/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190115.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, January 15, 2019, Vol. 20, No. 010 Headlines F R A N C E FINANCIERE DRY: Moody's Reviews B2 CFR for Upgrade Ff. Sika Deal I T A L Y ICCREA BANCA: S&P Affirms 'BB' Long-Term ICR, Outlook Stable L U X E M B O U R G CDS HOLDCO III: Fitch Assigns B+ Long-Term IDR, Outlook Stable S P A I N ABANCA CORPORACION: Moody's Rates EUR-Denom. Bond Issuance Ba3 BANKINTER 2 PYME: S&P Affirms 'D (sf)' Rating on Class E Notes U N I T E D K I N G D O M BUSINESS MORTGAGE 4: Fitch Raises Class C Tranche Rating to CCC DEBENHAMS PLC: Rescue Plan May Result to 10,000 Job Losses DEBENHAMS PLC: New Interim Chair Seeks Consensus Among Investors DECO 10: Fitch's Rating on Class C Debt Cut to Dsf Then Withdrawn DECO 11: Moody's Cuts Class A-1A Notes Rating to Ba1(sf) FLYBE GROUP: Virgin-Led Venture Acquires Business for GBP2.2MM MELTON RENEWABLE: Moody's Withdraws Ba3 CFR for Business Reasons NEW LOOK: Seeks to Cut GBP1.35-Bil. Debt Pile Under Rescue Plan TRANSDIGM HOLDINGS: Moody's Affirms B3 Sr. Subordinated Rating * UK: 20+ Retailers Seek Advice from Deloitte on Store Closures ********* =========== F R A N C E =========== FINANCIERE DRY: Moody's Reviews B2 CFR for Upgrade Ff. Sika Deal ---------------------------------------------------------------- Moody's Investors Service placed the ratings of Financiere Dry Mix Solutions S.A.S., including the B2 Corporate Family Rating, and Dry Mix Solutions Investissements S.A.S. under review for upgrade. This follows the announcement that Sika AG made a binding offer to acquire Parex from funds advised by CVC Capital Partners. The transaction is expected to close during Q2-Q3 2019 subject to French works council consultation process and regulatory approvals. RATINGS RATIONALE The rating review will focus on the intention by Sika to repay existing debt issued by Dry Mix Solutions Investissements S.A.S., a wholly owned financing subsidiary of Parex and takes into consideration the potentially stronger credit profile of Sika. RATING METHODOLOGY The principal methodology used in these ratings was Building Materials Industry published in January 2017. LIST OF AFFECTED RATINGS Issuer: Dry Mix Solutions Investissements S.A.S. On Review for Upgrade: Backed Senior Secured Bank Credit Facility, currently B2 Outlook Actions: Outlook, Changed To Rating Under Review From Stable Issuer: Financiere Dry Mix Solutions S.A.S. On Review for Upgrade: Corporate Family Rating, currently B2 Probability of Default Rating, currently B2-PD Outlook Actions: Outlook, Changed To Rating Under Review From Stable ========= I T A L Y ========= ICCREA BANCA: S&P Affirms 'BB' Long-Term ICR, Outlook Stable ------------------------------------------------------------ S&P Global Ratings affirmed its 'BB' long- and 'B' short-term issuer credit ratings on Italy-based Iccrea Banca SpA and its core subsidiary Iccrea BancaImpresa SpA (together Iccrea). S&P also affirmed its issue ratings on Iccrea's senior unsecured debt and subordinated debt at 'BB' and 'B', respectively. The outlooks on both banks are stable. S&P said, "The affirmation reflects our view that the formation of a single banking group -- comprising 142 Italian cooperative banks under Iccrea Banca -- is progressing as we anticipated. The affirmation further reflects that we had already considered Iccrea and its associated cooperative banks to be a group, of which Iccrea is a core entity, ahead of yesterday's announcements. Therefore, although the approved measures are important steps for legally forging a single group, we see the reorganization and capital increase at Iccrea as intra-group transactions. As such, they do not change our view on the group's consolidated solvency and its overall creditworthiness (group credit profile), nor the degree of integration of Iccrea into the group." The affirmation follows Iccrea's extraordinary shareholders meeting on Jan. 10, 2019. The meeting approved a modification of its statute, turning Iccrea into the group's operating holding company. Currently, the cooperative banks jointly own Iccrea. In the next few days, S&P understands Iccrea and the 142 cooperative banks will also sign a cohesion contract (Contratto di Coesione). The signatures will ratify the creation of the new group that will become legally effective after receiving regulatory approval. Following its transformation, the group will adopt the name Gruppo Bancario Cooperativo Iccrea (GBCI). S&P said, "We expect the capital increase to be finalized by the end of first-quarter 2019, after receiving the regulatory approval and when the administrative procedures have been completed. This transaction will strengthen Iccrea's stand-alone capital ratios. "We now project Iccrea's risk-adjusted capital (RAC) ratio to increase to 5.5% by end-2020, from our previous forecasts of 4.7%. However, this does not change our ratings on its subordinated debt obligations, which we notch down from its stand-alone credit profile (SACP). The SACP remains 'bb', the same level as the group credit profile of the entire GBCI group. Given the ongoing integration process and role of Iccrea as group parent, we expect Iccrea's stand-alone creditworthiness to become indistinguishable from the overall creditworthiness of the GBCI group. "Moreover, we see some costs and risks related to the completion of the integration process that might limit the immediate benefits of the capital strengthening action. We also view Iccrea's asset quality metrics as still weaker-than-domestic peers, despite recent improvements. Therefore, our combined view of Iccrea's capitalization and risk position remains unchanged despite the capital increase. "Our ratings on Iccrea continue to benefit from the stability of its role as the central bank for GBCI's cooperative banks. Yesterday's shareholder decisions have reinforced the integration of Iccrea into the group. Importantly, the cohesion contract includes a cross-guarantee scheme under which each GBCI group member bank will guarantee the external obligations of other GBCI members, including those of Iccrea. We continue to see Iccrea providing a complete range of financial services to the GBCI member banks including leasing, factoring, credit cards, payments, and capital market brokerage. It focuses on all supporting activities, including risk management and controls. It also expects to intervene to solve crises at the single GBCI cooperative bank level. "The stable outlooks on Iccrea Banca and its core subsidiary Iccrea BancaImpresa reflect the balanced risks to our ratings over the next 12 months. We expect the ratings to move in parallel with our view of the overall creditworthiness of the GBCI group. In particular, we expect the GBCI group to successfully progress in reaping the benefits of closer integration while maintaining a strong funding and liquidity position and its RAC ratio above 5%. We factor in our expectation that the group will increase efforts to reduce the high stock of nonperforming exposures, thereby narrowing the gap with peers. "We could lower the ratings if we perceived that market volatility was going to rise further and for longer, eroding the group's already modest profitability. This could lead GBCI's RAC ratio to decline to below 5.0%, without a material improvement in asset quality. Similarly, we could lower our ratings if the group's outstanding funding and liquidity profile deteriorated or if the group members failed to agree on a joint strategy that enabled strong risk governance and reaping of cost synergies. "An upgrade is less likely in the current environment. We could take this action if market pressure abated and the GBCI's combined solvency and risk profiles strengthened. For example, this could happen if we expected the RAC ratio to increase comfortably above 7% or asset quality materially improved to a level more akin to the rest of the domestic sector." As a result of the transformation, S&P would also need to observe the following in the new group: -- Effective strengthening of operational relationship and risk- sharing between the individual cooperative banks and Iccrea; -- Better efficiency; and -- Improved corporate governance, enabling the GBCI group to truly operate as a single group in the market. =================== L U X E M B O U R G =================== CDS HOLDCO III: Fitch Assigns B+ Long-Term IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has assigned Luxembourg-based CDS Holdco III BV (M7) a Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'B+'. The Outlook on the IDR is Stable. Fitch has also assigned an instrument rating of 'BB-' /'RR3' to M7's senior secured term- loan. The ratings of M7 reflect a cash-generative business model and scalable satellite pay-TV platform, which enables the company to profitably manage a number of small- to medium-sized customer bases across its geographic footprint. Sectorial risks related to mature operations in the Netherlands and Belgium are manageable, in its opinion, as existing investments in the Czech Republic and Austria provide avenues for growth and stable to growing free cashflow (FCF) generation. M7's announced acquisition of UPC's DTH assets in central and eastern Europe (CEE) is likely to strengthen the company's operating and credit profile through increased scale, synergies, diversification and result in an improvement in organic deleveraging capacity. This improvement along with potential deleveraging over the next two years is reflected in the IDR's Stable Outlook. M7's rating would not change in the unlikely event that the transaction is not completed as planned. Key Rating Drivers Scalable and Profitable Business Model: M7 operates a pay-TV platform across eight European markets servicing 3.6 million customers on a proforma basis including the acquisition of UPC's central and eastern European (CEE) assets. The company's back office and technology operations are centralised with sales and marketing activities conducted locally. This enables M7 to profitably manage a number of relatively small- to medium-sized customer bases across different geographies while meeting investment requirements for a multichannel hybrid direct-to-home (DTH) platform with over-the-top (OTT) capabilities. A focus on value-for-money and mid-market segments avoids investment requirements in premium content and complements OTT content applications such as Netflix and Amazon TV. Businesses at Different Stages of Development: M7 has a mixed portfolio of businesses with a combination of mature, growth and early- stage assets. The company's operations in the Netherlands and Belgium are mature and cash-generative but in slight decline. Fitch estimates that these markets accounted for 47% of pro-forma adjusted EBITDA (excluding Germany, central and other costs) in 2018 and are likely to decline below 40% over the next three years. M7's other operations in CEE and Austria are in a growth- to-early phase with scope to continue growing over the next three to four years as pay-TV, digital viewing and HD adoption increases in those markets. The combination of assets should enable M7 to maintain stable to growing revenue and EBITDA. Strong Cash Generation, Reducing Leverage: M7 has a strong cash- generative capacity, which is reflected in its pro-forma pre- dividend FCF margin of 17% to 18% from 2020. This is significantly stronger than many of its larger media sector peers such as Sky Plc (6%), Vivendi (5%) and Bertelsmann (4%). Assuming no shareholder remuneration over the next four to five years, most of the FCF will be retained for reducing leverage or investment purposes. its base case forecasts indicate that on pro-forma a basis, M7 should be able to reduce its funds from operations (FFO)-adjusted net leverage to below 4.5x over the next two years from around 4.9x at end-2018. CEE Acquisition Improves Profile: The acquisition of UPC's CEE DTH assets improves M7's operating profile as a result of a complimentary footprint, increased scale and greater diversification from a geographic and growth perspective. Fitch estimates that the acquisition will increase M7's pro-forma 2018 EBITDA by 20%. The use of its centralised business model will enable the gradual extraction of synergies that relate principally to technological platforms, content costs and taxation. its base case forecasts indicate that synergies will account for around 17% of its annual pro-forma FCF in 2021. The acquisition will however, create a FX mis-match between the company's debt, which is denominated in euros, and cashflows from some external markets. Assuming the Czech krona remains stable against the euro, the extent of exposure to Romania and Hungary will be about 14% of total pro-forma EBITDA by its estimates. Acquisition Enhances Deleveraging Capacity: M7 intends to fund the DTH acquisition through a combination of existing cash and debt. The funding is likely to increase projected pro-forma 2019 FFO-adjusted net leverage to 5.1x compared with 4.6x based on Fitch's forecasts for 2019 excluding the acquisition. However, the acquisition will enhance the company's organic deleveraging capacity to between 0.7x and 0.9x per year on an FFO adjusted net leverage basis from around 0.5x, allowing significant deleveraging over the next two years. The improvement is due to a combination of the purchase price, incremental EBITDA, synergies and no dividends payments. Financial Policy, Leverage Management: M7 has no formal financial policy on long-term leverage. Historically, the company has used FCF for growing the business through bolt-on M&A and reducing leverage. M7's credit agreements limit the payment of dividends until net debt/EBITDA is below 3.75x . This is equivalent to about 4.3x FFO adjusted net leverage, which is comfortably within the thresholds of the company's 'B+' rating. M7 maintains a strong deleveraging capacity to manage temporary leverage spikes. Notching of Secured Debt: Under Fitch's rating methodology, the secured nature of M7's debt and expected recovery prospects of 61% ( RR3) allows M7's term-loan to be rated one notch above the IDR of 'B+' at 'BB-'. The security collateral includes the shares of the company that hold principal assets such as M7's customer base. Derivation Summary M7's small scale, niche market positioning in some countries, concentrated exposure to sectorial risks of satellite based pay- TV distribution and leverage trajectory position the company's ratings in the high single 'B' range. Similar or higher-rated peers such as VodafoneZiggo Group B.V (B+/Stable), UPC Holding BV (BB-/Stable) and Telenet Group Holdings N.V (BB-/Stable) have stronger domestic positions, greater scale, broader product ranges and network ownership, which enable them to sustain higher leverage. These attributes are also reflected in M7's investment grade rated peers in the media sector, which also maintain more conservative leverage levels, such as Sky Plc (BBB- / RWP) and Vivendi SA (BBB/Stable). Key Assumptions Fitch's Key Assumptions Within its Rating Case for the Issuer - Standalone revenue of EUR323 million in 2018 increasing to EUR404 million in 2019 as a result of the acquisition and remaining broadly flat thereafter - Standalone EBITDA of EUR112 million in 2018 and increasing to EUR130 million in 2019 as a result of the acquisition. Gradually growing to around EUR140 million by 2021. The forecasts assume that M7 achieves about 50% of its projected synergies from the acquisition. - Controlled start-up costs for Diveo in Germany - Capex around 8% of sales in 2018, increasing to 9% to 10% thereafter - No dividend payments over the next four to five years and a significant proportion of annual FCF used for reducing debt - A weighted average lease multiple for the purpose of calculating off balance sheet debt adjustment of 5.2x. This represents a blend of 5x for transponder lease obligations and 9x for other long-term lease obligations. KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that M7 would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated. Fitch has assumed a 10% administrative claim in the recovery analysis. - M7's recovery analysis assumes a post-reorganisation EBITDA 30% below 2019 pro-forma EBITDA. - For its recovery analysis, Fitch applies a distress enterprise value multiple of 5.0x, which is comparable with sector peers, - Fitch assumes fully drawn revolving credit facilities (RCFs) in its recovery analyses as credit revolvers are tapped when companies are in distress. Fitch assumes a full draw on M7's RCF of EUR20 million. - Fitch calculates recoveries for the EUR675 million senior secured debt at approximately 61%. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - FFO adjusted net leverage sustained below 4.5x - FFO fixed charge cover sustained above 2.5x - Stabilisation of EBITDA and operating performance in declining markets Developments That May, Individually or Collectively, Lead to Negative Rating Action - FFO adjusted net leverage sustained above 5.5x - FFO fixed charge cover sustained below 1.5x - Sharper-than-expected revenue declines in the Netherlands and Belgium and or stagnating growth in other markets - Erosion of EBITDA and FCF Liquidity and Debt Structure Satisfactory Liquidity: M7 has no debt repayments in the next three to four years. At end-2017, M7 had EUR23 million of cash and an undrawn RCF of EUR20 million. Fitch also expects the company to be FCF-positive over the next five years. On a pro- forma basis, Fitch estimates M7 will end 2018 with around EUR25 million cash and with the RCF remaining undrawn. ========= S P A I N ========= ABANCA CORPORACION: Moody's Rates EUR-Denom. Bond Issuance Ba3 -------------------------------------------------------------- Moody's Investors Service has assigned a Ba3 long-term domestic- currency subordinated debt rating to ABANCA Corporacion Bancaria, S.A.'s planned EUR-denominated plain vanilla Tier 2 bond issuance. RATINGS RATIONALE The Ba3 rating assigned to the subordinated debt obligations of Abanca reflects the securities' loss absorbing features in the case of failure, being subordinated to senior obligations. The rating is positioned one notch below the bank's adjusted baseline credit assessment (BCA) of ba2, in line with Moody's standard notching guidance for plain vanilla subordinated debt instruments. The rating does not incorporate any uplift from government support. The planned subordinated debt issuance is expected to be eligible for Tier 2 capital treatment under European law. The positioning of Abanca's rating one notch below the bank's adjusted BCA reflects the probability of default in line with the Adjusted BCA and the high loss severity under its Advanced Loss Given Failure (LGF) analysis, due to the limited volume of debt and protection from more subordinated instruments and residual equity. WHAT COULD CHANGE THE RATING UP/DOWN Abanca's subordinated debt rating is linked to the standalone BCA. As such, any change to the BCA would also likely affect these ratings. The bank's subordinated debt ratings could also change as a result of changes in the loss given failure that these securities face. LIST OF AFFECTED RATINGS Issuer: ABANCA Corporacion Bancaria, S.A. Assignment: Subordinate Regular Bond/Debenture, assigned Ba3 PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks published in August 2018. BANKINTER 2 PYME: S&P Affirms 'D (sf)' Rating on Class E Notes -------------------------------------------------------------- S&P Global Ratings withdrew its credit ratings on Bankinter 2 PYME, Fondo de Titulizacion de Activos' class B, C, and D notes. At the same time, S&P has affirmed its 'D (sf)' rating on the class E notes, which S&P will withdraw in 30 days time. The rating actions follows the transaction's early liquidation. According to the trustee report, the class B, C, and D notes were fully repaid on Nov. 16, 2018. S&P has therefore withdrawn S&P's ratings on these classes of notes. The class E notes were not fully repaid and remain in default. Consequently, S&P has affirmed its 'D (sf)' rating on this class of notes. Bankinter 2 PYME is a single-jurisdiction cash flow collateralized loan obligation (CLO) transaction backed by small and midsize enterprise (SME) loans. RATINGS WITHDRAWN Bankinter 2 PYME, Fondo de Titulizacion de Activos Class Rating To From B NR AAA (sf) C NR AA (sf) D NR BBB (sf) RATING AFFIRMED E D (sf) NR--Not rated. =========================== U N I T E D K I N G D O M =========================== BUSINESS MORTGAGE 4: Fitch Raises Class C Tranche Rating to CCC --------------------------------------------------------------- Fitch Ratings has upgraded nine tranches of the Business Mortgage Finance (BMF) series, affirmed 11 tranches and downgraded two tranches. The BMF transactions are securitisations of mortgages to small and medium-sized enterprises and to the owner-managed business community, originated by Commercial First Mortgages Limited (CFML). Fitch has analysed the performance of the transactions using its SME Balance Sheet Securitisation Rating Criteria. KEY RATING DRIVERS Robust Credit Enhancement (CE) The transactions have deleveraged substantially and their current note balances are between 17% (BMF 4) and 42% (BMF 7) of the original issuance. The resulting increase in CE is the main driver of the upgrades and affirmations of the most senior notes of the series. The build-up in CE is partially offset by the increasing pool concentration, which is a rating constraint, especially for BMF 4. Secondary Quality Collateral The pools comprise owner-occupied commercial real estate, which is likely to be more affected by a deterioration in the economic sentiment, and more so given the secondary quality of the collateral properties. This leave the transactions exposed to tail risks in case of an economic downturn. Junior Notes Mostly Under-Collateralised The combination of cumulative large period losses and insufficient excess spread has led to the depletion of reserve funds and increasing principal deficiency ledgers (PDL). Specifically, the outstanding PDLs in BMF 5, 6 and 7 now account for 14%, 22% and 19% of the current note balance, respectively. The debited PDLs, together with the presence of other loans in litigation but still not provisioned for, leave the junior notes in serious distress. These distressed notes are rated from 'CCCsf' to 'Csf' depending on each class level of subordination and each transaction's recovery prospects. RATING SENSITIVITIES Further losses and increases in PDLs beyond Fitch's stresses could lead to negative rating action, particularly on the mezzanine and junior notes. An adverse Brexit scenario could limit the recoveries coming from the outstanding loans in litigation. Moreover, given the secondary nature of the collateral, a downturn of the economic cycle is likely to affect the series performance more than other UK structured finance transactions. Therefore an adverse Brexit could potentially put negative pressure on the notes' ratings, particularly those of the non-senior notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO 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 pools and the transactions. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any- third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, 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. SOURCES OF INFORMATION The information here was used in the analysis. - Loan-by-loan data provided by Target Servicing Limited as at July 31, 2018 - Transaction reporting provided Target Servicing Limited as at November 2018 The rating actions are as follows: BMF4: Class M (XS0249508242): upgraded to 'AAsf' from 'A+sf'; Outlook Stable Class B (XS0249508754): upgraded to 'B-sf' from 'CCCsf'; Outlook Stable Class C (XS0249509133): upgraded to 'CCCsf' from 'CCsf'; RE revised to 40% from 0% BMF5: Class M1 notes (XS0271324724): upgraded to 'B+sf' from 'CCCsf'; Outlook Stable Class M2 notes (XS0271324997): upgraded to 'B+sf' from 'CCCsf'; Outlook Stable Class B1 notes (XS0271325291): affirmed at 'CCsf'; RE revised to 30% from 0% Class B2 notes (XS0271325614): affirmed at 'CCsf'; RE revised to 30% from 0% Class C notes (XS0271326000): affirmed at 'Csf'; RE 0% BMF6: Class A1 notes (XS0299445808): upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Detachable A1 coupon (XS0299535384): upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class A2 notes (XS0299446103): upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Detachable A2 coupon (XS0299536515): upgraded to 'AA+sf' from 'AAsf'; Outlook Stable Class M1 notes (XS0299446442): affirmed at 'CCCsf'; RE 55% Class M2 notes (XS0299446798): affirmed at 'CCCsf'; RE 55% Class B2 notes (XS0299447507): downgraded to 'Csf' from 'CCsf'; RE 0% Class C notes (XS0299447846): affirmed at 'Csf'; RE 0% BMF7: Class A1 notes (XS0330211359): affirmed at 'Asf'; Outlook Stable Detachable A1 coupon (XS0330212597): affirmed at 'Asf'; Outlook Stable Class M1 notes (XS0330220855): affirmed at 'CCCsf'; RE 45% Class M2 notes (XS0330222638): affirmed at 'CCCsf'; RE 45% Class B1 notes (XS0330228320): downgraded to 'Csf' from 'CCsf'; RE 0% Class C notes (XS0330229138): affirmed at 'Csf'; RE 0% DEBENHAMS PLC: Rescue Plan May Result to 10,000 Job Losses ---------------------------------------------------------- Ben Marlow at The Daily Telegraph reports that a daring rescue attempt being drawn up to save Debenhams from going bust could cost more than 10,000 job losses, dealing the biggest blow to the high street since the collapse of BHS. The Daily Telegraph understands that the chain has earmarked as many as 90 of its high street stores for closure, more than half the current total, as part of a radical turnaround plan. Debenhams has 165 shops in the UK and Ireland, and 26,000 employees, The Daily Telegraph discloses. It has said publicly that around 50 stores could be jettisoned but the board has quietly identified another 30 to 40 that could be offloaded as it seeks to focus on the most profitable ones, The Daily Telegraph relates. DEBENHAMS PLC: New Interim Chair Seeks Consensus Among Investors ---------------------------------------------------------------- James Davey at Reuters reports that the new interim chairman of Debenhams, the British department store chain that is fighting for survival, began the task of trying to find a consensus among investors on the way forward. On Jan. 10, two major Debenhams shareholders -- Mike Ashley's Sports Direct and Middle Eastern investor Landmark Group -- forced Chief Executive Sergio Bucher off the board and Chairman Ian Cheshire out of the company following a drop in Christmas sales, Reuters relates. According to Reuters, Terry Duddy, Debenhams' senior independent director, was appointed interim chairman, and said he would meet with shareholders to understand their concerns. A spokesman for Debenhams, as cited by Reuters, said Mr. Duddy, a former CEO of Home Retail Group, wasted no time, meeting Ashley informally in London on Jan. 10. Debenhams has a program to close 50 of its underperforming UK stores over three to five years, Reuters discloses. However, Mr. Ashley wants Debenhams to move faster, Reuters notes. He told Sky News last month he believed Debenhams should carry out a Company Voluntary Arrangement (CVA) restructuring to close stores. CVAs require the approval of landlords and creditors, Reuters recounts. Also in December, Debenhams declined the offer of a GBP40 million interest-free loan from Mr. Ashley, saying conditions attached to it could affect the interests of other stakeholders, according to Reuters. Debenhams has net debt of GBP286 million and debt facilities of GBP520 million, Reuters discloses. A key focus for Mr. Duddy will be refinancing Debenhams' existing banking facilities, Reuters notes. The firm needs to pass a banking covenant test next month, Reuters states. DECO 10: Fitch's Rating on Class C Debt Cut to Dsf Then Withdrawn ----------------------------------------------------------------- Fitch Ratings has downgraded Deco 10 - Pan Europe 4 plc and withdrawn the ratings as follows: EUR2.9 million class C (XS0276273074) downgraded to 'Dsf' from 'CCsf'; Recovery Estimate (RE) revised to 0% from 65%; withdrawn EUR19 million class D (XS027673660) affirmed at 'Dsf'; RE 0%; withdrawn DECO 10 closed in December 2006 and was originally the securitisation of 14 commercial real estate loans. All the issuer's assets have been liquidated, leaving the outstanding notes facing write-off. KEY RATING DRIVERS The downgrade reflects the insolvency of the issuer, with no prospects of either interest or principal being paid on the outstanding bonds. This supports the revision of RE to zero. Given terminal status of the issuer, the ratings have been withdrawn. RATING SENSITIVITIES Not applicable. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO 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. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, 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. DECO 11: Moody's Cuts Class A-1A Notes Rating to Ba1(sf) -------------------------------------------------------- Moody's Investors Service has downgraded the rating of one class and affirmed the rating of one class of Notes issued by DECO 11 -- UK Conduit 3 p.l.c. Moody's rating action is as follows: GBP220M Class A-1A Notes, Downgraded to Ba1 (sf); previously on May 16, 2017 Downgraded to Baa2 (sf) GBP74.5M Class A-1B Notes, Affirmed Caa2 (sf); previously on May 16, 2017 Downgraded to Caa2 (sf) Moody's does not rate the Class A2, Class B, Class C, Class D, Class E, Class F and the Class X Notes. RATINGS RATIONALE The rating on the Class A1-A Notes is downgraded due to the increased risk of the Issuer failing to redeem the Notes by the legal final maturity date in January 2020 as a result of the restructuring of the Mapeley Gamma loan (83% of current pool balance). As part of the restructuring, the asset manager is to complete the liquidation of the 24 properties no later than January 2020, however this date could be extended under certain limited circumstances to achieve the maximisation of recoveries. In order to facilitate a faster resolution, an amendment to the restructuring allows the Borrower, based on certain milestones, to exercise an option to discharge all liabilities by a predetermined amount. This amendment does not significantly mitigate the risk of a redemption post legal final maturity. The rating on the Class A1-B Notes is affirmed because its current credit enhancement level of 52.3% is sufficient to maintain the rating despite the loss expectation for the pool. Since the last review no loans have repaid or been worked-out. Moody's downgrade reflects a base expected loss in the range of 60%-70% of the current balance, unchanged since the last review. Moody's derives this loss expectation from the analysis of the default probability of the securitised loans (both during the term and at maturity) and its value assessment of the collateral. Moody's key assumptions for the Mapeley Gamma loan: LTV: 265% (Whole)/ 265% (A-Loan); Defaulted; Expected Loss 60%- 70%. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Approach to Rating EMEA CMBS Transactions" published in November 2018. Factors that would lead to an upgrade or downgrade of the ratings: Factors that could lead to a downgrade of the ratings are (i) delayed timing of asset disposals for the Mapeley Gamma loan or (ii) a decline in the property values backing the underlying loan. Factors that would lead to an upgrade of the ratings are higher than expected recoveries that are achieved via an accelerated asset disposal process that increases the likelihood of note repayment ahead of the legal final maturity date. FLYBE GROUP: Virgin-Led Venture Acquires Business for GBP2.2MM -------------------------------------------------------------- Christopher Jasper at Bloomberg News reports that a venture led by Richard Branson's Virgin Atlantic Airways Ltd. scooped up Flybe Group Plc for a penny a share, all but wiping out the value of the British regional carrier hit by dwindling passenger numbers, higher oil prices and uncertainty surrounding Brexit. According to Bloomberg, a statement on Jan. 11 said Virgin, Cyrus Capital and airport operator Stobart Group Ltd. agreed to purchase Flybe for GBP2.2 million (US$2.8 million). The deal drove shares of the Exeter, England-based carrier down as much as 90% to a market value of about GBP6 million, a fraction of its GBP215 million-capitalization on its trading debut on the London Stock Exchange in 2010, Bloomberg states. The new owners said Flybe will be combined with Stobart Air and operate under the Virgin Atlantic brand, Bloomberg relates. The new Flybe owners said they would provide GBP20 million of bridge loans and inject as much as GBP80 million to support growth, Bloomberg notes. The carrier will be purchased via Connect Airways, in which Virgin and Stobart each have 30% stakes, with the balance held by Cyrus, Bloomberg discloses. MELTON RENEWABLE: Moody's Withdraws Ba3 CFR for Business Reasons ---------------------------------------------------------------- Moody's Investors Service has withdrawn all the ratings of Melton Renewable Energy UK Limited including the company's Ba3 long term corporate family rating and the Ba2-PD probability of default rating. The stable outlook has also been withdrawn. RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. Melton Renewable Energy UK Limited's principal activity is that of a holding company to Melton Renewable Energy (Holdings) Limited and Melton LG Holding Limited. The group represents a UK based renewable energy portfolio of biomass and landfill gas generation assets with an installed capacity of 170MW at June 30, 2018. NEW LOOK: Seeks to Cut GBP1.35-Bil. Debt Pile Under Rescue Plan --------------------------------------------------------------- LaToya Harding at The Telegraph reports that struggling fashion chain New Look has unveiled a dramatic rescue plan that will see it hand control to its lenders in a bid to cut its overwhelming GBP1.35 billion debt pile. According to The Telegraph, the womenswear retailer aims to reduce its debt by 80% to GBP350 million, with a GBP150 million injection of capital raised by issuing new bonds. In return, its creditors will secure 72% of the business, while its current owner Brait, a South African investment firm controlled by Christo Wiese, will be left with a significantly reduced holding, The Telegraph discloses. A further 5% of the business will be held by management, The Telegraph states. Alistair McGeorge, executive chairman, said the move was "an important milestone for the business" as it battles to return to financial health, The Telegraph relates. TRANSDIGM HOLDINGS: Moody's Affirms B3 Sr. Subordinated Rating -------------------------------------------------------------- Moody's Investors Service affirmed certain ratings for TransDigm Inc. including the B1 Corporate Family Rating, the B1-PD Probability of Default Rating and the B3 senior subordinated rating. Concurrently, Moody's placed the senior secured Ba2 ratings under review for downgrade and anticipates that if the pending acquisition of Esterline Technologies Corp. is substantially financed through incremental senior secured debt, the senior secured ratings would be downgraded to Ba3. The outlook for TransDigm Inc. is changed to rating under review which applies only to senior secured debt and Moody's expects to only downgrade the Ba2 senior secured ratings and not any other ratings. Once the review is completed, Moody's would expect to affirm all ratings, downgrade the senior secured debt and have a negative outlook. Ratings of Esterline are unchanged, as the debt is expected to be repaid upon closing. RATINGS RATIONALE The B1 Corporate Family Rating considers TransDigm's high tolerance for financial risk, aggressive financial policy and the company's private equity-like business model that prioritizes shareholder returns over creditors. The rating also reflects TransDigm's weak balance sheet and the cyclical nature of its commercial OEM aerospace markets (30% of sales) which are vulnerable to economic downturns. Partially mitigating concerns around high financial leverage is TransDigm's strong competitive standing supported by the proprietary and sole-sourced nature of the majority of its products, its industry leading profitability metrics, as well a strong liquidity profile and favorable demand fundamentals within aerospace and defense end-markets. The company's installed base of niche products across multiple carriers and platforms as well as its focus on highly profitable aftermarkets, which add stability to its revenue stream adds further support to the rating. TransDigm's industry leading margins are a critical rating consideration as they enable the company to operate with higher levels of financial leverage and are an important driver of its strong cash generating capabilities. Given Esterline's lower margins (EBITDA margins currently in the mid-teens relative to TransDigm's EBITDA margins which approach 50%), Moody's anticipates that the acquisition will have a meaningful dilutive impact on TransDigm's profitability with pro forma consolidated margins likely to decline to below 40%. TransDigm's ability to strongly execute and to apply its value-based operating strategy to help mitigate the dilutive impact of Esterline on the company's margins such that it is able to restore future margins back into the 40% range will be an important rating consideration over the next few years. Pro forma for the Esterline acquisition, debt-to-EBITDA (after standard adjustments) is expected to increase about 0.75x to the high 7x range, a level that is at the upper bounds of leverage previously published for expectations for the ratings. Given the very high level of pro forma leverage, Moody's expects the company to refrain from any near-term shareholder distributions or additional leveraging M&A transactions. An inability or an unwillingness to reduce financial leverage back towards 7x would likely result in downward rating pressure. The negative outlook for TransDigm Holdings UK plc reflects TransDigm's highly leveraged balance sheet that will constrain financial flexibility over the next 12 months as well as elevated near-term execution risk relating to the large-sized acquisition of Esterline. The SGL-1 speculative grade liquidity rating denotes expectations of a very good liquidity profile over the next 12 months. Moody's expects TransDigm to maintain healthy cash balances (cash on hand after the Esterline acquisition is likely to be around $1.7 billion), substantial free cash generation (FCF-to-Debt during 2019 is anticipated to be at least in the mid-single-digits) and near full availability under its $600 million revolving credit facility. This should afford the company the financial flexibility necessary to manage its large debt burden. TransDigm's senior secured term debt is rated two notches above the CFR at Ba2 reflecting meaningful secured collateral support and the cushion against loss provided by the senior subordinated notes, which are rated B3, two notches below the CFR. While the financing specifics of the Esterline acquisition are still to be finalized, Moody's anticipates that substantially all of the transaction will be funded though incremental senior secured term debt. With a meaningful increase in secured debt relative to unsecured debt, this is expected to result in ratings on existing senior secured indebtedness being downgraded by one notch to Ba3. An upgrade is unlikely in the near term given TransDigm's highly leveraged capital structure. Any upward rating action would be driven by leverage sustained below 5.0x on a Moody's adjusted basis, coupled with the maintenance of the company's industry leading margins and a continuation of the strong liquidity profile. Factors that could result in lower ratings include expectations that Moody's adjusted Debt-to-EBITDA will remain sustained at the high 7x level. An inability or an unwillingness to reduce financial leverage back towards 7x would likely cause downward rating pressure. A deteriorating liquidity profile involving FCF- to-Debt continuously below 5%, annual free cash flow generation sustained below $700 million or increased reliance on revolver borrowings could also pressure the rating downward. An inability to improve profitability such that EBITDA margins were expected to remain around 40% could also result in downward rating pressure over time. The following rating actions were taken: Issuer: TransDigm Inc. Probability of Default Rating, Affirmed B1-PD Speculative Grade Liquidity Rating, Affirmed SGL-1 Corporate Family Rating, Affirmed B1 Senior Subordinated Regular Bond/Debenture, Affirmed B3 (LGD5) Senior Secured Bank Credit Facility, Placed on Review for Downgrade, currently Ba2 (LGD2) Outlook, Changed To Rating Under Review From Negative Issuer: TransDigm Holdings UK plc Senior Subordinated Regular Bond/Debenture, Affirmed B3 (LGD5) Outlook, Negative TransDigm Inc., headquartered in Cleveland, Ohio, is a manufacturer of engineered aerospace components for commercial airlines, aircraft maintenance facilities, original equipment manufacturers and various agencies of the US Government. TransDigm Inc. is the wholly-owned subsidiary of TransDigm Group Incorporated (TDG). Esterline Technologies Corp. designs and manufactures highly engineered products and systems primarily serving aerospace and defense customers. Pro forma revenues for the combined companies for the last twelve month period ending September 30, 2018 are approximately $5.8 billion. * UK: 20+ Retailers Seek Advice from Deloitte on Store Closures --------------------------------------------------------------- Charlotte Ryan at Bloomberg News reports that more than 20 U.K. retail chains instructed accountancy firm Deloitte LLP in the past two months to assess whether they are able to restructure their debt. The accountancy firm is considering whether the chains -- mostly fashion and homeware retailers -- can use a so-called company voluntary arrangement to close stores, Bloomberg discloses. The process allows businesses to leave behind lease liabilities and keep operating, but puts a financial burden on landlords, Bloomberg states. Restaurant chains Carluccio's, Byron Hamburgers, Prezzo and Jamie's Italian all used CVAs last year, Bloomberg relays, citing the Sunday Times, which didn't identify the chains in discussions with Deloitte. According to Bloomberg, competition for U.K. retailers has increased in the past year from online retailers while Brexit concerns have impacted results. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* 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 2019. 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. * * * End of Transmission * * *