/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190710.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 Wednesday, July 10, 2019, Vol. 20, No. 137 Headlines D E N M A R K DKT HOLDINGS: Fitch Lowers LongTerm IDR to B+, Outlook Stable F R A N C E RALLYE SA: Societe Generale Can Call in Collateral, Court Rules G E R M A N Y STEINHOFF INT'L: Provides June Update on Financial Restructuring I R E L A N D AQUEDUCT EUROPEAN 4: Fitch Assigns B-sf Rating on Class F Debt AQUEDUCT EUROPEAN 4: Moody's Rates EUR11.8MM Class F Notes 'B2' L U X E M B O U R G EP BCO: Fitch Assigns BB- LT Issuer Default Rating, Outlook Stable N E T H E R L A N D S TIKEHAU CLO II: Fitch Rates EUR10MM Class F Notes 'B-' TIKEHAU CLO II: Moody's Affirms B2 Rating on EUR10MM Class F Notes S P A I N FCC AQUALIA: Fitch Affirms BB+ LongTerm IDR, Outlook Stable GRANADA HIPOTECARIO 1: Fitch Affirms CCCsf Rating on Class B Debt U N I T E D K I N G D O M BURY FC: Creditors Seek More Time to Consider Rescue Plan DEBENHAMS PLC: Calls on Mike Ashley to Drop CVA Challenge MONSOON ACCESSORIZE: Announces 50 Redundancies After CVA Approval RJD FABRICATIONS: Enters Administration Amid Financial Woes [*] UK: Must Leave Under Clean Brexit or Face EUR200BB Bailout - - - - - ============= D E N M A R K ============= DKT HOLDINGS: Fitch Lowers LongTerm IDR to B+, Outlook Stable ------------------------------------------------------------- Fitch Ratings has downgraded DKT Holdings ApS, the owner of Danish telecoms company TDC A/S, to Long-Term Issuer Default Rating 'B+' from 'BB-'. The Outlook on the IDR is Stable. Fitch has also upgraded TDC's senior secured debt ratings. The downgrade reflects its view that the company's strategy to increase network investment and to separate TDC into two operating subsidiaries will increase capex and operating expenses. Fitch expects this will increase DKT's leverage to a level sustainably higher than its downgrade threshold for a 'BB-' rating. Its base case envisages funds from operations (FFO) adjusted net leverage to stabilise at around 6.2x-6.3x in 2020-2022. This high leverage, taken into consideration with the strong operating profile of an incumbent telecoms operator, is more consistent with a 'B+' rating. KEY RATING DRIVERS Higher Capex and Leverage: Fitch forecasts DKT's Fitch-defined FFO lease-adjusted net leverage to rise to 5.8x by end-2019 and to remain at around 6.2x-6.3x in 2020-2022. DKT plans to invest more on its FTTH and 5G network, and develop its TV platform. Fitch expects this higher capex starting in 2019 to continue over the next four years. The demerger of TDC into two operating subsidiaries (a NetCo focused on operating its fixed and mobile networks and an OpCo focusing on delivering customer experience) should also contribute to higher operational expenses and capex in 2019-2020. However, Fitch believes DKT has a strong ability to manage its leverage via flexible dividends and phasing of its capex programme. Fibre Network Investment: DKT's strategy to increase fibre network investment and FTTH coverage, in Fitch's view, should help to address growing demand for high-speed broadband connectivity and place DKT in a better competitive position relative to its infrastructure competitors. Fitch believes DKT is likely to focus its FTTH investments initially in areas where it has a fixed broadband market share, but where there is little alternative fibre deployment. In Denmark, FTTH network has been predominantly deployed and is owned by local utility companies. They have passed 1.2 million homes with fibre, which covers half of the country's households. Where fibre connections are not available, consumers rely on upgraded cable networks or TDC's copper-based network for their broadband service. Competitive Market: The mature Danish telecom market remains competitive with limited subscriber growth potential. DKT's 1Q19 results show some signs of stabilisation. Its business segment has delivered for the first time revenue growth of 0.9% yoy, reversing high single-digit declines in past years. The consumer segment's revenue dipped 0.2%. Based on DKT's solid market position as the incumbent operator in Denmark, Fitch expects overall revenue growth to turn positive starting from 2021. NetCo-OpCo Legal Separation: The legal separation of OpCo and NetCo has now been completed with these two business units transferred to 100%-owned TDC subsidiaries, Nuuday A/S and TDC NetCo A/S respectively. This demerger is still partial as certain headquarter functions and the primary part of TDC's external debt financing still remain at TDC. Fitch does not expect a full operational separation to be completed before 2021-2022 as complex issues, including IT systems, are still being worked through. However, changes to the security and guarantee package for the senior secured debt issued by TDC have now been put in place, in line with terms outlined during TDC's term loan B (TLB) euro tranche repricing in November 2018. Instrument Ratings Change: Fitch has updated its ratings on DKT's instrument ratings, as Fitch now has further clarity on the impact of TDC's planned network separation, with the legal separation being the first step. TDC's Senior Secured Upgraded: Recovery prospects for the debt issued by TDC remain good, even though Fitch expects 2019 EBITDA to be lower than 2018's. With the legal separation complete, the TLB (senior secured facilities issued by TDC) now has significant security advantages over TDC's senior unsecured notes. This includes the share pledge over TDC and its two new subsidiaries, TDC NetCo A/S and Nuuday A/S, as well as guarantees from the two new subsidiaries and TDC's immediate parent, DK Telekommunikation ApS. Therefore Fitch has upgraded TDC's senior secured instrument rating to 'BB+'/'RR1'/100%. TDC's Senior Unsecured Upgraded: Recovery prospects for TDC's senior unsecured noteholders are also good. While these noteholders do not benefit from any guarantee or security package, TDC's two new subsidiaries, due to the demerger under Danish law, will be liable on a statutory basis to satisfy existing noteholders' claims if TDC defaults on these notes. These notes mature in 2022 and 2023, before the TLB is due in 2025. Therefore Fitch has upgraded TDC's senior unsecured instrument rating to 'BB'/'RR2'/90%. DKT Holdco Rating Downgraded: The debt issued by DKT Finance ApS, a holding company that ultimately owns TDC, is structurally subordinated to the debt issued by TDC. Underlying recovery of the instrument remains weak given a substantial amount of prior-ranking debt totalling over 2x EBITDA. Hence Fitch doeswngraded the rating of the notes by DKT to 'B-'/'RR6'/10%, following DKT's IDR downgrade. No Impact from IFRS 16 Adoption: Its leverage metrics under its current methodology do not factor in the transition to IFRS16 accounting standards. Fitch continues to treat operating lease payments as part of operating costs and capitalise them for its total adjusted debt calculation. DERIVATION SUMMARY DKT's ratings reflect the company's leading position within the Danish telecoms market. The company has strong in-market scale and market shares that span both fixed and mobile segments. Ownership of both cable and copper-based local access network infrastructure partly reduces the company's operating risk profile, even though TDC faces network competition from FTTH fibres deployed by Danish electricity companies in parts of the country. Domestic European incumbent peers typically face infrastructure-based competition from cable network operators. DKT is rated lower than other peer incumbents, such as Royal KPN N.V (BBB/Stable), due to notably higher leverage, which puts it more in line with cable operators with similarly high leverage, such as VodafoneZiggo Group B.V. (B+/Stable), Unitymedia GmbH (B+/RWP), Telenet Group Holding N.V. (BB-/Stable) and Virgin Media Inc. (BB-/Stable). TDC's incumbent status, leading positions in both fixed and mobile markets, and unique infrastructure ownership justify higher leverage thresholds than cable peers. KEY ASSUMPTIONS Fitch's Key Assumptions within its Rating Case for the Issuer - Slightly declining revenue in 2019 and 2020, before stabilising and growing in the following two years - EBITDA margin of around 36%-37% in 2019-2020, reflecting investment in FTTH rollout as well as TV content costs. Improvement starts from 2021 onwards - Capex (excluding spectrum) of around 26% of revenue in 2019-2020 before declining in 2021-2022 - Dividends of around DKK800 million per year - Capex and dividend policy to keep leverage high but at stable levels after 2020 KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that the company would be considered a going concern in bankruptcy and that it would be reorganised rather than liquidated - A 10% administrative claim - Its going-concern EBITDA estimate of DKK5 billion reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases the valuation of the company - Its going-concern EBITDA estimate is 20% below its 2019 forecast EBITDA, which taking into account the operational expenses related to demerger in 2019. - An enterprise value (EV) multiple of 6x is used to calculate a post-reorganisation valuation and reflects a distressed multiple. The multiple reflects TDC's incumbent position in Denmark and is also in line with that used for large European cable operators like VodafoneZiggo and Unitymedia, which also have solid market position and own signify cant network assets - Fitch estimates the total amount of debt for claims at EUR4.9 billion (DKK36.4 billion), which includes debt instruments at the OpCo and HoldCo levels, as well as full drawings on available credit facilities, comprising EUR500 million facilities at TDC and a EUR100 million revolving credit facility (RCF) at DKT. =========== F R A N C E =========== RALLYE SA: Societe Generale Can Call in Collateral, Court Rules --------------------------------------------------------------- Harriet Agnew at The Financial Times report that a French commercial court has ruled that Societe Generale can call in the collateral it owns in Rallye SA, the parent company of French retailer Casino, handing a setback to the group's controlling shareholder Jean-Charles Naouri, who is trying to restructure the highly-indebted group. In May, Casino's parent companies Rallye, Finantis and Fonciere Euris entered into a "procedure de sauvegarde" -- a court-led creditor protection process available to solvent companies in financial distress, the FT recounts. This allows them to freeze their debt for up to three periods of six months each, the FT notes. The court document said after the "procedure de sauvegarde" was opened, Fonciere Euris sought to prevent SocGen from calling in the collateral it holds on these Rallye shares as part of the derivatives transaction, the FT relates. It said this was approved by a court on May 29, according to the FT. However, the latest ruling, dated July 4, as cited by the FT, said: "We challenge Fonciere Euris's request that Societe Generale be prohibited from collateralizing the 1,770,000 of Rallye in execution of the contract as of December 12, 2014, and we will immediately lift the ban on Societe Generale" as it relates to the ruling of May 29. If SocGen exercises its right to the collateralized Rallye shares, this would dilute Fonciere Euris's stake in Rallye, the FT states. Fonciere Euris is dependent on the dividends it receives from Rallye to service its own debt, the FT discloses. About Rallye SA France-based Rallye S.A., together with its subsidiaries, engages in the food, non-food e-commerce, and sporting goods retailing activities in France and internationally. It operates hypermarkets, supermarkets, and discount stores. The company conducts its retailing activities in France primarily under the Casino, Monoprix, Franprix-Leader Price, and Vindemia banners; food retail activities in Latin America primarily under the Exito, Disco, Devoto, and Libertad banners, as well as GPA food banner; and e-commerce comprising Cdiscount and the Cnova N.V. holding company businesses. The Company was placed under creditors' protection by a Paris court on May 23, 2019. At the time of its collapse, the Company was said to be saddled with a EUR2.9 billion debt. ============= G E R M A N Y ============= STEINHOFF INT'L: Provides June Update on Financial Restructuring ---------------------------------------------------------------- Steinhoff International Holdings N.V. together with its subsidiaries provided a monthly update on progress in connection with the corporate and capital restructuring of the Group's European business in accordance with the Company's reporting obligations under paragraph (e) of clause 20 of the lock-up agreement between, among others, the Company, Steinhoff Europe AG ("SEAG"), Steinhoff Finance Holding GmbH ("SFHG"), Stripes US Holding, Inc. ("SUSHI") and certain creditors, dated July 11, 2018 (the "LUA"). The Company noted that the report should be read in conjunction with recent market announcements (available at www.steinhoffinternational.com/sens.php), including the most recent monthly update issued on May 31, 2019 (the "May Update"). * CVA Consent Request No. 4 - extension to CVA Long-Stop Date and internal reorganization On June 20, 2019, following discussions between the Company, advisers to the SEAG Creditors Group and advisers to the SFHG Creditors Group, the Company launched CVA Consent Request No. 4. CVA Consent Request No. 4 was approved by the requisite majorities of SEAG and SFHG creditors on June 28, 2019. In summary, CVA Consent Request No. 4 included an extension to the CVA Long-Stop Date to 5:00 pm (London time) on August 9, 2019, and certain amendments and modifications to the SEAG CVA, the SFHG CVA and certain Restructuring Documents to accommodate the commencement of an internal reorganization within the SEAG cluster prior to the closing of the Restructuring (i.e. the Restructuring Effective Date) as well as the waiver of an Implementation Condition related to a certain tax clearance in the state of Victoria in Australia. As a consequence of amending the CVA Long-Stop Date, the Long-Stop Date pursuant to the Lock-Up Agreement has also been amended to be the same as the amended CVA Long-Stop Date (i.e. 5:00pm (London time) on August 9, 2019). In relation to CVA Consent Request No. 4 certain members of the SEAG Creditors Group and the SFHG Creditors Group requested for future extension fee arrangements to be agreed as part of the consents to CVA Consent Request No. 4. Further details of the agreement to which the Company, SEAG and SFHG consented is available at: www.lucid-is.com/steinhoff Preparation for the internal reorganization within the SEAG cluster has commenced and it is currently expected that this extension to the CVA Long-Stop Date under the CVAs will provide sufficient time to complete the relevant reorganization steps that are required to be undertaken prior to the closing of the Restructuring and to complete any other necessary outstanding matters prior to the Implementation Notice Date. It is also expected that once the Implementation Conditions Notice is issued, the closing of the Restructuring will occur approximately 20 Business Days later. The objective of the Group remains to complete the restructuring as soon as possible and ahead of the new CVA Long-Stop Date. * Implementation Conditions Notice and Entitlement Process As reported in the May Update (and following receipt of the requisite consent to CVA Consent Request No. 4), the remaining outstanding Implementation Conditions (as detailed in the SEAG CVA and SFHG CVA (as applicable)) continue to be assessed. Once the Implementation Conditions have been satisfied or waived (or SEAG or SFHG (as applicable) considers that such Implementation Conditions are capable of being satisfied or will be waived prior to the Implementation Commencement Date), SEAG and SFHG will issue the Implementation Conditions Notice which will commence the next stage of the Restructuring. The Implementation Conditions Notice will also commence the entitlement process and will set the deadline (the Participation Deadline) by which relevant CVA Creditors and SFHG Creditors must submit their Entitlement Letters in order to be eligible to receive their entitlements under the New Lux Finco 2 Loans and/or New Lux Finco 1 Loans (as applicable), and the date at which the exchange rate for conversion of non-Euro amounts into Euro amounts for the purpose of calculating Final Entitlements will be set. Further information in relation to the entitlement process will be detailed in the Implementation Conditions Notice (which will be available at www.lucid-is.com/steinhoff). As detailed in the SEAG CVA and the SFHG CVA, following the Participation Deadline, the Information Agent (Lucid Issuer Services Limited) will have a prescribed period to calculate Final Entitlements based on information received from SEAG, SFHG and from creditors, including information received pursuant to the entitlement process. SEAG and SFHG continue to work with the Information Agent and the Group's Financial Advisers to prepare for the entitlement and allocation process. Please refer to the May Update for information regarding how creditors' eligibility to receive fees under the Lock-Up Agreement and Support Letters will be reconciled and verified, as well as KYC requirements. This includes details of action that may need to be taken by creditors and brokers, to the extent not already done so. * Lock-Up Agreement Consent No. 10 and Consent No. 11 As described in the May Update, on May 29, 2019, the Company launched a request under the Lock-Up Agreement (Consent Request No. 10) relating to matters which needed to be resolved prior to the conclusion of the Restructuring pursuant to the SEAG CVA and the SFHG CVA. Lock-Up Agreement Consent No. 10 was approved by the requisite majorities of SEAG and SFHG creditors on June 6, 2019. On June 6, 2019, the Company launched a further request under the Lock-Up Agreement (Consent Request No. 11) relating to the refinancing of the existing credit facilities of Pepkor Europe Limited and its subsidiaries (the "Pepkor Refinancing"). Lock-Up Agreement Consent No. 11 was approved by the requisite majorities of SEAG and SFHG creditor on June 10, 2019. * Head office liquidity The Company continues to actively monitor cash flows and manage other liabilities (including contingent claims, tax and bilateral facilities) as well as funding needs that may arise at the subsidiary level. * Litigation On June 19, 2019, the Company launched proceedings against former CEO Markus Jooste and former CFO Ben La Grange in the Cape Town High Court, South Africa to recover certain salary and bonus payments paid to the former CEO and CFO prior to 2017. On June 21, 2019, the Company received a writ of summons from Barents & Krans on behalf of Hamilton B.V. ('Hamilton'). This writ of summons initiates legal proceedings against the Company and others for declaratory relief relating to currently unquantified damages arising from alleged wrongful acts. The Company and Hamilton have agreed that no procedural act would be due from the Company until later in the year. * Financial statements On June 18, 2019, the Company published its audited Annual Report, including the Consolidated Financial Statements, for the year ended 30 September 2018; this is available on the Company's website http://steinhoffinternational.com/. The unaudited 2019 half-year interim results are scheduled for release on July 12, 2019. The Group intends to host an Investor Presentation subsequent to that release -- further details in this regard will be provided once the interim results have been published. * Update on Group Governance As previously reported, the onboarding process between the Group and the nominees identified for the Newco 3 board and the boards of the key intermediate holding companies (in addition to the two directors nominated by the Company, Louis du Preez and Theodore de Klerk) in the SEAG group is ongoing. The Group expects to announce the candidates publicly prior to the Restructuring Effective Date. * Current management priorities The key priorities for the management team currently include: -- Undertaking the internal reorganization, determining the date on which to launch the Implementation Conditions Notice and finalizing the remaining outstanding Implementation Conditions and the final implementation steps in order to complete the Restructuring; -- Finalization of arrangements to appoint the nominees of the new management boards within the SEAG group; -- Maintaining stability across the Group and managing the ongoing operations of the Group, including actively monitoring cash flows, supporting operating performance, managing other liabilities and funding needs that arise at the operating company level; -- Continuing to consider the contents of the PwC report and to progressing various actions as appropriate together with the roll out of the Remediation Plan; -- Monitoring and defending any litigation claims brought against the Group and identifying and pursuing recoveries where available; and -- Engaging with the wider stakeholder group and regulators. Shareholders and other investors in the Company are advised to exercise caution when dealing in the securities of the Group. Steinhoff International Holdings NV is a South African international retail holding company that is dual listed in Germany. Steinhoff deals mainly in furniture and household goods, and operates in Europe, Africa, Asia, the United States, Australia and New Zealand. ============= I R E L A N D ============= AQUEDUCT EUROPEAN 4: Fitch Assigns B-sf Rating on Class F Debt -------------------------------------------------------------- Fitch Ratings has assigned Aqueduct European CLO 4 - 2019 DAC final ratings. Aqueduct European CLO 4 -2019 DAC is a cash flow collateralised loan obligation. It comprises primarily European senior secured obligations (at least 90%) with a component of corporate rescue loans, senior unsecured, second-lien loans, mezzanine and high yield bonds. Net proceeds from the issuance of the notes are being used to purchase a portfolio with a target par of EUR400 million. The portfolio is managed by HPS Investment Partners CLO (UK) LLP. The CLO envisages a 4.5-year reinvestment period and an 8.5-year weighted average life. Aqueduct European CLO 4-2019 DAC Class A; LT AAAsf New Rating; AAA(EXP)sf Class B-1; LT AAsf New Rating; AA(EXP)sf Class B-2; LT AAsf New Rating; AA(EXP)sf Class C; LT Asf New Rating; A(EXP)sf Class D; LT BBB-sf New Rating; BBB-(EXP)sf Class E; LT BBsf New Rating; BB(EXP)sf Class F; LT B-sf New Rating; B-(EXP)sf Class M-1; LT NRsf New Rating; NR(EXP)sf Class M-2; LT NRsf New Rating; NR(EXP)sf Class M-3; LT NRsf New Rating; NR(EXP)sf Class X; LT AAAsf New Rating; AAA(EXP)sf KEY RATING DRIVERS 'B+'/'B' Portfolio Credit Quality Fitch places the average credit quality of obligors in the 'B+'/'B' range. The Fitch-weighted average rating factor (WARF) of the identified portfolio is 32.3. High Recovery Expectations At least 96% 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 65.7%. Limit on Concentration Risk The transaction has different Fitch test matrices with different allowances for exposure to both the 10 largest obligors and and fixed-rate assets. The manager can interpolate between these matrices.The transaction also includes limits on maximum industry exposure based on Fitch's industry definitions with the maximum exposure to the three-largest (Fitch-defined) industries in the portfolio covenanted at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Adverse Selection and Portfolio Management The transaction features a 4.5-year reinvestment period and includes reinvestment criteria similar to 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 Analysis Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls, and the various structural features of the transaction. Fitch also used this model to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. Limited Interest Rate Risk Up to 10% of the portfolio can be invested in fixed-rate assets, while fixed-rate liabilities represent 3.75% of the target par. Fitch modeled both 0% and 10% fixed-rate buckets and found that the rated notes can withstand the interest rate mismatch associated with each scenario. AQUEDUCT EUROPEAN 4: Moody's Rates EUR11.8MM Class F Notes 'B2' --------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to the notes issued by Aqueduct European CLO 4 - 2019 Designated Activity Company: EUR2,000,000 Class X Senior Secured Floating Rate Notes due 2032, Assigned Aaa (sf) EUR244,000,000 Class A Senior Secured Floating Rate Notes due 2032, Assigned Aaa (sf) EUR30,000,000 Class B-1 Senior Secured Floating Rate Notes due 2032, Assigned Aa2 (sf) EUR15,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2032, Assigned Aa2 (sf) EUR23,300,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Assigned A2 (sf) EUR26,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Assigned Baa3 (sf) EUR20,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Assigned Ba2 (sf) EUR11,800,000 Class F Senior Secured Deferrable Floating Rate Notes due 2032, Assigned B2 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in its methodology. The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured obligations and up to 10% of the portfolio may consist of senior unsecured obligations, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be 70-80% ramped up as of the closing date and comprises predominantly corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the 6 month ramp-up period in compliance with the portfolio guidelines. HPS Investment Partners CLO (UK) LLP will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four and a half-year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations or credit improved obligations. Interest and principal amortisation amounts due to the Class X Notes are paid pro rata with payments to the Class A Notes. The Class X Notes amortise by EUR 250,000 over 8 payment dates starting on the 2nd payment date. In addition to the eight classes of notes rated by Moody's, the Issuer issued EUR 16.5m M-1 subordinated notes, EUR 18.6m M-2 subordinated notes and EUR 0.1m M-3 subordinated notes, which are not rated. To the extent M-2 and M-3 subordinated notes are held by affiliates of HPS Investment Partners CLO (UK) LLP, these notes will accrue interest in the amount of the senior and subordinated management fee which would have otherwise been paid to the collateral manager. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology underlying the rating action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in March 2019. Moody's used the following base-case modeling assumptions: Par Amount: EUR 400,000,000 Diversity Score: 44 Weighted Average Rating Factor (WARF): 2901 Weighted Average Spread (WAS): 3.65% Weighted Average Coupon (WAC): 4.50% Weighted Average Recovery Rate (WARR): 44.30% Weighted Average Life (WAL): 8.5 years Moody's has addressed the potential exposure to obligors domiciled in countries with local currency ceiling (LCC) of A1 or below. As per the portfolio constraints and eligibility criteria, exposures to countries with LCC of A1 to A3 cannot exceed 10% and obligors cannot be domiciled in countries with LCC below A3. =================== L U X E M B O U R G =================== EP BCO: Fitch Assigns BB- LT Issuer Default Rating, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has assigned EP BCo S.A. a Long-Term Issuer Default Rating of 'BB-' with a Stable Outlook. In addition, Fitch has assigned 'BB' ratings with Recovery Rating 'RR2' to the EUR315million first-lien term loan B and EUR30million revolving credit facility; and 'B' rating with a Recovery Rating 'RR6' to the EUR105million second-lien facility, issued by EP. EP is the financing vehicle and the sole shareholder of Euroports Holdings Sarl, a large, deep-sea port terminal operator in Europe and China. KEY RATING DRIVERS Euroports' IDR reflects stable cash flows from its mature terminals concentrated in the commodity sector and its deleveraging expectations. Its long-standing relationships with a diversified customer base mitigate limited visibility on future cash flow, especially from terminals under development. Few of Euroports' contracts guarantee revenue or volumes; however, Fitch expects pricing to broadly track inflation. Its 2019-2023 capex plan is large, self-funded and focused on well-identified projects partially backed by long-term contracts. Euroports' bullet debt structure entails refinancing risk in seven to eight years, respectively, when each of the company's facilities matures, especially if Euroports cannot renew its concessions in the meantime. The current EBITDA-weighted average concessions tenor of 18 years will decline to around 11 years at maturity of the first lien term loan. However, Euroports has a record of extending existing concessions. Under Fitch's rating case, the average lease-adjusted gross leverage is 6.0x over 2019-2023, peaking at 7.4x in 2019. The first and second liens have the same probability of default but different recovery prospects of 'RR2' and 'RR6', respectively. As a result, Fitch assigns a 'BB' rating to the first lien, notched up once from the IDR of 'BB-', and a 'B' rating to the second lien, notched down twice from the IDR. The RCF is rated in line with the first lien as it is pari passu. Diversified Portfolio of Commodity Terminals - Volume Risk: Midrange Euroports' portfolio of 15 terminal areas is strategically located close to production and consumption centres and benefits from good hinterland and multi-modal connectivity. The portfolio comprises mature assets, such as the German and Finnish terminals, as well as terminals with projects under development backed, in some cases, by long-term contracts. Customer concentration is moderate as the top 20 clients accounted for around 50% of 2017 revenue. Cargo is origin and destination (O&D) and concentrated in the commodity sector. Euroports' three largest terminal areas (TA518, Finnish Terminals, and Rostock), which represent around 60% of consolidated operating EBITDA (OEBITDA), focus on pulp and forest products, sugar and agri-bulk cargoes. Euroports plans to expand throughput of minerals, metals, food and agri-products to tap potential synergies with the international metal and minerals activities of its main shareholder, Monaco Resources Group (MRG). Euroports is targeting seven key industries, including fertiliser and minerals, sugar, forest products, agri-bulk, metal and steel. With the exception of coal and metals, commodities show a low degree of correlation, hedging to some extent the volatility of Euroports' volumes. Euroports' 2008-2009 volume peak-to-trough decline, based on 2006-2016 key industry volume indices weighted by Euroports' 2017 revenue, was high at 17%, but OEBITDA suffered a milder decline of around 14%. Exposure to competition is generally limited by Euroports' proximity to the port end-users and a lower portion of standardised cargo volume than a port container operator's. Pricing Tracks Inflation - Price Risk: Midrange Euroports has long-standing relationships with a diversified customer base; its revenue- weighted average of customer contract length is around 5.5 years, considering its top 25 customers. However, take-or-pay clauses underpin only a small portion of revenue. Revenue with global clients grew 19% in 2017 and 13% in 2016, due to additional services provided to the existing customer base. The terminal operator benefits from full price flexibility across all regions; however, tariff increases tend to be limited by contractual arrangements, generally indexed at inflation to varying degrees. Self-Funded Capex Plan - Infrastructure Development & Renewal: Midrange Euroports is well-equipped to deliver its investment programme given its record of implementation of large maintenance and expansionary investments on its network. Its 2019-2023 capex plan is large, self-funded and focused on well-identified projects, such as new warehouses, backed by long-term contracts with group clients and short payback periods of up to six years. Terminals under development, in particular Gaolan in China, represent the majority of the expansionary capex. The capex will be mostly rolled out in 2019-2020 and will materially reduce thereafter. In Fitch's view, the high utilisation rates in some terminal areas, especially on mature assets, reduce the capex flexibility. Refinance Risk and Floating-Rate Debt - Debt Structure: Weaker Euroports' acquisition finance bullet debt is secured, exposed to variable rates and looser covenants than a pure project finance (PF) debt structure. The structure entails some protection against re-leveraging risk, as the additional facility limit allows for future taps only up to the net leverage at financial close, tested at both the senior and second-lien levels. Excess cash flow sweep and lock-up features are less protective than the typical PF transactions, and Fitch does not assume any debt repayment until the facilities mature. The significant refinancing risk of the bullet structure weighs on its assessment. The current weighted average concession life of 18 years will decrease to around 11 years at refinancing maturity of the first-lien term loan. However, Euroports has a history of extending concession tenors ahead of its legal maturity. In its view, the first- and second-lien term loans share similar probability of default, as second-lien creditors can undertake enforcement actions upon an event of default, and collapse the entire debt structure once that the standstill period lapses. Key Recovery Assumptions The recovery analysis assumes that Euroports would remain a going concern in restructuring and that the company would be reorganised rather than liquidated. Fitch has assumed a 10% administrative claim in the recovery analysis. - The recovery analysis assumes a 20% discount to Euroports' OEBITDA as of December 2018. - Fitch also assumes a distressed multiple of 6.5x and a fully drawn EUR30 million RCF. - These assumptions result in a recovery rate for the first-lien term loan and RCF within the 'RR2' range to allow a one-notch uplift to the debt rating from the IDR. The recovery rate for the second-lien term loan is within the 'RR6' range and leads to a downward adjustment of two notches from the IDR. Financial Profile Under Fitch's rating case, lease-adjusted gross leverage averages at 6.0x over the next five years, as a result of its lower traffic assumptions, reduced margins on the logistic business, and haircuts applied to expected synergies compared with the sponsor case. OEBITDA growth from terminals currently under development is the main driver of deleveraging, together with revenue and cost synergies. PEER GROUP Fitch compares Euroports to Russian Global Ports Investment PLC (GPI) and LLC DeloPorts (Delo) and Turkish Global Liman Isletmeleri A.S (GPH) and Mersin Uluslararasi Liman Isletmeciligi A.S. (MIP). GPI (BB/Stable) is larger than Euroports, has a dominant position in its market, albeit with increasing competition, and less concentrated cargo, as it operates a container business. Euroports is more dependent on growth and exhibits higher leverage than GPI. Deloports' (BB-/Stable) volumes, like those Euroports, are concentrated on the commodity sector and a small number of customers. Furthermore, it does not benefit from material take-or-pay agreements and is undertaking a major expansionary capex plan. Deloports is more exposed to competition and has a weaker volume assessment, but is rated 'BB' on a consolidated basis as its Fitch-adjusted net debt/EBITDAR below 3x is materially lower than the 6x five-year average of Euroports. GPH (senior unsecured: BB-/Stable) is rated in line with Euroports, as the structural volatility of its two businesses, the cruise ship segment and marble export to China, is offset by its 3.3x net leverage, which is lower than Euroports'. Mersin (senior unsecured: BB+/Negative) is rated higher than Euroports because of its lower leverage of around 2.2x over the next five years. Turkey's Country Ceiling caps Mersin's rating. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Negative Rating Action: - Projected Fitch-adjusted gross debt/EBITDAR above 6x on a sustained basis from 2020 Developments That May, Individually or Collectively, Lead to Positive Rating Action: - Projected Fitch-adjusted gross debt/EBITDAR sustained below 5x with commitment from both sponsor and management not to re-leverage TRANSACTION SUMMARY In February 2019, a consortium led by MRG, an international natural resource group with a 53% stake, and including a Belgian Regional (PMV) and Federal (SFPI-FPIM) Sovereign wealth funds, agreed to acquire Euroports. EP BCo S.A. is the company issuing the term loans to fund the acquisition. Asset Description Euroports is a large, deep-sea port terminal operator in continental Europe with terminals spanning a diverse geographic footprint, including operations in China. Operations are generally based on long-term agreements and concessions with port authorities or other public bodies, which entitle it to operate port terminals and related facilities in the various ports in which it has a presence. In addition to deep-sea terminals, Euroports operates a number of inland river terminals and contract logistics sites. Fitch Cases Fitch's Key Assumptions Within Its Rating Case for the Issuer: - 4.2% CAGR of revenue between 2018 and 2023 - OEBITDA margin increasing to 13% by 2020 - Capex in line with the sponsor case, just below EUR200 million on a cumulative basis up to 2023 - No dividends paid between 2018 and 2023 Criteria Variation The analysis includes a variation from the "Rating Criteria for Infrastructure and Project Finance", which excludes recovery prospects given a default in instrument ratings. The analysis under the "Rating Criteria for Infrastructure and Project Finance" is assimilated with its assessment of recovery prospects, which are key credit considerations in differentiating between the first- and second-lien term loans. The loans have the same probability of default but different recovery prospects. The assigned Recovery Ratings were derived from the application of the "Corporates Notching and Recovery Ratings Criteria" published in March 2018 and the "Country-Specific Treatment of Recovery Ratings Criteria" published in January 2019. ===================== N E T H E R L A N D S ===================== TIKEHAU CLO II: Fitch Rates EUR10MM Class F Notes 'B-' ------------------------------------------------------ Fitch Ratings has assigned Tikehau CLO II B.V.'s refinancing notes final ratings, and affirmed the remaining notes as follows: EUR244.0 million class A-R notes: assigned at 'AAAsf'; Outlook Stable EUR46.0 million class B notes affirmed at 'AAsf'; Outlook Stable EUR 23.0 million class C-R notes: assigned at 'Asf'; Outlook Stable EUR18.0 million class D-R notes: assigned at 'BBBsf'; Outlook Stable EUR28.0 million class E notes affirmed at 'BBsf'; Outlook Stable EUR10.5 million class F notes affirmed at 'B-sf'; Outlook Stable Tikehau CLO II B.V. is a cash flow collateralised loan obligation (CLO). Net proceeds from the issue of the notes are being used to refinance the current outstanding class A, C, and D notes. The portfolio is actively managed by Tikehau Capital Europe Limited. KEY RATING DRIVERS 'B' Portfolio Credit Quality Fitch expects the average credit quality of obligors to be in the 'B' category. The Fitch- weighted average rating factor (WARF) of the current portfolio is 32.0. High Recovery Expectations At least 90% of the portfolio comprises senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-weighted average recovery rating (WARR) of the current portfolio is 64.4%. Diversified Asset Portfolio The covenanted maximum exposure to the top 10 obligors for assigning the expected ratings is 15% or 23% of the portfolio balance, depending on the matrix chosen by the manager. The transaction also includes limits on the largest Fitch-defined industry exposure covenanted at 17.5% and on the three-largest Fitch-defined industries covenanted at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Limited Interest Rate Risk Fixed-rate liabilities represent 0% of the target par, while fixed-rate assets can represent up to 10% of the portfolio. At closing, the issuer entered into interest rate caps to hedge the transaction against rising interest rates. The notional of the caps is EUR34.3 million, representing 8.6% of the target par amount, and the strike rate is fixed at 2%. These caps will remain in place through the refinancing and will expire in November 2021. Extended Weighted Average Life (WAL) On the refinancing date, the issuer will extend the WAL covenant by one year to 6.5 years as part of the refinancing of the notes and update the Fitch matrix based on the extended WAL covenant. Cash Flow Analysis Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls. This was also used to test the various structural features of the transaction, as well as to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. TIKEHAU CLO II: Moody's Affirms B2 Rating on EUR10MM Class F Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has assigned the following definitive ratings to refinancing notes to be issued by Tikehau CLO II B.V.: EUR244,000,000 Class A Senior Secured Floating Rate Notes due 2029, Definitive Rating Assigned Aaa (sf) EUR23,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2029, Definitive Rating Assigned A2 (sf) EUR18,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2029, Definitive Rating Assigned Baa3 (sf) At the same time, Moody's affirmed the ratings of the outstanding notes which have not been refinanced: EUR46,000,000 Class B Senior Secured Floating Rate Notes due 2029, Affirmed Aa2 (sf); previously on Nov 30, 2016 Definitive Rating Assigned Aa2 (sf) EUR28,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2029, Affirmed Ba2 (sf); previously on Nov 30, 2016 Definitive Rating Assigned Ba2 (sf) EUR10,500,000 Class F Senior Secured Deferrable Floating Rate Notes due 2029, Affirmed B2 (sf); previously on Nov 30, 2016 Definitive Rating Assigned B2 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in its methodology. The Issuer will issue the refinancing notes in connection with the refinancing of the following classes of notes: Class A Notes, Class C Notes and Class D Notes due 2029, previously issued on November 30, 2016. On the refinancing date, the Issuer will use the proceeds from the issuance of the refinancing notes to redeem in full the Original Notes. The Class B Notes, Class E Notes and Class F Notes are not being refinanced and will remain outstanding following the Refinancing Date. The terms and conditions of the notes will be amended accordingly. On the Original Closing Date, the Issuer also issued EUR 44.70 million of subordinated notes, which will remain outstanding. The terms and conditions of the subordinated notes will be amended in accordance with the refinancing notes' conditions. As part of this refinancing, the Issuer will decrease the spreads paid on the affected classes of notes and will extend the weighted average life covenant by 1 year. In addition, the Issuer will amend the base matrix and modifiers that Moody' will take into account for the assignment of the definitive ratings. Tikehau CLO II B.V. is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, high yield bonds and mezzanine loans. The underlying portfolio is already fully ramped as of the refinancing date. Tikehau Capital Europe Limited will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's remaining one and a half year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in March 2019. Moody's used the following base-case modeling assumptions: Target Par Amount: EUR 400,000,000 Diversity Score: 50 Weighted Average Rating Factor (WARF): 2939 Weighted Average Spread (WAS): 3.60% Weighted Average Coupon (WAC): 5.25% Weighted Average Recovery Rate (WARR): 42.0% Weighted Average Life (WAL): 6.42 years Moody's has addressed the potential exposure to obligors domiciled in countries with local currency ceiling of A1 or below. As per the portfolio constraints and eligibility criteria, exposures to countries with LCC of A1 to A3 cannot exceed 10% and obligors cannot be domiciled in countries with LCC below A3. ========= S P A I N ========= FCC AQUALIA: Fitch Affirms BB+ LongTerm IDR, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed FCC Aqualia, S.A.'s Long-Term Issuer Default Rating at 'BB+' with a Stable Outlook. Fitch has also affirmed the utilities company's senior secured ratings at 'BBB-'. The 'BB+' IDR of Aqualia reflects its low business risk as a water and wastewater network operator with long-term municipal concessions, largely in Spain; water-related infrastructures under build, own and transfer (BOT) concessions; and limited non-regulated operation and maintenance (O&M) contracts and water-related engineering procurement and construction (EPC) activities. Its ratings also reflect its expectations of gradual deleveraging until 2022, supported by steady cash-flow generation and a limitation on dividend distribution defined by bond documentation. The Stable Outlook reflects management's decision to resume business expansion and dividend distributions from 2019, which is financially offset by a new cash interest inflow from FCC S.A. (FCC), Aqualia's majority shareholder. Finally, Fitch views the corporate governance of Aqualia as being strengthened by the entry of IFM Global Infrastructure investment fund (IFM) as a relevant minority shareholder of the company. KEY RATING DRIVERS Water Concessions Drive Rating: Resilient municipal water concessions, largely in Spain, contributed 83% of total recourse EBITDA, BOT concessions 3%, O&M 7%, and EPC 7%. Municipal concessions have around 12 years of remaining life and annual renewal rates are above 90%. Growth in EPC activities, which are the most volatile part of the business, above 10% of consolidated EBITDA would require board approval. This supports the resilience of the business risk profile. Fitch expects municipal water and BOT concessions to represent around 90% of EBITDA by 2022, supporting Aqualia's business risk profile. Resuming Growth: In 2019 the company has announced a new business plan that reinstates business expansion, following a period of only maintenance capex. Total capex for 2019-2022 is EUR469 million, of which 39% is for growth through tendering or small scale bolt-on M&A. The plan targets to grow water concession activity (EUR131 million) in traditional areas in Europe (i.e. Spain, France and Portugal) and Latam (i.e. Mexico, Peru and Chile); and BOT projects (EUR25 million) in Latam and MENA (i.e. Saudi Arabia, Argelia and Egypt), in which Aqualia has had previous experience. Predominantly Non-recourse Growth: The bulk of BOT projects, which will most likely be financed with project-funding and structured in a special purpose vehicle (SPV) with a local partner (up to 49%), would fall outside the recourse scope of the rating and bonds. Equity contributions by Aqualia to those non-recourse SPVs would fall within the recourse scope, as do limited cash dividend received from 2019-2022. Fitch expects expansion capex to start in 2019 and a ramp-up from 2020. Fitch may re-considers the deconsolidated approach to credit ratios should the expansion in core business that is funded with non-recourse debt become material. Capex Timing and Scale Uncertain: Fitch sees positive prospects for water-infrastructure development, especially in water treatment (i.e. desalination, waste water treatment plants), in the various geographies in which the company operates. However, forecasted projects within the plan are not yet earmarked for funding as they depend on the company's success in the relevant upcoming tender offers in light of competition. Aqualia is currently bidding for several projects in countries with long-term national planning to improve water conditions. Additional Cash Flow Benefits Bondholders: Fitch believes that the September 2018 novation of the two existing subordinated loans (total amount of EUR807 million) to FCC is positive for Aqualia's bondholders as cash interest received (instead of earlier PIK) represents recurring operating cash inflow for Aqualia's activities within the recourse scope. In practice, this can offset annual service fees paid by Aqualia to FCC (EUR24 million for 2018). The inclusion of this cash flow of around EUR29 million annually in funds from operations (FFO) results in a steady decrease in FFO-based leverage of around 0.7x. Restricted Dividends and Leverage: The EUR1.35 billion bonds documentation and the shareholder agreement set a maximum leverage for the company of recourse net debt/recourse EBITDA below 5.0x, which translates into slightly higher FFO net leverage than is consistent with the 'BB+' IDR. The company however has reaffirmed its commitment to maintaining leverage in line with the current rating. In addition, annual dividends are limited to a 45% pay-out of cumulated net Income from January 2017. Aqualia has approved a EUR90 million dividend in 2H19, close to the maximum allowed distribution. Fitch expects the pay-out to be at 45% of annual net income thereafter. Higher Leverage than Peers': Aqualia's leverage is high compared with European rated peers', which is a rating constraint. Aqualia's recourse FFO adjusted net leverage fell to 6.3x at end-2018 from 7.9x at end- 2017. Fitch forecasts it to continue falling in 2019 to around 5.5x, reaching the negative guideline for a 'BB+' rating two years earlier than Fitch expects last year, on the back of the additional cash interest received and steady cash-flow generation. This is despite higher capex and dividend distributions that are at the maximum allowed under the bond's documentation. Cash Generative Business: 2018 has been a challenging year due to weather-related lower water volumes (around -2%) and a moderate average tariff increase of 1.12% (due to the slowdown of investments in an election year in Spain). This resulted in a 0.7% decrease in like-for-like revenue following a strong 2017. However, cost efficiencies and managerial actions to improve working capital cycle have offset weak revenue at EBITDA and FFO level. Moreover, low maintenance capex and a lack of dividend payments in 2018 have resulted in healthy cash generation. Fitch expects Aqualia to be FCF- neutral-to-positive until 2022. Concessions Still Favoured by Municipalities: Political initiatives advocating the transfer of water services to local authorities only materialised for a small number of municipalities in 2018, with no implications for Aqualia. In addition, contracts have been moved to the public sector only after the expiration of the concessions agreement. In its view municipalities will continue to opt for concession schemes due to budget constraints and lack of regional, state or EU support. Aqualia had a success rate in contract renewals of 94% in 2018. IFM Strengthens FCC/Aqualia Operational Separation: The sale of 49% of Aqualia to IFM was completed in September 2018. IFM is represented in three out of the seven-member Board of Directors. A new shareholder agreement has been signed where operational related-party transactions with FCC have been defined under a support service agreement. The entry of IFM strengthens its view of the operational separation of the two entities. In addition, Fitch believes that new minority shareholder IFM has strengthened corporate governance controls on related-party transactions. DERIVATION SUMMARY Aqualia is a water and sewerage network operator that, unlike some of its European peers, does not own its asset base. However, its investments are supported by the value of its concessions. The company is fairly well positioned relative to peers in water-cycle management activities, but its water infrastructure construction activity adds some volatility to cash flows compared with pure water asset operators such as Canal de Isabel II, S.A. (BBB+/Stable). Moreover, the company operates in a decentralised and less developed regulatory environment than other European countries, with slightly higher business risk than for Italian and UK players. Aqualia's leverage is the highest in the peer group, resulting in a lower rating. In accordance with Fitch's parent and subsidiary linkage (PSL) methodology, Fitch rates Aqualia on a standalone basis as Fitch assesses the legal and operational ties between FCC and Aqualia as weak. However, its assessment is based on the contractual ring-fencing provisions in the bond documentation and the operational and financial separation from FCC, therefore looser ring-fencing provisions or more related-party transactions could lead us to reconsider the PSL linkage. Senior secured bonds are rated one notch above Aqualia's IDR. This uplift is supported by a combination of creditor-friendly provisions in the financing package (ie the security provided, the debt service coverage reserve account (DSCRA) for 12 months and the covenanted structure). Any of these in isolation would not support the uplift. In addition, Fitch does not apply the one-notch uplift due to above-average expected recoveries that are common to regulated networks. This is due to the less developed regulatory framework than other jurisdictions and the complexity of a highly granular base of contracts. KEY ASSUMPTIONS Fitch's Key Assumptions within its Rating Case for the Issuer - Growth of existing businesses based on CPI of around 2%, which is around 0.5% above CPI expectations and stable water consumption; - 90% renewal rate of water concession contracts, in line with historical trend; - Recourse EBITDA margin of 20% for 2019-2022; water and BOT concessions: 24%, O&M: 10%; and EPC: 8%; - Average capex of around EUR116 million per year over 2019-2022, including around EUR70 million for maintenance O&M and EUR46 million for growth; - Limited EBITDA and dividends received from new contracts awarded and acquisitions (around EUR22 million in 2022); - EUR90 million dividend paid in 2019, which is around the maximum level of allowed distributions under the bond documentation. Annual pay-out ratio of around 45% from 2020 onwards. GRANADA HIPOTECARIO 1: Fitch Affirms CCCsf Rating on Class B Debt ----------------------------------------------------------------- Fitch Ratings has affirmed three Spanish RMBS transactions, and all Rating Outlooks remain Stable. The transactions comprise Spanish mortgages serviced by Bankia S.A. (BBB/Stable/F3) for AyT Caja Granada Hipotecario 1 (Granada 1), AyT Caja Murcia Hipotecario I (Murcia 1), and AyT Caja Murcia Hipotecario II (Murcia 2). KEY RATING DRIVERS Credit Enhancement (CE) Trends Fitch expects CE levels for Murcia 1 and 2 securitisation notes to remain stable as the prevailing pro rata amortisation is expected to continue in the near term. The amortisation of the notes will switch to sequential when the outstanding portfolio balance represents less than 10% of their original amount (currently 14% and 16% respectively), or sooner if certain performance triggers are breached. On the other hand, CE ratios for Granada 1's class A notes are expected to continue increasing as the sequential amortisation is expected to continue. Performance Adjustment Floor (PAF) A higher 70% PAF was used for Murcia 1 and Murcia 2, even though seasoning and indexed LTV characteristics are compatible with a lower 50% PAF in line with Fitch's European RMBS Rating Criteria. Fitch believes transaction performance during the first few years after transactions closed may have been influenced by originator buybacks for loans in arrears or defaulted. The high payment rates, and the absence of defaults during the first seven (Murcia 1) and five (Murcia 2) years of performance support this assumption. Nevertheless, Fitch considers more recent data to accurately reflect transaction performance. High Seasoning and Asset Performance The rating actions reflect Fitch's expectation of stable credit trends given the significant seasoning of the securitised portfolios of 12-13 years, the prevailing low interest rate environment and the Spanish macroeconomic outlook. Three-month plus arrears (excluding defaults) as a percentage of the current pool balance remains below 0.5% for both Murcia 1 and 2, and below 1.5% for Granada 1. Rating Caps Due to Counterparty Risks The 'A+sf' rating cap on Granada 1 and Murcia 2 senior notes reflect account bank replacement triggers supporting rating up to the 'A' category. In addition, Granada 1 is exposed to an additional rating cap at the 'A' category due to payment interruption risk. Fitch assesses the availability of liquidity sources as insufficient to cover stressed senior fees, net swap payments, and stressed senior note interest amounts in the event of a servicer disruption while an alternative arrangement is implemented. Fitch has taken the following rating actions: Granada 1: Class A: affirmed at 'A+sf' Outlook Stable Class B: affirmed at 'CCCsf' Recovery Estimate (RE) revised to 90% from 60% Class C: affirmed at 'Csf' RE 0% Class D: affirmed at 'Csf' RE 0% Murcia 1: Class A: affirmed at 'AA-sf' Outlook Stable Class B: affirmed at 'Asf' Outlook Stable Class C: affirmed at 'BBB-sf' Outlook Stable Murcia 2: Class A: affirmed at 'A+sf' Outlook Stable Class B: affirmed at 'BBB+sf' Outlook Stable Class C: affirmed at 'BBB-sf' Outlook Stable =========================== U N I T E D K I N G D O M =========================== BURY FC: Creditors Seek More Time to Consider Rescue Plan --------------------------------------------------------- BBC News reports that Bury Football Club's creditors have asked for more time to consider a rescue plan to clear some of the League One club's debts. Owner Steve Dale put forward a Company Voluntary Arrangement (CVA) proposal in June which would see the club's football creditors paid in full, BBC recounts. Unsecured creditors, including HM Revenue and Customs, would be paid 25% of the money owed, BBC states. According to BBC, creditors will now hold further negotiations before meeting on Thursday, July 18. If approved, the CVA would qualify as an insolvency event under English Football League rules, which would see Bury deducted points, BBC notes. The Shakers are looking for new ownership after Mr. Dale put the club up for sale in April, BBC discloses. DEBENHAMS PLC: Calls on Mike Ashley to Drop CVA Challenge --------------------------------------------------------- Alys Key at Belfast Telegraph reports that Debenhams plc has called for Mike Ashley to drop a challenge to its store closures and rent reductions after property firm M&G withdrew from a similar action. A challenge from Mr. Ashley's Sports Direct and Combined Property Control (CPC) remains outstanding, Belfast Telegraph notes. According to Belfast Telegraph, Debenhams chairman Terry Duddy said: "I call on Sports Direct and CPC to do the same. If they do not, we will seek to have it thrown out. In the meantime, we continue to make good progress with the company's restructuring plans." The proposals involve 50 store closures as well as lower rents on more than 100 outlets, Belfast Telegraph discloses. About Debenhams plc Debenhams plc is a British multinational retailer operating under a department store format in the United Kingdom and Ireland with franchise stores in other countries. It is the biggest department store chain in the UK with 166 stores, and employs about 25,000 people. The Company went into administration on April 9, 2019. Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting LLP were appointed as administrators. The administrators sold the parent's entire holding of the group's operating subsidiaries to a company controlled by its lenders in a pre-packaged sale. S&P Global Ratings lowered its long-term issuer credit rating on Debenhams to 'D' from 'SD' (selective default), following the administration filing. MONSOON ACCESSORIZE: Announces 50 Redundancies After CVA Approval ----------------------------------------------------------------- Drapers reports that Monsoon Accessorize has announced up to 50 redundancies across its head office teams, as part of its ongoing restructuring. According to Drapers, staff were told on July 4 that up to 50 roles were to enter into consultation for redundancy. It is not confirmed at this stage which teams have been affected, Drapers notes. The news follows the approval of Monsoon Accessorize's company voluntary arrangement by creditors on July 3, Drapers relays. The CVA proposals, as announced on June 20, outline rent reductions of between 25% and 65% across 135 out of a total 258 Monsoon and Accessorize stores, Drapers discloses. No store closures have been proposed as part of the CVA, but the retailer is seeking to exit at least seven Monsoon stores as leases expire, Drapers states. About Monsoon Accessorize Monsoon Accessorize is a fashion chain based in the United Kingdom, which sells clothes, accessories and homeware. It reported faced financial difficulties. UK firm Shoosmiths advised the company on its restructuring. The company ultimately sought a company voluntary arrangement. RJD FABRICATIONS: Enters Administration Amid Financial Woes ----------------------------------------------------------- Business Sale reports that RJD Fabrications Ltd., an engineering firm based in South Yorkshire, has fallen into administration as a result of difficult trading conditions and consequential cash flow difficulties. According to Business Sale, the company, which provides engineering and fabrication services from its site in Rotherham, was forced to call in professional advisory firm KPMG to handle the administration process, with partners Howard Smith -- howard.smith@kpmg.co.uk -- and Dave Costley-Wood appointed as joint administrators. The company endured a long period of unsustainable and loss-making activity, providing specialist heavy duty steel engineering services, which resulted in its administration, Business Sale relates. The administrators are exploring the sale of the assets, and are inviting potential buyers to express their interests immediately, Business Sale discloses. [*] UK: Must Leave Under Clean Brexit or Face EUR200BB Bailout -------------------------------------------------------------- Maggie Pagano at The Telegraph reports that Britain could face paying more than EUR200 billion to the European Union in the event of a eurozone bail-out unless the UK leaves under a managed clean Brexit, according to leading City and business figures. According to The Telegraph, the warning comes from the Brexit Coalition, a new grouping that represents 29 diverse pro-Brexit campaigning organizations, including the Alliance of British Entrepreneurs, Artists for Brexit and Farmers for Britain as well as Labour Leave and Green Leaves. In a letter sent this week to Conservative Party constituency chairmen and senior Tory officials, the Brexit Coalition urges members to support a new prime minister who is "committed unequivocally" to backing a clean WTO-based Brexit, The Telegraph relates. ********* 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 * * *