/raid1/www/Hosts/bankrupt/TCREUR_Public/250324.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
Monday, March 24, 2025, Vol. 26, No. 59
Headlines
G E R M A N Y
ASTERIX HOLDCO: Moody's Raises CFR to B1, Alters Outlook to Stable
XSYS GERMANY: Fitch Assigns 'B-' Final LongTerm IDR, Outlook Stable
G R E E C E
PIRAEUS BANK: S&P Affirms 'BB+/B' ICR on Acquisition of Ethniki
I R E L A N D
CAPITAL FOUR I: S&P Assigns 'B-(sf)' Rating to Class F-R Notes
CAPITAL FOUR IX: Fitch Assigns 'B-sf' Final Rating to Class F Notes
DRYDEN 56 2017: Fitch Assigns 'B-sf' Final Rating to Cl. F-R Notes
EURO CLO VII: Fitch Assigns 'B-(EXP)sf' Rating to Class F Notes
HARVEST CLO XXXIV: S&P Assigns B- (sf) Rating to Class F Notes
I T A L Y
CEDACRI SPA: S&P Affirms 'B' Long-Term ICR on Sound Deleveraging
P O L A N D
CITY OF ZABRZE: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable
R O M A N I A
GLOBALWORTH REAL ESTATE: S&P Lowers ICR to 'BB', Outlook Stable
U N I T E D K I N G D O M
ASTON MARTIN: Fitch Affirms 'B-' LongTerm IDR, Outlook Now Neg.
BCP V MODULAR III: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
CHESHIRE 2021-1: Fitch Lowers Rating on Class E Notes to 'B+sf'
COUNTY PLANT: BRI Business Named as Administrators
LMR HOLDINGS: Grant Thornton Named as Administrators
LUXURY HOME: Kroll Advisory Named as Joint Administrators
THRIFT RETAIL: Alvarez & Marsal Named as Joint Administrators
WE SODA: Fitch Affirms 'BB-' Long-Term IDR, Outlook Stable
[] UK: Retail, Hospitality Administrations Up in February 2025
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G E R M A N Y
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ASTERIX HOLDCO: Moody's Raises CFR to B1, Alters Outlook to Stable
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Moody's Ratings has upgraded to B1 from B2 the long-term corporate
family rating and to B1-PD from B2-PD the probability of default
rating of Asterix HoldCo GmbH's (Asterix), the parent company of
The Quality Group GmbH (TQG), a German producer and direct seller
of sports and dietary nutrition products.
Concurrently, Moody's have assigned B1 ratings to the proposed
EUR600 million backed senior secured term loan due in 2032 and the
proposed EUR60 million backed senior secured revolving credit
facility (RCF) due in 2031, both borrowed by Asterix AcquiCo GmbH.
Moody's took no action on the ratings of the existing EUR300
million backed senior secured term loan B due in 2029 and EUR50
million backed senior secured revolving credit facility (RCF) due
in 2028, both borrowed by Asterix AcquiCo GmbH, and Moody's expects
to withdraw these ratings upon full repayment with proceeds from
the proposed transaction. The outlook on both entities was changed
to stable from positive.
Proceeds from the proposed EUR600 million new term loan, along with
EUR12 million of cash on balance sheet, will refinance the existing
debt, fund a bolt-on acquisition in the US and EUR200 million
dividend to shareholders and pay related transaction fees.
"The rating action reflects Moody's expectations that, although the
sponsor opted for a shareholder-friendly financial policy using the
financial flexibility gained from robust earnings to re-leverage
the restricted group, continued solid operating performance
trajectory will favor continued deleveraging. This largely offset
the additional debt raised and will keep credit metrics and
leverage at a level commensurate with a B1 rating", says Valentino
Balletta, a Moody's Ratings Analyst and lead analyst for TQG.
"The upgrade also reflects improving scale and a gradual increase
in diversification both by geography and channels, also supported
by the expansion in the US, as well as expectations of solid
projected free cash flow, and good liquidity" adds Mr Balletta.
RATINGS RATIONALE
While the proposed transaction increases TQG's gross leverage by
around 1.9x on a pro forma basis for the last twelve months as of
February 2025, the upgrade reflects the company's continued strong
operating performance that will support deleveraging over the next
12 to 18 months following the transaction, to a level which Moody's
believes is commensurate with credit metrics set for the current B1
CFR.
Considering the revised capital structure and the bolt-on
acquisition in US that the company aims to finalize in the near
term, Moody's anticipates Moody's-adjusted leverage — measured as
Moody's-adjusted gross debt/EBITDA — declining to 3.3x by the end
of 2025, and to approximately 2.6x in 2026. This will be driven by
earnings growth, primarily from the implementation of value
creation initiatives, including geographical expansion, and
sustained good profitability.
Although, the absolute amount of debt and the higher interest
burden weight on TQG's cash flow generation capacity, Moody's
expects retained cash flow (RCF) to net debt to remain above 20% in
2025, with further substantial improvement thereafter. Moody's also
expects FCF to remain positive at around EUR60 million in 2025 and
EUR90 million in 2026 and EBITA coverage of interest to remain
comfortable for the rating category at more than 4.0x over the next
couple of years.
The upgrade also reflects improving scale with revenue pro forma
for the US acquisition, approaching EUR1 billion. The acquisition,
while creating integration and high execution risks, given the
expansion in a highly competitive market, will enhance TQG'
geographical reach and channel diversification towards food
retailers and business-to-business (B2B). This demonstrate that the
company continues to pursue its expansion strategy aiming at
strengthening its existing market positions and expand into new
geographies, while maintaining a financial policy that is aligned
with key credit metrics, including its Moody's-adjusted gross
debt/EBITDA staying below 3.5x on a sustained basis.
Moody's expects the company to keep delivering on its organic plan,
incorporating the new management capabilities to achieve
sustainable growth, which focuses on diversifying its channels,
including expanding its business-to-business operations, and its
geographical reach. At the same time, Moody's also expect TQG will
continue to utilize bolt-on acquisition to facilitate growth and
diversification, that entails some event and execution risks.
However, this is partially compensated by Moody's expectations that
the company's good cash flow generation capacity could potentially
be used to fund accretive bolt-on acquisition.
TQG's B1 CFR takes into account the benefits from favorable demand
dynamics, reflecting growing consumer demand for healthy,
convenient, protein-enriched food and beverages; solid profit
margins; and the market-leading position of its two core brands,
ESN and More Nutrition, in the sports and dietary nutrition
market.
Less positively, the rating remains constrained by the company's
significant geographical concentration in its Germany market,
despite some presence in other European markets and the US;
production concentration in one manufacturing plant; narrow
business focus on a niche market, with limited product categories;
and exposure to the risks related to its community leader marketing
strategy. The high product and channel concentration creates
potential earnings volatility given the competitive market.
ESG CONSIDERATIONS
Governance was one of the key drivers of rating action because
Moody's views the decision to re-leverage the company capital
structure as a sign of shareholders-friendly financial policy.
However, Moody's assumes the company's financial policy will remain
unchanged, including the intention to operate the business with a
net debt-to-EBITDA leverage target below 3.5x.
LIQUIDITY
Pro forma for the transaction, Moody's expects TQG to maintain good
liquidity in the next 12-18 months, supported by a cash balance of
EUR52 million at closing and full availability under the EUR60
million equivalent multi-currency revolving credit facility (RCF)
due in 2031. Moody's expects the company to maintain ample capacity
under the springing covenant of total net leverage at the holding
company level not exceeding 6.4x (3.1x at closing, pro forma for
the transaction), tested when the facility is more than 40% drawn.
Moody's also expects TQG to generate solid FCF of more than EUR60
million in 2025 and around EUR90 million in 2026 on the back of
improving earnings, and despite higher project-based capital
spending to support growth.
Assuming no RCF utilisation, the company will have no material debt
maturities until 2032, when its term loan is due.
COVENANTS
Moody's have reviewed the marketing draft terms for the new credit
facilities. Notable terms include the following:
Guarantor coverage will be at least 80% of consolidated EBITDA
(determined in accordance with the agreement) and include all
companies representing 5% or more of consolidated EBITDA. Security
will be granted over key shares, bank accounts and receivables,
with floating charges in England & Wales and all asset security in
USA.
Unlimited pari passu debt is permitted up to a senior secured net
leverage ratio of 3.2x, and unlimited unsecured debt is permitted
subject to a total net leverage ratio of 4.5x. Unlimited restricted
payments are permitted if TNLR is 2.5x or lower, unlimited
restricted investments are permitted if it is 3.0x or lower, and
unlimited payments of subordinated debt are permitted if it is 4.5x
or lower. Asset sale proceeds are only required to be applied in
full where SSNLR leverage is greater than 3.20x.
Adjustments to consolidated EBITDA include the full run rate of
cost savings and synergies, capped at 25% of consolidated EBITDA
and believed to be realisable within 18 months of the test period.
The proposed terms, and the final terms may be materially
different.
STRUCTURAL CONSIDERATIONS
The B1 ratings assigned to the EUR600 million backed senior secured
term loan and the EUR60 million backed senior secured RCF, both
borrowed by Asterix AcquiCo GmbH, is in line with the CFR,
reflecting the fact that these instruments rank pari passu and
constitute most of the company's debt. The term loan and the RCF
benefit from pledges over the shares of the borrower and
guarantors, as well as bank accounts and intragroup receivables,
and are guaranteed by the group's operating subsidiaries
representing at least 80% of consolidated EBITDA.
The B1-PD probability of default rating assigned to TQG reflects
Moody's assumptions of a 50% family recovery rate, given the weak
security package and the covenant-lite structure.
The capital structure also includes a shareholder loan from the
original leveraged buyout transaction, which will be partially
repaid as part of this transaction, entering the restricted group
and lent to Asterix HoldCo GmbH, with maturity beyond the term
loan, to which Moody's assign 100% equity credit.
RATIONALE FOR THE STABLE OUTLOOK
The stable rating outlook reflects Moody's expectations that the
company's credit metrics will continue to improve over the next
12-18 months, supported by revenue growth and solid operating
performance. The stable outlook assumes that the company will
maintain good liquidity and a financial strategy that ensures
moderate leverage and good interest coverage. It also assumes that
the company will not undertake any large debt-funded acquisitions
or shareholder distributions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade could occur over time if the company continues to
successfully execute its expansion strategy and materially
diversify its product offerings, channel mix and geographic reach;
maintains its Moody's-adjusted gross debt/EBITDA below 2.0x on a
sustained basis; maintains at least good liquidity and a FCF/debt
that is consistently above 15%. An upgrade would also require the
company to maintain a track record of financial policy consistent
with these credit metrics with meaningful levels of
predictability.
A rating downgrade could occur if the company's operating
performance significantly deteriorates because of significant
market share losses, or declining profitability or the company
engages in large debt-funded distributions such that it fails to
maintain a Moody's-adjusted gross debt/EBITDA below 3.5x on a
sustained basis; or the company fail to maintain free cash
flow-to-debt above 10%, resulting in weakened liquidity.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Consumer
Packaged Goods published in June 2022.
COMPANY PROFILE
TQG is a leading German sports and dietary nutrition company,
operating primarily in Germany, but with a foothold in other
European countries and the US. It offers premium lifestyle products
like protein powder, weight management items, vitamins, drinks, and
sports supplements, under its two core brands More Nutrition and
ESN. The company develops and produces around 80% of its products
in-house and outsources the rest. Pro forma for the acquisition,
about 70% of its sales are direct-to-consumer online, leveraging a
community leader marketing strategy. In 2024, the company generated
EUR904 million in revenue and EUR155 million in company-adjusted
EBITDA (pro forma for the acquired business).
CVC Capital Partners is the majority shareholder, with the founding
shareholders holding a minority stake.
XSYS GERMANY: Fitch Assigns 'B-' Final LongTerm IDR, Outlook Stable
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Fitch Ratings has assigned XSYS Germany Holding GmbH (XSYS) a final
Long-Term Issuer Default Rating (IDR) of 'B-'. The Outlook is
Stable. Fitch has also assigned its first-lien term loan B (TLB) of
EUR435 million with an add-on of EUR250 million a final senior
secured rating of 'B-' with a Recovery Rating of 'RR4'.
The IDR is constrained by the company's small size, limited product
diversification, material execution risk associated with its
acquisition of MacDermid Graphics Solutions (MGS), and high
leverage post its debt issue. This is balanced by the group's
strong market position, good geographical and customer
diversification, and expected healthy EBITDA margins.
Fitch expects improving EBITDA generation to drive a material
improvement in free cash flow (FCF) margins from 2026 onwards,
which will bring leverage to within its rating sensitivity and
supports the Stable Outlook.
Key Rating Drivers
Transformative Acquisition: XSYS completed its acquisition of MGS
from Element Solutions at end-February 2025. The acquisition is
transformative for XSYS as Fitch estimates it will contribute to
about 50% of total revenue and EBITDA. The transaction was
conducted on a debt- and cash-free basis. MGS is a complementary
fit as a manufacturer of flexographic plates and reseller of
platemaking equipment for package printing markets globally.
Management's pro-forma projections indicate that MGS's EBITDA
margins are lower than those of XSYS (which are above 30% based on
management data), but they are still healthy at over 20%. Fitch
expects acquisition synergies to support margins improvement.
High Leverage to Reduce: XSYS's EBITDA leverage is high, which
Fitch estimates at 9.8x end-2024, without considering the TLB
add-on of EUR250 million. Fitch forecasts high pro-forma leverage
of 8.2x at end-2025, post-TLB add on, before improving to 7.0x at
end-2026 on stronger EBITDA, which is commensurate with the
rating.
Healthy Profitability: XSYS's financial profile benefits from solid
EBITDA margins, of above 20% based on 2023 financials
(Fitch-defined calculations). Management is targeting further
profitability improvement; cost savings initiatives launched in
2022, along with acquisition synergies, should help XSYS double its
EBITDA by 2028 versus the 2023 level. Fitch forecasts EBITDA
margins to increase to 28.1% in 2026 and to above 29% from 2027
onwards, compared with 22.7% in 2023.
Improving FCF: XSYS's FCF is weak due to material interest costs
and capex exceeding EBITDA. Fitch forecasts FCF will be sustainably
positive from 2026 onwards, following the MGS acquisition and
subsequent EBITDA margin improvement. With the absence of
dividends, Fitch expects FCF margins to be sustainably above 3%,
supporting its deleveraging capacity.
Strong Market Position: XSYS holds a strong market position in a
highly specialised area of flexographic plates production. The MGS
acquisition will further bolster this position and enable an
expansion of its sales footprint. Its solid market position and
strong R&D underpin its long-term relationship with customers and
support revenue and EBITDA generation.
Good Geographical Diversification: XSYS's business profile is
characterised by good geographical and customer diversification.
About 42% of its revenue following the MGS acquisition is exposed
to EMEA, North America at 27% , Latin America at 16%, and Asia at
15%. The group also benefits from a well-diversified customer
base.
Limitations on Business Profile: XSYS's business profile is
constrained by its small scale in comparison to larger industrial
peers as it operates in a highly specialised area. In addition, it
has a narrow product range of primarily flexible and corrugated
packaging, further limiting its operational flexibility.
Peer Analysis
Like Flender International GmbH (B/Stable), EVOCA S.p.A. (B/Stable)
and Ammega Group B.V. (B-/Stable), XSYS's business profile is
constrained, with a less diversified product range and market
exposure compared with its large industrial peers. Nevertheless,
the group has good geographical diversification, similar to
Ahlstrom Holding 3 Oy (B+/Stable), Ammega, Flender, and INNIO Group
Holding GmbH (B+/Positive).
XSYS's financial profile features solid double-digit EBITDA
margins, which are higher than that of some Fitch-rated diversified
industrials peers, such as Flender, TK Elevator and Ahlstrom, but
are close to Evoca's margins. Fitch forecasts a material
improvement of FCF margins from 2026 onwards, reaching levels
comparable to those forecast for INNIO and Evoca.
Projected high EBITDA leverage of 9.0x at end-2025 is similar to
those of Ammega and TK Elevator Holdco GmbH (B/Stable), but is
higher than Evoca's, Flender's, and Ahlstrom's.
Key Assumptions
- Revenue to rise 50% in 2025 due to the acquisition of MGS,
followed by increases in the mid-teens in 2026 and mid-single
digits in 2027 and 2028. This follows a revenue gain of 3.9% in
2024
- Costs initiatives to drive EBITDA margin to close to 30% from
2027 onwards, versus 23% in 2024
- Capex at 4% of revenue in 2024-2026 and 3% in 2027-2028
- Add-on of EUR250 million drawn in 2025 following the MGS
acquisition
- No debt amortisation with bullet maturity in 2029
- No M&As before 2028
- No dividend payments before 2028
Recovery Analysis
- The recovery analysis assumes that XSYS would be reorganised as a
going concern (GC) in bankruptcy rather than liquidated
- Fitch assumes a 10% administrative claim
- Fitch estimates the GC EBITDA of XSYS at EUR80 million, taking
into account the acquisition of MGS. The GC EBITDA reflects its
view of a sustainable, post-reorganisation EBITDA on which Fitch
bases the valuation of the group
- Fitch applies an enterprise value multiple of 5.0x to GC EBITDA
to calculate a post-reorganisation valuation. It reflects XSYS's
strong market position in the flexographic plates industry, good
geographical diversification, and expected moderate FCF generation.
The enterprise value multiple also reflects the group's limited
range of products and scale
- Fitch deducts about EUR12 million from the enterprise value due
to XSYS's high use of factoring, in line with its criteria
- Fitch estimates senior debt claims at EUR875 million, which
include an increased EUR110 million senior secured revolving credit
facility (RCF), a EUR685 million senior secured first-lien TLB
(including an add-on of EUR250 million), and a EUR80 million
secured second-lien TLB
- Its waterfall analysis generates a ranked recovery for XSYS's TLB
(excluding the second-lien TLB) in the 'RR4' category, leading to a
'B-' rating for the TLB.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA leverage above 7.5x
- EBITDA interest coverage below 1.5x
- FCF margin consistently negative
- Failure to deliver EBITDA margin growth with cost-optimisation
initiatives and a structurally weaker business profile
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA leverage below 6.0x
- EBITDA interest coverage above 2.5x
- FCF margin consistently above 3%
Liquidity and Debt Structure
At end-September 2024, XSYS had readily available cash of EUR23.8
million (net of Fitch-restricted cash of EUR2.3 million) and an
undrawn RCF of EUR80 million, due in August 2028, which is
sufficient to cover slightly negative FCF over the next 12 months.
The group has increased its RCF to EUR110 million following the TLB
issue, further supporting its liquidity. Expected sustainably
positive FCF generation from 2026 will serve as an additional cash
cushion.
XSYS has a favourable debt maturity profile with its first-lien TLB
due February 2029 and its second-lien TLB due February 2030. In
addition, XSYS has a EUR89 million shareholder loan that matures
six months after the second-lien TLB, which Fitch views as
equity-like.
Issuer Profile
XSYS is a leading provider of mission-critical consumables
(printing plates and sleeves) and equipment to the global
flexographic printed 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
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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XSYS Germany
Holding GmbH LT IDR B- New Rating B-(EXP)
senior secured LT B- New Rating RR4 B-(EXP)
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PIRAEUS BANK: S&P Affirms 'BB+/B' ICR on Acquisition of Ethniki
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On March 20, 2025, S&P Global Ratings affirmed its 'BB+/B' long-
and short-term issuer credit ratings on Greece-based Piraeus S.A.
and its 'BB-/B' long- and short-term issuer credit ratings on
Piraeus Financial Holdings S.A. The outlooks on both entities
remain stable.
S&P said, "The capital consumption of the deal does not challenge
our moderate capital and earnings assessment. The deal, which
remains subject to regulatory approval, will be paid in EUR540
million cash to acquire 90.01% of Ethniki Insurance from CVC
Capital Partners, representing a capital hit of 50 bps-60 bps as
measured by our RAC ratio. We forecast the bank's RAC ratio to
stand at about 5.7% by end-2025 down from 6.2% before the
announcement, compared to the bank's estimated total capital ratio
for 2025 of 18.5% which was previously forecast at 20.0%. Piraeus
qualifies for a moderate capital and earnings assessment, although
with less buffer against the lower threshold of the 5%-7% range.
Piraeus' operating performance will support its capitalization
going forward with its RAC ratio projected to increase to 5.9%-6.1%
over the next 24 months, down from our previous forecast of
6.4%-6.6%."
Strategically, the acquisition aligns with Piraeus' ambition to
increase its fee-based revenue stream. Ethniki Insurance is one of
Greece's leading insurers, covering the entire spectrum of
insurance products, with a market share of about 14% in 2023 (17%
in life and 11% in non-life). S&P views the transaction as a
pivotal step in Piraeus' strategic expansion into the insurance
sector, reinforcing its revenue diversification and enhancing its
noninterest income profile, shifting from distributing third party
insurance services to running its own in-house insurance business.
Piraeus is expecting the share of net fees over net revenues to
increase to about 28% from 25% from 2026.
However, there are uncertainties surrounding the deal, including
Ethniki's financial strength and state upon acquisition; how the
existing insurance distribution agreements of Ethniki and NBG and
those of Piraeus and Ergo Insurance and NN Hellas will work out
after the transaction; or how Ethniki will be run and how its
operations will be integrated with those of the bank. S&P will
closely monitor the situation as further developments unfold.
S&P said, "Our stable outlook on Piraeus Bank reflects our
expectation that the bank will preserve its creditworthiness over
the next 12-24 months, supported Greece's benign economic
environment.
"Despite lower rates and higher dividend payouts, we think that
Piraeus Bank will preserve sound profitability. We anticipate that
return on equity will gradually decline from its 2024 peak but
remain solid at 12.8% in 2026. Efficiency will also remain strong,
at 36.5%, even if it represents a weakening from an all-time low of
29.5% in September 2024. We expect asset quality indicators to
remain resilient, with the bank's nonperforming exposure ratio
dropping below 3% by year-end 2024, paving the way for better
cost-of-risk prospects moving forward. We also anticipate a smooth
completion of the purchase of Ethniki, which should contribute to
Piraeus' fee-based revenues in the upcoming years.
"We could lower the long-term rating on Piraeus Bank if its
performance is less resilient to declining rates than we
anticipate, leading to diminished earnings capacity and weaker
capitalization as the business expands. We could also lower the
rating if Piraeus' appetite for acquisitions increases in a manner
that erodes the bank's capital base or materially weaken its
operating efficiency."
A downgrade of Piraeus Bank will lead to a downgrade of Piraeus
Financials Holdings.
S&P said, "We could raise our rating on the bank if we see its
capitalization strengthening, with its RAC ratio exceeding 7% on a
sustained basis. This is, however, not our base-case scenario.
Although the bank will remain profitable, acquiring Ethniki is
depleting capital buffers." Furthermore, the bank has already fully
utilized its regulatory Tier 1 bucket and is committed to
distribute 50% of its earnings in the form of dividends, while
still financing loan growth.
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CAPITAL FOUR I: S&P Assigns 'B-(sf)' Rating to Class F-R Notes
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S&P Global Ratings assigned credit ratings to Capital Four CLO I
DAC's class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R reset notes.
At closing, the issuer had subordinated notes outstanding from the
existing transaction.
This transaction is a reset of the already existing transaction
which closed in December 2019. The issuance proceeds of the
refinancing debt will be used to redeem the refinanced debt (the
original transaction's class and class A, B-1, B-2, C, D, E, and F
notes, for which we withdrew our ratings at the same time), and pay
fees and expenses incurred in connection with the reset.
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will permanently switch to semiannual payments.
The portfolio's reinvestment period will end 4.5 years after
closing, while the noncall period will end 1.5 years after
closing.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
--The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2816.69
Default rate dispersion 572.07
Weighted-average life(years) 3.47
Weighted-average life including reinvestment (years) 4.50
Obligor diversity measure 101.18
Industry diversity measure 23.17
Regional diversity measure 1.30
Transaction key metrics
Portfolio weighted-average rating derived from our CDO
evaluator B
'CCC' category rated assets (%) 4.05
Actual 'AAA' weighted-average recovery (%) 37.48
Actual floating-rate assets (%) 91.32
Actual weighted-average coupon 2.89
Actual weighted-average spread (net of floors; %) 3.72
The portfolio is well-diversified, primarily comprising broadly
syndicated speculative-grade senior secured term loans and senior
secured bonds. Therefore, S&P has conducted its credit and cash
flow analysis by applying its criteria for corporate cash flow
CDOs.
S&P said, "In our cash flow analysis, we used the EUR375 million
target par amount, the covenanted targeted weighted-average spread
(3.57%), and the covenanted targeted weighted-average coupon
(2.80%) as indicated by the collateral manager. We assumed the
covenanted weighted-average recovery rate (36.48%) at the 'AAA'
rating level and the actual targeted weighted-average recovery
rates at all other rating levels. We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"Our credit and cash flow analysis shows that the class B-1-R,
B-2-R, C-R, D-R, and E-R notes benefit from break-even default rate
(BDR) and scenario default rate cushions that we would typically
consider to be in line with higher ratings than those assigned.
However, as the CLO is still in its reinvestment phase, during
which the transaction's credit risk profile could deteriorate, we
have capped our ratings on the notes."
The class A-R notes can withstand stresses commensurate with the
assigned rating.
For the class F-R notes, our credit and cash flow analysis indicate
that the available credit enhancement could withstand stresses
commensurate with a lower rating. However, S&P has applied its
'CCC' rating criteria, resulting in a 'B- (sf)' rating on this
class of notes.
The ratings uplift for the class F-R notes reflects several key
factors, including:
-- The class F-R notes' available credit enhancement, which is in
the same range as that of other CLOs we have rated and that have
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P's model generated BDR at the 'B-' rating level of 25.87%
(for a portfolio with a weighted-average life of 4.50 years),
versus if it was to consider a long-term sustainable default rate
of 3.1% for 4.50 years, which would result in a target default rate
of 13.95%.
-- S&P does not believe that there is a one-in-two chance of this
tranche defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
-- Following this analysis, we consider that the available credit
enhancement for the class F-R notes is commensurate with the
assigned 'B- (sf)' rating.
S&P said, "Until the end of the reinvestment period on Sept. 20,
2029, the collateral manager may substitute assets in the portfolio
for so long as our CDO Monitor test is maintained or improved in
relation to the initial ratings on the notes. This test looks at
the total amount of losses that the transaction can sustain as
established by the initial cash flows for each rating, and compares
that with the current portfolio's default potential plus par losses
to date. As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, if the initial ratings are
maintained.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"The transaction's legal structure and framework are bankruptcy
remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for the class
A-R to F-R notes.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we also included the
sensitivity of the ratings on the class A-R to E-R notes based on
four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category--and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met--we have not included the above scenario analysis results
for the class F-R notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit or limit certain assets
from being related to certain activities. Since the exclusion of
assets from these activities does not result in material
differences between the transaction and our ESG benchmark for the
sector, no specific adjustments have been made in our rating
analysis to account for any ESG-related risks or opportunities."
Ratings list
Balance Credit
Class Rating* (mil. EUR) enhancement (%) Interest rate§
A-R AAA (sf) 232.50 38.00 Three/six-month EURIBOR
plus 1.20%
B-1-R AA (sf) 26.80 28.19 Three/six-month EURIBOR
plus 1.75%
B-2-R AA (sf) 10.00 28.19 4.50%
C-R A (sf) 24.40 21.68 Three/six-month EURIBOR
plus 2.25%
D-R BBB- (sf) 27.90 14.24 Three/six-month EURIBOR
plus 3.30%
E-R BB- (sf) 17.80 9.49 Three/six-month EURIBOR
plus 5.00%
F-R B- (sf) 11.30 6.48 Three/six-month EURIBOR
plus 8.51%
Sub. NR 37.00 N/A N/A
*The ratings assigned to the class A-R, B-1-R, and B-2-R notes
address timely interest and ultimate principal payments. The
ratings assigned to the class C-R, D-R, E-R, and F-R notes address
ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event
occurs.
EURIBOR--Euro Interbank Offered Rate
NR--Not rated
N/A--Not applicable
Sub.--Subordinated
CAPITAL FOUR IX: Fitch Assigns 'B-sf' Final Rating to Class F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Capital Four CLO IX DAC final ratings,
as detailed below.
Entity/Debt Rating
----------- ------
Capital Four CLO IX DAC
Class A XS2990401197 LT AAAsf New Rating
Class B-1 XS2990401353 LT AAsf New Rating
Class B-2 XS2990401510 LT AAsf New Rating
Class C XS2990401783 LT Asf New Rating
Class D XS2990401940 LT BBB-sf New Rating
Class E XS2990402161 LT BB-sf New Rating
Class F XS2990402674 LT B-sf New Rating
Class X XS2990400892 LT AAAsf New Rating
Subordinated Notes XS2990402591 LT NRsf New Rating
Transaction Summary
Capital Four CLO IX DAC is a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans and high-yield bonds. Note
proceeds have been used to fund a portfolio with a target par of
EUR450 million. The portfolio is managed by Capital Four CLO
Management II K/S and Capital Four Management Fondsmæglerselskab
A/S. The CLO has a 5.1-year reinvestment period and an eight-year
weighted average life (WAL) test at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch places the
average credit quality of obligors in the 'B' category. The Fitch
weighted average rating factor of the identified portfolio is
24.4.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 61.9%.
Diversified Asset Portfolio (Positive): The transaction also
includes various other concentration limits, including a maximum
exposure to the three largest Fitch-defined industries in the
portfolio at 40%. These covenants ensure that the asset portfolio
will not be exposed to excessive concentration.
Portfolio Management (Neutral): The transaction has four matrices;
two effective at closing with fixed-rate limits of 5% and 10%, and
two at one year after closing (or 24 months after closing if the
WAL is extended) with the same fixed-rate limits, provided that the
portfolio balance (defaults at Fitch-calculated collateral value)
is above target par. All four matrices are based on a top-10
obligor concentration limit of 20%. The closing matrices correspond
to an eight-year WAL test, while the forward matrices correspond to
a seven-year WAL test.
The transaction has a 5.1-year reinvestment period and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed
portfolio analysis is 12 months less than the WAL covenant (subject
to a floor of six years), to account for the strict reinvestment
conditions envisaged by the transaction after its reinvestment
period. These include passing the coverage tests and the Fitch
'CCC' bucket limit test post reinvestment, as well as a WAL
covenant that progressively steps down over time, both before and
after the end of the reinvestment period. Fitch believes these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would lead to downgrades of no more than two notches each
for the class B and C notes, one notch each for the class D and E
notes, to below 'B-sf' for the class F notes and have no impact on
the class A notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B and C notes each display
a rating cushion of one notch, the class D, E and F notes each have
a cushion of two notches, while the class A notes have no rating
cushion.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of up to four
notches each for the class A to D notes and to below 'B-sf' for the
class E and F notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to three notches each for the notes, except for the
'AAAsf' rated notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
transaction's remaining life. After the end of the reinvestment
period, upgrades may result from stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread to cover losses in the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Capital Four CLO IX
DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
DRYDEN 56 2017: Fitch Assigns 'B-sf' Final Rating to Cl. F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned Dryden 56 Euro CLO 2017 DAC reset notes
final ratings, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Dryden 56 Euro CLO 2017 DAC
Class A Loan LT AAAsf New Rating AAA(EXP)sf
Class A-R XS2998763069 LT AAAsf New Rating AAA(EXP)sf
Class B-1-R XS2998763499 LT AAsf New Rating AA(EXP)sf
Class B-2-R XS2998763655 LT AAsf New Rating AA(EXP)sf
Class C-R XS2998763812 LT Asf New Rating A(EXP)sf
Class D-1-R XS2998764034 LT BBB-sf New Rating BBB-(EXP)sf
Class D-2-R XS2998764208 LT BBB-sf New Rating BBB-(EXP)sf
Class E-R XS2998764463 LT BB-sf New Rating BB-(EXP)sf
Class F-R XS2998764620 LT B-sf New Rating B-(EXP)sf
Subordinated Notes
XS3008571674 LT NRsf New Rating NR(EXP)sf
Transaction Summary
Dryden 56 Euro CLO 2017 DAC is a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans, first-lien last-out loans
and high-yield bonds. Net proceeds from the debt issuance were used
to redeem the existing rated notes and to fund a portfolio with a
target par of EUR500 million.
The portfolio is actively managed by PGIM Loan Originator Manager
Limited and PGIM Limited. The collateralised loan obligations (CLO)
have a reinvestment period of about 4.5 years and an 8.5-year
weighted average life (WAL) test.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 24.6.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is 62.6%.
Diversified Portfolio (Positive): The transaction includes various
concentration limits, including a maximum exposure to the three
largest Fitch-defined industries in the portfolio at 40%. These
covenants ensure that the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction includes four Fitch
test matrices, two of which are effective at closing. All matrices
correspond to a top 10 obligor concentration limit of 25%,
fixed-rate obligation limits at 5% and 12.5%, and an 8.5-year WAL
covenant. The transaction has two forward matrices corresponding to
the same top 10 obligors and fixed-rate asset limits, and a
7.5-year WAL covenant. The forward matrices will be effective
one-year post closing, subject to the aggregate collateral balance
(defaults at Fitch collateral value) being at least at the
reinvestment target par.
The transaction has a reinvestment period of about 4.5 years and
includes reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed portfolio
with the aim of testing the robustness of the transaction structure
against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL used for the transaction's
Fitch-stressed portfolio and matrices analysis is 12 months less
than the WAL covenant. This is to account for structural and
reinvestment conditions after the reinvestment period, including
passing the over-collateralisation tests and the Fitch 'CCC'
limitation test. Fitch believes these conditions will reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would lead to downgrades of no more than one notch each
for the class B-1-R, B-2-R, D-2-R notes, and would have no impact
on the class A-loan, class A-R, D-1-R, E-R and F-R notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B-1-R, B-2-R. D-1-R, D-2-R
and E-R notes each display a rating cushion of two notches and the
class C-R and F-R notes have a cushion of three notches. The class
A-R notes and class A-loan have no rating cushion, as their ratings
are already the highest achievable on Fitch's rating scale.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of up to four
notches for the class A-loan and the class A-R to D-2-R notes, and
to below `B-sf´ for the class E-R and F-R notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to three notches each, except for the 'AAAsf' debt.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
transaction's remaining life. After the end of the reinvestment
period, upgrades may result from stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread available to cover losses in the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Dryden 56 Euro CLO
2017 DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
EURO CLO VII: Fitch Assigns 'B-(EXP)sf' Rating to Class F Notes
---------------------------------------------------------------
Fitch Ratings has assigned Armada Euro CLO VII DAC expected
ratings. The assignment of final ratings is contingent on the
receipt of final documents conforming to information already
reviewed.
Entity/Debt Rating
----------- ------
Armada Euro CLO VII DAC
A XS2978783368 LT AAA(EXP)sf Expected Rating
B XS2978783525 LT AA(EXP)sf Expected Rating
C XS2978783871 LT A(EXP)sf Expected Rating
D XS2978784093 LT BBB-(EXP)sf Expected Rating
E XS2978784259 LT BB-(EXP)sf Expected Rating
F XS2978784416 LT B-(EXP)sf Expected Rating
Subordinated XS2978784689 LT NR(EXP)sf Expected Rating
Transaction Summary
Armada Euro CLO VII DAC will be a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans and high-yield bonds. Note
proceeds will be used to fund a portfolio with a target par of
EUR400 million. The portfolio will be actively managed by Brigade
Capital Europe Management LLP. The collateralised loan obligation
(CLO) will have a reinvestment period of around 4.5 years and an
8.5 year weighted average life (WAL) test limit.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch places the
average credit quality of obligors at 'B'/'B-'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 25.1.
High Recovery Expectations (Positive): At least 90% of the
portfolio is expected to comprise senior secured obligations. Fitch
views the recovery prospects for these assets as more favourable
than for second-lien, unsecured and mezzanine assets. The Fitch
weighted average recovery rate (WARR) of the identified portfolio
is 65.2%.
Diversified Asset Portfolio (Positive): The transaction will
include various concentration limits, including a maximum exposure
to the three largest Fitch-defined industries in the portfolio at
40% and a 10 largest obligor concentration limit at 20%. These
covenants ensure that the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction will have a
reinvestment period of around 4.5 years and will include
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period, including passing the over-collateralisation and Fitch
'CCC' limitation tests, and a WAL covenant that progressively steps
down over time. In Fitch's opinion, these conditions reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A, B, E and F notes,
and would lead to a downgrade of no more than one notch each to the
class C and D notes.
Downgrades, which are based on the identified portfolio, may occur
if the loss expectation is larger than initially assumed, due to
unexpectedly high levels of defaults and portfolio deterioration.
Due to the better metrics of the identified portfolio than the
Fitch-stressed portfolio, the rated notes each display a rating
cushion to a downgrade of up to five notches.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio erode due to manager trading or negative
portfolio credit migration, a 25% increase of the mean RDR and a
25% decrease of the RRR across all ratings of the Fitch-stressed
portfolio would result in downgrades of three notches each on the
class A and D notes, four notches each on the class B and C notes,
and to below 'B-sf' for the class E and F notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to an
upgrade of up to five notches each for the rated notes, except for
the 'AAA(EXP)sf' notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
remaining life of the transaction. After the end of the
reinvestment period, upgrades may result from stable portfolio
credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Armada Euro CLO VII
DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
HARVEST CLO XXXIV: S&P Assigns B- (sf) Rating to Class F Notes
--------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Harvest CLO XXXIV
DAC's class A-1, A-2, B-1, B-2, C, D, E, and F notes. At closing,
the issuer also issued unrated subordinated notes.
Under the transaction documents, the rated notes pay quarterly
interest, unless a frequency switch event occurs. Following such an
event, the notes would permanently switch to semiannual payments.
The portfolio's reinvestment period ends 4.58 years after closing;
the noncall period ends 1.5 years after closing.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,867.56
Default rate dispersion 486.98
Weighted-average life (years) 4.67
Obligor diversity measure 129.79
Industry diversity measure 22.42
Regional diversity measure 1.18
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 1.22
Actual 'AAA' weighted-average recovery (%) 37.29
Actual floating-rate assets (%) 98.35
Actual weighted-average coupon 4.58
Actual weighted-average spread (net of floors; %) 3.75
S&P said, "The portfolio is well-diversified, primarily comprising
broadly syndicated speculative-grade senior secured term loans and
senior secured bonds. Therefore, we have conducted our credit and
cash flow analysis by applying our criteria for corporate cash flow
CDOs.
"In our cash flow analysis, we used the EUR450 million target par
amount, the covenanted targeted weighted-average spread (3.75%),
and the covenanted targeted weighted-average coupon (4.50%), as
indicated by the collateral manager. We assumed the identified
weighted-average recovery rates at all rating levels. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios, for each liability rating category.
"Our credit and cash flow analysis shows that the class B-1 to
class F notes benefit from break-even default rate and scenario
default rate cushions that we would typically consider to be in
line with higher ratings than those assigned. However, as the CLO
is still in its reinvestment phase, during which the transaction's
credit risk profile could deteriorate, we have capped our ratings
on the notes. The class A-1 and A-2 notes can withstand stresses
commensurate with the assigned ratings."
Until Oct. 15, 2029, when the reinvestment period ends, the
collateral manager may substitute the assets in the portfolio, as
long the CDO Monitor test is maintained or improved in relation to
the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain, as established
by the initial cash flows for each rating, and compares that with
the current portfolio's default potential, plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may, through trading, cause the transaction's
credit risk profile to deteriorate.
Under S&P's structured finance sovereign risk criteria, the
transaction's exposure to country risk is sufficiently mitigated at
the assigned ratings.
At closing, the transaction's documented counterparty replacement
and remedy mechanisms adequately mitigate its exposure to
counterparty risk under our current counterparty criteria.
The transaction's legal structure and framework is bankruptcy
remote, in line with S&P's legal criteria.
S&P said, "Following our analysis of the credit, cash flow,
counterparty, operational, and legal risks, we believe the ratings
assigned are commensurate with the available credit enhancement for
the class A-1 to F notes.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we also assessed the
sensitivity of our ratings on the class A-1 to E notes, based on
four hypothetical scenarios.
"As our ratings analysis includes additional considerations to be
incorporated before we would assign ratings in the 'CCC'
category--and we would assign a 'B-' rating if the criteria for
assigning a 'CCC' category rating are not met--we have not included
the above scenario analysis results for the class F notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit assets from being related
to certain industries. Accordingly, since the exclusion of assets
from these industries does not result in material differences
between the transaction and our ESG benchmark for the sector, no
specific adjustments have been made in our rating analysis to
account for any ESG-related risks or opportunities."
Ratings list
Balance Credit
Class Rating* (mil. EUR) enhancement (%) Interest rate§
A-1 AAA (sf) 274.50 39.00 Three/six-month EURIBOR
plus 1.25%
A-2 AAA (sf) 6.75 37.50 Three/six-month EURIBOR
plus 1.45%
B-1 AA (sf) 37.25 27.00 Three/six-month EURIBOR
plus 1.75%
B-2 AA (sf) 10.00 27.00 4.50%
C A (sf) 27.00 21.00 Three/six-month EURIBOR
plus 2.00%
D BBB- (sf) 32.60 13.76 Three/six-month EURIBOR
plus 2.90%
E BB- (sf) 19.25 9.48 Three/six-month EURIBOR
plus 4.80%
F B- (sf) 13.50 6.48 Three/six-month EURIBOR
plus 7.64%
Sub. NR 43.90 N/A N/A
*The ratings assigned to the class A-1, A-2, B-1, and B-2 notes
address timely interest and ultimate principal payments. The
ratings assigned to the class C, D, E, and F notes address ultimate
interest and principal payments.
§The payment frequency permanently switches to semiannual and the
index switches to six-month EURIBOR when a frequency switch event
occurs. EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
Sub.--Subordinated.
=========
I T A L Y
=========
CEDACRI SPA: S&P Affirms 'B' Long-Term ICR on Sound Deleveraging
----------------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term issuer credit rating
on Italian core banking software provider Cedacri SpA and 'B' issue
ratings on the company's senior secured floating rate notes.
The stable outlook indicates S&P's expectation that Cedacri's
continued robust operating performance should lead to further
deleveraging toward 6x and FOCF to debt remaining well above 5%.
S&P said, "The affirmation reflects our view of Cedacri's recent
deleveraging and sound free cash flow. Recent earnings growth,
owing to healthy top-line and profitability gains, led to S&P
Global Ratings-adjusted debt to EBITDA falling to an estimated at
6.8x in 2024 from 7.4x in 2023. We anticipate the company will
continue to deleverage through higher EBITDA over the next
one-to-two years, thanks to an acceleration in recurring revenue
growth and further focus on containing operating costs, leading to
our expectation of leverage approaching 6x in 2025-2026. The
company has a sound track record in terms of FOCF, and we expect
FOCF to debt will remain in the 5%-7% range over the next two
years, after timing-related working capital flows led to volatility
in the metric in the previous two years.
"We think Cedacri's competitive position has strengthened under ION
Group's ownership. Cedacri's improved business risk profile
reflects the company's highly recurring revenue base (78% of its
total in 2024), increasing average contract lengths (expected at
close to six years in 2025), and higher adjusted EBITDA margins of
above 30%. These improvements reflect the company's prioritization
of recurring, higher-margin, and long-term contracted software and
data-driven products ahead of lower-margin, discretionary, and
service-oriented activities. We view the core banking software as
mission-critical so customers are very likely to renew their
contracts, as reflected in the company's minimal historical
turnover. We also understand the company has invested significantly
in its product suite, leveraging capabilities from ION Group's
sister companies. Some of these will start contributing to revenue
in 2025, supporting our expectations of 4%-6% organic revenue
growth and further margin expansion toward 35% over the next two
years. Still, Cedacri's client concentration (over 50% of its
revenue comes from its top 10 clients) and single-market focus
remain key constraints to our view of its business risk, because
these expose the company to a higher risk of client loss than rated
tech peers such as IFS (IGT Holding IV; B/Stable/--), Software GmbH
(B/Stable/--), or ION Trading Technologies (B-/Stable/--). We also
think potential consolidation in the Italian banking sector
exacerbates client concentration risk, although this has not
materialized in recent years.
"Lower product development intensity and the realization of cost
synergies will continue to support profitability improvement. We
expect declining capitalized development costs over the next two
years, trending toward EUR40 million by 2026 from a high of EUR50
million in 2023. This reflects the end of an initial period of
heavy investment in improving solutions and the launch of new
products, including for core banking analytics, regulatory risk,
and other areas. We understand that in its next phase, Cedacri will
focus on revamping its go-to-market strategy, leveraging the
group's focus in the Italian financial sector to drive
cross-selling and upselling opportunities. Cedacri has also tallied
EUR50 million of cost synergies since its acquisition by ION Group
in 2021, with EUR42 million completed to date and a further EUR8
million undertaken but not yet cash-realized in 2024.
"Cedacri has ratings headroom for dividend distributions or M&A,
but financial policy remains a key ratings consideration. Healthy
cash on the balance sheet (EUR140 million at the end of 2024) and
our expectation of deleveraging through organic earnings growth
provide the company space to tackle bolt-on acquisitions in
adjacent sectors or moderate dividend distributions to the ION
Group within the bounds for our 'B' rating. The group has a track
record of pursuing growth through acquisitions, which it has
generally funded with debt and dividends from group-owned
companies, so we calculate leverage on a gross basis for its rated
subsidiaries. Larger dividend recapitalizations or debt-funded
acquisitions could drive Cedacri's leverage above our 7.5x downside
trigger, potentially stressing our 'B' ratings on the company.
"The stable outlook reflects our view that Cedacri will maintain
adjusted debt to EBITDA of well below 7x in 2024 and 2025, thanks
to cost synergies and sound top-line growth, coupled with FOCF to
debt sustainably recovering to above 5% in the next 12 months."
S&P could lower the ratings if Cedacri either materially
underperforms compared with its base-case scenario, or implements
an aggressive debt funded distribution to ION Group, leading to:
-- Adjusted debt to EBITDA above 7.5x; or
-- FOCF to debt materially and persistently below 5%.
S&P could also downgrade the company if the parent's leverage
increased and remained above 8.5x (excluding payment-in-kind
facilities), with no clear path to deleveraging, and its FOCF to
debt remained below 5%.
S&P could raise its ratings on Cedacri if:
-- Adjusted leverage falls toward 5x;
-- FOCF to debt increases toward 10% sustainably; and
-- S&P's view of ION Group's creditworthiness improved, such that
the improved credit quality of Cedacri's stand-alone profile was at
least in line with that of the consolidated group.
===========
P O L A N D
===========
CITY OF ZABRZE: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the Polish City of Zabrze's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB'
with Stable Outlook.
The affirmation reflects Fitch's expectation that Zabrze's debt
metrics will improve over 2025-2029 and remain consistent with its
ratings. This is despite liquidity challenges and a PLN30 million
operating deficit recorded in 2024, which led the city to adopt a
prudential budget programme and seek a PLN354 million loan from the
state budget. The affirmation also reflects expected positive
effects of the recent revenue framework reform and the city's
commitment to the prudential programme. However, rating headroom
remains low, especially if the programme fails to deliver the
expected outcome.
The new local and regional governments (LRGs) revenue law does not
affect the city's rating but alters the funding framework by
increasing the share of personal income tax (PIT) and corporate
income tax (CIT) that it receives from the state in the revenue
structure. The new law ensures minimal growth in income tax revenue
and general subsidies in relation to the city's financial needs'
growth through its balancing and equalisation mechanisms. Despite
anticipated revenue growth, the city continues to face salary
growth pressures and a widening gap between its education spending
and government funding.
KEY RATING DRIVERS
Risk Profile: 'Midrange'
Zabrze's 'Midrange' risk profile reflects the following combination
of key risk factors assessments. Fitch has reassessed revenue
adjustability to 'Midrange' from 'Weaker', with no impact on the
overall risk profile.
Revenue Robustness: 'Midrange'
Zabrze's revenue sources are stable and align with national GDP
growth prospects. Income taxes are the major revenue source (Fitch
forecasts almost 50% of total revenue in 2025) and rely on
moderately cyclical activities. The city now receives its share in
these taxes based on local residents' taxable income, rather than
collected taxed income. This means the tax income is directly
linked to local, rather than national, development and is shielded
from politically driven tax decisions, such as rate cuts. Transfers
have a reduced share in the revenue structure, falling below 15% in
2025 from over 44% in 2024, but are mostly legally defined and
provided by the state (A-/Stable).
Revenue Adjustability: 'Midrange'
Its reassessment to 'Midrange' reflects changes in the equalisation
mechanism under the new revenue law, which offset the city's
limited fiscal flexibility. The city will now qualify for funding
equalisation if its per capita tax revenue from PIT, CIT, and local
taxes falls below 80% of its LRG tier average. This would result in
a higher subsidy from the state. The new system also ensures that
if income tax revenue grows slower than financial needs, the
general subsidy from the state will increase.
Expenditure Sustainability: 'Midrange'
Zabrze's main responsibilities, including education, public
transport, municipal services, and administration, are moderately
non-cyclical. It has historically maintained moderate control over
operating expenditure (opex) growth. However, in 2024, Zabrze
settled its payments to Social Insurance Institution and
contributions to Metropolis GZM that were postponed from 2023.
This, together with the payment of due liabilities and inclusion of
spending initially understated in the budget, led to a sharp
increase in opex and a widening of its budget deficit in 2024.
In response, Zabrze has undertaken budget rationalisation, which
allowed it to receive a state budget loan. In return, restrictions
are placed on the city to improve its financial position, including
spending optimisation, to keep opex growth below operating revenue
growth.
Expenditure Adjustability: 'Midrange'
Zabrze's spending flexibility is limited, due to high share of
mandatory responsibilities of about 90% of total expenditure. Capex
is partly flexible, allowing for phased implementation and
postponement, but Fitch expects it to decrease to 10% (PLN750
million in total) of total expenditure in 2025-2029, from 15% in
2020-2024. New capex will focus on roads, land development, and
building modernisation. Zabrze also has long-term commitments to
support its municipal companies (hospital, stadium and football
club) averaging PLN32 million a year.
Liabilities & Liquidity Robustness: 'Midrange'
Zabrze, like all other LRGs in Poland, must align debt servicing
with its operating balance and maintain an amortising repayment
structure. Its debt repayment schedule is smooth, with a final
maturity in 2045. Its debt totalled PLN1,091 million at end-2024
(PLN745 million at end-2023), and is solely in Polish zloty,
eliminating currency risk. However, 94% carries floating rates,
exposing the city to interest-rate risk as LRGs cannot use
derivatives. Municipal companies' liabilities, treated as other
Fitch-classified debt, totalled PLN127 million at end-2024 (PLN107
million at end-2023), and are expected to rise to PLN139 million in
2025.
The state loan granted under the prudential programme of PLN354
million offers preferential terms, including a three-year grace
period and maturity in 2045. Such loans are granted to LRGs in
financial difficulties, requiring specific prerequisites and
conditions on future new debt, including the Ministry of Finance
approval.
Liabilities & Liquidity Flexibility: 'Midrange'
Counterparty risk is moderate, with banks providing liquidity in
Poland rated between 'BBB-' and 'A+'. There is no emergency
liquidity support from the central government. Zabrze frequently
used an overdraft facility with a PLN50 million limit from ING Bank
Slaski S.A. (A+/Stable) to manage liquidity. The city can also
issue short-term liquidity bonds, which it must repay by year-end,
as it did in 2024, to cover its liquidity shortfall during
mid-year. The city's cash balance at end-2024 was PLN181 million
(zero at end-2023), while the average month-end cash balance was
PLN31.2 million.
Financial Profile: 'bbb category'
Fitch assesses Zabrze's financial profile in the middle of the
'bbb' score. Under its rating case, the city's payback (net
adjusted debt/operating balance) is expected to improve to 15x-16x
in 2027-2029, from nearly 40x for 2025.
This improvement will be mainly driven by an increase in the
operating balance to around PLN70 million in 2027-2029, as a result
of the prudential programme, which should start to show an impact
in 2025-2026. Beyond 2026, revenue growth should be stable, but the
under-financed education sector will weigh on the city's budget.
Net adjusted debt will remain largely unchanged at around PLN1,100
million, resulting from the city's limited new debt under the
prudential programme and the decreasing debt of municipal
companies, which Fitch includes in Zabrze's debt metrics.
The city's fiscal debt burden will remain in the 'aa' score at over
75% of operating revenue through to 2029, which is high among rated
LRGs in Poland but is moderate by international comparison. Fitch
expects the synthetic debt service coverage ratio (SDSCR; operating
balance/synthetic debt amortisation including short-term
maturities) to remain weak at 0.7x, corresponding to a 'b' score.
This metric is typically underestimated for Polish LRGs as it
calculates debt annuities for 15 years, whereas the duration of
loan agreements is typically longer. Zabrze's weighted life of debt
is 9.8 years, with a final maturity in 2045.
Derivation Summary
Zabrze's 'bb' Standalone Credit Profile (SCP) derives from its
'Midrange' risk profile and 'bbb' financial profile score. The SCP
assessment factors in comparison with peers with SCPs in the 'bb'
category, such as Italian and Portuguese regions, and is not
affected by any asymmetric risk. The city's IDRs are not influenced
by extraordinary support from the state and are equal to the SCP.
Zabrze has no direct peers with a 'Midrange' risk profile and in
the 'bb' SCP category. The nearest Polish peer in terms of SCP is
Chorzow, which has a lower payback and thus an SCP of 'bbb-'.
Zabrze's closest international peers in risk profile and SCP are
Italian regions and the Portuguese region of Azores, but they are
hardly comparable due to different responsibilities and funding
sources, as well as the size of their territories and population.
National Ratings
Zabrze's National Rating of 'BBB(pol)' is the lower of two options
under Fitch's National Rating scale that map to its Long-Term
Local-Currency IDR of 'BB'. This reflects the city's reliance on
the prudential programme for its financial improvements and high
spending commitment towards its municipal companies, which burden
the city's budget and limit its flexibility on spending.
Key Assumptions
Qualitative Assumptions:
Risk Profile: 'Midrange'
Revenue Robustness: 'Midrange'
Revenue Adjustability: 'Midrange'
Expenditure Sustainability: 'Midrange'
Expenditure Adjustability: 'Midrange'
Liabilities and Liquidity Robustness: 'Midrange'
Liabilities and Liquidity Flexibility: 'Midrange'
Financial Profile: 'bbb'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's through-the-cycle rating case incorporates a combination of
revenue, cost and financial risk stresses. It is based on 2020-2024
published figures and its expectations for 2025-2029:
- Annual average 3.1% increase in operating revenue, including tax
revenue CAGR 15.7% and transfers received CAGR -18.2% due to the
changes in the LRGs funding framework. Tax revenue growth should be
stable and linked to GDP growth and inflation, while local taxes
and fees should be additionally boosted by the actions under the
prudential programme
- Annual average 1.5% increase in opex, constrained by spending
optimisation under the prudential programme
- Annual net capex of PLN38 million on average, considering
uncertainty over the timing and amount of available non-returnable
EU and national capital grants, as well as limited self-financing
possibilities
- Average cost of debt increasing to 5% a year in 2025-2029 from
4.4% a year in 2020-2024, due to projected interest rates remaining
above their levels in 2020-2022. Long-term maturities of new debt
at a minimum of 10 years
Issuer Profile
Zabrze is an urban county in the Slaskie region with about 154,000
inhabitants in mid-2024. Its tax base is diversified but weaker
than other rated Polish cities. The unemployment rate was 4.1% at
end-2024, versus Poland's 5.1%.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A downward revision of the city's SCP, which could be driven by a
deterioration in debt metrics, particularly a debt payback rising
above 17x on a sustained basis under Fitch's rating case, could
lead to a downgrade.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A debt payback ratio remaining equal to, or lower than, 15x on a
sustained basis under Fitch's rating case could lead to an
upgrade.
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.
Discussion Note
Committee date: 12 March 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Zabrze, City of LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT BBB(pol) Affirmed BBB(pol)
=============
R O M A N I A
=============
GLOBALWORTH REAL ESTATE: S&P Lowers ICR to 'BB', Outlook Stable
---------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Globalworth Real Estate Investments Ltd. (Globalworth) to 'BB' from
'BB+' and its issue rating on its senior unsecured bonds to 'BB-'
from 'BB'.
The stable outlook reflects S&P's expectation that Globalworth's
operating performance will remain broadly stable, with occupancy
levels of at least 88% and an EBITDA interest coverage ratio close
to 1.8x over the next 12 months.
Globalworth's operating performance weakened in 2024, with its S&P
Global Ratings-adjusted EBITDA margin declining by about 2
percentage points to 77% on the back of stagnating occupancy rates
and an unexpected higher cost base. For 2024, the company reported
an overall occupancy rate of 86.7% versus 88.3% in 2023, stagnating
below 90% and reflecting the ongoing challenging market conditions
in Poland's regional cities. S&P said, "This, in combination with
increased costs, caused the company's EBITDA margin to fall to
77.4% in 2024 from 79.2% in 2023, versus our previous assumption of
above 80%. We believe the office segment will remain challenging
over the next 12-24 months due to muted demand for office space as
companies are assessing future needs for premises. We anticipate
Globalworth's occupancy levels will slightly improve to 88%-89%
over the next 12-24 months supported by a positive trend in the
capital cities. In total, we expect like-for-like rental growth of
about 1%-3% annually over the next two years (4.5% in 2024)."
S&P said, "Globalworth's S&P Global Ratings-adjusted EBITDA
interest coverage dropped to 1.8x at year-end 2024, well below our
previous base case of above 2x, and we do not expect it to recover
over the next 12 months. As of Dec. 31, 2024, EBITDA interest
coverage fell to 1.8x, from 2.3x at year-end 2023, as Globalworth's
cost of debt increased significantly to 4.9% (compared to 3.7% in
2023 and 2.89% in 2022) following the company's exchange offer at
market pricing last year. Although the transaction has lengthened
Globalworth's average debt maturity to 4.9 years from 3.7 years at
end-2023 and supported its liquidity profile, the significantly
higher funding costs combined with a demanding operational
environment have resulted in its EBITDA interest coverage breaching
our downside threshold of "comfortably above 1.8x" for a 'BB+'
rating. We anticipate the average cost of debt will remain at about
5.0% over the next 12-24 months and as a result, we forecast its
EBITDA-interest-coverage ratio will be close to 1.8x in 2025 with a
slight improvement to 1.9x in 2026. Our revised base case includes
a weaker operating environment for Globalworth, with occupancy
levels remaining below 90% and some loss of EBITDA from assets
disposals over the next 12-24 months. That said, Globalworth's
hedging ratio is high, at close to 95% at year-end 2024, providing
some visibility on its funding costs over our forecast period.
"Over the next 12-24 months, we expect the company to invest in its
portfolio and anticipate our adjusted debt to debt plus equity to
increase to 42%-43% from 39.6% at year-end 2024. Over the next
12-24 months, we understand that Globalworth would like to grow the
property portfolio and therefore our revised base case factors in
potential selective acquisitions of about EUR100 million over the
next 12-18 months and capital expenditure (capex) of about EUR90
million-EUR100 million in 2025 and about EUR60 million-EUR80
million in 2026. Therefore, we forecast debt to debt plus equity
will increase to 42%-43% in the coming 12 to 24 months including
our assumption of a negative fair value adjustment of minus 2.0% in
2025, mainly related to Polish regional cities and flat valuation
result thereafter (overall property devaluation of 1.6% in 2024 and
4.0% in 2023). The ratio is expected to increase close to 2023
levels after a temporary drop to 39.6% at year-end 2024, following
an asset disposal program that generated net proceeds of EUR166
million. That said, the company's leverage remains moderate for its
current rating level compared with other 'BB' rated peers. Our
assessment of leverage also considers the company's relatively low
debt to EBITDA ratio of about 9.0x in 2025 and 2026 (8.1x in
2024)."
Globalworth's liquidity remains adequate, supported by a high cash
balance of over EUR300 million at end-2024 and the lack of any
significant refinancing needs until 2029. The company has limited
debt maturing over the next 12 -24 months following its refinancing
activities in 2024. Its next large maturity will occur in 2029 when
the EUR224 million bonds and the EUR150 million of secured loans
will become due. As of year-end 2024, Globalworth has a solid
liquidity position, with EUR313 million in unrestricted cash and
cash equivalent in addition to a further EUR65 million in undrawn
credit facilities maturing beyond 12 months comfortably covering
committed capex spending of EUR20 million-EUR30 million. S&P said,
"We don't assume cash dividends over the next 12 months as we
understand that these are restricted under the bond covenants. Our
liquidity analysis does not include any uncommitted property
purchases, but we understand the company will deploy part of the
cash for growth opportunities over the next 12-24 months."
S&P said, "The stable outlook indicates that we expect cash flows
from Globalworth's income-generating property portfolio to remain
relatively stable over the next 12 months, despite current market
uncertainty. In our base-case scenario, we assume that the company
will maintain occupancy rates of about 88%-89%.
"We forecast that its debt-to-debt-plus-equity ratio will increase
to 42%-43% and EBITDA interest coverage of close to 1.8x with debt
to EBITDA of about 9.0x over the next 12 months."
S&P could lower the ratings if:
-- Debt to debt plus equity increases toward 60% for a prolonged
period;
-- EBITDA interest coverage falls below 1.8x on a sustainable
basis; or
-- Debt to EBITDA increases closer to 13x.
S&P could also lower the rating if market conditions worsen and
Globalworth's operating performance weakens beyond its current base
case, with occupancy rates declining or the company's liquidity
position deteriorating.
S&P may raise the rating if Globalworth's:
-- EBITDA-interest-coverage ratio improves to comfortably above
1.8x on a sustainable basis;
-- Debt-to-debt-plus-equity ratio remains close to 40%; and
-- Debt to EBITDA stays below 9.5x.
An upgrade would also depend upon the company's ability to maintain
solid operating performance, including positive like-for-like
rental growth, and improving occupancy levels.
===========================
U N I T E D K I N G D O M
===========================
ASTON MARTIN: Fitch Affirms 'B-' LongTerm IDR, Outlook Now Neg.
---------------------------------------------------------------
Fitch Ratings has revised Aston Martin Lagonda Global Holdings PLC
(AML) Outlook to Negative from Stable, while affirming its
Long-Term Issuer Default Rating (IDR) at 'B-'. Fitch has also
affirmed Aston Martin Capital Holdings Limited's senior secured
rating at 'B', with a Recovery Rating at 'RR3'.
The Outlook revision reflects a larger-than-expected 2024 free cash
flow (FCF) shortfall, due to supply chain issues, subdued demand in
China, and liquidity risk stemming from further turnaround delays.
Although AML does not plan to access debt capital markets this year
to fund cash shortfalls, Fitch views its cash flow generation and
liquidity as vulnerable to challenging market conditions,
turnaround execution risks, and tariff introductions.
Following the weaker-than-expected 2024 results and downward
forecasts revision, Fitch now expects FCF generation to turn
positive only in 2027.
Key Rating Drivers
FCF Turnaround Delayed: AML reported negative FCF of GBP392 million
(or EUR408 million Fitch-adjusted) at end- 2024. The deficit was
primarily driven by supply chain issues, decreased demand in China,
and working capital outflows due to lower customer deposits
following special deliveries. With a fully renewed product line,
AML is committed to achieving substantial FCF improvements in 2025,
aided by the Valhalla programme. Fitch now projects that FCF
generation will turn positive only in 2027, following turnaround
delays and higher FCF break-even due to additional interest
expenses from notes add-ons issued in 2H024.
Lower-Than-Expected FCF: Further turnaround execution delays may
result in additional external funding needs for AML. While Fitch
projects that AML will be able to absorb 2025-2026 FCF losses with
its own funds, its 2024 liquidity was below its expectation. A key
downside risk involves potential further delays of the special
Valhalla. If AML's product launch proceeds as planned, most
deliveries are scheduled for 4Q25, which Fitch expects to benefit
the company's profit-and loss (P&L) statement and cash flow.
Deleveraging Delayed by Lower Profitability: EBITDA leverage
reached 6.1x in 2024, higher than the 4.3x for 2023 and its
forecast of 3.2x for 2024. Higher debt and lower EBITDA contributed
to its higher leverage than forecast. Fitch now forecasts EBITDA
leverage to decline to 3.7x in 2025 before declining more gradually
to 2.2x in 2028. This improvement depends on the company being able
to improve profitability and ensure successful deliveries. Failure
to do so may lead to the continuing breach of its negative leverage
sensitivity and result in a downgrade.
Weak Chinese Market: Like its other peers in the luxury goods
segment, AML experienced a sharp decline of 49% in wholesale
volumes in China in 2024, which the company partly attributed to a
model change-over introduction. Fitch expects weak market
conditions in China to continue to weigh on sales in the short term
as AML addresses excess inventory and revises its dealership base.
There may be room for sales recovery if the demand and dealership
recovery is sooner than expected. However, this is not its base
case.
Risks from Tariffs Introduction: AML remains heavily exposed to the
introduction of tariffs for imports into US. However, the US
administration has not announced any new duty on imports from the
UK, where AML relies on its two plants for production. The US
market represents by far the largest single market for AML at 37.3%
of total sales in 2024. As a result, any increase in import costs
into US can magnify the impact on AML's P&L and cash flow, although
Fitch still believes that demand is less elastic than that of other
discretionary durable goods.
Low Order Book Visibility: Fitch believes that AML could benefit by
extending its order book, lowering inventory levels, and enhancing
product desirability. At YE24, the company reported an order book
extending up to five months on the core models. This level is
considerably below that of other luxury carmakers. AML is targeting
an order book on core model of six to nine months. Fitch still
believes the AML brand carries substantial value and pricing power
that comes with limited sales volume. AML's strategy to limit
production growth to drive product scarcity is in line with other
manufacturers in the luxury goods industry.
Product Personalisation Key to Margins: To speed up the
profitability recovery, and in line with other luxury car
manufacturers, AML plans to expand its range of model variants and
provide customers with around 100 options for personalising their
vehicles. Fitch believes this approach is strategically sound, as
the investment needed is low compared with the positive impact on
margins. However, despite the introduction of about 40 options in
2025, Fitch anticipates this to yield meaningful results only over
the medium term.
Cost Savings: AML aims to reduce adjusted operating expenses
through greater operational discipline to improve efficiency,
focused spending, and rightsizing, in response to inflation and
growth-related costs. This would involve reducing 5% of its global
workforce to achieve annualised savings of approximately GBP25
million, with half of these savings expected in 2025. AML expects
restructuring costs of about GBP 10 million in 2025. Fitch expects
beneficial effects on the P&L and cash flow only in 2026.
Key Shareholder Support: Equity support from Aston Martin's
shareholders, has reached almost GBP2 billion since 2020. While the
company has so far proven its access to debt capital markets,
further execution delays may pose a challenge in funding additional
cash shortfalls.
Peer Analysis
Next to McLaren Holdings Limited (MHL; CCC+), AML is the car
manufacturer with the highest leverage and weakest FCF generation
in Fitch's rated auto original equipment manufacturers. Its
leverage and cash generation also compare unfavourably with that of
peers in the luxury goods segment. Fitch expects FCF generation to
progressively improve in 2025-2026, although the company's
execution plan remains subject to execution risk.
AML has a strong brand within the luxury sector and is on a par
with other luxury car makers'. Management's focus on creating
limited sale volumes to create product scarcity supports AML's
pricing power. However, the order book on core models is currently
well under one year, which is materially below other luxury car
brands'.
AML is also one of the smallest rated auto manufacturers. Its
business model is dependent on the manufacturing and sale of a
handful of models, which is similar to MHL's business profile. This
dependence could drive higher cash flow volatility than peers.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue CAGR of 10.1% for 2024-2028, led by sales of new models
and specials deliveries
- EBITDA margin expanding above 20% by 2028 on higher volumes and
progressively increasing average selling price per vehicle
- Net working capital outflows at 0.2% of revenue on average in
2025-2028
- Annual capex at GBP390 million-GBP 400million per annum to 2028
- No dividend distributions
- Restricted cash at about 2.5% of sales
Recovery Analysis
- The recovery analysis assumes that AML would be reorganised as a
going concern in bankruptcy rather than liquidated
- Fitch assumes a 10% administrative claim
- Fitch ranks AML's senior secured notes (GBP635 million and USD960
million) and other bank debt as subordinated to its GBP170 million
super senior revolving credit facility (RCF) and GBP40 million
factoring facility
- Fitch uses Fitch-adjusted EBITDA of GBP250 million to reflect its
view of a sustainable, post-reorganisation EBITDA on which Fitch
bases the enterprise valuation
- Fitch uses a multiple of 4.0x to estimate the going-concern
EBITDA to reflect the company's post-reorganisation enterprise
value. The multiple incorporates AML's brand value and engineering
expertise as a luxury auto manufacturer. The multiple is broadly in
line with that of niche original equipment manufacturing peer,
reflecting its solid business profile but continued negative FCF
generation
- The recovery computation leads to a ranked recovery for the
senior secured debt of 'RR3', supporting the 'B' debt rating at one
notch above the IDR
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Continued negative FCF generation leading to deteriorating
liquidity
- EBITDA leverage above 4.0x for a sustained period
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Successful execution of the business plan, indicated by
maintaining FCF margins at above 0.5%
- EBITDA leverage sustained below 2.5x
- EBIT margin of above 6%
Liquidity and Debt Structure
Fitch views AML's liquidity as appropriate, but Fitch sees an
increasing risk of additional external funding needs, should the
company not be able to execute its product launches and
meaningfully reduce its FCF shortfall in 2025. This is despite the
company's GBP360 million cash on its balance sheet and a largely
undrawn super senior RCF of GBP170 million at end-2024.
In March 2024 AML refinanced its existing debt, replacing its
first- and second-lien senior secured notes, due 2025 and 2026,
respectively, with new senior secured notes due in 2029. This has
removed refinancing risk and lowered borrowing costs. To restore
liquidity, in August and November 2024, AML issued GBP235 million
add-ons notes (ranking pari-passu with the notes issued in March),
while raising also GBP111 million in equity.
Issuer Profile
AML is the ultimate holding company of Aston Martin Investment Ltd
and its fully owned subsidiaries, including Aston Martin Lagonda
Group Ltd and Aston Martin Capital Holdings Ltd. Aston Martin is a
world-renowned manufacturer of luxury, high-performance sport cars
and supercars.
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
----------- ------ -------- -----
Aston Martin Lagonda
Global Holdings PLC LT IDR B- Affirmed B-
Aston Martin Capital
Holdings Limited
senior secured LT B Affirmed RR3 B
BCP V MODULAR III: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed BCP V Modular Services Holdings III
Limited's (Modulaire) Long-Term Issuer Default Rating (IDR) at 'B'
with a Stable Outlook.
Fitch has also affirmed the senior secured debt ratings of BCP V
Modular Services Finance II PLC (BCP Finance II) and Modulaire
Group Holdings Limited (MGHL) at 'B+' with a Recovery Rating of
'RR3' and the senior unsecured debt rating of BCP V Modular
Services Finance PLC's (BCP Finance) at 'CCC+' with 'RR6'.
Key Rating Drivers
Growing Franchise; High Leverage: Modulaire's Long-Term IDR
reflects its large franchise within European modular leasing, where
it has achieved increasing penetration for its value-added products
and services (VAPS; such as furnishings and system installations)
along with sound utilisation rates for its core assets. However,
the IDR is constrained by the company's high leverage.
Some Diversification Benefits: Fitch views Modulaire's franchise in
the modular leasing sector as well established, encompassing
operations in Europe and APAC, with VAPS (estimated 65% penetration
in 2024) as offering improved pricing power relative to the more
homogenous modular market. Around a fifth of revenues is from the
construction industry, but potential volatility of rental demand is
mitigated by diversification into other markets that are less
susceptible to economic swings, such as healthcare, education and
housing, as well as by revenue from sales of units.
High Leverage: Gross cash flow management leverage (as measured by
post-IFRS16 gross debt/adjusted EBITDA on a run-rate for the last
12 months basis) is estimated to be 6.9x as of end-2024. Fitch
expects sluggish construction volumes to continue to weigh on
leverage in the near term, but Fitch sees some medium-term
deleveraging potential as cost efficiencies are realised and capex
levels moderate over the next 12-18 months.
Fairly Stable EBITDA: Modulaire's revenue visibility benefits from
contract length averaging 21 months, stable utilisation patterns,
and extended lead times for delivery and installation of typically
three to four months.
The company recorded a pre-tax loss in 9M24, but its EBITDA margin
(post IFRS 16) remained steady at around 32%, aided by increasing
VAPS penetration despite lower volumes, and diversification to
non-construction related offerings. Capex is discretionary in the
event of reduced demand, as demonstrated in previous quarters.
Important Infrastructure Provider: Utilisation rates have
historically been sound at around 85% and continue to be supported
by infrastructure demand for modular buildings and the high
disincentive for temporary withdrawal, given the associated costs
and logistical relocation requirements.
Adequate Liquidity: As of 30 September 2024, Modulaire had total
liquidity of EUR303 million, consisting of EUR91 million of cash,
EUR45 million available under a committed asset-backed loan
facility, and EUR167 million available under its committed
revolving credit facility (RCF). Modulaire faces no significant
short-term debt maturities and has a large amount of its debt
coming due in 2028.
Debt Funding Largely Hedged: As of end- 2024, all of Modulaire's
senior secured notes and term loan B, which in aggregate comprise
the majority of its borrowings, were fixed or hedged until
end-2025. This brings the group's fixed-rate/floating-rate ratio to
just over 90% for 2025. Interest coverage has historically been
weak on account of its high debt levels, and Fitch expects it to
remain modest at around 2x over the next 12-18 months.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Cash flow leverage consistently in excess of 7x, whether because
of weakened cash flow generation or increased debt
- A reduction in the interest cover ratio towards 1x, unless for
specific short-term reasons
- Deteriorating pre-tax profitability, eg. from declining asset
utilisation metrics or rental margins, thereby undermining debt
service and limiting capital accumulation
- Evidence of increased risk appetite, eg. from a weakening of the
corporate governance framework, dilution of risk control protocols,
or prioritisation of upstreaming earnings over long-term
deleveraging
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A sustained reduction in gross cash flow leverage towards 5x, or
a demonstrated improvement in the interest cover ratio towards 4x
- Significantly enhanced franchise or business model
diversification, within the broader modular space sector
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
BCP Finance, BCP Finance II and MGHL Senior Secured and Unsecured
Debt
All outstanding debt and Modulaire's RCF benefit from guarantor
coverage of 80% of security group EBITDA. Fitch estimates
recoveries for senior secured debtholders to result in a long-term
rating at one notch above Modulaire's Long-Term IDR, at 'B+' with
'RR3'.
In view of the group's volume of higher-ranking senior secured
debt, estimated recoveries for BCP Finance's senior unsecured debt
are zero, resulting in a rating at two notches below Modulaire's
Long-Term IDR, at 'CCC+' with 'RR6'.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
BCP Finance II and MGHL Senior Secured Debt
- The ratings of the senior secured debt issued by BCP Finance II
and MGHL are primarily sensitive to a change in Modulaire's
Long-Term IDR, from which they are notched
- Changes leading to a material reassessment of recovery prospects,
for example movements in equipment valuation, could trigger a
change in the notching either up or down
- A shift in the balance of Modulaire's total debt between senior
secured and senior unsecured sources, could also trigger a change
in the notching either up or down
BCP Finance Senior Unsecured Debt
- The rating of the senior unsecured debt issued by BCP Finance is
primarily sensitive to a change in Modulaire's Long-Term IDR, from
which it is notched
- Changes leading to a material positive reassessment of recovery
prospects, for example movements in equipment valuation, or a
decline in the proportion of Modulaire's total debt drawn from
higher-ranking senior secured sources, could reduce the notching
between Modulaire's IDR and BCP Finance's unsecured debt.
ADJUSTMENTS
The 'b' Standalone Credit Profile (SCP) is below the implied SCP of
'b+' due to the following adjustment reason: weakest link -
capitalisation & leverage (negative).
The 'bb' business profile score is below the implied range of 'bbb'
due to the following adjustment reason: business model (negative).
The 'b' earnings & profitability score is assigned below the
implied range of 'a' due to the following adjustment reasons:
revenue diversification (negative).
The 'b-' capitalisation & leverage score is above the implied range
of 'ccc and below' due to the following adjustment reason: risk
profile and business model (positive).
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
----------- ------ -------- -----
BCP V Modular Services
Finance II PLC
senior secured LT B+ Affirmed RR3 B+
Modulaire Group
Holdings Limited
senior secured LT B+ Affirmed RR3 B+
BCP V Modular Services
Holdings III Limited LT IDR B Affirmed B
BCP V Modular Services
Finance PLC
senior unsecured LT CCC+ Affirmed RR6 CCC+
CHESHIRE 2021-1: Fitch Lowers Rating on Class E Notes to 'B+sf'
---------------------------------------------------------------
Fitch Ratings has downgraded Cheshire 2021-1 PLC's class C, D, E
and F notes and affirmed the others.
Entity/Debt Rating Prior
----------- ------ -----
Cheshire 2021-1 PLC
A XS2386503721 LT AAAsf Affirmed AAAsf
B XS2386503994 LT AAsf Affirmed AAsf
C XS2386504026 LT A-sf Downgrade A+sf
D XS2386504299 LT BBB-sf Downgrade A-sf
E XS2386504372 LT B+sf Downgrade BBBsf
F XS2386504455 LT CCCsf Downgrade B+sf
Transaction Summary
Cheshire 2021-1 PLC is a multi-originator securitisation of legacy
owner-occupied (OO) and buy-to-let (BTL) mortgages. The three
largest lenders are GMAC-RFC Limited, Future Mortgages Limited and
Mortgages 1 Limited. The transaction is a refinancing of the
Dukinfield II PLC issuance.
KEY RATING DRIVERS
Deteriorating Asset Performance: There has been a material increase
in arrears since the last review based on the March 2024 interest
payment date. One-month plus arrears have increased to 44.2% from
40.0% and three-month plus arrears have increased to 35.1% from
27.9%. This makes the transaction one of the worst performing deals
in Fitch's UK non-conforming RMBS portfolio. However, the number
and value of loans in arrears have decreased since the last review,
suggesting a stabilisation in arrears build-up.
As loans in arrears are now a higher portion of the collateral
portfolio, due to voluntary and scheduled repayment of performing
collateral, Fitch's weighted average foreclosure frequency (WAFF)
has increased. The risk of further migration to late-stage arrears
remains a significant rating driver.
High Loss Severity: Fitch estimates the loss severity to date has
been 19.5%, based on the 15 sold repossession cases since closing.
This implies a recovery rate (RR) below Fitch's expected case RR
assumption in its ResiGlobal Model: UK for the transaction. Given
the observed performance, Fitch stressed the RR assumptions in its
analysis and this contributed to the downgrade of the class C to F
notes.
Deferred Interest: The class E and F notes currently have deferred
interest, and interest is accruing on the deferred amounts. As per
the transaction documents, deferred interest is not an event of
default for class B and below and is due at the final legal
maturity date of the notes on 21 December 2049. The interest
deferrals are a result of insufficient revenue funds to pay
interest on the notes due to the substantial proportion of the pool
that is in arrears. If arrears continue to increase, interest
deferrals may continue to grow and compound.
Increased CE: Credit enhancement (CE) has increased since the last
review supporting the senior notes' affirmations. CE has risen to
22.57% from 20.73% for the class B notes and to 32.37% from 29.60%
for the class A notes.
Asset Analysis Assumptions: Certain loan-level attributes that
attract a FF adjustment (in relation to adverse credit history,
employment type and income verification) were not provided to
Fitch, but were reported in the Dukinfield II PLC prospectus. In
its analysis, Fitch used these reported proportions to apply
pool-level data adjustments to capture the relevant FF
adjustments.
Rental income data was not provided to Fitch. Fitch assumed that
the rental income was sufficient to meet the minimum interest
coverage ratio defined in the underwriting policy at the time of
origination. This assumption is consistent with the approach
applied in its initial analysis.
Originator Adjustment: In its initial analysis, when setting the
originator adjustment for the portfolio, Fitch considered factors
including the historical performance and average annualised
constant default rate since closing of Dukinfield II PLC. This
resulted in an originator adjustment of 1.0x for the OO sub-pool
and 1.5x for the BTL sub-pool. Fitch has maintained these
assumptions in the analysis for this rating action.
Payment Interruption Risk Constrains Junior Notes: The interest
payments for all notes other than the class A are deferrable at all
times. In its analysis, Fitch tested the class A notes' rating on a
timely basis and assessed the materiality of the interest
deferability exposure for the class B to F notes. Fitch considers
the liquidity protection in the structure adequate at the
respective ratings. Nonetheless, the ratings of the class B notes
and below are unable to exceed 'AA+sf'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Material increases in the frequency of defaults and loss severity
on defaulted receivables producing losses greater than Fitch's base
case expectations may result in negative rating action. Fitch's
analysis revealed that a 15% increase in the WAFF, along with a 15%
decrease in the WARR, would imply downgrades of up to one notch for
the class A, B, D and E notes and two notches for the class C
notes
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE and potentially upgrades.
Fitch tested an additional rating sensitivity scenario by applying
a decrease in the WAFF of 15% and an increase in the WARR of 15%.
The impact on the notes could be upgrades of up to two notches for
the class B notes, four notches for the class C notes, and six
notches for the class D, E and F notes.
CRITERIA VARIATION
Fitch applied a criteria variation against its RR assumption in its
ResiGlobal Model: UK output for the transaction, due to the
elevated loss severity. To date, Fitch calculates the loss severity
as 19.5%, based on the 15 sold repossession cases since closing.
This loss severity figure implies a RR below Fitch's expected case
RR assumption in its ResiGlobal Model: UK output for the
transaction. Given the observed performance, Fitch reduced the RR
assumptions by 15% in all rating cases in its analysis, and this
contributed to the downgrades of the class C to F notes.
The variation led to ratings below the model-implied ratings by one
notch for the class B notes, two notches for the class C and F
notes and three notches for the class D and E notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Prior to the transaction closing, Fitch reviewed the results of a
third party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Cheshire 2021-1 PLC has an ESG Relevance Score of '4' for Customer
Welfare - Fair Messaging, Privacy & Data Security due to exposure
to compliance risks including fair lending practices, mis-selling,
repossession/foreclosure practices, consumer data protection (data
security), which has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
Cheshire 2021-1 PLC has an ESG Relevance Score of '4' for Human
Rights, Community Relations, Access & Affordability due to exposure
to accessibility to affordable housing, which has a negative impact
on the credit profile, and is relevant to the ratings in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COUNTY PLANT: BRI Business Named as Administrators
--------------------------------------------------
County Plant Hire Ltd (Formerly Marriott Plant Limited) was placed
into administration proceedings in the High Court of Justice
Business and Property, No 001597 of 2025, and John William Rimmer
and Lauren Louise Auburn of BRI Business Recovery and Insolvency,
were appointed as administrators on March 10, 2025.
County Plant specializes in hiring of construction equipment.
Its registered office is at 100 St James Road, Northampton, NN5
5LF.
Its principal trading address is at Ladywood House, Leicester Road,
Lutterworth, Leicestershire, LE17 4HD.
The administrators can be reached at:
John William Rimmer
Lauren Louise Auburn
BRI Business Recovery and Insolvency
1160 Elliott Court, Herald Avenue
Coventry Business Park, Coventry
CV5 6UB
Telephone No: 02476 226839
For further information contact:
Parmjit Mankoo
BRI Business Recovery and Insolvency
Tel No: 02476 25389
Email: pmankoo@briuk.co.uk
1160 Elliott Court, Herald Avenue
Coventry Business Park
Coventry, CV5 6UB
LMR HOLDINGS: Grant Thornton Named as Administrators
----------------------------------------------------
LMR Holdings Limited was placed into administration proceedings in
the High Court Of Justice, Business & Property Court Of England &
Wales, Insolvency & Companies List, No 001700 of 2025, and Alistair
Wardell and Richard J Lewis of Grant Thornton UK LLP were appointed
as joint administrators on March 12, 2025.
LMR Holdings specialized in activities of construction holding
companies.
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
Tel No: 0161 953 6906
Email: cmusupport@uk.gt.com
2 Glass Wharf, Temple Quay
Bristol, BS2 0EL
LUXURY HOME: Kroll Advisory Named as Joint Administrators
---------------------------------------------------------
Luxury Home Design Group Ltd was placed into administration
proceedings in the High Court of Justice Business and Property
Courts in Manchester, Insolvency & Companies List (ChD) Court
Number: CR-2025-MAN-000300, and David Riley and Mark Robert
Blackman of Kroll Advisory Ltd, were appointed as joint
administrators on March 13, 2025.
Luxury Home specialized in retail sale via mail order houses or via
internet.
Its registered office and principal trading address is at 7
Trafford Moss Road, Trafford Park, Manchester, M17 1SQ.
The joint administrators can be reached at:
David Riley
Mark Robert Blackman
Kroll Advisory Ltd
The Chancery, 58 Spring Gardens
Manchester, M2 1EW
Contact details for the Joint Administrators:
Tel No: 0161 827 9021
Email: Suleman.Shaheen@Kroll.com
THRIFT RETAIL: Alvarez & Marsal Named as Joint Administrators
-------------------------------------------------------------
Thrift Retail Ltd was placed into administration proceedings in the
High Courts of Justice, Business & Property Courts of England &
Wales, Insolvency & Companies List (ChD) No CR-2025-001754, and
Jonathan Marston and Robert Croxen of Alvarez & Marsal Europe LLP,
were appointed as joint administrators on March 14, 2025.
Thrift Retail, trading as Thrift +, specialized in business support
service activities.
Its registered office and principal trading is at Unit G1, Airfield
Business Park, Market Harborough, LE16 7WB.
The joint administrators can be reached at:
Jonathan Marston
Robert Croxen
Alvarez & Marsal Europe LLP
Suite 3 Regency House
91 Western Road, Brighton
BN1 2NW
Telephone: +44 (0) 20 7715 5200
For further information, contact:
Emma Ovington
Alvarez & Marsal Europe LLP
Tel No: +44 (0) 20 7715 5200
Email: INS_THRIRL@alvarezandmarsal.com
WE SODA: Fitch Affirms 'BB-' Long-Term IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed WE Soda Ltd.'s Long-Term Issuer Default
Rating (IDR) at 'BB-' with a Stable Outlook. Fitch has also
affirmed the senior secured rating on the notes issued by WE Soda
Investments Holding PLC and guaranteed by WE Soda Ltd. at 'BB-'.
The Recovery Rating is 'RR4'.
The affirmation follows WE Soda's acquisition on 3 March 2025 of
US-based Genesis Alkali (Alkali) for an enterprise value of USD1.43
billion in a debt and equity-funded transaction.
The rating reflects increased scale, industry-leading production
costs resulting in strong through-the-cycle margins and its strong
market position as the largest global soda ash producer. It also
reflects elevated Fitch-adjusted EBITDA net leverage in 2025-2026
and its expectation of de-leveraging towards its revised negative
sensitivity of 3.0x by 2027.
Rating constraints are its single commodity exposure, limitations
of corporate governance and a challenging macroeconomic environment
in Turkiye (BB-/Stable).
Key Rating Drivers
Transformative Acquisition, Increased Scale: The acquisition is
transformative for WE Soda as it increases pro forma production
capacity to 9.5mt from 5.2mt and the combined entity is the largest
natural soda ash and bicarbonate soda producer globally. The
acquisition expands WE Soda's geographical footprint, adding 45% of
production volumes and around 22% of pro forma EBITDA from US-based
assets. It also accessed Alkali's export sales, marketing and
logistics subsidiary, ANSAC, with export capacity of 4mt per year
through exclusive access to Terminal 4 at the Port of Portland.
High Leverage: Weak market conditions in the soda ash market drove
WE Soda's EBITDA net leverage to 3.7x at end-2024 from 2.2x at
end-2023, and Fitch estimates pro forma EBITDA net leverage at
around 4.4x at the transaction's closure. Fitch-adjusted debt
includes Alkali's overriding royalty interest bonds of around
USD400 million and USD225 million off-balance-sheet factoring.
Fitch believes the company has the capacity to de-leverage as
EBITDA recovers to mid-cycle levels and synergies are realised.
However, growth capex will partly offset the pace of debt
reduction.
Fitch forecasts a gradual reduction in Fitch-adjusted EBITDA net
leverage to 3.0x by 2027 as Fitch expects management to take a
prudent approach to further inorganic growth and pay no dividends
in 2025-2027.
Revised Debt Capacity: Fitch has relaxed WE Soda's EBITDA net
leverage sensitivities by 0.5x, since in its view, WE Soda's
material increase in scale and geographical diversification
supports higher debt capacity.
Strong Cost Position: WE Soda's solution-based production of soda
ash in Turkiye is among the lowest cost methods of extraction for
this commodity globally. However, Fitch expects moderate dilution
of margins as around 75% of Alkali's production is from higher-cost
conventional underground mining. In 2025, the company guides for an
increase in EBITDA of up to USD10 per tonne compared with 2024 from
pre-acquisition WE Soda assets. Fitch expects that cost-saving
initiatives and synergies will drive margins up towards 40% by 2027
from around 31% forecast for 2025.
Market Downturn Affects Earnings: Global soda ash prices fell
towards multi-year lows in 2024. Demand from cyclical applications
such as flat glass used in construction (around 30% of soda ash
demand) is particularly weak, given the slowdown in economic growth
across major customer markets, while meaningful supply
rationalisation across the industry has yet to materialise. Fitch
expects market conditions to modestly improve in 2025, although
Fitch believes that capacity ramp-up in China will prevent a more
pronounced price recovery.
Growth Capex Amended: WE Soda divested its 40% stake in the Pacific
project to Sisecam in December 2024, and Fitch assumes the
development of greenfield Project West in Wyoming will be postponed
beyond 2027. Growth capex will continue on a 0.6 mt capacity
expansion at the Kazan project, and Fitch expects new investment in
brownfield expansion of US assets to start in 2026. Fitch forecasts
total capex for 2025-2028 at around USD1.5 billion, of which around
two-thirds will be for growth projects. A high share of optional
capex gives WE Soda flexibility to moderate expansion if weak
market conditions continue.
Country Ceiling: WE Soda's IDR of 'BB-' is at the level of the
Turkish Country Ceiling. If Fitch revised the Turkish Country
Ceiling down, Fitch would reassess whether the company's offshore
EBITDA generation and structural enhancements are sufficient to
rate the IDR above the Country Ceiling. On a pro-forma basis, WE
Soda generated around 78% of EBITDA in 2024 from Turkiye.
Peer Analysis
WE Soda has higher EBITDA margins than its peers. Its rating also
incorporates a weaker operating environment and greater corporate
governance limitations than peers.
Tata Chemicals Limited (TCL, BB+/Stable) is WE Soda's direct peer.
TCL is more diversified, with a presence across industrial
chemicals, agri-chemicals and specialty products but most of its
earnings come from soda ash. Its production capacity of 4.1mt a
year is materially lower than WE Soda's pro-forma 9.5mt a year. TCL
has a mix of natural and synthetic production leading to lower
average profitability than WE Soda. TCL's production footprint is
more diverse and its financial profile is more robust, with lower
leverage than WE Soda's.
WE Soda's financial profile is stronger than INEOS Group Holdings
S.A. (IGH; BB/Negative) and INEOS Quattro Holdings Limited
(BB-/Stable). However, both IGH and INEOS Quattro have larger scale
and are more diversified.
WE Soda has a strong financial profile and significantly larger
scale than other European commodity chemical producers like Nobian
Holding 2 B.V. (B/Stable), Lune Holdings S.a r.l. (CCC+) or its
Turkish commodity chemical peers like Sasa Polyester Sanayi Anonim
Sirketi (B/Negative).
Key Assumptions
- Average annual sales volumes of 9.4mt in 2025-2026 and 9.9mt in
2027-2028
- Soda ash realised prices bottoming in 2024, with a gradual
recovery over 2025-2028
- Capex totaling around USD1.5 billion of which around USD1 billion
for growth projects over 2025-2028
- No dividend payout over 2025-2027 and USD150 million paid in
2028
- No M&A over 2025-2028
RATING SENSITIVITIES
Fitch has increased leverage sensitivities to reflect the company's
stronger business profile following the acquisition.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Aggressive acquisition strategy and/or shareholder distributions
leading to EBITDA net leverage above 3x on a sustained basis
- Material negative FCF due to larger-than-expected investments or
dividends
- A downward revision of Turkiye's Country Ceiling and a
deterioration of WE Soda's hard-currency debt service coverage
ratio well below 1.5x on a sustained basis
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Record of a conservative financial policy with EBITDA net
leverage sustained below 2x
- A record of improvements of corporate governance
- Upward revision of Turkiye's Country Ceiling
- Commitment to proactive debt management and maintenance of hard
currency debt service coverage ratio of around 1.5x during the
forecast period
Liquidity and Debt Structure
WE Soda held USD121 million of cash and cash equivalents at the
transaction's closure. Liquidity is bolstered by availability of
USD258 million under RCFs. The RCFs include committed facilities of
USD435 million and USD100 million, both maturing in 2026. Fitch
expects the company to refinance the RCFs ahead of their maturities
and to fund its large capex through a combination of internal cash
flow generation and debt.
Issuer Profile
WE Soda is a leading global producer of soda ash (or sodium
carbonate) and sodium bicarbonate with total capacity of 9.5mt post
acquisition of Alkali in March 2025.
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
----------- ------ -------- -----
WE Soda Ltd. LT IDR BB- Affirmed BB-
We Soda Investments
Holding PLC
senior secured LT BB- Affirmed RR4 BB-
[] UK: Retail, Hospitality Administrations Up in February 2025
--------------------------------------------------------------
Responding to the latest Company Insolvency statistics covering
February 2025 published on March 18 by the Insolvency Service,
Benjamin Wiles, Head of UK Restructuring Kroll, said: "While there
is a slight uptick month-on-month in company administrations,
notably across retail and hospitality, for now the insolvency
market is quiet with evidence of many larger corporates getting
ahead of the curve with broader restructuring activity.
"In terms of outlook, given international events, there is
understandable caution that will likely lead to a lot of businesses
shelving investment plans. Closer to home, the reality of next
month's National Minimum Wage increase and NICs hike is already
leading to many smaller businesses intimating that they plan to or
are already cutting back.
"The big question remains as to whether we will see a surge in
business failures later in the year as a result of these changes?
The obvious answer might be yes, but we should not ignore the
scenario where improving wage growth and robust consumer spending
actually boosts the economy. We could also see an unhappy medium
with increasing inflation alongside businesses choosing to cut back
on staff and opening hours. Next week's Spring Statement will be
the Government's opportunity to announce substantive measures to
help businesses."
About Kroll
Kroll -- http://www.kroll.com-- is an independent provider of risk
and financial advisory solutions, Kroll's team of more than 6,500
professionals worldwide continues the firm's 100-year history of
trusted expertise spanning risk, governance, transactions and
valuation. Kroll.com.
Kroll also tracks another form of insolvency, administrations,
throughout the year. The attached document and table below breaks
down a comparison of the top 10 administrations by sector in
February 2025.
2025 Administration Appointments by Sector
Administrations in February
Retail - 13
Construction - 13
Real Estate - 12
Manufacturing - 10
Media & Tech - 9
Leisure & Hospitality - 8
Energy & Industrials - 7
Logistics & Transport - 7
Automotive - 4
Recruitment- 3
Total Admins in 2025
Retail - 26
Construction - 18
Real Estate - 15
Manufacturing - 21
Media & Tech - 17
Leisure & Hospitality - 19
Energy & Industrials - 9
Logistics & Transport - 9
Automotive - 8
Recruitment- 7
Total Admins Jan-Feb 2024
Retail - 23
Construction - 31
Real Estate - 22
Manufacturing - 38
Media & Tech - 27
Leisure & Hospitality - 15
Energy & Industrials - 12
Logistics & Transport - 12
Automotive - 4
Recruitment- 5
*********
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-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
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.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
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