
Broadwater Street West, Worthing, BN14 9DH.
The joint administrators can be reached at:
Glen Carter
RSM UK Restructuring Advisory LLP
Highfield Court
Tollgate, Chandlers Ford
Eastleigh SO53 3TY
-- and --
James Hawksworth
RSM UK Restructuring Advisory LLP
Davidson House
Forbury Square, Reading
Berkshire, RG1 3EU
Correspondence address & contact details of case manager:
Nick Talbot
RSM Restructuring Advisory LLP
Highfield Court, Tollgate
Chandlers Ford, Eastleigh
Hampshire, SO53 3TY
Tel No: 0117 945 2082
For further details, contact:
Glen Carter
Administrators
Tel No: 023 8064 6464
-- or --
James Hawksworth
Tel No: 0118 953 0350
INKLING LTD: Moorfields Named as Administrators
-----------------------------------------------
Inkling Ltd was placed into administration proceedings in the High
Court of Justice, Court Number: No 001076 of 2025, and Richard
Keley and Andrew Pear of Moorfields were appointed as
administrators on Feb. 18, 2025.
Inkling Ltd specialized in printing.
Its registered office is at 27 High Street, Horley, RH6 7BH.
Its principal trading address is at The Pump House, Dwelly Lane,
Edenbridge, Kent, TN8 6QD.
The joint administrators can be reached at:
Andrew Pear
Richard Keley
Moorfields
Arundel House
1 Amberley Court, Whitworth Road
Crawley, RH11 7XL
Tel NO: 01293 410333
For further information, contact:
Jill King
Moorfields
Arundel House, 1 Amberley Court
Whitworth Road, Crawley, RH11 7XL
Email: jill.king@moorfieldscr.com
Tel No: 01293 452845
KECKS LTD: Edge Recovery Named as Administrators
------------------------------------------------
Kecks Ltd was placed into administration proceedings in the High
Court of Justice, Business and Property Courts of England and
Wales, Insolvency and Companies List (CHD), Court Number:
CR-2025-000720, and Robert Cundy of Edge Recovery were appointed as
administrators on Feb. 17, 2025.
Kecks Ltd specialized in retail sale via mail order or internet.
Its registered office and principal trading address is at 19
Dovedale Road, London, SE22 0NF.
The joint administrators can be reached at:
Robert Cundy
Edge Recovery
5/7 Ravensbourne Road
Bromley, Kent, BR1 1HN
For further details, contact:
Kristina Todorova
Email: kristina.todorova@edgerecovery.com
Tel No: 020 8315 7430
NVAYO LIMITED: Leonard Curtis Named as Administrators
-----------------------------------------------------
Nvayo Limited was placed into administration proceedings in the
High Court of Justice Business and Property Courts of England and
Wales, Court Number: CR-2025-000564, and Dane O'Hara and Alex
Cadwallader and Andrew Poxon of Leonard Curtis were appointed as
administrators on Feb. 10, 2025.
Nvayo Limited is into the banking business.
Its registered office and principal trading address is at 1 King
William Street, London, EC4N 7AF.
The joint administrators can be reached at:
Dane O'Hara
Alex Cadwallader
Andrew Poxon
Leonard Curtis
5th Floor, Grove House
248a Marylebone Road
London, NW1 6BB
For further details, contact:
The Joint Administrators
Tel No: 0161 660 0579
Email: nvayo@leonardcurtis.co.uk
RIPON MORTGAGES: S&P Assigns B-(sf) Rating on Class X-Dfrd Notes
----------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Ripon Mortgages
PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, and X-Dfrd
U.K. RMBS notes. At closing, Ripon Mortgages also issued unrated
class Z and R notes and X1, X2, and Y certificates.
The transaction is a second refinancing of the Ripon Mortgages PLC
transaction, which closed in April 2017 (the original
transaction).
S&P said, "We have based our credit analysis on the £3.5 billion
pool. The pool comprises first-lien U.K. buy-to-let (BTL)
residential mortgage loans that Bradford & Bingley PLC and Mortgage
Express PLC originated. The loans are secured on properties in
England and Wales and were originated between 1996 and 2009. The
underlying loans in the securitized portfolio are and will continue
to be serviced by Topaz Finance Ltd., which is also the legal title
holder. Topaz Finance is a subsidiary of Computershare Mortgage
Services Ltd. (CMS). We reviewed CMS' servicing and default
management processes and are satisfied that it is capable of
performing its functions in the transaction."
The collateral performance has historically been in line with S&P's
legacy BTL index.
All of the loans in the portfolio are more than 10 years seasoned.
S&P said, "Our rating on the class A notes addresses the timely
payment of interest and the ultimate payment of principal, and our
rating on the class X-Dfrd notes addresses the ultimate payment of
interest and principal. Our ratings also address the timely receipt
of interest on the class B-Dfrd to F-Dfrd notes when they become
the most senior class of notes outstanding. Any deferred interest
is due at maturity. Our rating definitions are in line with the
notes' terms and conditions."
The rated notes are supported by the principal borrowing mechanism,
the general reserve, and the liquidity reserve (class A notes). The
first two are subject to a principal deficiency ledger condition
for the class B-Dfrd to F-Dfrd notes, unless they are the most
senior outstanding. These reserve funds were funded at closing.
Additionally, the transaction features a liquidity facility.
S&P said, "Our cash flow analysis indicates that the available
credit enhancement for the class B-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd
is commensurate with higher ratings than those currently assigned.
The ratings on these notes also reflect their ability to withstand
joint lead managers' (JLM) indemnity claims, higher levels of
defaults, and greater-than-expected loss severity observed on the
original transaction since its closing.
"In our analysis, the class X-Dfrd notes are unable to withstand
the stresses we apply at our 'B' rating level. However, payment on
this class of notes does not rely on favorable business, financial,
and economic conditions. Consequently, we have assigned a 'B- (sf)'
rating to the notes, in line with our criteria.
"A portion of JLM indemnity claims ranks senior and is thus modeled
in our cash flow analysis. They represent a potential expense (to
the benefit of JLMs) if, for instance, investors sue the JLMs for a
breach of representations and warranties."
There is no swap counterparty to hedge the mismatch between the
interest rate paid under the loans and the interest rate paid under
the notes.
Ripon Mortgages PLC is a U.K. RMBS transaction that closed in April
2017 and securitizes a pool of buy-to-let loans secured on
properties in England and Wales.
Ratings
Class Rating* Class size (%)
A AAA (sf) 88.15
B-Dfrd AA- (sf) 3.90
C-Dfrd A (sf) 3.40
D-Dfrd BBB- (sf) 1.75
E-Dfrd BB- (sf) 0.75
F-Dfrd B (sf) 0.65
Z NR 1.40
R NR 1.25
X-Dfrd B- (sf) 0.50
X1 certs NR N/A
X2 certs NR N/A
Y certs NR N/A
*S&P's ratings address timely receipt of interest and ultimate
repayment of principal for the class A notes, and the ultimate
payment of interest and principal on the class X-Dfrd notes. Its
ratings also address the timely receipt of interest on the other
rated notes when they become most senior outstanding. Any deferred
interest is due at maturity.
§Credit enhancement comprises subordination and the general
reserve fund at closing.
N/A--Not applicable.
NR--Not rated.
STRATEGIC VALUE: Arafino Advisory Named as Administrators
---------------------------------------------------------
Strategic Value Wealth Management Ltd placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales Insolvency and Companies, No 1222 of
2025, and Simon Bonney and James Varney of Arafino Advisory Limited
were appointed as administrators on Feb. 24, 2025.
Its registered office is c/o Arafino Advisory Limited, at Central
Court, 25 Southampton Buildings, London, WC2A 1AL
Its principal trading address is at 52 Grosvenor Gardens,
Belgravia, London, SW1W 0AU
The joint administrators can be reached at:
James Varney
Simon Bonney
Arafino Advisory Limited
Central Court
25 Southampton Buildings
London, WC2A 1AL
Email: james.varney@arafino.com
simon.bonney@arafino.com
For further information, contact:
Tom Maker
Arafino Advisory Limited
Email: tom.maker@arafino.com
THAMES WATER: Moody's Lowers Prob. of Default Rating to D-PD
------------------------------------------------------------
Moody's Ratings has downgraded Thames Water Utilities Ltd.'s
Probability of Default rating to D-PD from Ca-PD. The rating
action coincides with the effective date of Thames Water's
restructuring plan, as announced by the company on February 21,
2025[1].
Moody's have additionally affirmed Thames Water Utilities Ltd.'s
Corporate Family Rating at Caa3, and Thames Water Utilities Finance
Plc's backed senior secured debt (referred to as Class A under its
finance documents) ratings at Caa3, backed subordinate debt
(referred to as Class B under its finance documents) rating at C,
and backed senior secured and subordinate MTN programme ratings at
(P)Caa3 and (P)C respectively; the outlook on all entities remains
stable.
RATINGS RATIONALE
RATIONALE FOR PROBABILITY OF DEFAULT RATING
The restructuring plan extends the final maturities and scheduled
amortization payments of all existing debt obligations by two
years, as well as structurally subordinating all existing creditors
behind a soon-to-be-issued GBP1.5 billion super senior tranche
(with a further GBP1.5 billion accessible later this year).
Moody's regards the restructuring plan to be a distressed exchange,
and hence a default under Moody's definitions. An amendment or
extension of credit terms that results in a loss relative to the
original promise to pay constitutes a distressed exchange.
The effective date of the restructuring plan followings the
sanctioning of the restructuring plan by the High Court on February
18, 2025[2]. Certain dissenting creditors have appealed the
decision, with an appeal hearing due to conclude by March 13, 2025.
All actions taken by Thames Water to implement the restructuring
plan prior to the conclusion of the appeal must be reversible in
case the appeal is successful.
In a few business days, Moody's will upgrade the PDR to Ca-PD,
consistent with the probability of default expectation embedded in
Thames Water Utilities Ltd.'s CFR of Caa3.
RATIONALE FOR ALL OTHER RATINGS
Thames Water's CFR reflects the challenges in Ofwat's final
determination for the regulatory period running from April 01, 2025
to March 30, 2030 as well as Moody's expectations of haircuts for
existing creditors through either a further restructuring process
within the next 12 months or as part of a special administration
process. The restructuring and the upcoming super senior issuance
provides the company with emergency liquidity. However, the company
will only establish a more sustainable capital structure and
funding position after a second debt restructuring, expected to
take place later this year and involving the raise of new equity.
Thames Water, along with five other water utilities, has appealed
its final determination to the Competition and Markets Authority
(CMA) for a redetermination. This is expected to conclude within 12
months of the formal referral by Ofwat.
The senior secured Caa3 rating of the Class A bonds issued by
Thames Water's finance subsidiary, in line with the CFR, reflects
their senior ranking in the cashflow waterfall and after any
enforcement of security. However, it also takes into account
additional super-senior obligations, including derivative
liabilities with a mark-to-market value of around GBP1.9 billion
(excluding credit value adjustment; GBP1.3 billion adjusted) at
September 2024, as well as the expected issuance of GBP1.5-3.0
billion to be provided on a super-senior basis, the servicing of
which could further reduce cash flows available to service Class A
creditors.
The C rating of the Class B bonds reflects Moody's expectations of
a heightened expected loss severity for the Class B lenders, given
their deeply subordinated position in the cash flow waterfall.
The rating action reflects materially negative financial strategy
and risk management risk under Moody's governance considerations
and regulatory risk as part of demographic and societal trends
under social considerations of Moody's frameworks for
environmental, social and governance risks.
RATING OUTLOOK
Thames Water's outlook is stable reflecting that it will take time
to establish a more sustainable capital structure, which will
ultimately determine recovery for senior lenders. However, the
currently expected recovery rate is unlikely to change in the short
term.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the ratings is unlikely in the near term. However,
upward pressure could arise in the medium to long term if there was
a substantial deleveraging, either as a result of a significant
equity injection or following a debt restructuring process.
Thames Water's ratings, specifically its CFR or senior secured
Class A debt ratings, could be downgraded further if creditors
incurred more significant losses than embedded within current
ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Regulated Water
Utilities published in August 2023.
Thames Water is the largest of the ten main water and sewerage
companies in England and Wales by both RCV (GBP20 billion at March
2024) and number of customers served. The company provides drinking
water to around nine million customers and sewerage services to
around 15 million customers in London and the Thames Valley.
THAMES WATER: S&P Ups ICR to 'CCC' on Completed Debt Restructuring
------------------------------------------------------------------
S&P Global Ratings raised its issue-level ratings on Thames Water
Utilities Finance PLC's (TWUF) Class A debt to 'CCC' and on the
Class B debt to 'CC'.
S&P also raised its issuer credit rating on Thames Water Utilities
Ltd. (TWUL) and TWUF to 'CCC' from 'D'.
The outlook on the ratings is negative.
S&P said, "Upon the completion of the maturity extension, we would
consider the default that resulted from the first stage of the
restructuring plan cured. On Feb. 25, 2025, the maturities of all
class A debt and class B debt issued by TWUF were extended by two
years. This followed the High Court of Justice of England and
Wales' approval of the restructuring plan proposed by Thames Water
Utilities Holdings Ltd. in connection with implementing a liquidity
extension transaction.
"We note that an ad hoc group of class B debt creditors, Thames
Water Ltd., and Charlie Maynard MP, were each granted permission to
appeal the court's decision to sanction the plan on certain
grounds. They have since filed and served notices of appeal. The
appeal hearings will now take place March 11-13, 2025. We believe
that, should the appeals overturn the court's decision of Feb. 18,
2025, the maturity extension would become void and new funding of
up to £3 billion would no longer be available to Thames Water.
Thames Water has the option to appeal to the Supreme Court, but
that would likely be a prolonged process. In this case, we believe
there would be insufficient liquidity for Thames Water to honor its
financial obligation in March 2025. TWUL would therefore enter
standstill and most likely enter a special administrative regime,
while TWUF would most likely also enter into insolvency
proceedings.
"We revised down our assessment of TWUL's business risk profile to
satisfactory because we now consider that U.K. water companies will
operate in a less supportive regulatory environment. On Feb. 18,
2025, we took multiple rating actions on companies in the U.K.
water utilities sector, after revising our view of the preliminary
regulatory advantage for water companies in England and Wales to
strong/adequate from strong. We project gearing at TWUL will reach
over 85%, significantly above Ofwat's notional gearing of 55%.
There are significant uncertainties associated with the execution
of TWUL's business plans under such conditions, and it already has
a track record of weak operational performance during the current
AMP7 period, including large outcome delivery incentive (ODI)
penalties. Thames Water does not believe that AMP8 operating
targets are achievable, which is one of the reasons why it has
asked Ofwat to refer its final determination to the competition and
market authority for a redetermination. We therefore continue to
apply a negative business modifier to assess TWUL's regulatory
advantage as adequate. Similar to most U.K. water companies, we
consider that the use of the medial volatility table better
reflects our risk perception for Thames Water.
"We anticipate the second stage of the restructuring plan will
likely result in write-downs of class A and class B debt. To allow
the company to make the committed investment, we anticipate
significant capital structure changes in the next 12-24 months,
which could include new equity raise, as well as likely significant
write-downs of its existing debt.
"The negative outlook indicate that we expect the second stage of
the restructuring plan will likely result in write-downs of the
class A and class B debt. There are also risks that there will be
missed repayments if the pending appeals overturn the court
decision of Feb 18, 2025."
S&P could lower the issuer credit ratings if TWUL:
-- Misses any principal or interest payments; or
-- Implements the next round of restructuring plan that includes a
potential write-down of its class A and class B debt.
S&P could revise the outlook to stable or raise the ratings if TWUL
meaningfully improves its liquidity position without weakening
terms for current lenders.
WESTVALE DEVELOPMENTS: RSM UK Named as Administrators
-----------------------------------------------------
Westvale Developments 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-2025-001224, and Lee Van Lockwood and Gordon
Thomson of RSM UK Restructuring Advisory LLP, were appointed as
administrators on Feb. 24, 2025.
Westvale Developments specialized in letting and operating of own
or leased real estate.
Its registered office and principal trading address is at 71-75
Shelton Street, Covent Garden, London, WC2H 9JQ.
The joint administrators can be reached at:
Lee Van Lockwood
RSM UK Restructuring Advisory LLP
Central Square, 5th Floor
29 Wellington Street
Leeds, LS1 4DL
-- and --
Gordon Thomson
RSM UK Restructuring Advisory LLP
25 Farringdon Street
London, EC4A 4AB
Correspondence address & contact details of case manager:
Kirsty Baillie
RSM UK Restructuring Advisory LLP
3rd Floor, 2 Semple Street
Edinburgh, EH3 8BL
Tel No: 0131-659-8300
Contact details for the Joint Administrators:
(Lee Van Lockwood)
Tel No: 0113 285 5000
(Gordon Thomson)
Tel No: 020 3201 8000
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2025. All rights reserved. ISSN 1529-2754.
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