/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/191011.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 Friday, October 11, 2019, Vol. 20, No. 204 Headlines F R A N C E BOURBON CORP: Court Administrators Receive Takeover Offer REMADEGROUP: Placed Into Receivership, Debts Wiped Out G E R M A N Y GALAPAGOS HOLDING: Triton Advisers Takes Over Assets I R E L A N D ROCKFORD TOWER 2019-1: Moody's Rates EUR9.75MM Class F Notes B3 I T A L Y ALITALIA SPA: Deutsche Lufthansa Set to Join Takeover Bid NEXI SPA: S&P Assigns 'BB-' Rating on EUR825MM Sr. Unsecured Notes K A Z A K H S T A N BATYS TRANSIT: S&P Gives B/B Issuer Credit Ratings, Outlook Stable N E T H E R L A N D S CREDIT EUROPE: Fitch Affirms BB- LongTerm IDR, Outlook Stable R U S S I A KAFOLAT JSC: Fitch Affirms BB- IFS Rating, Outlook Stable S P A I N VALENCIA HIPOTECARIO 3: Fitch Affirms CCCsf Rating on Class D Debt U K R A I N E PRIVATBANK: Bond Default Ruling to Complicate Kolomoisky Dispute U N I T E D K I N G D O M BLACKROCK EUROPEAN IX: S&P Assigns Prelim. B-(sf) Rating on F Notes EUROSAIL PLC 2006-3NC: S&P Affirms B- Rating on Class E1c Notes FERROGLOBE PLC: S&P Lowers LongTerm ICR to 'CCC+', Outlook Neg. MONTPELIER TRUST: Forced Into Receivership SUMMER (BC) HOLDCO: Moody's Rates $250MM Sec. Notes Due 2026 'B1' TWIN BRIDGES 2019-2: Fitch Assigns BBsf Rating on Class X1 Notes TWIN BRIDGES 2019-2: Moody's Rates GBP5.1MM Class X1 Notes Caa1 WRIGHTBUS: Nears Rescue Deal with JCB, Talks Ongoing X X X X X X X X [*] BOOK REVIEW: Bendix-Martin Marietta Takeover War - - - - - =========== F R A N C E =========== BOURBON CORP: Court Administrators Receive Takeover Offer --------------------------------------------------------- As part of the reorganization proceedings opened since August 7, 2019 by the Marseilles Commercial Court to the benefit of BOURBON Corporation and its affiliate BOURBON Maritime, Court Administrators have received a takeover offer. This offer made by a company owned by a group of French banks, concerns assets and activities of BOURBON Corporation. As other takeover or continuation offers could be received by the Court Administrators, BOURBON Corporation has asked Euronext Paris to suspend the listing of its shares as of October 9, 2019, and until the Commercial Court has completed its analysis of the various options. About BOURBON Corporation Among the market leaders in marine services for offshore oil & gas, BOURBON offers the most demanding oil & gas companies a wide range of marine services, both surface and sub-surface, for offshore oil & gas fields and wind farms. These extensive services rely on a broad range of the latest-generation vessels and the expertise of more than 8,400 skilled employees. Through its 29 operating subsidiaries the group provides local services as close as possible to customers and their operations throughout the world, of the highest standards of service and safety. BOURBON provides three operating activities (Marine & Logistics, Mobility and Subsea Services) and also protects the French coastline for the French Navy. In 2018, BOURBON'S revenue came to EUR689.5 million and the company operated a fleet of 483 vessels. REMADEGROUP: Placed Into Receivership, Debts Wiped Out ------------------------------------------------------ Rachel McGovern at Bloomberg News reports that the debts of Remadegroup have been wiped out after a French court placed the French mobile phone repair business into receivership late in September, according to company spokesman Guillaume Foucault. According to Bloomberg, for the two direct lenders and one co-investor that provided the fast-growing company with an EUR125 million (US$137 million) unitranche just over a year ago, the court order means they will probably recover nothing directly. LGT Capital Partners AG's private debt arm arranged the financing while Idinvest Partners SA and Swen Capital Partners SA also joined the deal, Bloomberg discloses. The spokesman, as cited by Bloomberg, said had actual owners been able to produce a plan for Remadegroup's recovery, there might have been a chance for some debt repayment but the French receivership process ends their claims. The company, Bloomberg says, is now seeking a buyer to turn around the business debt-free. The spokesman said it's not clear whether the lenders will have the chance to claw some of the cash, Bloomberg notes. ‎Matthieu Millet, the company's president and founder, was paid a dividend from the proceeds of the debt financing, Bloomberg relays, citing two people familiar with the transaction. The first overt sign of trouble within the fast-growing iPhone "remanufacturer" was a June announcement that its investors would put an extra EUR50 million of capital into the business as part of a plan to improve its financial structure and governance, Bloomberg recounts. At the same time, Mr. Millet was replaced by Francois Dehaine as president, Bloomberg notes. ============= G E R M A N Y ============= GALAPAGOS HOLDING: Triton Advisers Takes Over Assets ---------------------------------------------------- Antonio Vanuzzo at Bloomberg News reports that private equity firm Triton Advisers Ltd. took over the assets of Germany's manufacturer Galapagos on Oct. 9, in the latest development of the dispute between owners and junior creditors over the company's restructuring. Assets from Galapagos' operating unit were transferred into a new company named Mangrove Luxco IV, and in addition, Triton will inject new money into the business, Bloomberg relays, citing two separate statements by the companies. As part of the transaction, EUR250 million (US$274 million) worth of junior notes will be wiped out, Bloomberg discloses. Meanwhile, EUR333 million of senior notes maturing in 2021 will be refinanced with new bonds due 2025, Bloomberg states. Junior creditors have been pushing back against Triton in U.K., Germany and U.S. courts, Bloomberg notes. The embattled manufacturer of cooling equipment for power plants, has come under strain as energy firms switch to renewable technology and amid volatile oil markets, according to Bloomberg. ============= I R E L A N D ============= ROCKFORD TOWER 2019-1: Moody's Rates EUR9.75MM Class F Notes B3 --------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to Notes to be issued by Rockford Tower Europe CLO 2019-1 DAC: EUR248,000,000 Class A Senior Secured Floating Rate Notes due 2033, Assigned (P)Aaa (sf) EUR31,000,000 Class B-1 Senior Secured Floating Rate Notes due 2033, Assigned (P)Aa2 (sf) EUR5,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2033, Assigned (P)Aa2 (sf) EUR25,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2033, Assigned (P)A2 (sf) EUR27,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2033, Assigned (P)Baa3 (sf) EUR23,500,000 Class E Senior Secured Deferrable Floating Rate Notes due 2033, Assigned (P)Ba3 (sf) EUR9,750,000 Class F Senior Secured Deferrable Floating Rate Notes due 2033, Assigned (P)B3 (sf) Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. Upon a conclusive review of a transaction and associated documentation, Moody's will endeavour to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating. 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. Rockford Tower Europe CLO 2019-1 DAC 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 unsecured senior obligations, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be approximately 73% ramped as of the closing date and to comprise of predominantly corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the six month ramp-up period in compliance with the portfolio guidelines. Rockford Tower Capital Management, L.L.C. 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, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and improved obligations and are subject to certain restrictions. In addition to the seven Classes of Notes rated by Moody's, the Issuer will issue EUR 38.725 million of Subordinated Notes due 2033 which will not be rated. The transaction will incorporate 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: Par Amount: EUR 400,000,000 Diversity Score: 44* Weighted Average Rating Factor (WARF): 2900 Weighted Average Spread (WAS): 3.50% Weighted Average Coupon (WAC): 5.00% Weighted Average Recovery Rate (WARR): 44.0% Weighted Average Life (WAL): 8.5 years * The covenanted base case diversity score is 45, however Moody's has assumed a diversity score of 44 as the deal documentation allows for the diversity score to be rounded up to the nearest whole number whereas usual convention is to round down to the nearest whole number 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 the eligibility criteria, exposures to countries with LCC of A1 or below cannot exceed 10%, with exposures to LCC of Baa1 to Baa3 further limited to 5% and with exposures of LCC below Baa3 not greater than 0%. ========= I T A L Y ========= ALITALIA SPA: Deutsche Lufthansa Set to Join Takeover Bid --------------------------------------------------------- Tommaso Ebhardt and William Wilkes at Bloomberg News report that Deutsche Lufthansa AG is preparing to join a takeover bid for bankrupt Italian airline Alitalia SpA in a deal that would see it help run the carrier without injecting equity. While Lufthansa previously said it wanted full ownership of Alitalia, the German company is now prepared to partner with other investors, Bloomberg relays, citing people familiar with the plan who asked not to be named as it's not yet public. According to Bloomberg, one of the people said Lufthansa had considered a cash injection involving a 15% to 20% stake, but with resources focused on a turnaround at its Eurowings arm decided to offer support without equity involvement. Should the deal go ahead, Europe's biggest airline would replace Atlanta-based Delta Air Lines Inc. in a group aiming to rescue Alitalia, alongside state railway Ferrovie dello Stato Italiane SpA and the Benetton family's Atlantia SpA, Bloomberg states. The consortium faces an Oct. 15 deadline to submit a binding offer for Alitalia, Economic Development Minister Stefano Patuanelli said on Oct. 8 after meeting state-appointed commissioners, Bloomberg discloses. He added that the cutoff cannot be extended, Bloomberg notes. According to Bloomberg, if the proposal comes to fruition, Alitalia -- under special administration for more than two years -- will join a stable of carriers including Austrian Airlines, Swiss and Brussels Airlines, as well as the main Lufthansa brand. State-appointed administrators have been running unprofitable Alitalia since 2017 after former shareholder Etihad Airways pulled the plug on funding and workers rejected a EUR2 billion (US$2.2 billion) recapitalization tied to 1,600 job cuts from a workforce of 12,500, Bloomberg recounts. The Rome-based company is seeking international partners to stay afloat as it burns through a EUR900 million state loan while seeking to compete in a market where fares are falling amid a glut of seats and industry consolidation has left it dwarfed by rivals, according to Bloomberg. About Alitalia With headquarters in Fiumicino, Rome, Italy, Alitalia is the flag carrier of Italy. It's main hub is Leonardo da Vinci-Fiumicino Airport, Rome. The company has a workforce of 12,000+. It reported EUR 2,915 million in revenues in 2017. Alitalia and its subsidiary, Alitalia Cityliner S.p.A., are in Extraordinary Administation (EA), by virtue of decrees of the Ministry of Economic Development on May 2 and May 17, 2017 respectively. The companies were subsequently declared insolvent on May 11 and May 26, 2017 respectively. Luigi Gubitosi, Prof. Enrico Laghi and Prof. Stefano Paleari were appointed as Extraordinary Commissioners of the Companies in Extraordinary Administration. The Italian government ruled out nationalizing Alitalia in 2017 and since then, the airline has been put up for sale. To this development, Delta Airlines, Easyjet and Italian railway company Ferrovie dello Stato Italiane have expressed interest in acquiring the airline in 2018. Since then, Easyjet has withdrawn its offer. NEXI SPA: S&P Assigns 'BB-' Rating on EUR825MM Sr. Unsecured Notes ------------------------------------------------------------------ S&P Global Ratings said that it assigned its 'BB-' issue rating with a '3' recovery rating to the proposed EUR825 million senior unsecured notes to be issued by Nexi SpA. S&P's '3' recovery rating indicates its expectation for meaningful recovery (50%-90%; rounded estimate: 50%) in the event of a default. Nexi will use the proceeds of the proposed note issuance to repay the outstanding EUR825 million senior secured notes due November 2023. S&P will withdraw its 'BB-' issue rating and '3' recovery rating on the senior secured notes upon completion of the refinancing transaction. The new notes will rank pari passu with all of Nexi's other outstanding debt. =================== K A Z A K H S T A N =================== BATYS TRANSIT: S&P Gives B/B Issuer Credit Ratings, Outlook Stable ------------------------------------------------------------------ S&P Global Ratings, on Oct. 9, 2019, assigned its 'B/B' long-term and short-term issuer credit ratings, and its 'kzBBB-' Kazakhstan national scale rating, to Batys Transit JSC. The ratings reflect S&P's view that tariff regulation for Batys leaves the company exposed to volume risk and does not allow automatic cost pass-through. The company operates two electric transmission lines constructed in the last ten years. The single customer for both is Kazakh-based ferrochrome producer and exporter Kazchrome (a part of Eurasian Resources Group S.a r.l [ERG Group; B/Stable/B]). Despite Kazchrome's advantageous position of on the global cost curve, the company is very much exposed to ferrochrome price volatility, which might lead to fluctuations of volumes produced and, therefore, electricity consumed. The existing tariffs for Batys are set by the regulator for five years and do not allow for intraperiod upward revisions of tariffs even in case of much lower volumes. Although electricity payments are operating costs and not financial liabilities, S&P believes that if Kazchrome experiences financial difficulties, Batys could face working capital outlays. In addition, the asset concentration makes the company susceptible to the risks of technical or operational failures. Still, Batys has an adequate track record of assets operations with supportive margins, because regulation incorporates reasonable costs and returns into the tariff, and electricity transit volumes have been relatively stable in recent years. In 2018, Batys' EBITDA margin was 63%, while its direct peer and shareholder, the Kazakh state-owned dominant electricity operator KEGOC, had 46%. Recently, the company started constructing street lighting systems for Kazakh municipalities, with the pilot being Atyrau. S&P said, "The company is actively investigating its opportunities to enter other similar projects across largest cities of Kazakhstan, which we think will likely be debt-funded if exercised. In our base-case scenario, we anticipate the contribution of this segment to EBITDA will be about 20% in the next three years, but this could fluctuate substantially depending on how successful Batys bids at several upcoming tenders. Also, we understand the company is considering several investment projects to expand its main business by constructing new transmission lines. All this, though helping to potentially diversify customer and asset base, might lead to debt accumulation beyond our current expectations and reduce the company's headroom under covenants. We view this financial policy as relatively aggressive, which affects our assessment of the company's credit quality." S&P said, "We think credit metris will fluctuate, with funds from operations (FFO)-to-debt in the 12-20% range in 2019-2021. In our calculations, we do not deduct cash when calculating the adjusted debt figure: we understand that the company would like to continue having some cash buffer in order to absorb any potential negative events and gradually prepare for the infrastructure bond maturing in 2025, but at the same time note high appetite of the management to new investments and potential willingness to start paying dividends on income from the unregulated street lighting construction business line. Batys plans to undertake a material KZT4 billion project, to construct a 110 kilovolt (kV) power transmission line in 2021. Until then, we expect the company to generate positive free operating cash flow of KZT2.0 billion-KZT2.5 billion per year. In 2021, we anticipate, it should turn negative of about KZT2.0 billion on the back of DGOK line investment. "We treat Batys as a GRE with limited importance for the Kazakh government and limited link to it. This view is based on the fact that the company is 80% owned by individuals, immaterial in the country context and does not provide any public services to population. Infrastructure bonds enhanced by the Ministry Finance guarantee financed the construction of the major Batys asset -- a 500 kV power transmission line, which was constructed under the concession agreement . This guarantee does not satisfy our criteria for timeliness, and we don't think the company's future debt would likely receive state guarantees or any forms of timely financial support. "The stable outlook reflects our view that the risks associated with small size, lack of solid regulatory protection, exposure to one large industrial customer, and undiversified asset base are balanced by relatively healthy projected operating cash flows in the next three years, a sizable cash position, adequate profitability, and solid 10-year track record of operations. "Our base-case scenario assumes that Batys will generate EBITDA of KZT5.5 billion-KZT6.9 billion annually in 2019-2021, which includes the transmission revenues and already-signed contracts for construction and maintenance of street lighting systems in Atyrau. With only maintenance capex of KZT200 million-KZT 250 million in 2019-2020, we project positive free operating cash flow generation of KZT2.5 billion per year, turning negative in 2021 on the back of the new 110 kV line. That said, we project that FFO-to-gross debt will be in the 15%-20% range for the next three years, which we see as commensurate with the 'B' rating. "We could consider a negative rating action if the company demonstrates heightened level of related party transactions (raising concerns about governance issues) or if its liquidity materially deteriorates, for instance due to increased reliance on short-term borrowings." Also, ratings will come under pressure if the company becomes more leveraged, with FFO-to-gross debt of below 12%, notably because: -- Batys undertakes a more aggressive stance towards investments or dividends than we currently assume; -- The company shows a material operating underperformance (for instance, as a result of Kazchrome off-taking much lower volumes, or delaying payments on its electricity bills, or due to a technical disruption) leading to weakened metrics; or -- The new regulatory period starting from November 2020 is less favorable for the company (for example, with more stringent on costs and returns included into tariffs). An upgrade is less likely in the next two years given the company's small size and appetite for undertaking ambitious projects. Given the heavy exposure to the single power transmission customer, S&P sees only limited potential for Batys to be rated above ERG Group. S&P could consider upgrading the ratings if: -- The company diversifies its asset and customer base significantly leading to reduced single customer exposure in the electricity transmission segment; -- The regulatory environment improves in a way that eliminates exposure of Batys to volume risk; or -- The company demonstrates improved financial performance and commitment to keep debt leverage moderate, at FFO-to-gross debt above 20% with a headroom at all times. Batys is a small electricity transmission grid operator in Kazakhstan. The company was established in 2005 under a concession agreement between the company and the Kazakh government, under which it received the exclusive right to construct and operate the interregional power transmission line in Aktobe region. The concession agreement was recently extended until 2030. Batys operates two electricity transmission lines, and its single customer is Kazchrome. Recently, Batys has engaged a new type of activity--construction and operation street lighting systems for the municipalities, with the pilot project being Atyray city. ===================== N E T H E R L A N D S ===================== CREDIT EUROPE: Fitch Affirms BB- LongTerm IDR, Outlook Stable ------------------------------------------------------------- Fitch Ratings affirmed Credit Europe Bank N.V.'s Long-Term Issuer Default Rating at 'BB-' with a Stable Outlook and affirmed the Viability Rating at 'bb-'. KEY RATING DRIVERS IDRS AND VR CEB's ratings consider its significant direct and indirect exposure to volatile operating environments, in particular Turkey, inherent to its business model, which has resulted in a relatively high rate of loan impairment and low profitability. The ratings also consider its niche but established trade finance franchise, experienced management and generally stable funding and liquidity. CEB spun off 90% of its interest in its Russian subsidiary, Credit Europe Bank (Russia) Ltd to its ultimate parent, in September 2018. As a result, the proportion of its exposure extended to counterparties based in developed markets has increased. However, CEB will remain significantly exposed to emerging markets as it has material direct exposure to Turkey (about a quarter of gross loans) and because of its presence in Romania (about a quarter of gross loans). CEB's lending to western European operations of large Turkish groups in Europe may also indirectly expose it to the deterioration of the Turkish operating environment, in its view. Weakening of the Turkish parents' credit profiles could spill over to their international operations, which CEB lends to. CEB continues to report significantly above-average levels of impaired assets, which accounted for an increased proportion of total assets at end-2018 and end-1H19 compared with previous years as CEB's balance sheet size decreased following the spin-off of the Russian operations. In addition, the bank's Turkish counterparties are facing more challenging conditions. This is due to Turkish lira exchange-rate volatility, interest rate hikes and a weaker growth outlook for the country. CEB's Stage 3 loans were 10.1% of gross loans at end-June 2019 (The denominator includes EUR25 million of loans mandatorily carried at fair value under IFRS 9 but that are not staged). Loans to Turkish counterparties were about 40% Stage 3 loans at end-June 2019 and legacy Romanian mortgage loans are about a quarter. The risk of further losses on the latter is limited, in its view, but the recovery process is likely to be slow due to lengthy court procedures. Despite reporting relatively high regulatory capital ratios, CEB's capital levels are not fully commensurate with risks, in its view. Its Fitch Core Capital (FCC) ratio and its fully loaded common equity Tier 1 (CET1) ratio were 15.8% and 16.1% at end-June 2019, respectively, but buffers above regulatory minimums are low in absolute terms. Unreserved impaired exposures, which have increased due to the challenging operating environment in Turkey, now encumber about a third of the bank's FCC. Its assessment of CEB's capitalisation also takes into account high single-name concentration in the loan book, which is partly mitigated by the close involvement of the bank's executives in managing corporate customers. CEB's profitability remains relatively low, although it is improving. Annualised operating profit/risk-weighted assets reached 1.0% in 1H19 following muted performance in previous years. Operating profit was partly supported by net releases of loan loss allowances in Romania, which Fitch does not expect to be repeated in the same magnitude. Fitch expects CEB's ability to generate capital internally will improve due to almost full elimination of hedging costs relating to the bank's RUB-denominated investment in CEBR. These consumed the bulk of CEB's comprehensive income before the spin-off. CEB's funding and liquidity are generally stable and granular retail deposits are its main source of funding (about 75% of total non-equity funding). These deposits are collected online in the Netherlands and Germany and the majority benefit from the Dutch deposit guarantee, contributing to funding stability. Liquidity is comfortable, with high-quality liquid assets (cash, unpledged securities and central bank deposits excluding mandatory reserve deposits) amounting to about 15% of total assets at end-June 2019. SUPPORT RATING AND SUPPORT RATING FLOOR CEB's Support Rating of '5' and Support Rating Floor of 'No Floor' reflect Fitch's view that senior creditors cannot rely on receiving full extraordinary support from the sovereign if CEB becomes non-viable. This reflects the bank's lack of systemic importance in the Netherlands, as well as the implementation of the EU's Bank Recovery and Resolution Directive and the Single Resolution Mechanism. These provide a framework for resolving banks, which is likely to require senior creditors participating in losses, if necessary, instead or ahead of a bank receiving sovereign support. Similarly, support from the bank's private shareholder, although possible, cannot be reliably assessed. SUBORDINATED DEBT CEB's Tier 2 subordinated debt is rated one notch below the banks' VR, reflecting below-average recovery prospects for this type of debt. RATING SENSITIVITIES IDRS AND VR CEB NV's ratings could be downgraded if its asset quality continues to deteriorate resulting in pressure on the bank's capitalisation. An upgrade would require a track record of loan book resilience and a reduction of risks stemming from the bank's exposure to the Turkish operating environment. SUPPORT RATING AND SUPPORT RATING FLOOR An upgrade of the Support Rating and upward revision of the Support Rating Floor would be contingent on a positive change in the Netherlands' propensity to support its banks and a significant increase in CEB's systemic importance. While not impossible, this is highly unlikely in Fitch's view. SUBORDINATED DEBT CEB's subordinated debt rating is sensitive to changes in CEB's VR. =========== R U S S I A =========== KAFOLAT JSC: Fitch Affirms BB- IFS Rating, Outlook Stable --------------------------------------------------------- Fitch Ratings affirmed Uzbekistan-based JSC Insurance Company Kafolat's Insurer Financial Strength Rating at 'BB-'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects the state ownership, the insurer's moderate business profile and the record of sound profitability in recent years. These strengths are offset by the high investment risks on the asset side. The Uzbek state and state-owned companies hold a combined 93% interest in Kafolat, with the Agency for Management of State Assets of Uzbekistan holding 66.51% at end-6M19. As part of the new economic policy framework, the Uzbek government announced its intention to cede control in Kafolat, without giving any details on the timescale or cession strategy. Fitch does not expect this to happen in the short term. Fitch views Kafolat's business profile as moderate compared with other Uzbek players. This assessment is driven by Kafolat's favourable competitive positioning and moderate business diversification. Kafolat is the sixth-largest insurer in Uzbekistan, with a 7% market share by gross written premiums (GWP) in 2018 (2017: 9%). In international terms Kafolat is a small domestically focused insurer with GWP of USD13 million in 2018, at the average exchange rate of the Central Bank of Uzbekistan. In 2018, large one-off contracts in property and casualty lines and to a lesser extent, steady volumes of the inwards insurance enhanced Kafolat's business mix diversification. The voluntary lines outweighed the compulsory lines, which include in particular workers' compensation, and accounted for 51% of GWP and for 53% of net written premiums (NWP) compared with 31% and 30% in 2017. In 1H19, Kafolat intensified writing of financial risks, which mainly included credit default insurance of farm equipment loans, with the share of financial risks growing to 23% of NWP in 6M19. The sum insured under this line equalled UZS460 billion in 1H19, which was six times as much as the insurer's total shareholders' funds at end-6M19. Fitch considers that the non-core nature of these risks is credit negative. This risk is mitigated by the presence of the government guarantees under this line. The Uzbek government is committed to compensate any losses exceeding 10% of the insurer's shareholders' equity and stemming out of this line. In Fitch's view, Kafolat's investment portfolio carries several significant risks, which include a high and growing exposure to equity instruments representing 82% of the total investments at end-2018 (end-2017: 61%) and a major concentration per single issuer within the portfolio of equity holdings. The fixed-income part of the insurer's portfolio is mainly formed of bank deposits, which are reasonably well diversified and mainly placed with the state-owned banks. Kafolat had sound profitability, reflected in net income of UZS9 billion and return on equity of 9% in 2018. The net result was fully driven by strengthened investment component of UZS15 billion. The insurer's underwriting result was negative, with the combined ratio growing to 100.9% in 2018 from 93.2%, driven by the commission ratio. Kafolat continued to report a very strong and stable loss ratio, which averaged 24% and varied between 18% and 31% in 2014-2018. This performance was recorded across all key lines of business, with the workers' compensation the only exception. Kafolat has strong capital relative to its business volumes. However, the capital remains exposed to equity investments and to heightened risk related to the 25% weight of the revaluation reserve made for tangible assets in the capital at end-2018. The insurer carries a comfortable buffer in its regulatory capital, with a Solvency I-like margin of 291% at end-2018. RATING SENSITIVITIES A change in Fitch's view of the financial condition of the Republic of Uzbekistan is likely to have a direct impact on Kafolat's rating. Sustained reserving deficiencies or underwriting losses leading to operational losses or capital depletion could lead to a downgrade. Any significant change in the insurer's relations with the government would also be likely to directly affect its rating. ========= S P A I N ========= VALENCIA HIPOTECARIO 3: Fitch Affirms CCCsf Rating on Class D Debt ------------------------------------------------------------------ Fitch Ratings placed Valencia Hipotecario 2, FTA's class C notes on Rating Watch Negative reflecting counterparty dependency, and affirmed three other tranches. Fitch has also affirmed Valencia Hipotecario 3, FTA. Valencia Hipotecario 2, FTH Series A ES0382745000; LT AAAsf Affirmed; previously at AAAsf Series B ES0382745018; LT A+sf Affirmed; previously at A+sf Series C ES0382745026; LT A+sf Rating Watch On; previously at A+sf Series D ES0382745034; LT CCCsf Affirmed; previously at CCCsf Valencia Hipotecario 3, FTA Class A2 ES0382746016; LT AA+sf Affirmed; previously at AA+sf Class B ES0382746024; LT A+sf Affirmed; previously at A+sf Class C ES0382746032; LT A-sf Affirmed; previously at A-sf Class D ES0382746040; LT CCCsf Affirmed; previously at CCCsf TRANSACTION SUMMARY The transactions comprise Spanish residential mortgages serviced by Caixabank, S.A. (BBB+/F2/Stable). KEY RATING DRIVERS Credit Enhancement (CE) Trends Current and projected CE for the notes is sufficient to mitigate the credit and cash flow stresses under their rating scenario, as reflected by the affirmations. For both transactions, Fitch expects CE ratios to remain broadly stable or gradually increase given the pro-rata amortisation of the notes and the reserve funds being at their absolute floors. The prevailing pro-rata amortisation of the notes will switch to sequential when the outstanding portfolio balance represents less than 10% of their original amount (currently between 15.0% and 22.8%) or sooner if certain performance triggers are breached. Rating Cap Due to Counterparty Risk Valencia Hipotecario 2's class C notes' rating is capped at the issuer account bank provider's rating (Barclays Bank plc; A+/RWN/F1), as the only source of structural CE for this class is the reserve fund at the account bank. The rating cap reflects the excessive counterparty dependency on the SPV account bank holding the cash reserves, as the sudden loss of these funds would imply a downgrade of 10 or more notches of the notes in accordance with Fitch's criteria. As Barclays Bank plc is currently on RWN, Fitch has placed Valencia Hipotecario 2's class C notes on RWN. Resolution of the RWN is directly linked to the resolution of the RWN on Barclays Bank plc, which may take longer than six months. High Seasoning and Stable Asset Performance The rating actions reflect Fitch's expectation of stable credit trends given the significant seasoning of the securitised portfolios of more than 14 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 0.7% in both cases as of the latest reporting date, and cumulative gross defaults range between 3.4% for Valencia Hipotecario 2 and 3.9% for Valencia Hipotecario 3 relative to portfolio initial balances. The securitised portfolios are exposed to geographical concentration in the Valencia region, where approximately 69% and 73% of the borrowers are located for Valencia Hipotecario 2 and Valencia Hipotecario 3, respectively. In line with Fitch's European RMBS rating criteria, higher rating multiples are applied to the base foreclosure frequency assumption to the portion of the portfolio that exceeds two and a half times the population within this region. Payment Interruption Risk Mitigated Fitch views the transactions as sufficiently protected against payment interruption risk in the event of servicer disruption, as liquidity sources are sufficient to cover at least three months of senior fees, net swap payments and interest payment obligations on the senior notes, until an alternative servicing arrangement is implemented. RATING SENSITIVITIES A worsening of the Spanish macroeconomic environment, especially employment conditions or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability. This could have negative rating implications, especially for junior tranches that are less protected by structural CE. As Valencia Hipotecario 2 class C notes' rating is capped at the SPV account bank's Long-Term Issuer Default Rating, a change to this rating could trigger a corresponding change to the class C notes' rating. ============= U K R A I N E ============= PRIVATBANK: Bond Default Ruling to Complicate Kolomoisky Dispute ---------------------------------------------------------------- Marc Jones at Reuters reports that a London court order for Ukraine's largest lender PrivatBank to repay two of its defaulted bonds in full plus interest is a boost for their holders, but looks set to add to Kiev's complex tussle with the bank's former owner, oligarch Igor Kolomoisky. The ruling by the London Court of International Arbitration (LCIA) was originally made in June but the exact details have only just emerged after the bonds' trustee got approval to communicate them to investors, Reuters relates. According to Reuters, in theory, PrivatBank could pay out as much as US$460 million -- the two bonds' "principles" plus as much as 3.5 years of unpaid interest. However, the LCIA ruling said payment should only be made on bonds which are not held by PrivatBank's former shareholders and their beneficiaries, which includes Kolomoisky and another oligarch Gennadiy Bogolyubov, Reuters notes. That raises the bonds' "pari passu" legal clause, however, which deems that all holders be treated equally, Reuters states. As a result, the trustee has asked the High Court in London to make a judgment, Reuters discloses. A hearing is scheduled for late February, according to Reuters. The case forms part of a wider protracted legal battle between Ukraine's government and Kolomoisky and Bogolyubov after PrivatBank was forcibly nationalized in December 2016 at a cost of US$5.5 billion to plug a gap in the bank's capital, Reuters relays. One potential option in the latest case is for PrivatBank to pay out the bonds, but for Kiev to then freeze the accounts of the oligarchs until a broader decision is reached, according to Reuters. PrivatBank is the largest commercial bank in Ukraine, in terms of the number of clients, assets value, loan portfolio and taxes paid to the national budget. PrivatBank has its headquarters in Dnipropetrovsk, in central Ukraine. =========================== U N I T E D K I N G D O M =========================== BLACKROCK EUROPEAN IX: S&P Assigns Prelim. B-(sf) Rating on F Notes ------------------------------------------------------------------- S&P Global Ratings assigned preliminary credit ratings to the class A to F European cash flow collateralized loan obligation (CLO) notes issued by BlackRock European CLO IX DAC. At closing the issuer will issue unrated subordinated notes. The preliminary ratings 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. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The transaction's counterparty risks, which S&P expects to be in line with its counterparty rating framework. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will permanently switch to semiannual payments. S&P notes that the interest amount from the semiannual obligations will not be trapped in the interest smoothing account for so long as any of the following apply: (i) the aggregate principal amount of the semiannual obligations is less than or equal to 5% or (ii) the aggregate principal amount of the semiannual obligations is less than or equal to 20%, the class F interest coverage ratio is equal to or greater than 105% (excluding any payments from semiannual obligations), and the class F par value test is satisfied. The portfolio's reinvestment period will end approximately four-and-a-half years after closing. S&P said, "We understand that at closing, the portfolio will be well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations. "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (3.70%), the reference weighted-average coupon (4.75%), and the target minimum weighted-average recovery rate as indicated by the collateral manager. The transaction also benefits from a EUR60 million interest cap with a strike rate of 2% until December 2025, entered between the issuer and NatWest Markets PLC, and reducing interest rate mismatch between assets and liabilities in a scenario where interest rates exceed 2%. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Under our structured finance ratings above the sovereign criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned preliminary rating levels." Until the end of the reinvestment period on June 15, 2024, the collateral manager is allowed to substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager can, through trading, deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. S&P said, "At closing, we expect that the transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "We expect the transaction's legal structure to be bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for each class of notes." The transaction securitizes a portfolio of primarily senior secured leveraged loans and bonds, and will be managed by BlackRock Investment Management (UK) Ltd. Ratings List BlackRock European CLO IX DAC Class Prelim. Rating Prelim. amount (mil. EUR) A AAA (sf) 250.00 B AA (sf) 40.00 C A (sf) 28.00 D BBB (sf) 22.00 E BB- (sf) 22.00 F B- (sf) 10.00 Sub notes NR 35.00 NR--Not rated. EUROSAIL PLC 2006-3NC: S&P Affirms B- Rating on Class E1c Notes --------------------------------------------------------------- S&P Global Ratings raised its credit ratings on Eurosail 2006-3NC PLC's class C1a, C1c, D1a, and D1c notes. At the same time, S&P has affirmed its ratings on the class A3a, A3c, B1a, and E1c notes. S&P said, "The rating actions follow the implementation of our revised criteria for assessing pools of U.K. residential loans. They also reflect our full analysis of the most recent transaction information that we have received and the transaction's structural features as of June 2019. "Upon republishing our global RMBS criteria following the extension of the criteria's scope to include the U.K., we placed our ratings on all classes of notes from this transaction under criteria observation. Following our review of the transaction's performance and the application of our republished global RMBS criteria, our ratings on these notes are no longer under criteria observation." The pool factor (the outstanding collateral balance as a proportion of the original collateral balance) in this transaction is 17%. Total arrears have increased to 36.3% from 30.3%, and 90-plus-day arrears have increased to 22.9% from 21.1% since S&P's last review of the transaction, with performance being worse than our U.K. nonconforming delinquency index. Cumulative losses are at 4.36%. S&P said, "The notes in this transaction are currently amortizing sequentially, as they have breached the pro rata payment triggers relating to arrears. We believe the transaction will continue to pay principal sequentially, and we have incorporated this assumption into our cash flow analysis. The sequential amortization, combined with a nonamortizing reserve fund, has increased the transaction's available credit enhancement since our previous review. "After applying our updated residential loans criteria, the overall effect in our credit analysis results is an increase in the weighted-average foreclosure frequency (WAFF) at all rating levels due to the fact that arrears have increased since last review. The arrears adjustment is higher following the implementation of our revised criteria. "Our weighted-average loss severity assumptions (WALS) have decreased at all rating levels due to a reduction in the current loan-to-value (LTV) ratio and the revised jumbo valuation thresholds." WAFF And WALS Levels Rating level WAFF (%) WALS (%) Expected credit loss (%) AAA 48.40 32.93 15.94 AA 43.22 26.32 11.38 A 39.97 16.06 6.42 BBB 36.18 10.86 3.93 BB 32.15 7.61 2.45 B 31.15 5.10 1.59 The lower expected credit losses, combined with increased available credit enhancement, allows the class A3a, A3c, B1a, C1a, and C1c notes to pass our stresses at the highest rating level. However, because the transaction's bank account and re-investment account rating triggers have been previously breached but not remedied by Barclays Bank PLC, our current counterparty criteria cap our ratings on the notes in this transaction at 'A (sf)', which equates to the long-term issuer credit rating on Barclays Bank. Because the notes are capped at the 'A (sf)' level due to counterparty risk, S&P has affirmed its 'A (sf)' ratings on the class A3a, A3c, and B1a notes, and S&P has raised its ratings on the class C1a and C1c notes to 'A (sf)'. S&P said, "The passing cash flow results for the class D1a and D1c notes outperform the results of our last review. We have not given full benefit to the modeling results in our rating decision to account for their subordinated position in the payment structure, their sensitivity to our fees assumptions, and the high percentage of interest-only loans, which exposes the transaction to back-loaded risks to which more junior tranches are more sensitive. We have therefore raised our ratings on these classes of notes to 'BB- (sf)'. "We have also affirmed our rating on the class E1c notes at 'B- (sf)'. In our cash flow analysis, the class E1c notes did not pass our 'B' rating level cash flow stresses in a number of our cash flow scenarios, in particular when we modeled high prepayment rates, rising interest rates, and slow defaults. Therefore, we applied our 'CCC' ratings criteria to assess if either a 'B-' rating or a rating in the 'CCC' category would be appropriate. We performed a qualitative assessment of the key variables, together with an analysis of performance and market data, and we do not consider repayment of this class of notes to be dependent upon favorable business, financial, and economic conditions. Furthermore, the increased credit enhancement and lower credit coverage assumption at the 'B' level have resulted in improved cash flow results since our last review. We therefore believe that the class E1c notes will be able to pay timely interest and ultimate principal in a steady-state scenario commensurate with a 'B-' stress in accordance with our 'CCC' ratings criteria. "Our credit stability analysis for this transaction indicates that the maximum projected deterioration that we would expect at each rating level over one- and three-year periods, under moderate stress conditions, is in line with our credit stability criteria." Ratings List Eurosail 2006-3NC PLC Class Rating to Rating from A3a A (sf) A (sf) A3c A (sf) A (sf) B1a A (sf) A (sf) C1a A (sf) BBB+ (sf) C1c A (sf) BBB+ (sf) D1a BB- (sf) B- (sf) D1c BB- (sf) B- (sf) E1c B- (sf) B- (sf) FERROGLOBE PLC: S&P Lowers LongTerm ICR to 'CCC+', Outlook Neg. --------------------------------------------------------------- S&P Global Ratings, on Oct. 8, 2019, lowered its long-term issuer credit rating on silicon metal and ferrosilicon producer Ferroglobe PLC to 'CCC+' from 'B-'. The downgrade follows the downturn in Ferroglobe's core markets, which will translate into a very low EBITDA in 2019 and 2020, making its capital structure unsustainable (with adjusted debt to EBITDA of more than 10x in 2019, and more than 6.5x in 2020). In addition, the company's liquidity situation has become the center of attention because Ferroglobe is still negotiating a new debt instrument, replacing the existing $150 million RCF, to avoid a possible covenant breach in the coming weeks. The negative FOCF, effective lack of long-term credit facilities, very high yields on its notes, and (to a lesser extent) a large maturity over the medium term lead us to assess the company's liquidity as weak. According to Ferroglobe, securing a new debt instrument is imminent, but we believe this is not likely to trigger a positive rating action. The weak demand from end-markets, notably the steel and auto industries, continued to stress the demand for silicon metal, ferrosilicon, and ferromanganese. For example, the silicon metal benchmark dropped to about $2,500/ton in June 2019, and more recently to about $2,300/ton, from a level of $2,700/ton in December 2018 and more than $3,100/ton in 2018. This translated into reported EBITDA of about $8 million in the first half on 2019. Under S&P's revised base-case scenario for 2019, it projects EBITDA of zero-$30 million, compared with about $250 million in 2018, with negative FOCF. Looking into 2020, S&P expects some rebound in the market as supply and demand become more balanced. S&P said, "With growing signs of slower global economic growth in 2020, muted recovery for the steel and auto industries, and poor free cash flows, we see the company's capital structure as unsustainable. In this respect, even if Ferroglobe's core markets rebounded in 2020 and EBITDA grew to $100 million or more, the company won't be able to materially reduce its debt. In our view, Ferroglobe initiatives (such as divestments and cost cutting programs) helped to soften the downturn's impact. "Following the divestment of FerroAtlantica ($173 million) and after taking into account the negative FOCF in 2019, we forecast a reduction in net debt by about $115 million, such that adjusted debt (after deducting all cash) will be about $675 million by the end of 2019 (equivalent to reported net debt of about $310 million). Our adjustments include about $227 million of trade receivables, leases, pension obligations, and deferred payments for acquired assets from Glencore." The negative outlook reflects a potential downgrade in the near term if a failure to comply with its covenants led to a debt acceleration in the coming weeks or weak performance continued into 2020, leading Ferroglobe to restructure its unsustainable debt position. S&P said, "Under our base-case scenario, we expect close to break-even EBITDA in 2019 (compared with $250 million in 2018) and negative $75 million FOCF. In our view, the muted recovery in the company's core markets in 2020 will support higher EBITDA, but this won't lead to a substantial reduction in the company's elevated debt level, maintaining adjusted debt-to-EBITDA above 6.5x." In S&P's view, a negative rating action could follow one or more of the following: -- Failure to comply with its covenants leading to a debt acceleration in the coming weeks. However, S&P views this risk as low because it understands that the company can repay the facility to avoid a default, and a refinance of the existing RCF with a new debt instrument is imminent; or -- No recovery in commodity prices, which will increase the probably of a distressed exchange offer. -- S&P could revise its outlook to stable if Ferroglobe completed the RCF's refinancing with no near-term liquidity pressure, it saw early signs of recovery in the company's market that might support improved profitability, and management developed a credible program to address the current high debt level. MONTPELIER TRUST: Forced Into Receivership ------------------------------------------ David Marchant at Offshore Alert reports Isle of Man-based Montpelier (Trust & Corporate) Services Ltd. has been forced into receivership following a regulator's allegation that its principal, Watkin Gittins, has diverted "millions of pounds" of client money to fund his lifestyle. SUMMER (BC) HOLDCO: Moody's Rates $250MM Sec. Notes Due 2026 'B1' ----------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to the USD250 million equivalent EUR senior secured notes (due 2026) being issued by Summer (BC) Holdco B S.a r.l. and a Caa1 rating to the USD525 million equivalent EUR senior unsecured notes (due 2027) to be issued by Summer (BC) Holdco A S.a r.l.. Summer (BC) Holdco B S.a r.l. and Summer (BC) Holdco A S.a r.l. are indirect subsidiaries of Summer (BC) Lux Consolidator S.C.A. (B2 corporate family rating). Summer (BC) Lux Consolidator S.C.A. is the top-entity of the ring-fenced group that will ultimately own Kantar's (a global market leading data, research, consulting and analytics business) US and rest of World (RoW) controlling entities, under the ultimate joint ownership of Bain Capital and WPP plc. The outlook is stable. RATINGS RATIONALE The rating for the USD250 million equivalent of proposed senior secured notes is in line with the B1 rating of the term loan B issued by Summer (BC) Holdco B S.a r.l. as it will benefit from the same security and guarantees as the term loan B. To the extent the company proceeds with these senior secured notes the company will reduce the size of the term loan B to an aggregate of USD2.25 billion equivalent from the originally proposed USD2.50 billion equivalent, such that the portion of secured debt in the capital structure remains unchanged. The USD525 million of senior unsecured notes provide a junior debt cushion that has resulted in the rating of the company's senior secured debt, one notch higher than the B2 CFR for the Summer (BC) Lux Consolidator group. The Caa1 rating on the senior unsecured notes reflects their junior ranking in the company's capital structure. RATING OUTLOOK The stable ratings outlook reflects Moody's expectation that the company will strive to grow its revenues and EBITDA in line with its business plan and focus on the timely realization of the planned transformation initiatives. WHAT COULD CHANGE THE RATING UP/DOWN Positive pressure on the ratings could develop over time, if (1) Kantar demonstrates sustained moderate revenue and EBITDA growth; (2) its gross debt/EBITDA (Moody's-adjusted) decreases sustainably and is maintained well below 5.5x; and (2) Moody's adjusted free cash flow (FCF)/ Debt ratio for the company improves towards 10%. Downward ratings pressure would materialize if (1) Kantar's revenues and EBITDA do not grow in line with the business plan or come under further pressure due to a difficult market environment (2) the company sees no material de-leveraging over the next 12 months and its gross leverage (Moody's-adjusted gross debt/EBITDA) remains close to 6.5x by the end of 2020; and/ or (2) its free cash flow (FCF)/ debt (Moody's-adjusted) declines materially. There would also be downward rating pressure if the company's liquidity were to significantly deteriorate. LIST OF AFFECTED RATINGS Assignments: Issuer: Summer (BC) Holdco A S.a r.l. BACKED Senior Unsecured Regular Bond/Debenture, Assigned Caa1 Issuer: Summer (BC) Holdco B S.a r.l. BACKED Senior Secured Regular Bond/Debenture, Assigned B1 Outlook Actions: Issuer: Summer (BC) Holdco A S.a r.l. Outlook, Assigned Stable Issuer: Summer (BC) Holdco B S.a r.l. Outlook, Assigned Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. COMPANY PROFILE Summer (BC) Lux Consolidator is the top-most entity of the restricted group that will own Kantar. Kantar is a global data, research, consulting and analytics business which offers a complete view of consumer behaviour in over 100 countries. It employs more than 28,000 people worldwide. In its fiscal year ended December 31, 2018, Kantar generated revenue of USD4 billion and constant currency company adjusted EBITDA of USD543 million. TWIN BRIDGES 2019-2: Fitch Assigns BBsf Rating on Class X1 Notes ---------------------------------------------------------------- Fitch Ratings assigned Twin Bridges 2019-2 plc notes final ratings. Twin Bridges 2019-2 Current Rating Prior Rating Class A; LT AAAsf New Rating; previously at AAA(EXP)sf Class B; LT AAsf New Rating; previously at AA(EXP)sf Class C; LT Asf New Rating; previously at A(EXP)sf Class D; LT BBB+sf New Rating; previously at BBB(EXP)sf Class X1; LT BBsf New Rating; previously at BB-(EXP)sf Class Z1; LT NRsf New Rating; previously at NR(EXP)sf Class Z2; LT NRsf New Rating; previously at NR(EXP)sf TRANSACTION SUMMARY The transaction is a securitisation of buy-to-let mortgages originated in the UK by Paratus AMC Limited. The class D and X1 notes have been assigned a higher rating than their expected ratings of 'BBB(EXP)sf' and 'BB-(EXP)sf', respectively. This is due to the improved economics of the transaction on pricing compared with the information provided to Fitch at the time of assigning expected ratings. KEY RATING DRIVERS Prime Underwriting The loans are exclusively BTL loans advanced to finance properties located in England and Wales. The loans were granted to borrowers who had no adverse credit history over the past six years. Paratus also obtains full independent verification of rental incomes from a RICS-qualified valuer. As a result, Fitch treated the loans as prime and applied its BTL matrix to assign the pool's foreclosure frequency (FF). Pre-Funding A further amount of GBP67 million of loans will be acquired by the issuer up to, and including, the last purchase date on November 30, 2019. Note over-issuance is credited to a pre-funding reserve to execute these further purchases. Fitch has been provided with a pool of completed loans for GBP233 million, alongside loan information for an additional GBP140 million containing loans currently under offer and identified for potential future sale. Fitch has considered the pre-funding eligibility criteria to determine the collateral features post pre-funding period. Fixed Hedging Schedule The issuer entered into a swap at closing to mitigate the interest rate risk arising from the fixed-rate assets and floating-rate notes. The swap is based on a defined schedule, rather than the balance of fixed-rate loans in the pool. In the event that loans prepay or default, the issuer will be over-hedged. The excess hedging is beneficial to the transaction in high interest-rate scenarios and detrimental in declining interest rate scenarios. Unrated Seller Paratus, the seller, is unrated by Fitch and as a result may have an uncertain ability to make substantial repurchases from the pool in the event of a material breach in representations and warranties (R&W). This risk is mitigated by the nature of Paratus as a trading business with assets and only one breach of R&W in preceding Twin Bridges transactions, which was repurchased by the seller as soon as the breach was identified. RATING SENSITIVITIES Material increases in the frequency of defaults and loss severity on defaulted receivables producing losses greater than Fitch's base case expectations may result in negative rating action on the notes. Fitch's analysis showed that a 30% increase in the weighted average FF, along with a 30% decrease in the weighted average recovery rate, would imply a downgrade of the class A notes to 'AA-sf'. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of Paratus's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. TWIN BRIDGES 2019-2: Moody's Rates GBP5.1MM Class X1 Notes Caa1 --------------------------------------------------------------- Moody's Investors Service assigned definitive long-term credit ratings to the following Classes of Notes issued by Twin Bridges 2019-2 PLC: GBP249,000,000 Class A Floating Rate Notes due June 12, 2053, Definitive Rating Assigned Aaa (sf) GBP15,000,000 Class B Floating Rate Notes due June 12, 2053, Definitive Rating Assigned Aa1 (sf) GBP15,000,000 Class C Floating Rate Notes due June 12, 2053, Definitive Rating Assigned A1 (sf) GBP12,000,000 Class D Floating Rate Notes due June 12, 2053, Definitive Rating Assigned A2 (sf) GBP5,100,000 Class X1 Floating Rate Notes due June 12, 2053, Definitive Rating Assigned Caa1 (sf) Moody's has not assigned any ratings to the GBP 9,000,000 Class Z1 Notes due June 12, 2053 and the GBP 6,000,000 Class Z2 Notes due June 12, 2053. This transaction represents the fourth securitisation transaction rated by Moody's that is backed by buy-to-let mortgage loans originated by Paratus AMC Limited (not rated). The portfolio consists of loans secured by mortgages on properties located in the UK extended to 817 borrowers and the current pool balance is approximately equal to GBP 232.7 million as of August 2019. The seller can sell up to GBP 67.3 million of additional loans into the transaction until the additional mortgage loan purchase date, November 30, 2019, subject to certain eligibility conditions for the additional loan portfolio. The eligibility criteria do not include the requirement of the mortgage loans having made a first payment prior to inclusion in the additional loan portfolio, but the seller has a buy-back obligation if no payment is made. RATINGS RATIONALE The ratings take into account the credit quality of the underlying mortgage loan pool, from which Moody's determined the MILAN Credit Enhancement and the portfolio expected loss, as well as the transaction structure and legal considerations. The expected portfolio loss of 2.2% and the MILAN required credit enhancement of 13.0% serve as input parameters for Moody's cash flow model and tranching model. The expected loss is 2.2%, which is in line with other UK BTL RMBS transactions owing to: (i) the weighted average (WA) current LTV of around 70.3%; (ii) the performance of comparable originators; (iii) the current macroeconomic environment in the UK; (iv) the limited track record of historical information (since 2015); and (v) benchmarking with similar UK BTL transactions. MILAN CE for this pool is 13.0%, which is in line with other UK BTL RMBS transactions, owing to: (i) the WA current LTV for the pool of 70.3%, which is in line with comparable transactions; (ii) top 20 borrowers accounting for approx. 11.3% of current balance, which represents a higher concentration level than observed in comparable transactions; (iii) prefunding representing up to c.29% of the initial pool, subject to certain conditions, which can lead to some collateral deterioration; (iv) the lack of historical information; and (v) benchmarking with similar UK BTL transactions. At closing, the transaction benefits from a fully funded, amortising liquidity reserve fund that equals 1.5% of the outstanding Class A and Class B Notes covering fees and interest on Class A and B Notes (in respect of the latter, if it is the most senior Class outstanding and otherwise subject to a PDL condition). The liquidity reserve fund will stop amortising if the Notes are not redeemed on the optional redemption date or if cumulative defaults of the mortgage loans exceed 6%. In addition, at closing there is a fully funded, non-amortising general reserve fund that equals 2.0% of the principal amount outstanding of the collateralized Notes as of the closing date. Operational Risk Analysis: Paratus is the servicer in the transaction whilst U.S. Bank Global Corporate Trust Limited (not rated) will be acting as a cash manager. In order to mitigate the operational risk, Intertrust Management Limited (not rated) will act as back-up servicer facilitator. To ensure payment continuity over the transaction's lifetime the transaction documents incorporate estimation language whereby the cash manager can use the three most recent servicer reports to determine the cash allocation in case no servicer report is available. The transaction also benefits from approx. 4 quarters of liquidity based on Moody's calculations. Finally, there is principal to pay interest as an additional source of liquidity for the Class A Notes and in certain scenarios for the Class B Notes. Interest Rate Risk Analysis: 99.9% of the loans in the pool are fixed rate loans reverting to three months LIBOR with the remaining proportion linked to three months LIBOR. The Notes are floating rate securities with reference to daily SONIA. To mitigate the fixed-floating mismatch between the fixed-rate asset and floating liabilities, there is a scheduled notional fixed-floating interest rate swap provided by National Australia Bank Limited (Aa2(cr)/P-1(cr)). The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in July 2019. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Significantly different loss assumptions compared with its expectations at close due to either a change in economic conditions from its central scenario forecast or idiosyncratic performance factors would lead to rating actions. For instance, should economic conditions be worse than forecast, the higher defaults and loss severities resulting from a greater unemployment, worsening household affordability and a weaker housing market could result in a downgrade of the ratings. Deleveraging of the capital structure or conversely a deterioration in the Notes available credit enhancement could result in an upgrade or a downgrade of the ratings, respectively. WRIGHTBUS: Nears Rescue Deal with JCB, Talks Ongoing ---------------------------------------------------- Mark Kleinman at Sky News reports that a member of the industrial dynasty behind JCB is edging closer to a rescue deal for the Northern Irish bus-maker Wrightbus that could save hundreds of jobs. Sky News has learnt that Jo Bamford has entered exclusive talks about a transaction, two weeks after the Ballymena-based company was forced to appoint Deloitte as administrator. The move by Mr. Bamford, who was among the bidders for Wrightbus before it plunged into insolvency proceedings, threatening 1,300 jobs, will raise hopes that the company has a viable future, Sky News states. However, the completion of a rescue deal is understood to be contingent upon Mr. Bamford reaching agreement with the member of the founding Wright family who owns the factory from which Wrightbus operates, Sky News notes. Negotiations over rental payments were among the major sticking points that prevented a deal being reached before Wrightbus called in administrators, Sky News discloses. According to Sky News, sources said that unless Mr. Bamford's vehicle and Jeff Wright, the factory's owner, could strike a deal, the latest rescue effort was also at risk of falling apart. Administrators Deloitte, Sky News says, is understood to be determined to resolve the company's future as quickly as possible, with future customer orders at risk. If completed, Mr. Bamford's prospective rescue deal would save "hundreds" of jobs, although at least half of Wrightbus's 1300-strong workforce are unlikely to secure ongoing employment with the company, according to Sky News. Sky News revealed in July that Wrightbus had hired Deloitte, the professional services firm, to court potential buyers after a financial downturn that has left it facing heavy losses. An insider said in July that annualized losses are currently running to approximately GBP15 million, and the company may need a capital injection of at least GBP30 million, Sky News recounts. Wrightbus has had a presence in Ballymena for decades, although the company has faced significant headwinds amid an accelerating transition from diesel to electric in bus technology, Sky News relays. About Wrightbus Established in 1946 by Robert and William Wright, Wrightbus was a Northern Ireland coachbuilder and pioneer of the low-floor bus. On Sept. 25, 2019, Wrightbus entered into administration with the loss of 1,300 jobs at their factory. Deloitte UK has been appointed as administrators to the company, along with other businesses within the group like Wrights Group, Wright En-Drive, Wright Composites and Metallix. Deloitte's Michael Magnay is a joint administrator. Among other things, Wrightbus suffered from slow down of the UK bus market. The Ballymena-based engineering company opted for administration when rescue talks failed to materialize. Wrightbus' collapse is the second significant UK insolvency in recent weeks, following the demise of holiday group Thomas Cook. =============== X X X X X X X X =============== [*] BOOK REVIEW: Bendix-Martin Marietta Takeover War ---------------------------------------------------- MERGER: The Exclusive Inside Story of the Bendix-Martin Marietta Takeover War Author: Peter F. Hartz Publisher: Beard Books Soft cover: 418 pages List Price: $34.95 Review by Gail Owens Hoelscher William Agee, the youngest man ever to head one of the top 100 American corporations, seemed unstoppable. In 1977, at the age of 39, he took over Bendix Corporation, an aerospace, automotive, and industrial firm, determined to diversify the company out of the automotive industry. In his words, "Automobile brakes are in the winter of their life and so is the entire automobile industry." He sold off a few Bendix units, got some cash together, and began to look for acquisitions. Then Agee's relationship with Mary Cunningham burst into the news. Agee had promoted Cunningham from his executive assistant to vice president, to the outrage of other Bendix employees. Their affair, replete with power, brains, youth, good looks, charm, denial, and deceit, fascinated the American public. Cunningham was forced to leave Bendix to work for Seagrams, with the entire country wondering just how well she would do. The two divorced their respective spouses and married soon thereafter. To the chagrin of many, Cunningham continued to play a pivotal role in Bendix affairs. Eager to regain his standing, Agee turned to acquisition as soon as the gossip died down. A failed attempt to acquire RCA left him more determined than ever. He then set his sights on Martin-Marietta, an undervalued gem in the 1982 stock market slump. Thus began an all-out war of tenders and countertenders, egoism and conceit, half-truths and dissimulation, and sudden alliances and last-minute court decisions. This is a very exciting account of the war's scuffles, skirmishes, and battles. The author, son of a long-time Bendix director, was able to interview some of the major participants who most likely would have refused the requests of other authors. Some gave him access to personal notes from the various proceedings. The author thoroughly researched the documents involved in the takeover war, as well as news reports and press releases. He explains the complicated legal maneuverings very clearly, all the while keeping the reader entertained with the personal lives and thoughts of the players. People love this book. The New York Times Book Review said "Aggression and treachery, hairbreadth escapes and last-minute reversals, "white knights" and "shark repellants" - all of these and more can be found in the true-life adventure of the Bendix-Martin Marietta merger war." The Wall Street Journal said "Merger brims with tension, authentic-sounding dialogue and insider detail." Peter F. Hartz was born in Toronto, Canada, in 1953, and moved to the U.S. as a child. He holds degrees from Colgate University and Brown University. He lives in Toluca Lake, California. ********* 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 * * *