/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/190814.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, August 14, 2019, Vol. 20, No. 162 Headlines B O S N I A A N D H E R Z E G O V I N A SECERANA: Sale of Assets Fails for Tenth Time I T A L Y AUTOFLORENCE 1: S&P Assigns BB- (sf) Rating on Class E-Dfrd Notes K A Z A K H S T A N FIRST HEARTLAND: S&P Alters Outlook to Positive, Affirms B-/B ICRs NURBANK: S&P Affirms 'B-/B' ICRs on Anticipated External Support N E T H E R L A N D S EURO-GALAXY V: S&P Assigns B-(sf) Rating to EUR12.3MM Cl. F-R Notes R O M A N I A CIECH SODA: Parent Prepares to Halt Production from Sept. 18 R U S S I A KRASNOYARSK KRAI: S&P Affirms 'BB' Long-Term ICR, Outlook Stable SAMARA OBLAST: S&P Hikes Long-Term ICT to 'BB+' on Criteria Change U N I T E D K I N G D O M ARCADIA GROUP: Clashes With Landlords Over U.S. Assets ARCADIA GROUP: Dorothy Perkins, Burton Store to Close on Sept. 21 AWAZE GROUP: S&P Alters Outlook to Negative & Affirms 'B' LT ICR BURY FC: Staff Implores Steve Dale to Accept Acquisition Offer DEBONAIR LANGUAGE: Enters Administration, Halts Operations FERGUSON: Rescue Decision for Shipyard Must Be Unsentimental GATOR HOLDCO: S&P Ups Rating on 2nd-Lien Term Loan Due 2027 to CCC+ JAGUAR LAND: S&P Affirms 'B+' Issuer Credit Rating, Off Watch Neg. MERGERMARKET MIDCO 2: S&P Withdraws B ICR Following Debt Repayment X X X X X X X X [*] Walsh Joins Cadwalader's London Office as Special Counsel - - - - - =========================================== B O S N I A A N D H E R Z E G O V I N A =========================================== SECERANA: Sale of Assets Fails for Tenth Time --------------------------------------------- SeeNews reports that the sale of assets of Bosnian sugar mill Secerana by its creditors has failed for the tenth time, as the auction held on Aug. 5 drew no bids. According to SeeNews, news portal eKapija.com quoted Vojislav Nikolic, chairman of the board of creditors, board, as saying on Aug. 5, "No one paid a deposit for participation by the deadline. In early September, the board of creditors will analyze the situation and make certain decisions. We will see then what to do with Secerana's assets". The assets of Secerana, which is in bankruptcy, were offered for sale at a price of BAM10 million (US$5.7 million/EUR5.1 million), SeeNews discloses. ========= I T A L Y ========= AUTOFLORENCE 1: S&P Assigns BB- (sf) Rating on Class E-Dfrd Notes ----------------------------------------------------------------- S&P Global Ratings has assigned its credit ratings to AutoFlorence 1 S.r.l.'s auto asset-backed floating-rate class A, B, C, D-Dfrd, and E-Dfrd notes. At closing, AutoFlorence 1 also issued unrated subordinated fixed-rate class F notes. The collateral in AutoFlorence 1 comprises unsecured auto loan receivables that Findomestic S.p.A. originated and granted to its private customers. This transaction is Findomestic's first public auto asset-backed securities (ABS) securitization in Italy. S&P said, "Our ratings reflect our assessment of the transaction's payment structure, its exposure to counterparty and operational risks, and the results of our cash flow analysis to assess whether the rated notes would be repaid under stress test scenarios. Our analysis indicates that the available credit enhancement for the class E-Dfrd notes is commensurate with a higher rating than that currently assigned. However, we have not given full benefit to the modeling results due to the sensitivity of those notes to the yield of the portfolio, which can vary during the revolving period." The transaction is revolving for 12 months. The ratings on the class A, B, and C notes are based on timely payment of interest, while the ratings on classes D and E are based on ultimate payment of interest. The transaction features a principal deficiency ledger (PDL). The PDL is divided into six sub-ledgers from class A to class F PDL sub-ledgers. In addition, the transaction features two fixed-to-floating interest rate swap agreements, which in our opinion mitigates the risk of potential interest rate mismatches between the fixed-rate assets and floating-rate liabilities. S&P's analysis indicates that AutoFlorence 1's available credit enhancement is sufficient to withstand losses that are commensurate with the assigned rating levels. S&P's ratings on this transaction are constrained by the application of its sovereign risk criteria for structured finance transactions and its counterparty risk criteria. S&P's operational risk criteria do not cap this transaction. Operational risk S&P said, "We consider that Findomestic's origination policies and its ability to fulfill its role as servicer under the transaction documents are in line with market standards and are adequate to support the ratings assigned. We have also considered that Findomestic is a top player in the Italian consumer loan market and has extensive experience as a servicer. We have rated different transactions in the past for which Findomestic was the originator and servicer. Our structured finance operational risk criteria do not constrain the maximum potential rating assignable to the transaction." Economic outlook S&P said, "In our base-case scenario, we forecast that Italy will record GDP growth of 0.1% in 2019 and 0.6% in 2020 and 2021, compared with 0.8% in 2018. At the same time, we expect the unemployment rate to remain stable at 10.6% until 2020, before decreasing to 10.4% in 2021. In our view, changes in GDP growth and the unemployment rate largely determine portfolio performance. We have considered our macroeconomic outlook when sizing our base-case assumptions." Credit risk S&P said, "We have analyzed credit risk under our European auto loan criteria, using historical loss data from the originator's loan book. "We analyzed the performance data provided by the originator at the subpool level, split by new cars, used cars, and other vehicles. We have reviewed historical performance measures such as gross losses and recovery rates, taking into account macroeconomic and industry trends. Based on the pool composition, we expect to see about 4.16% gross losses in the securitized pool and a recovery rate of 12%. We have sized the applicable stresses at the 'AA' rating level at a 3.5x multiple, 2.5x at 'A', 1.75x at 'BBB', and 1.25x at 'B'. "We have not considered balloon risk as part of our analysis because loans with balloon payments are not eligible to be securitized." Cash flow analysis S&P said, "Our ratings on the classes of notes reflect our assessment of the transaction's structural features under the transaction documents. The notes pay down pro rata unless the transaction hits sequential trigger. We have tested the structure to assess the impact of different amortization of the notes." There is a liquidity reserve fund, which provides only liquidity support to class A, B, and C. Principal proceeds can also be used for curing interest shortfalls for class A, B, and C. Sovereign risk S&P said, "The application of our criteria for structured finance ratings above the sovereign caps the ratings on this transaction. The analytical framework in our structured finance sovereign risk criteria assesses the ability of a security to withstand a sovereign default scenario. We have applied these criteria and determined the sensitivity of this transaction to sovereign risk as low. Therefore, the highest rating that we can assign to the tranches in this transaction is six notches above the unsolicited Italian sovereign rating, or 'AA (sf)', if certain conditions are met." Counterparty risk The transaction is exposed to BNP Paribas Securities Services, Milan branch, as the bank account provider and BNP Paribas S.A. as guarantor of the swap counterparty and of the set-off reserve provider. The replacement mechanisms implemented in the transaction documents adequately mitigate the counterparty risks to which the transaction is exposed. S&P analyzes the counterparty risks by applying our current counterparty criteria. Legal risk S&P considers the issuer to be a bankruptcy-remote entity, in line with its legal criteria. S&P said, "We believe the transaction may be exposed to set-off risk and commingling risk. We expect set-off risk to be mitigated through several features, including a set-off reserve that will be put in place upon BNP Paribas being downgraded below 'BBB' or upon insolvency of Findomestic. We have addressed commingling risk by sizing it and applying a loss in our cash flow model." The legal opinion at closing confirms that the sale of the assets would survive the seller's insolvency. Credit stability S&P said, "In line with our approach to scenario analysis, we have run two scenarios to test the stability of the assigned ratings. The results show that under moderate stress conditions, the ratings would not suffer more than the maximum projected deterioration that we would associate with each rating level in the one-year horizon, as contemplated in our credit stability criteria." Ratings List Class Rating Amount (mil. EUR) A AA (sf) 807.50 B AA (sf) 38.00 C A (sf) 28.50 D-Dfrd BBB (sf) 23.750 E-Dfrd BB- (sf) 19.00 F NR 33.25 NR--Not rated. =================== K A Z A K H S T A N =================== FIRST HEARTLAND: S&P Alters Outlook to Positive, Affirms B-/B ICRs ------------------------------------------------------------------ S&P Global Ratings said that it revised the outlook on First Heartland Jusan Bank (FHJB) to positive from stable. S&P said, "At the same time, we raised the national scale rating on FHJB to 'kzBB' from 'kzBB-', and we affirmed the 'B-/B' long- and short-term issuer credit ratings on the bank. "We also raised the national scale rating on FHJB's senior unsecured debt to 'kzBB' from 'kzBB-', and we affirmed the 'B-' rating on the senior unsecured debt. "The outlook revision reflects our view that First Heartland Jusan Bank's (FHJB, formerly known as Tsesnabank) new management team is making gradual progress in the bank's financial rehabilitation, and we think it may achieve a more stable business position in the local market in the next 12-18 months. We think the bank has massively cleaned up and de-risked its balance sheet. At the end of 2018 and the beginning of 2019, the government bought out Kazakhstani tenge (KZT) 1,054 billion problem assets from Tsesnabank's balance sheet--with no recourse to FHJB--and the bank's new owner, First Heartland Securities, has provided new capital injection of KZT70 billion. "FHJB has provisioned 88% of its KZT936 billion residual loan book as of July 1, 2019. Liquid assets and government bonds account for about 73% of the bank's balance sheet. We also note that the new management has already recovered KZT47.4 billion on several large exposures in the inherited loan book, and we expect to see further progress in this area until the end of 2019. Therefore, despite the weak quality of the bank's residual loan book, we assess the bank's risk position as moderate, due to structurally low risks on the balance sheet. "That said, the track record of the new management team remains limited, and there is still some uncertainty regarding the bank's further strategy. We note that FHJB is planning to merge with its sister bank, First Heartland Bank (FHB). Since FHB has total assets of KZT173 billion as of July 1, 2019, we consider FHB to be well capitalized and to have a low risk profile in the local context. Under our base-case assumption, the joint bank is likely to maintain lower risk appetite than domestic peers', and will focus on providing financial services to small and midsize enterprises and retail clients. We think the joint bank will also focus on servicing Nazarbayev University and related educational clusters in Kazakhstan. "Although we think FHJB and FHB could benefit from synergies, we would still need to observe the execution of the merger and assess the final impact that the merger would have for the joint bank business stability and earnings capacity. FHJB's business position remains weak, although we think it might improve in the future if the bank successfully executes a clearer, balanced strategy. "We think FHJB's capital and earnings are adequate, and expect that the bank's risk-adjusted capital ratio will remain within the 7%-10% range over the next 12-18 months. We base this on the assumption that the bank will maintain a relatively high proportion of liquid assets on the balance sheet, proceeds with loan book recoveries, and gradually recovers its net interest margin to levels that are close to the market average. "Funding and liquidity are currently neutral factors for our ratings on FHJB. In our view, the immense funding pressure has eased and we do not expect deposit withdrawals within the outlook horizon, either from corporate or retail clients, following the massive support provided. We estimate a comfortable post-cleanup loan-to-deposit ratio of about 33% as of July 1, 2019. "Our positive outlook reflects that we could raise the ratings within the next 12-18 months if the bank makes further progress in recovering problem assets, restoring profitability, and maintaining a relatively low risk appetite. An upgrade would also require FHJB to demonstrate customer deposit stability. "We could revise the outlook back to stable if the bank experienced delays with planned asset recoveries, or if the new management team's risk appetite proved to be higher than we currently expect. This could happen if the bank rapidly expands its activities in risky segments. We could also revise the outlook to stable if we thought the bank was unable to strengthen its business position and demonstrate sustainable earnings, or if the bank's franchise became weaker and less stable than its domestic peers'." NURBANK: S&P Affirms 'B-/B' ICRs on Anticipated External Support ---------------------------------------------------------------- S&P Global Ratings affirmed its 'B-/B' long- and short-term issuer credit ratings on Kazakhstan-based Nurbank. The outlook remains negative. S&P also affirmed its 'kzBB-' Kazakh national scale rating on the bank. S&P said, "We affirmed the ratings given our expectation that Nurbank will receive sufficient external support that will allow the bank to create sizable provisions for impairment and, therefore, improve its asset quality. However, we see significant downside pressure coming from Nurbank's currently high amount of legacy problem loans. Until we see significant improvements in the loan book credit quality, these toxic assets might continue to constrain the bank's competitive position, prospects for new business generation, and earning capacity improvement, and weigh on the bank's capital adequacy. It also exposes the bank to risks of negative regulatory interventions, in our view. In addition, we see risks of funding pressures in case of potential deterioration of market sentiment toward Nurbank. These risks are particularly relevant with regard to the government program of asset quality review (AQR) in the Kazakh banking sector. As per our understanding, AQR was launched on Aug. 1, 2019, and results of the review might be public." This could put an additional strain on Nurbank's capital position and customer relationships if timely and sufficient external support is not provided. Nurbank has been cleaning-up its balance sheet since 2013, but its asset quality metrics remain worse than the sector average. The share of problem loans (stage 3 under the International Financial Reporting Standards 9 disclosures) is around 40% of gross loan portfolio and 170% of total equity. S&P said, "In addition, coverage of problem loans by reserves is very low, at around 25%, and in our view, Nurbank's pre-provision core earnings capacity is not sufficient to materially improve this ratio. Therefore, we believe that Nurbank is reliant on external support, which we understand it will receive within the next six months." As per S&P's assumptions, the amount of external support might be enough to materially improve Nurbank's loss-absorption capacity, allowing to cover by reserves around 50%-60% of the currently problem loans. In addition, support is likely to be provided in the form of long-term financing, potentially contributing to Nurbank's funding base stability. Apart from the abovementioned external support, S&P expects beneficiary owner and affiliated structures to provide additional significant liquidity support to the bank in case of urgency, which will be enough to compensate for possible outflows up to 60% of current customer accounts. The previous track record supports its expectations. For example, in 2018, the owner bought out problem loans, allowing Nurbank to report material one-time profits. The owner also placed substantial deposits in 2017-2018, which helped to stabilize the bank's funding profile following significant deposit outflows. The shareholder owns a number of businesses not related to the bank, including insurance company Victoria, Gelios petrol stations, and stakes in several other companies operating in cosmetics, hotels, and education. According to Forbes, he is the sixth-richest Kazakh businessperson with wealth estimated at around $780 million. In addition to external support, Nurbank's quality of loans and consequently viability of its business will also depend on the imposition of more prudent underwriting and credit risk management practices. S&P said, "The negative outlook reflects our view that Nurbank's weak asset quality leaves the bank vulnerable to the risk of negative regulatory intervention as well as capital and funding volatility in the absence of sufficient external support. "We could lower the ratings if we see significant funding and liquidity pressures with visible scenarios of default over the next 12 months, not adequately balanced by sufficient and timely external support. Negative regulatory intervention in the absence of asset-quality improvements and/or the breach of regulatory capital ratios might also trigger a downgrade. "We could revise the outlook to stable over the next 12 months if, in our view, the quality of the Nurbank's loan portfolio and risk-management practices improved significantly with signs of recovering business opportunities, making risks of negative regulatory interventions and funding outflows remote." ===================== N E T H E R L A N D S ===================== EURO-GALAXY V: S&P Assigns B-(sf) Rating to EUR12.3MM Cl. F-R Notes ------------------------------------------------------------------- S&P Global Ratings assigned its credit ratings to Euro-Galaxy V CLO B.V.'s class A-R-R, A-R, B-R, C-R, D-R, E-R, and F-R notes. On Aug. 12, 2019, the issuer refinanced the original class A-R, A, B, C, D, E, and F notes by issuing replacement notes of the same notional. Based on the application of "Global Methodology And Assumptions For CLOs And Corporate CDOs," published on June 21, 2019, the post-refinancing cash flow results are presented in table 1. Table 1 Cash Flow Results Class Rating Subordination(%) BDR(%) SDR(%) BDR cushion(%) A-R-R AAA (sf) 39.00 68.66 60.54 8.12 A-R AAA (sf) 39.00 68.66 60.54 8.12 B-R AA (sf) 26.70 63.83 52.82 11.01 C-R A (sf) 20.90 58.19 46.92 11.27 D-R BBB (sf) 16.10 53.93 41.43 12.50 E-R BB (sf) 10.28 39.31 33.23 6.08 F-R B- (sf) 7.20 27.36 25.01 2.35 BDR--Break-even default rate. SDR--Scenario default rate. The replacement notes are largely subject to the same terms and conditions as the original notes, except for the following: -- The replacement notes have a lower spread over Euro Interbank Offered Rate (EURIBOR) than the original notes except for the class F notes, whose spread increased from 8.00% to 8.30%. -- The portfolio's maximum weighted-average life has been extended by one year. -- The notes' optional redemption can occur on any business day. The ratings assigned to Euro-Galaxy V CLO's refinanced notes reflect S&P's assessment of: -- The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. Portfolio Benchmarks S&P weighted-average rating factor 2,624 Default rate dispersion (%) 6.36 Weighted-average life (years) 4.91 Obligor diversity measure 119.48 Industry diversity measure 20.00 Regional diversity measure 1.56 Transaction Key Metrics Total par amount (mil. EUR) 400 Defaulted assets (mil. EUR) 0 Number of performing obligors 162 Portfolio weighted-average rating derived from our CDO evaluator 'B' 'CCC' category rated assets (mil. EUR)2.61 'AAA' weighted-average recovery calculated on the performing assets(%)38.01 Weighted-average spread of the performing assets (%)(with floor) 3.70 Weighted-average coupon of the performing assets (%) 5.53 S&P said, "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty. "Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "We consider that the transaction's legal structure is bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for the class A-R-R, A-R, B-R, C-R, D-R, E-R, and F-R notes." Euro-Galaxy V CLO is a European cash flow corporate loan collateralized loan obligation (CLO) securitization of a revolving pool, primarily comprising euro-denominated senior secured loans and bonds, issued mainly by European borrowers. PineBridge Investments Europe Ltd. is the collateral manager and Credit Industriel et Commercial is the junior collateral manager. Ratings List Euro-Galaxy V CLO B.V. Class Rating Amount (mil. EUR) A-R-R AAA (sf) 60.00 A-R AAA (sf) 184.00 B-R AA (sf) 49.20 C-R A (sf) 23.20 D-R BBB (sf) 19.20 E-R BB (sf) 23.30 F-R B- (sf) 12.30 Sub notes NR 39.90 NR--Not rated. ============= R O M A N I A ============= CIECH SODA: Parent Prepares to Halt Production from Sept. 18 ------------------------------------------------------------ SeeNews reports that Polish chemicals producer Ciech said on Aug. 9 that it is preparing to halt production at its Romanian soda factory from Sept. 18, as the factory lacks a cost-effective source of steam at present. "The direct reason for this decision is the termination of the existing contract for the supply of technological steam with CET Govora, Ciech's only available steam supplier in Romania," SeeNews quotes the company as saying in a press release. Ciech explained CET Govora has proposed a new price of industrial steam 135% higher than it was in 2018, which weakens the profitability of Ciech Soda Romania's business operations, SeeNews relates. Ciech added advanced analyses of available scenarios are underway, including the possibility of acquiring a new, cost-effective source of steam in cooperation with external partners, and further decisions in this regard will be made towards the end of the year, SeeNews notes. On June 19, Ciech said that its Romanian unit received a three-month notice of termination of its deal with CET Govora for the supply of industrial steam due to the inability of CET to deliver steam on the terms specified, SeeNews recounts. In April, Ciech Soda Romania signed a PLN330.6 million (US$86.7 million/EUR77.5 million) agreement with CET Govora for industrial steam deliveries for 21 months until the end of 2020, SeeNews relays. The decision on the preparations for the halt of production of the Romanian factory until a reasonable, cost-effective source of steam is acquired, leaves many open possibilities, Ciech, as cited by SeeNews, said on Aug. 9, adding that technological steam--a raw material necessary for the production of soda--made over 30% of Ciech Soda Romania's operating costs last year. In preparation for a long-term pause in production, Ciech said it is developing a broad severance package offer for its employees in Romania, including a voluntary leave program, outplacement programme and proposals to move to other factories within the Ciech Group, according to SeeNews. Further decisions in regard to the future of Ciech Soda Romania will be made towards the end of the year, SeeNews notes. Ciech said over the past dozen or so years, the company has been saving the Romanian plant from bankruptcy and made copious efforts to develop it, SeeNews relates. According to SeeNews, between 2006-2018, the Ciech Group invested over EUR100 million (US$112 million) in Romania, thanks to which the production process was thoroughly modernized, and it extended the production capacity. As a result of the implemented investments, Ciech Soda Romania products are shipped to Europe, Asia, or Africa among others, SeeNews states. The Romanian plant is one of four soda factories in the Ciech Group, with the other three located in Poland and Germany. Ciech Soda Romania is the smallest soda company in the group. It produces soda ash, water glass, sodium silicate and soda derivatives. =========== R U S S I A =========== KRASNOYARSK KRAI: S&P Affirms 'BB' Long-Term ICR, Outlook Stable ---------------------------------------------------------------- On Aug. 9, 2019, S&P Global Ratings affirmed its 'BB' long-term issuer credit rating on Krasnoyarsk Krai. The outlook is stable. As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 "EU CRA Regulation"), the ratings on Krasnoyarsk Krai are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar. Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the reason for the deviation is our review of Krasnoyarsk Krai under our revised criteria, "Methodology For Rating Local And Regional Governments Outside Of The U.S.," published July 15, 2019, on RatingsDirect. Outlook The stable outlook reflects S&P's view that Krasnoyarsk Krai's management will maintain its prudent approach to expenditures and will continue to post an operating surplus, while maintaining total debt below 60% of consolidated operating revenues through year-end 2021. Downside scenario S&P could lower the rating on Krasnoyarsk Krai if the region reported materially higher deficits after capital accounts, leading to a deterioration of budgetary performance and larger debt accumulation than we expect. Additionally, this would lead to Krasnoyarsk Krai's liquidity position deteriorating, with the debt service coverage ratio dropping below 80%. Upside scenario S&P could raise the rating on Krasnoyarsk Krai if management's prudent debt and liquidity management resulted in liquidity coverage improving structurally and sustainably to above 120%. Rationale In the coming three years, S&P expects that Krasnoyarsk Krai will continue to post operating surpluses and modest deficits after capital accounts, thanks to sustained revenue growth above the national rate and management's consistent budget consolidation efforts. This will allow the region to keep its tax-supported debt below 60% of consolidated operating revenues through 2021. S&P further believes that Krasnoyarsk Krai will retain its sound liquidity position over this period, owing to its regular presence on the bond market and access to short-term liquidity from the federal treasury. Volatility of the institutional setting under which the Russian regions operate and concentration of the economy on commodities will continue to constrain the rating on Krasnoyarsk Krai. The centralized institutional framework and concentration of the economy on commodities constrain the rating Like other Russian regions, Krasnoyarsk Krai's financial position depends heavily on the federal government's decisions under Russia's institutional setup, which remains unpredictable, with frequent changes to the tax mechanisms affecting regions. Decisions regarding regional revenues and expenditures are centralized at the federal level, constraining the predictability of Krasnoyarsk Krai's financial policy. S&P siad, "We believe that Russia's modest GDP per capita and the concentration of the local economy on commodities constrain and add volatility to Krasnoyarsk Krai's wealth. We forecast that national GDP per capital will remain below US$16,000 over the next three years. The region's economy benefits from large reserves of metals--including Russia's largest volumes of nickel, cobalt, and copper, as well as 16% of its coal and 10% of its gold. We believe that the economy will remain highly concentrated on oil and metal extraction. Production will be concentrated on two companies, Norilsk Nickel and Rosneft, which both operate in cyclical industries and together account for over 20% of Krasnoyarsk Krai's revenues. At the same time, we think that the negative impact of the low national growth rate is counterbalanced by Krasnoyarsk Krai's better long-term growth prospects than its peers, thanks to its abundant natural resources and a number of large industrial projects executed in the region." Over the past couple of years, management has improved its expenditure management with the implementation of tighter controls over spending growth, and it remains conservative in terms of planning. Additionally, Krasnoyarsk Krai has established a good track record of market borrowings with longer maturities and is a regular presence on the bond market. At the same time, and similar to most Russian local and regional governments, Krasnoyarsk Krai lacks reliable long-term financial planning and does not have sufficient mechanisms to counterbalance the volatility that stems from the concentrated nature of its economy and tax base in an international context. Krasnoyarsk Krai will likely maintain operating surpluses and will not increase debt significantly S&P said, "We believe that management will succeed in balancing the budget efficiently, with operating surpluses and modest overall deficits thanks to steady economic growth in the coming three years. Krasnoyarsk Krai's budgetary performance will likely be supported by strong revenue growth and the continuous application of budget consolidation measures. Tax collections in the region will likely benefit from increased production at the new oil and metal extraction facilities. We believe that pressure on expenditures from the implementation of national development projects announced by the Russian president in 2018 will be moderate, as many of the projects are already included in the existing regional expenditure programs. "We think that the regional government's budgetary consolidation efforts will likely allow Krasnoyarsk Krai to maintain its tax-supported debt below 60% of consolidated operating revenues through 2021. In calculating Krasnoyarsk Krai's contingent liabilities, we consider the debt and payables of the region's government-related entities, as well as the municipal sector's debt. The unitary enterprises and regional joint stock companies of which Krasnoyarsk Krai owns 25% or more are mostly financially healthy. The municipal sector's debt mainly consists of commercial loans and does not represent a significant liability for the region. Overall, we see little risk of contingent liabilities materializing for Krasnoyarsk Krai. "We anticipate that modest deficits and Krasnoyarsk Krai's liquidity sources will allow the region to maintain sufficient liquidity coverage in the next 12 months." At the same time, the region's liquidity position is supported by its satisfactory access to external liquidity, given its regular presence on the Russian bond market, a track record of obtaining financing in tight market conditions, and consistent federal support in the form of treasury loans. Nevertheless, in the near term, debt service will likely remain at a high 10% of operating revenues on average, owing to large debt maturities. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List Ratings Affirmed Krasnoyarsk Krai Issuer Credit Rating BB/Stable/-- SAMARA OBLAST: S&P Hikes Long-Term ICT to 'BB+' on Criteria Change ------------------------------------------------------------------ On Aug. 9, 2019, S&P Global Ratings raised its foreign and local currency long-term issuer credit rating on Russia's Samara Oblast to 'BB+' from 'BB'. The outlook is stable. As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 "EU CRA Regulation"), the ratings on Russia's Samara Oblast are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar. Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the reason for the deviation is our review of Samara Oblast under our revised criteria "Methodology For Rating Local And Regional Governments Outside Of The U.S.," published July 15, 2019, on RatingsDirect. Outlook The stable outlook reflects S&P's expectation that the management's prudent expenditure approach will help the oblast to contain deficits after capital accounts below 5% of total revenue in the medium term, while its debt will remain low and its liquidity position robust. Upside scenario S&P could consider raising the rating on Samara Oblast if its financial planning became more reliable and the region further improved its financial management practices. This would lead S&P to revise upward its assessment of the region's financial management. Downside scenario S&P could lower the rating on the oblast if management significantly relaxed its prudent expenditure policies and deficits after capital accounts structurally widened beyond 5% of total revenues, thereby straining the oblast's budgetary performance, debt, and liquidity position. Rationale S&P said, "We have raised our assessment of Samara Oblast's liquidity under our revised criteria for rating non-U.S. local and regional governments (LRGs). The higher assessment reflects a combination of the oblast's accumulated cash holdings and satisfactory access to external liquidity, demonstrated by its regular presence on the bond market. We further believe the oblast will retain sufficient liquidity coverage over the forecast period. We expect that in the coming three years Samara Oblast's financial management will remain committed to achieving operating surpluses solidly above 5% of operating revenues and deficits after capital accounts well within 5% of total revenues." This will allow the region to keep its tax-supported debt below 60% of consolidated operating revenues through 2021. The volatility of the institutional setting under which Russian regions operate and the relatively low wealth of the national economy, combined with weaker growth prospects, will continue to constrain the rating on Samara Oblast. Stable liquidity thanks to strong balances, decreased debt, and proven market access S&P said, "We believe that in the coming three years, in line with the management's policy, the oblast will demonstrate strong operating balances and only a modest deficit after capital accounts. Over the past few years, Samara has consistently improved its balance, supported by tax growth and continuous application of budget-consolidation measures by the management. We expect revenue performance will normalize compared with the very strong results in 2018, when the commodities sector was strongly supported by higher prices and a weak Russian ruble. "At the same time, we anticipate that the oblast's budgetary performance will be supported by sound financial results of domestically oriented oil production and refinancing companies, manufacturers, food processors, and financial industries. We also believe that pressure on expenditures from the implementation of national development projects announced by the Russian president in 2018 will be moderate, as many of the projects are already included in the existing expenditure programs and the oblast will receive higher grants in the coming years. At the same time, we believe that capital expenditures (capex) will remain above 15% of total spending in the coming three years based on the management's plans to increase capital investment in infrastructure. "We believe that modest deficits will help the oblast to maintain the level of its tax-supported debt well below 60% of consolidated operating revenues through 2021. We believe that the risk of contingent liabilities materializing for Samara Oblast is low. The region is continuing to decrease its number of government-related entities (GREs), aiming to leave the only the key companies responsible for essential communal services in the longer term. The oblast's municipal sector debt mainly consists of commercial loans and doesn't constitute significant liabilities for the region. "We anticipate that modest deficits, lower debt service, and accumulated cash holdings will allow the oblast to maintain sufficient liquidity coverage. Samara enjoys a smooth repayment schedule with evenly spread maturities. At the same time, the region's liquidity position is additionally supported by its satisfactory access to external liquidity, given its regular presence on the Russian bond market, a proven track record of obtaining financing in periods of tight market conditions, and continuous federal liquidity support. We consider that the oblast's cash will cover debt service by more than 100% over the next 12 months. Sound liquidity and debt management, despite a volatile and unbalanced institutional framework Under Russia's volatile and unbalanced institutional framework, Samara's budgetary performance is significantly affected by the federal government's decisions regarding key taxes, transfers, and expenditure responsibilities. S&P estimates that federally regulated revenues will continue to make up more than 95% of Samara's budget revenues, which leaves very little revenue autonomy for the region. The application of the consolidated taxpayer group, the tax payment scheme used by corporate taxpayers since 2012, continues to undermine predictability of corporate profit tax (CPT) payments. At the same time, the region is participating in the restructuring of the outstanding budget loans initiated by the Russian Federal Ministry of Finance, which supports its liquidity. The restructuring agreement requires the LRG to limit the debt stock to below 50% of total revenues by 2020 and keep deficits after capex below 10% of total revenues. Samara also benefits from access to the revolving federal treasury facility, which could be used as an additional short-term liquidity source. S&P said, "Samara Oblast is one of Russia's key industrial regions, but we believe that the country's limited growth prospects put pressure on the oblast's wealth levels. We forecast that national GDP per capita will remain below US$16,000 over the next three years. We still believe that the region's revenues remain exposed to changes in the tax regime on oil production and the refining industry. At the same time, in our view, the oblast's tax base is not intrinsically concentrated compared with other peers that are commodity and mineral extraction oriented." The oblast's liquidity and debt management has improved in the past few years, with increased duration of its debt and regular presence on capital markets. S&P also believes that the oblast's contingent liabilities management is stronger than that of local peers as the sector is quite small, and that most of the companies are financially sound and well monitored, together with the relatively healthy municipal sector. At the same time, similar to all Russian LRGs, the oblast lacks reliable long-term financial planning. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List Upgraded To From Samara Oblast Issuer Credit Rating BB+/Stable/-- BB/Positive/-- Senior Unsecured BB+ BB =========================== U N I T E D K I N G D O M =========================== ARCADIA GROUP: Clashes With Landlords Over U.S. Assets ------------------------------------------------------ Tom Corrigan, writing for The Wall Street Journal, reported that a group of disgruntled landlords told Judge James Garrity Jr. of the U.S. Bankruptcy Court for the Southern District of New York that they should have a "full accounting" of Arcadia Group Ltd.'s U.S. assets, which they say have been "bleeding in and out" of the London-based operator of Topshop and Topman stores. According to the Journal, in a court hearing, the landlords said Arcadia may have transferred assets to affiliates to keep them beyond the reach of U.S. creditors. Richard Chesley, Esq., a lawyer for Arcadia, told the judge that all of the money that has flowed out of the company has been to pay legitimate expenses like rent and payroll. "Vague accusations that we are seeking to take the money and run are unfounded," the Journal cited Mr. Chesley as saying. Arcadia, which is in administration in the U.K., is also seeking to have its Chapter 15 case in the United States dismissed, but Judge Garrity denied the request, saying he has "serious questions as to whether it's appropriate to dismiss the proceeding." The judge said he wants to know more about how the landlords' claims are going to be treated in the U.K and asked for more information about the dispute over Arcadia's U.S. assets before he addresses other issues in the case, including a potential dismissal, the Journal related. About Arcadia Group (USA) Arcadia Group (USA) Limited is a London-based operator of a number of retail stores throughout the United States, selling clothing and accessories under the brand name Top Shop and Top Man. Visit https://www.arcadiagroup.co.uk for more information. Arcadia Group (USA) Limited sought Chapter 15 protection (Bankr. S.D.N.Y. Case No. 19-11650) on May 22, 2019, to seek U.S. recognition of its English law administration proceeding under the Insolvency Act 1986. Daniel Francis Butters and Ian C. Wormleighton, as foreign representatives, signed the petition. Judge James L. Garrity Jr. is assigned to the U.S. case. Jamila J. Willis, Esq., Richard A. Chesley, Esq., and Oksana Koltko Rosaluk, Esq., at DLA Piper LLP, serve as counsel in the U.S. case. ARCADIA GROUP: Dorothy Perkins, Burton Store to Close on Sept. 21 ----------------------------------------------------------------- Haydn Lewis at York Press reports that the Dorothy Perkins and Burton store in Coney Street will shut on Saturday, Sept. 21. As previously reported by The Press, the closure is part of a company voluntary arrangement (CVA) for the Arcadia retail empire. Owner Sir Philip Green rejected suggestions that Arcadia came close to collapse before the restructuring plan was clinched with regulators and landlords, The Press relates. He dismissed speculation that the decision had been on a "knife-edge," suggesting it comfortably cleared a vote, and said the move was cause for celebration for Arcadia's workforce and supply chain, The Press discloses. Some 18,000 jobs could have been at risk if the CVA had not been agreed, The Press notes. About Arcadia Group Arcadia Group Ltd. is the UK's largest privately owned fashion retailer with seven major high street brands: Burton, Dorothy Perkins, Evans, Miss Selfridge, Topshop, Topman and Wallis, along with its out-of-town fashion destination Outfit. In June 2019, Arcadia's creditors approved a Company Voluntary Arrangement (CVA). The company's landlords agreed to rent cuts, 23 store closures and 520 job losses. AWAZE GROUP: S&P Alters Outlook to Negative & Affirms 'B' LT ICR ---------------------------------------------------------------- S&P Global Ratings revised to negative from stable the outlook on U.K.-based vacation rental intermediary Awaze Group (a carve-out of European rental business from the Wyndham Group) and affirmed the 'B' long-term issuer credit rating. S&P affirmed its 'B+' issue rating and '2' recovery rating on the company's EUR105 million revolving credit facility (RCF) and EUR585 million first-lien term loan B and its 'CCC+' issue rating and '6' recovery rating on the EUR167 million second-lien loan. The outlook revision follows S&P's review of the group's current trading performance and its revised forecasts for 2019, which indicate that its credit ratios are weaker than in our previous base case. Awaze has completed more than a year under a private equity sponsor ownership, after the carve-out from Wyndham Group. Under the new owner, the group has installed a new management team, strengthened its regional operating team, rebranded itself as Awaze, changed its reporting currency to euros, and adopted International Financial Reporting Standards (IFRS). While its organic revenue growth rate has been positive, its EBITDA is affected by increased marketing costs due to higher pay-per-click costs, higher variable costs in the Novosol and Landal segments, and one-off operating costs. According to management's financial reports, organic revenues increased by about 5.3% in 2018. However, EBITDA declined by about EUR4.5 million (before IFRS 16 changes and any permitted add-backs) to about EUR108 million. Factoring additional restructuring and non-recurring costs of EUR30 million for 2019, S&P believes EBITDA will be pressured this year. Organic growth momentum and full cost synergies will be needed for the group to generate reported FOCF of about EUR20 million-EUR30 million. However, S&P understands some of the cost-saving initiatives were delayed, and the benefits will likely be realized only in 2020. Therefore, S&P forecasts the group's FOCF to be negative in 2019. Awaze decided to reclassify its future annual payments to its former owner as deferred/contingent consideration rather than an operating expense because it is unlikely that any revenue benefits will accrue from these payments. Therefore, S&P's adjusted debt computation includes about EUR100 million of deferred/contingent consideration. Due to the seasonal nature of the business (with about 55% of EBITDA generated in the third quarter), Awaze's cash balance is at its lowest toward the financial year-end as it pays out its creditors (homeowners/landlords). Therefore, the group drew EUR78.6 million under its RCF as of Dec. 31, 2018, and held EUR65 million in cash to ensure that there were no working capital issues as it operated as a stand-alone entity, apart from the wider Wyndham Group. The drawings under the revolver were repaid in the first quarter of 2019 as the working capital inflows of the new holiday season built up the group's cash reserve. However, S&P expects the group will use the RCF again toward year-end. S&P therefore forecasts group leverage for 2019 at about 7.5x-8.0x. Despite the short-term challenges and the highly competitive nature of the fragmented vacation rental segment, S&P believes that Awaze's leading positions in the holiday park and private accommodation sectors support its growth fundamentals. The group encompasses leading regional brands with a long history and high brand awareness: about 80% of bookings are through proprietary channels. Moreover, S&P believes the group's leadership position will be protected by its well-established portfolio and differentiated value proposition in being able to meet the needs of both travelers and homeowners. However, the improvement in profitability and consequently its FOCF generation depends on it fully achieving identified cost-saving initiatives. S&P said, "The negative outlook reflects that we could consider a downgrade if there were any further operating underperformance, caused by either a weak macroeconomic environment or significant delays to cost synergies that resulted in FOCF being negative for a prolonged period. It also reflects the risk of a weak macroeconomic environment (namely within the U.K.) translating into depressed consumer confidence and lower spending on leisure activities such as holidays. "We could take a negative rating action if Awaze posted declining revenues and subdued EBITDA margins for a prolonged period that resulted in negative FOCF in 2020." Operating performance could be affected by increased competition, stricter regulations, higher-than-expected costs relating to the carve-out, and delays in achieving synergies from cost-optimization efforts. Rating pressure would also arise if the group's financial policy became more aggressive and it pursued debt-financed acquisitions or shareholder returns. Specifically, S&P could lower the rating if adjusted EBITDA interest coverage fell below 2.0x. S&P could also consider a negative rating action if liquidity weakened substantially. S&P could revise the outlook to stable if the group can maintain its organic revenue growth while improving margins that support reported FOCF of at least EUR20 million-EUR30 million on a sustained basis. Such a revision would also depend on our assessment of a benign macroeconomic environment in Awaze's main economic source markets (including the U.K., the Netherlands, and Germany). BURY FC: Staff Implores Steve Dale to Accept Acquisition Offer -------------------------------------------------------------- BBC News reports that Bury owner Steve Dale says he will consider selling financially embattled League One club after staff "implored" him to accept a new offer. Shakers staff issued a statement on Aug. 12 saying interest had come in for the club, which could face having a fourth successive game postponed, BBC relates. Minutes earlier, the EFL gave Bury until 09:00 BST on Tuesday, Aug. 13, to show how it will pay creditors, BBC discloses. If they cannot, Saturday's game with Gillingham will be suspended, BBC notes. According to BBC, the statement from Bury staff posted on the club website read: "We have received an offer for the sale of Bury Football Club, one that we all at the club believe is a very good offer. "This offer is the only lifeline for the future of the club and we implore Steve Dale to accept it, as it has the full backing of all of the senior staff at Bury FC." Bury has been given until Aug. 23 to avoid being expelled from the English Football League, BBC states. The league says it has still to get satisfactory evidence about how Bury will meet their commitments to football creditors, those outlined in their Company Voluntary Arrangement (CVA) or details how the club will be funded this season, BBC discloses. Mr. Dale denies that claim, BBC relays. The Shakers, who won promotion from League Two last season, have already been given a 12-point deduction for the season after entering into a CVA--which is classed as an insolvency event by the EFL--to try to clear some of their debts, BBC recounts. Bury, BBC says, saw a winding-up petition against them dismissed by the High Court on July 31, while Mr. Dale claimed the EFL were "working against" the club, to which Jevans later said that the league was "not standing in the way" of the club's survival. The EFL had previously issued the club with a withdrawal of membership notice--which was itself suspended since July 25--but this has now been lifted, BBC relates. DEBONAIR LANGUAGE: Enters Administration, Halts Operations ---------------------------------------------------------- Brad Marshall at The Bolton News reports that thousands of highly skilled interpreters and translators could be left unpaid after the collapse of Debonair Language, a languages agency. Debonair Languages confirmed that it has gone into administration after ceasing operations on Aug. 5, The Bolton News relates. The Chorley Old Road-based business had thousands of linguists working across the country on its books, The Bolton News discloses. According to The Bolton News, prior to the announcement of Debonair's collapse, linguists working for the company received an email informing them the agency had ceased booking operations and thanking them for their services. It added that the company had secured an agreement with thebigword to make linguist payments, The Bolton News notes. However, many complained they were unable to get in touch with Debonair to discuss their payment, The Bolton News states. In the meantime, payment of agents and the fulfilment of commissions agreed by Debonair after Aug. 5 will now be transferred to thebigword, according to The Bolton News. However, for bookings made prior to that date, thebigword remains responsible to pay Debonair for them and therefore Debonair is obligated to pay its linguists, The Bolton News relays, citing thebigword. Debonair was set up in the 1970s after founder, Visvalingam "Mani" Manivannan moved to Bolton from Sri Lanka. The company fulfilled contracts in sectors including corporate, education, medical and legal services for clients such as the Ministry of Justice and one of the UK's biggest specialist language agencies thebigword. It also operates a recruitment section to help bilingual, multilingual and international candidates into careers. FERGUSON: Rescue Decision for Shipyard Must Be Unsentimental ------------------------------------------------------------ The Scotsman reports that any decision to save Ferguson shipyard in Port Glasgow must be unsentimental and pragmatic, not based on dogma. Around 350 jobs are at risk after managers last week served notice of their intention to put the Ferguson yard, which is currently building two ferries for Cal Mac's west coast services under a GBP97 million fixed-price contract, into administration, The Scotsman relates. Things have clearly gone seriously wrong at the yard and, as Scottish Liberal Democrats leader Willie Rennie pointed out, the Scottish Government may have some difficult questions to answer about its role in the affair and use of public money, The Scotsman discloses. According to The Scotsman, speaking on BBC Scotland, Finance Secretary Derek Mackay spelt out his view of the situation: "The GBP97 million has already been spent on vessels that are not complete . . . The alternative is for the government to walk away, the company goes into administration, the jobs are lost, the vessels are not complete." And the GMB union stressed Ferguson's was "not a basket case by any stretch of the imagination" and had a "huge future" as it was at the "cutting edge of hydrogen technology", The Scotsman notes. So there might be a case to nationalize the company, perhaps temporarily, to save it from the fate Mackay described or to tide it over even further because of its potential for success as the world moves to a zero-carbon economy, The Scotsman states. However, any such decision must be pragmatic, unsentimental, and driven by hard economics, not political dogma, according to The Scotsman. GATOR HOLDCO: S&P Ups Rating on 2nd-Lien Term Loan Due 2027 to CCC+ ------------------------------------------------------------------- S&P Global Ratings raised the issue-level rating on Alpharetta, Ga.-based Gator Holdco (UK) Ltd.'s (dba Aptean Inc.) second-lien term loan due 2027 to 'CCC+' from 'CCC' and revised the recovery rating to '5' from '6' after the company issued a $37 million add-on to their existing second-lien term loan. The '5' recovery rating indicates S&P's expectation for modest (10%-30%; rounded estimate: 10%) recovery in event of a default. The upgrade reflects the increased share of the enterprise resource planning (ERP) company's value from non-obligors, which adds value available to second-lien lenders. S&P said, "At the same time, we affirmed our 'B-' issue-level rating on the company's first-lien term loan due 2026, first-lien delayed draw term loan expiring 2021, and revolving credit facility due 2024 after the company issued a $75 million add-on to their existing first-lien term loan. The recovery rating remains '3', reflecting our expectation of meaningful recovery (50%-70%; rounded estimate: 60%) recovery in the event of a default. Gator will use the proceeds of the incremental term loans to acquire Sanderson, an ERP, digital technology, and supply chain solutions provider primarily serving the U.K. market. "Our 'B-' issuer credit rating on Gator Holdco, the parent of Aptean Inc., remain unchanged, reflecting S&P Global Ratings-adjusted pro forma leverage in the mid-8x area (not including expected cost savings and synergies) at the close of the transaction. We expect the company to achieve synergies and cost savings from the acquisitions in next 12 months, driving leverage to low-7x area by 2020. While Gator has continued to add debt to their capital structure, we believe the company has sufficient liquidity for debt service and will continue to generate positive unadjusted free operating cash flow." ISSUE RATINGS--RECOVERY ANALYSIS Key Analytical Factors -- The revision of the second lien rating reflects the increased share of value from non-obligors to 40% from 20%, due to the fact that Sanderson's business comes from the U.K. -- S&P's simulated default scenario assumes a default in 2021 because of a significant EBITDA decline due to intense competition or large restructuring costs from poor merger and acquisition integration. These factors would lead to lower revenue and cash flow and contribute to a default. -- S&P values the company as a going concern because it believes this approach would yield higher value for creditors, due to the company's leading brand and technology. Simulated default assumptions -- Simulated year of default: 2021 -- EBITDA at emergence after recovery adjustment: approximately $70 million -- EBITDA multiple: 6.0x -- Revolving credit facility: 85% drawn at default -- First-lien delayed draw term loan: 100% drawn at default Simplified waterfall -- Net enterprise value (after 5% administrative costs): approximately $397 million -- Valuation split in (obligor/non-obligors): 60%/40% -- Value available for first-lien claims: approximately $372 million -- Secured first-lien debt: approximately $578 million -- Recovery expectations: 50%-70% (rounded estimate: 60%) -- Value available for second-lien claims: approximately $25 million -- Secured second-lien debt: approximately $197 million -- Recovery expectations: 10%-30% (rounded estimate: 10%) All debt amounts include six months of prepetition interest. JAGUAR LAND: S&P Affirms 'B+' Issuer Credit Rating, Off Watch Neg. ------------------------------------------------------------------ S&P Global Ratings affirmed its 'B+' long-term issuer credit and issue ratings on U.K.-based premium car manufacturer Jaguar Land Rover Automotive PLC (JLR) and removed its ratings from CreditWatch negative. S&P said, "Although we had expected JLR's performance to improve over the next 12-24 months, its credit profile remains under pressure after weaker-than-forecast performance in the first quarter of the financial year (FY) ending March 31, 2020. Although JLR's first-quarter retail sales grew by 2.6% in the U.K., outperforming the market, they contracted elsewhere. In North America, year-on-year sales contracted by only 0.6% and still outperformed the market. Sales in the rest of JLR's markets underperformed--the contraction in Europe was 9.3%, in China was 29.2%, and in JLR's overseas segment was 19.6%. We expect JLR's FOCF generation to remain significantly negative at least for the next two years, until global auto demand recovers and ongoing cost-reduction measures restore the company's profitability." That said, despite tough market conditions, management's actions led to cash flows in the first quarter that were almost GBP1 billion higher than the prior year. By the end of FY2020, JLR aims to significantly improve profitability and operating efficiency. It is executing a GBP2.5 billion cost reduction program called "Project Charge." Management continues to make good progress toward the program's three key goals: reducing capital expenditure (capex) and investment by GBP1 billion, generating GBP500 million of cash out of working capital, and generating another GBP1 billion of profit and loss (P&L) actions. JLR continues to successfully deliver planned new model roll outs, despite markets weakening. S&P said, "We expect JLR's volumes to gradually recover over the next 12-24 months, supported by the rollout of new models (including the new Evoque and new Defender), stabilizing Chinese markets, and for profitability to improve, driven by cost reductions. In FY2020, we expect JLR to sell about 600,000 vehicles, and to see revenues growing to more than GBP25 billion. S&P Global Ratings-adjusted EBITDA margins would rise gently toward 5% in this scenario. "Given that we usually strip impairments or exceptional costs out of our adjusted measure of EBITDA, achieving this improvement in profitability depends on JLR not repeating the sizable impairments or exceptional costs we saw at the end of FY2019. In addition, JLR's ability to continue to deliver on its Project Charge targets for capex and working capital is key to improving FOCF. "At the same time, although we expect working capital-related cash inflows going forward, JLR's high research and development costs and capex will result in significantly negative FOCF for the next two years." Specifically, FOCF is predicted to be -GBP1.2 billion in FY2020 and -GBP1.15 billion in FY2021, approaching breakeven in FY2022. JLR's business risk profile is currently under pressure, due to low and volatile profitability, and increased competition. Furthermore, JLR exports more than 20% of its production to the EU and 20% to the U.S. This means it is more exposed than many of its rated peers to either a no-deal Brexit or new U.S. import tariffs. The company's adjusted EBITDA margin (about 4.5%-5.0% in FY2020 in S&P's base case) is currently at the low end of its rated peer group. S&P expects management's cost reduction measures to lead to an improvement through 2020. Despite positive demand trends in the larger and more mature markets of the U.S. and the U.K.--ahead of the industry--these two markets pose arguably the largest risk to JLR's credit quality in the coming months. A potential no-deal Brexit poses a significant risk to JLR: the company may experience supply chain shocks and production closures, and it exports a large volume of vehicles to Europe from the U.K. In the U.S., the government is currently weighing up whether to impose tariffs on vehicles imported from Europe--a 25% rate is on the table. At this stage, S&P views a potential no-deal Brexit and new U.S. tariffs as event risks, and it does not include them in its base case. Exports to Europe and the U.S. each account for approximately GBP5 billion of sales, with an additional GBP1 billion of sales to markets that have strong trade treaties with the EU--in other words, exposure to these countries could lead to further collateral fallout from a no-deal Brexit. The negative outlook indicates that JLR faces risks from weaker-than-expected market volume growth, pressured profitability, and potentially near-term events such as a potential no-deal Brexit and new U.S. tariffs. It also signifies that the success of new model rollouts is critical to JLR's growth strategy and its ability to generate positive free operating cash flow. S&P said, "We would lower the ratings if we thought that the chances of a turnaround for JLR had diminished. Specifically, we could downgrade JLR if we saw material underperformance against our expectations for FOCF or working capital in FY2020, especially in the U.K. or other core markets; or if the U.K. government were to press ahead with a no-deal Brexit or if the U.S. government were to introduce new vehicle import tariffs. "We could revise the outlook to stable if JLR improves its performance in line with our expectations and the risks relating to a no-deal Brexit or U.S. tariffs become less imminent. We could also revise the outlook to stable if the company's FOCF prospects were to trend materially toward breakeven with supportive industry conditions and improvement stemming from management's implementation of Project Charge." MERGERMARKET MIDCO 2: S&P Withdraws B ICR Following Debt Repayment ------------------------------------------------------------------ S&P Global Ratings said that it withdrew its issuer credit rating on Mergermarket Midco 2 Ltd. and its issue ratings on the debt facilities issued by Mergermarket Bidco Ltd., after all the rated debt facilities were repaid. This followed the sale of a majority stake in Mergermarket Midco 2 by its majority sponsor owner, BC Partners, to Ion Investment Group, announced on May. 13, 2019. At the time of withdrawal, the outlook on Mergermarket Midco 2 was negative. Ratings List Not Rated Action To From Mergermarket Midco 2 Ltd. Issuer Credit Rating NR/-- B/Negative/-- Mergermarket Bidco Ltd. Senior Secured NR B Recovery Rating NR 3(60%) Senior Secured NR CCC+ Recovery Rating NR 6(0%) NR-–Not rated. =============== X X X X X X X X =============== [*] Walsh Joins Cadwalader's London Office as Special Counsel ------------------------------------------------------------- Cadwalader, Wickersham & Taft LLP on July 23 disclosed that international arbitration and disputes lawyer Simon Walsh has joined the firm's London office. Mr. Walsh will join Cadwalader's Global Litigation Group as Special Counsel. Prior to joining the firm, he was Senior Investment Officer at Woodsford Litigation Funding in London with responsibility for global investments. Previously, Mr. Walsh practiced for nine years in the litigation and arbitration practice at Skadden Arps. Before that, Mr. Walsh assisted in establishing the London disputes group of O'Melveny & Myers. "Simon has played a key role on a number of very significant international arbitration matters and disputes and has an outstanding market reputation," said London managing partner Gregory Petrick. "We are actively expanding our highly successful disputes practice in London as part of our overall strategy to continue to broaden our London and European footprint." Added partner Melis Acuner, who leads the firm's London disputes practice, "I have known and have worked alongside Simon for a number of years and have seen first-hand his capabilities and the way he works with clients. I am very excited that we will be working together once again and that he will be in a position to support our clients on their most important matters." Mr. Walsh's practice focuses on high-value, complex international commercial arbitration and cross-border litigation across a broad spectrum of sectors, including telecoms, private equity, financial, maritime, offshore, power and aviation. He has acted in some of the world's largest telecoms disputes. Mr. Walsh has represented both claimants and defendants in the English high court and in arbitrations under a variety of rules as well as under ad hoc arbitrations and has significant experience in the enforcement and annulment of international arbitral awards and judgments. He also has significant experience in the offshore courts in Guernsey, Jersey, the Isle of Man, the British Virgin Islands, Bermuda and the Cayman Islands. Mr. Walsh's experience extends to restructuring and insolvency matters, and to regulatory and civil/criminal investigations under the U.K. Bribery Act and the U.S. Foreign Corrupt Practices Act. "Cadwalader has outstanding capabilities in London and in the U.S. and is very committed to growing its global practice," Mr. Walsh said. "In London, the firm is increasingly being called on to assist on more and more complex and critically important matters, and I look forward to making a real impact on behalf of the firm's clients." Mr. Walsh joins an expanding senior team in Cadwalader's London office. Most recently, financial regulatory lawyer Michael Sholem joined the firm from Davis Polk. Prior to Sholem's arrival, fund finance partner Samantha Hutchinson, real estate finance partner Duncan Hubbard and M&A special counsel Joanna Valentine came on board to expand the firm's capabilities. Mr. Cadwalader's U.S.-based Litigation Group has also experienced significant growth, adding 10 partners over the last 18 months, most recently with the additions of former Maryland State Attorney General Doug Gansler and partners Sean O'Shea, Michael Petrella and Amanda Devereux from Boies Schiller. ********* 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 * * *