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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                          E U R O P E

          Tuesday, December 31, 2019, Vol. 20, No. 1

                           Headlines



F I N L A N D

TEOLLISUUDEN VOIMA: S&P Places 'BB+' LT ICR on Watch Negative


F R A N C E

ELIOR GROUP: S&P Affirms 'BB' Rating, Outlook Stable
EVEREST BIDCO: S&P Lowers Long-Term ICR To 'B-', Outlook Stable
NOVARTEX SAS: S&P Upgrades ICR to 'B-' on Recapitalization


G E R M A N Y

E-MAC DE 2005-I: S&P Downgrades Class E Note Rating to 'D (sf)'
HEIDELBERGER DRUCKMASCHINEN: S&P Cuts ICR to 'B-', Outlook Stable


I R E L A N D

PROTEUS RMBS: S&P Raises Class E-Dfrd Notes Rating to BB (sf)


I T A L Y

AMALIA SPV: S&P Assigns BB- (sf) Rating to Class M3 Notes


L U X E M B O U R G

AI AQUA: S&P Places 'B-' Issuer Credit Rating on Watch Positive


N E T H E R L A N D S

SAPPHIRE MIDCO: S&P Downgrades ICR To 'B-', Outlook Negative


R U S S I A

KOKS PJSC: S&P Withdraws 'B' Long-Term Issuer Credit Rating
NATIONAL BANK: S&P Affirms 'BB-/B' ICR, Outlook Stable
SAFMAR FINANCIAL: S&P Alters Outlook to Neg. & Affirms BB-/B ICR


S W E D E N

PERSTORP HOLDING: S&P Alters Outlook to Negative & Affirms 'B' ICR


U N I T E D   K I N G D O M

SURF INTERMEDIATE: S&P Assigns Prelim 'B-' Rating Following Buyout

                           - - - - -


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TEOLLISUUDEN VOIMA: S&P Places 'BB+' LT ICR on Watch Negative
-------------------------------------------------------------
S&P Global Ratings placed its 'BB+' long-term and 'B' short-term
issuer credit ratings on Teollisuuden Voima Oyj (TVO) on
CreditWatch negative.

The recently announced updated schedule for completing OL3 means
another seven-month delay.

According to ASC, the delay relates to the pushing forward in fuel
loading, because of slow progression of system tests, and delivery
failures of equipment and components from the plant supplier. S&P
understands that this follows numerous delays, leading to
maintenance of already installed components. The updated schedule
also include a four-month operational testing period that was not
incorporated previously. S&P understands this is a sort of cushion
that has not been included previously. In line with the current
schedule and if all operational and regulatory processes are
progressing as announced, the key milestones will be as follows:

-- Fuel loading in June 2020
-- Connection to grid in November 2020
-- Provisional takeover in March 2021
-- This delay increases costs for ASC and could lead to a
potential shortage liquidity.

S&P said, "Before this delay, it was our understanding that ASC had
set aside sufficient funds to complete the OL3 project through a
trust mechanism on which TVO has complete visibility. We understand
a top-up of the fund is necessary to meet all obligations and costs
until the end of the guarantee period because of the delay. In our
view, if ASC fails to replenish the trust mechanism in accordance
with the settlement agreement, it would indicate that the
consortium might not have sufficient financial capacity until the
end of the plant unit's guarantee period, which means two years
after provisional takeover. We acknowledge that ASC has fulfilled
its obligation in accordance to the settlement agreement to pay TVO
EUR122 million."

The company intends to finalize OL3, although the "call-off date"
is closing in.

The settlement agreement signed in 2018 include a clause stating
that if provisional takeover is not achieved by June 30, 2021 (the
call-off date), TVO has the right to terminate the OL3 contract.
However, S&P understands that TVO is committed to the project.

The company's deleverage plan is pushed forward as OL3 commission
date is postponed.

TVO has increased its net debt (S&P Global Ratings-adjusted) to
about EUR4.6 billion by year-end 2018. S&P expects debt to increase
to about EUR5.3 billion in 2021, before OL3 is operation, at which
point the company will start its deleverage path. This results in
TVO starting its deleveraging 6-7 months later then S&P's previous
base-case scenario.

The CreditWatch placement reflects the potential for a downgrade if
the company does not obtain sufficient funding to finalize the
construction via ASC's top-up mechanism, or construction faces
further delays or operational issues.

The recently announced updated schedule increase ASC's need to top
up the trust mechanism. S&P sees an inherent risk of higher
capitalized interest for TVO and that the company might not be
sufficiently and timely compensated for by penalty payments by the
time the project is completed, although, TVO could from penalties
deduct final milestone payment.

S&P said, "We could downgrade TVO, if ASC fails to replenish the
trust mechanism as stipulated in the settlement agreement, and we
could potentially downgrade by more than one notch if AFC fails to
replenish the trust mechanism timely and (or otherwise secure the
funding of the project) if new operational or regulatory issues
arise. However, our base-case scenario stipulates no major
operational or regulatory issues.

"If ASC replenishes the trust mechanism to cover all remaining
costs in accordance to the settlement agreement, and if operational
and regulatory progress smoothly, we are likely to affirm the 'BB+'
rating.

"We aim to resolve the CreditWatch within the next three months,
depending on ASC's replenishment of the trust mechanism and if
construction progresses without any additional operational or
regulatory delays."




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ELIOR GROUP: S&P Affirms 'BB' Rating, Outlook Stable
----------------------------------------------------
S&P Global Ratings affirmed its 'BB' rating on Elior Group S.A. and
its 'BB' rating on its senior secured syndicated debt facilities.

The sale this year of Areas affected two aspects of S&P's ratings
analysis, leading it to affirm the ratings. Elior's business risk
profile weakened after the sale, but its credit metrics improved
because it used most of the sale proceeds to significantly reduce
its debt.

Areas was Elior's concession catering business and accounted for
around 27% of the group's revenue in the financial year (FY) ending
on Sept. 30, 2018. Its business had higher adjusted EBITDA margins
than the group as a whole, at almost 10% in 2018, compared with
about 7.3% for the group. Its focus on transportation hubs added
business diversity because foot traffic at transportation hubs is
supported by factors that are relatively uncorrelated with the
growth drivers for Elior's contract catering customers. In S&P's
view, the sale of Areas therefore weakened Elior's business risk
profile. S&P now expects Elior to expand organically by 2%-3% and
to generate EBITDA margins of 6.0%-6.5%.

That said, Elior made good use of the proceeds of the sale by
repaying a significant amount of its debt, confirming its more
conservative financial policy post the sale of Areas. As a result,
S&P now expects the group's S&P Global Ratings-adjusted debt to
EBITDA to be 3.5x-4.0x over the next two years. This represents a
significant improvement from 5x a year earlier.

S&P said, "The stable outlook indicates that we expect Elior Group
to continue to steadily grow its margins and revenue while
maintaining its existing shareholder policies. As a result, we
anticipate that the company's revenue will expand organically by
2%-3%, EBITDA margins will be stable at 6.0%-6.5%, and S&P Global
Ratings-adjusted debt to EBITDA will remain at 3.5x-4.0x after the
transaction.

"We could lower the rating if the remaining business' operating
performance weakens such that EBITDA declines organically or the
group adopts a more aggressive financial policy, such as
debt-funded shareholder returns, such that we expect debt to EBITDA
to be sustained above 4x.

"Although we view it as unlikely in the near term, we could
consider raising the rating if strong EBITDA growth and further
debt repayment result in adjusted debt to EBITDA below 3x, and
Elior commits to sustaining leverage at that level over the longer
term."


EVEREST BIDCO: S&P Lowers Long-Term ICR To 'B-', Outlook Stable
---------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Exclusive Group's (EG) parent, Everest Bidco SAS, and its
first-lien secured term loan to 'B-' from 'B'.

The downgrade reflects EG's weaker-than-anticipated operating
performance, resulting in worse financial prospects in 2019 and
2020. EBITDA margins decreased in 2018 and in the first three
quarters of 2019 due to the expansion of lower-margin contracts in
Europe, growth in U.S. revenue contribution (where EG provides less
sophisticated services), and investment in headcount to support
future growth. Lower profitability also partly reflects
uncertainties in exchange rate movements, to which the group's
performance is sensitive. For example, EG's margin suffered from
the depreciation of the euro in 2018. S&P said, "As a result, we
expect EG's adjusted EBITDA to stand at about EUR85 million in 2019
(about 3.7% adjusted EBITDA margin) instead of EUR110
million-EUR115 million as initially projected (4.7% margin). In
2020, we forecast a similar discrepancy in adjusted EBITDA margin
between our former and most recent projections. We also believe
FOCF will amount to EUR0 million-EUR1 million in 2019, instead of
EUR28 million-EUR29 million in our previous forecasts. This is due
to an unfavorable working capital evolution, lower EBITDA
performance, and growth in highly working capital-intensive
regions, namely the Middle East and Asia. Given EG's low-margin
business model, such a shift has a significant effect on leverage.
We expect adjusted debt to EBITDA to peak at about 8.6x in 2019
before declining to 7.1x in 2020, against 6.2x and 5.5x in previous
forecasts for those years, respectively. Also, we now forecast FOCF
of 0.0%-0.5% of debt in 2019, against about 4% previously. We
expect a gradual, but slower, improvement in FOCF to debt to 2%-3%
in 2020 and 3%-4% in 2021, instead of 5%-6% and 7%-8% previously.
The FOCF trend will mainly be spurred by (absolute) EBITDA growth,
albeit slower than expected."

Future growth and vendor diversification should continue to
constrain margins. S&P said, "In our previous analysis, we
acknowledged EG's positioning as a "value-added" services provider
in the information technology (IT) distribution industry. This
strategy translated into higher EBITDA margins (4.7% reported in
2017) and favorable FOCF generation, which were key differentiators
with peers. However, we believe recent margin pressures are the
result of a structural evolution of EG's environment and intrinsic
business, and not solely short-term factors. In our opinion, EG's
objective to continue expanding will encourage the company to keep
signing lower-margin mandates and hiring staff in the coming years.
EG's diversification of its vendor base, undertaken through the
"Exploration" project, should also prevent margins from rebounding
to former levels." S&P's view of EG's business risk continues to be
constrained by several factors:

-- EG has a niche position in a fragmented and highly competitive
enterprise IT security and data center market, leading to a
narrower revenue base than peers.

-- Its strong reliance on a few vendors limits its product
diversity, despite recent efforts to mitigate such concentration.

-- Furthermore, by expanding its footprints, EG is competing with
larger and better capitalized generalist resellers.

To some extent, S&P still considers these weaknesses to be partly
balanced by its:

-- Supportive industry fundamentals, including solid growth
(8%-10% annually in cybersecurity) and low commoditization risk;

-- Successful business model and reseller network;

-- Global reach, which is an advantage against local and other
smaller regional value-added distributors; and

-- Track record of addressing vendors' specifics needs and growth
in new geographies, which support mutually beneficial relationships
with vendors and resellers.

The group's adequate liquidity points to its ability to absorb
near-term pressure from nil or negative cash flows. Liquidity
sources exceeding uses by more than 1.2x in the next 12 months
provide a buffer against forecast nil or negative cash flows in
2019. S&P said, "We also note the EUR70 million-EUR110 million of
consolidated cash the group kept on its balance sheet throughout
2018. In addition, the expected return to positive FOCF from 2020
onward gives us comfort against potential liquidity stress, hence
our stable outlook."

S&P said, "The stable outlook reflects our anticipation that EG's
adjusted EBITDA margin will decrease to 3.5%-4.0% in 2019 before
stabilizing as revenue continues increasing steadily. We expect
adjusted leverage to peak at about 8.6x in 2019 before declining to
7.0x-7.5x in 2020. Although FOCF should be close to zero in 2019
due to the decline in EBITDA and unfavorable changes in working
capital, we expect it to increase to 2.0%-3.0% of debt in 2020,
supported by EBITDA recovery.

"We could raise the rating if EG managed to restore its adjusted
EBITDA margin to 4%-5% and significantly improve its cash flow
generation, while maintaining strong growth in revenue. This would
lead to adjusted leverage falling below 6.0x and FOCF to debt
remaining above 3%.

"Although we do not expect to lower the ratings over the next 12
months, we would consider downgrading EG if liquidity deteriorated
markedly, if it failed to generate positive FOCF, or if interest
coverage ratios deteriorated to less than 2.0x. These events could
occur if EG did not increase its absolute EBITDA, due to further
decreasing margins and/or low revenue growth, or in the case of
renewed working capital setbacks."


NOVARTEX SAS: S&P Upgrades ICR to 'B-' on Recapitalization
----------------------------------------------------------
S&P Global Ratings raised its long-term issuer credit rating on
French apparel retailer Novartex S.A.S. to 'B-' from 'SD'.

The rationalization of Norvatex' capital structure and its improved
liquidity position has bolstered its credit quality.

Following the termination of Novartex's debt load by its exchange
to equity, the company has negligible amounts of debt and a high
amount of cash on the balance sheet. S&P said, "We believe this
makes the group's capital structure more sustainable. We expect a
mild amelioration in profitability over the next two years, leading
to an improvement in cash flow generation since the group will no
longer have to service cash interest. However, we see significant
risk to our forecasts given the company's history of
underperformance, and believe it could face constrained liquidity
if intra-year working capital requirements increase and in absence
of any committed financing arrangements."

Asset disposals enable the group to face operating challenges.

Novartex has successfully sold activities, notably the divesture of
Besson Chausson, drawing about EUR200 million on its balance sheet,
which considerably enhanced the group's ability to face revenue
challenges over the short term. S&P also anticipates that the group
is likely to dispose of more of its banners in the coming years.
The company demonstrates additional encouraging signs. For example,
Novartex has implemented several strategies aimed at increasing
operating performance, reducing expenses, and improving working
capital. The company's has shown progress, and we expect its
reported EBITDA to continue to increase, with EUR40 million-EUR45
million of reported EBITDA projected for the fiscal year ending
Aug. 31, 2020. S&P now anticipates an S&P Global Ratings-adjusted
EBITDA margin increasing to 3.5% in fiscal 2020, while it expects
its adjusted leverage to stabilize around 3.5x in fiscal 2020
taking into account operating leases commitment in its adjusted
debt.

Novartex' performance is vulnerable to intense competition and weak
fashion retail market trends

S&P said, "We still see material risk to our base case, which
incorporates a moderate improvement in operating performance.
Novartex' performance over the past several years has suffered from
a shrinking French fashion market and a challenged strategic brand
repositioning. Moreover, the retail industry as a whole has been up
against severe competition from online apparel retailers. This
resulted in a steep decline in revenues and profitability. Finally,
Novartex continues to feel constraints from the tough social
environment in France, as strikes continue to severely affect
transport to stores in city centers. If these factors were to lead
to even insignificant drop in revenues, and considering still-high
operational leverage, there would be wear and tear on the company's
cash flow generation, depleting the group's liquidity position.

"The negative outlook reflects downside risks to our base-case
projections over the coming 12 months given the ongoing tough
social environment in France and intense competition in the fashion
retail market. Sales could consequently decline more than expected,
jeopardizing the company's ability to generate sufficient cash
flows to preserve its current cash balance position and overall
liquidity.

"We could lower our rating on Novartex over the next 12 months if
the company does not achieve sufficient success in its turnaround
plan, resulting in a larger drop in cash outflows over the next
exercise. We would view negatively larger seasonal working capital
requirements than we currently anticipate or any other shortfall in
cash generation that would deplete its cash balance or otherwise
weaken Vivarte's liquidity to notably less than our current
estimate of sources to uses ratio of 1.5x and about EUR70 million
of buffer.

"We could revise the outlook to stable if Novartex' turnaround plan
is successfully implemented leading to reported FOCF to be
consistently positive and rising. This would materialize if the
company stabilizes its top-line growth, and if it effectively
increases profitability while pursuing tight management of working
capital and capital expenditure (capex) supporting cash generation
and robust liquidity."




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E-MAC DE 2005-I: S&P Downgrades Class E Note Rating to 'D (sf)'
---------------------------------------------------------------
S&P Global Ratings lowered to 'D (sf)' from 'CCC (sf)' its credit
rating on E-MAC DE 2005-I B.V.'s class E notes.

Cumulative net losses over the original portfolio balance for E-MAC
DE 2005-I are 7.93% at the end of November 2019. As a result of the
ongoing weak performance, the principal deficiency ledger for the
class D notes has started being booked and the interest due on the
August and November 2019 interest payment dates was not paid to the
class E noteholders. In S&P's view, it is unlikely that full
interest payment on the class E notes including full reimbursement
of the interest shortfall amount, will restart within 12 months
after the first interest shortfall in August 2019.

Consequently, S&P has lowered to 'D (sf)' from 'CCC (sf)' its
rating on this class of notes, in line with its criteria.

The transaction is a true sale German residential mortgage-backed
securities transaction, originated by GMAC RFC. CMIS Investments
B.V. is the mortgage payment transaction provider and Adaxio AMC
GmbH is the subservicer.

HEIDELBERGER DRUCKMASCHINEN: S&P Cuts ICR to 'B-', Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Germany-based printing equipment manufacturer Heidelberger
Druckmaschinen AG (HDM) to 'B-' from 'B'. S&P also lowered its
issue rating on the company's senior unsecured notes to 'CCC' from
'CCC+'.

Slower macroeconomic growth will result in lower demand for HDM's
new hardware. Macroeconomic uncertainties coupled with changing
dynamics in different regions affected HDM's product demand in the
first half of 2019, and it remains volatile. Order intake was down
7.5% for the first quarter of the fiscal year (FY) 2020 ending June
30, 2020, and 3.3% down for the first half of FY2020, thanks to
stronger performance in the second quarter. Meanwhile, sales
remained flat for the first half of FY2020. As a result, S&P
expects slightly lower performance than previously anticipated,
with sales down by about 2% in 2020-2021. While demand has been
weakening for new equipment, HDM's contract and subscription
business is just starting to ramp up. S&P believes that in the next
two to three years, recurring contract and subscription-based
business will provide more stability. However, at its current
development stage, this area of the business is not yet able to
counterbalance the negative effects of economic weakening on
equipment sales.

Profitability will remain under strain over the next two years due
to ongoing restructuring and product mix.

On July 17, 2019, HDM announced that was revising its target EBITDA
margin range to 6.5%-7% from 7.5%-8% (excluding restructuring).
Aside from difficult market conditions and pricing pressures, the
company continues to streamline its business. HDM is seeking to
optimise its still-complex corporate structure and narrow down its
product portfolio. We therefore believe that restructuring costs
will continue to weigh on margins. In addition, HDM is feeling the
effects of an unfavorable product mix, whereby sales of
lower-margin products are prevailing. In our view, all these
factors combined will continue to weigh on profitability in 2020
and 2021. We now expect an S&P Global Ratings-adjusted EBITDA
margin of about 6.0% in 2020, improving to 6.3%-6.5% in 2021.

Heidelberg continues to generate negative FOCF and will start to
reduce debt before 2021. We expect FOCF generation will remain
negative in 2020, by about EUR60 million-EUR70 million, improving
to positive EUR15 million-EUR25 million in 2021, as the company
completes its investment in digital production and tackles working
capital swings. FOCF generation has remained negative in the past
two years, limiting the company's capacity to reduce debt. We
therefore expect debt to EBITDA to remain elevated in 2020 and
2021, at 7.3x and 7.1x respectively. Of the total adjusted debt,
EUR530 million-EUR550 million relates to pensions.

Liquidity should remain adequate over the next 12 months. The
company has announced that it will take measures to support its
liquidity by improving working capital management and strengthening
FOCF. This involves cutting planned investments by about EUR20
million and reducing tied-up working capital by EUR50 million in
the next two years. In addition, HDM is looking to optimise its
portfolio by divesting smaller noncore businesses. As a part of its
portfolio optimisation plan, HDM has already announced a small
disposal of EUR38.5 million, which closed in November 2019.

The stable outlook on Germany-based printing equipment manufacturer
HDM incorporates our expectation that the company's ongoing
restructuring will result in profitability stabilization and
improvement. Additional working capital management measures and
lower capital expenditure (capex) should reduce cash outflow and
support liquidity. While S&P expects FOCF to remain negative in
2020, it should become neutral in 2021. In S&P's view,
rating-commensurate credit measures include FFO interest coverage
comfortably above 1.5x (we forecast 3.3x-3.5x at the end of
FY2019/FY2020), debt to EBITDA of about 7x, and liquidity remaining
adequate.

S&P said, "We might consider a negative rating action on HDM if
weaker-than-expected market conditions resulted in depressed
operating results, because of a considerable sales decline. Rating
pressure could also occur if HDM continued generating negative FOCF
increasing leverage. Weaker liquidity, either arising from a weak
financial performance or tightening covenant headroom, could also
cause weigh on ratings. A downgrade could also result from the
company's inability to maintain its FFO cash interest coverage
ratio of comfortably above 1.5x and debt to EBITDA increasing
materially above 7x. We would also consider a downgrade if capital
structure became unsustainable over the longer term."

Rating upside potential is limited at this point. It would require
a sustainable improvement in operating performance, supported by
positive market developments resulting in profitability improvement
and positive FOCF generation. In addition, any upside would require
demonstration of a prudent financial policy and substantial
deleveraging, resulting in adjusted debt-to-EBITDA ratios of about
6x and FFO cash interest of more than 2.5x.




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PROTEUS RMBS: S&P Raises Class E-Dfrd Notes Rating to BB (sf)
-------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Proteus RMBS DAC's
class B-Dfrd to E-Dfrd notes and affirmed its rating on the class A
notes.

S&P said, "The rating actions follow the implementation of our
revised criteria and assumptions for assessing pools of Irish
residential loans. They also reflect our full analysis of the most
recent transaction information that we have received and the
transaction's structural features.

"Upon revising our Irish RMBS criteria, we placed our ratings on
the class B-Dfrd to E-Dfrd notes under criteria observation.
Following our review of the transaction's performance and the
application of our updated criteria for rating Irish RMBS
transactions, our ratings on these notes are no longer under
criteria observation."

Borrowers pay into collection accounts held with the Governor and
Company of the Bank of Ireland, and Citibank Europe PLC provides
the issuer transaction account. The documented replacement
framework is in line with our current counterparty criteria to
support a 'AAA (sf)' rating on the notes.

S&P said, "After applying our updated Irish RMBS criteria, the 'AA'
to 'B' weighted-average foreclosure frequency (WAFF) has decreased
primarily driven by the removal of the arrears projection and the
decrease of our archetypal foreclosure frequency anchors at all
rating levels. Our weighted-average loss severity (WALS)
assumptions have decreased at all rating levels driven mainly by
the revised jumbo valuation thresholds and the decrease in the
weighted-average current loan-to-value ratio."

  Credit Analysis Results
  Rating level    WAFF (%)   WALS (%)
  AAA             41.26      29.73
  AA              27.63      25.87
  A               20.90      19.87
  BBB             13.72      16.88
  BB              6.12       14.89
  B               4.60       13.15

  WAFF--Weighted-average foreclosure frequency.
  WALS--Weighted-average loss severity.

The results of S&P's cash flow analysis support the currently
assigned rating on the class A notes. S&P has therefore affirmed
its 'AAA (sf)' rating on this class of notes.

The transaction's performance has been stable, with low arrears and
default levels. The reserve fund is now at target, having been
topped up with excess spread since closing.

S&P said, "Our analysis indicates that the class B-Dfrd to E-Dfrd
notes could withstand our stresses at higher ratings than those
currently assigned. However, the ratings on these classes of notes
are constrained by additional factors. Specifically, we considered
the high proportion of loans that are on low rate tracker mortgages
linked to the European Central Bank rate. In a rising interest rate
environment, we expect that these borrowers would not be able to
absorb the rate increases, which could lead to increased arrears
levels in the underlying collateral. Additionally, we considered
the available credit enhancement for these notes and their relative
positions in the capital structure. Finally, we also considered the
interest-only exposure in the pool, the loss provisioning mechanism
in the transaction, and these classes' sensitivity to tail-end
risk. We have therefore raised to 'AA+ (sf)', 'A+ (sf)', 'BBB+
(sf)', 'BB (sf)', from 'AA- (sf)', 'A- (sf)', 'BBB-'(sf)', and 'B+
(sf)' our ratings on the class B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd
notes, respectively."

Proteus RMBS DAC is a securitization of a pool of buy-to-let and
owner-occupied residential mortgage loans secured on properties,
mainly located in Ireland. The transaction closed in December
2018.




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AMALIA SPV: S&P Assigns BB- (sf) Rating to Class M3 Notes
---------------------------------------------------------
S&P Global Ratings has assigned its credit ratings to Amalia SPV
S.r.l.'s credit-linked fixed-rate class M1, M2, and M3 notes. At
closing, Amalia also issued unrated class M4 and J notes.

This is a synthetic partially funded ABS transaction. It transfers
to the noteholders the credit risk associated with a reference
portfolio of salary and pension assignment loans that are currently
on BNL Finance SpA's balance sheet (BNLF). The issuer used the
proceeds of the notes to grant a limited recourse loan (LRL) to
BNLF. The issuer will use the payments received under the LRL to
pay the securitization's costs and fees and to make the payment due
under the notes.

Timely payment of interest and ultimate payment of principal to the
noteholders will be linked to the reference portfolio's inherent
credit risk, and therefore depends on the borrowers' performance
under their respective loan agreements with BNLF.

The portfolio mainly comprises loans secured over pension and
salary assignments (97.2%). Under those loans, the pension
authority or the employer withholds up to one-fifth of the
pension/salary every month, and pays the amount directly to the
lender. By virtue of the salary/pension assignment, the lender has
a direct claim against the employer/pension authority. By law,
those loans need to be insured: for life and job termination events
for salary assignment loans (CQS, Cessione Quinto dello Stipendio),
and life events only for pension assignment loans (CQP, Cessione
Quinto della Pensione). CQS loans also benefit from severance
payments in case of employment termination. A minor portion of the
portfolio is made of payment delegation loans (PD, 2.8%). Those
loans only feature an instruction to the employer to withhold a
portion of the salary and pay it to the lender. They do not feature
an assignment of the claim over a portion of the borrower's
salary.

S&P said, "Our structured finance sovereign risk criteria constrain
our ratings in this transaction at the unsolicited sovereign rating
on Italy. The portfolio comprises pensioners (83.3%) and employees
of public or quasi-public entities (15.3%), with only a minor
portion of employees of private companies (1.5%). Considering the
portfolio composition, we determined the sensitivity to country
risk to be high. In addition, we did not allocate any notches of
uplift above the sovereign rating because we believe that in a
sovereign default scenario, pension payments and public employees'
salaries may be impacted.

"Our counterparty criteria also constrain our ratings in this
transaction. The issuer makes interest payments under the notes
through the payments it receives under the BNLF's limited recourse
loan. Since BNLF is an unrated entity, those payments are
guaranteed by Banca Nazionale del Lavoro (BNL; BBB+/Negative/A-2).
The transaction documents do not incorporate any remedies in case
of a downgrade of BNL. Therefore our ratings on the notes cannot be
higher than the long-term issuer credit rating (ICR) on BNL.
Similarly, our ratings on the notes cannot be higher than the ICR
on the originator bank account provider and the transaction bank
account provider because the documented remedies in case of
downgrade are not in line with our criteria.

"Our ratings reflect our analysis of the transaction's payment
structure as well as its exposure to sovereign, counterparty, and
operational risks. Our analysis indicates that the available credit
enhancement for the rated notes is sufficient to withstand the
stressed losses we have assumed at each rating level."

  Ratings List

  Class   Rating*    Amount (mil. EUR)
  M1      BBB (sf)   168.977
  M2      BBB- (sf)  19.432
  M3      BB- (sf)   19.432
  M4      NR         20.277
  J       NR         50.693

*S&P's ratings address timely payment of interest and ultimate
payment of principal.
NR--Not rated.




===================
L U X E M B O U R G
===================

AI AQUA: S&P Places 'B-' Issuer Credit Rating on Watch Positive
---------------------------------------------------------------
S&P Global Ratings placed the issuer credit rating and senior
secured issue ratings on household and commercial water treatment
services provider AI Aqua Sarl (doing business as Culligan) on
CreditWatch with positive implications.

Culligan has announced the acquisition of AquaVenture Holdings Ltd.
for $1.1 billion. Culligan intends to finance the acquisition with
a combination of debt and equity, which S&P expects will be
modestly deleveraging including S&P-adjusted pro forma debt to
EBITDA near 7.5x compared with pro forma leverage closer to 8x for
the 12 months ended Sept. 30, 2019.

S&P said, "The CreditWatch positive placement means we could either
raise or affirm our ratings at the competion of our review. We
believe the acquisition would further diversify Culligan's existing
U.S. point-of-use water filtration products, which currently sell
through both owned and independent (largely Dealer) channel, by
expanding into the direct channel where AquaVenture's Quench
business has a leading market share with strong commercial customer
relationships. Additionally, the company is starting to benefit
more materially from geographic diversification following several
acquisitions over the past 18 months which are contributing more
meaningfully to EBITDA now that they are near fully integrated.
Therefore, we could favorably reassess Culligan's business risk
profile for the newly combined business. This would result in a
one-notch upgrade to 'B' if the transaction is modestly
deleveraging on a S&P-adjusted pro forma basis as we currently
expect given Culligan's intentions to fund the acquisition with
more equity than debt.

"We will likely resolve the CreditWatch following our review of the
impact the acquisition has on Culligan's business and of the final
mix of debt and equity financing used to fund the acquisition. Our
review will likely conclude in first-quarter 2020 following
confirmation that AquaVenture's shareholders have approved the
transaction and that it will be funded with equity in line with our
pro forma leverage expectations. If these factors are in line with
our expectations, we would likely raise the 'B-' issuer credit
rating one notch to 'B' with a stable outlook. Our review will also
assess the impact that the transaction's incremental debt may have
on the company's first- and second-lien recovery ratings, for which
we currently do not expect any material changes."




=====================
N E T H E R L A N D S
=====================

SAPPHIRE MIDCO: S&P Downgrades ICR To 'B-', Outlook Negative
------------------------------------------------------------
S&P Global Ratings lowering the issuer credit ratings on
Netherlands-based corporate services provider TMF Group's parent
Sapphire Midco B.V., and on its financing subsidiary Sapphire Bidco
B.V., to 'B-' from 'B'.

S&P said, "The downgrade reflects TMF Group's trading performance
year-to-date, which has been weaker than our previous base-case
forecasts, and our downward revision of our expectations for 2020.
We now forecast materially weaker credit metrics for the group on
an ongoing basis.

"Market conditions for corporate structuring providers in the
Netherlands have been challenging due to regulatory changes
introduced by the Dutch government in 2019 with regard to profit
shifting by multinationals. While we anticipated that the change
would have a negative impact on TMF, we expected that the clarity
provided by the introduction of new rules would stabilize some of
the declines in the region in 2018.

"In line with other service providers in the Netherlands, the firm
has suffered further revenue declines, about 4% in the Benelux
region year-to-date in TMF's case. Although there were signs of
stabilization in the group' recent nine-month 2019 results, we
expect a decline in revenues from Benelux for the full year and
minimal growth in 2020.

"Despite our expectations of relatively robust top-line growth in
the group's other business lines, we expect it to be insufficient
to offset the decline in EBITDA in Benelux, given the comparably
high-margin nature of the group's business there, and our
expectation of exceptional costs associated with the group's
planned investment in digitization and streamlining of management.
As a result, we expect the group's adjusted EBITDA in 2019 and 2020
to be broadly in line with 2017 levels, and considerably lower than
our previous expectations. At these levels, we do not expect the
group to generate positive free operating cash flow and expect
funds from operations (FFO) cash interest coverage to be below 1.5x
until 2021 due to the group's high interest burden.

"The negative outlook reflects our view of a one-in-three chance
that further operational underperformance could lead us to consider
the group's capital structure to be unsustainable given the group's
high adjusted debt burden. While we consider the group to have
adequate covenant headroom and sufficient time to improve operating
performance before the 2025 maturity, we could lower the ratings if
we expected the group to be unable to deliver positive free
operating cash flow for the foreseeable future.

"We could lower the ratings to 'CCC+' if we did not expect a
meaningful improvement in operating performance, such that we
expected free operating cash flow to remain negative on a sustained
basis.

"We could revise the outlook to stable if we observed a material
improvement in EBITDA generation, for example if margins in other
jurisdictions were sufficient to compensate for the decline in the
Netherlands. Specifically, FFO cash interest coverage increasing to
above 2x, with the group generating positive free operating cash
flow, would be a trigger for a positive rating action."





===========
R U S S I A
===========

KOKS PJSC: S&P Withdraws 'B' Long-Term Issuer Credit Rating
-----------------------------------------------------------
S&P Global Ratings said that it had withdrawn its 'B' long-term
issuer credit rating and issue rating on Russian pig iron producer
KOKS PJSC at the issuer's request. The outlook was stable at the
time of withdrawal.


NATIONAL BANK: S&P Affirms 'BB-/B' ICR, Outlook Stable
------------------------------------------------------
S&P Global Ratings said that it had affirmed its 'BB-/B' long- and
short-term issuer credit ratings on National Bank for Foreign
Economic Activity of the Republic of Uzbekistan (NBU). The outlook
remains stable.

S&P said, "The affirmation reflects our expectation that the bank
will remain the largest financial institution in Uzbekistan,
maintaining its dominance in government-related and commercial
lending, as well as in systemwide customer deposits.

"We expect that NBU's capitalization will materially improve, and
forecast our risk-adjusted capital (RAC) ratio at close to 10% at
year-end 2021, a significant increase from 5.8% at year-end 2018.
We also estimate that the bank's regulatory capital adequacy ratio
will increase to about 30% by year-end 2019." This improvement will
come through the recently initiated reform of state-owned banks,
which will see NBU transfer about 26% of its existing loan
portfolio to Uzbekistan Reconstruction and Development Fund (UFRD).
The bank will also receive about $680 million in common equity
through the conversion of some of UFRD's deposits into capital.
Furthermore, it will convert government-related entity loans of
$680 million that remain on its balance sheet to local currency
with higher interest rates.

S&P said, "We think that the transfer of loans and conversion of
the remaining loans into local currency will reduce dollarization
and single-name concentration in the bank's loan portfolio. In
particular, we expect the share of loans in foreign currency will
decline to 57% from 83% as of Oct. 1, 2019.

"We forecast that lending growth will slow, but remain significant
at 25%-30% per year in 2020-2021. In our view, commercial lending
will become the key spur of credit growth and may increase by
40%-50% annually, since the bank will utilize its capital buffer to
further strengthen its commercial banking franchise. Although we
expect that the share of commercial lending will increase,
state-related business will remain an important part of the bank's
business model and represent about 50% of the loan portfolio over
the next two years. Nevertheless, increasing commercial lending and
higher interest rates on the remaining state-related loans will
improve the bank's earnings capacity and business sustainability.
We expect that the bank's problem assets will gradually increase to
2.0%-2.2% in 2020-2021 from 1.6% as of year-end 2018.

"Like other large state-owned Uzbek banks, NBU will lose access to
cheap and long-term funding at UFRD. We expect that funds attracted
from international financial institutions (IFIs) and other banks
will represent about half the bank's funding base. We note that
major IFI funds are long-term project resources attracted to
support a particular development activity of the bank. We,
therefore, expect that the bank's funding base will remain stable.
In our view, the bank's funding base is similar to that of other
large state-owned banks in terms of stability and diversity.

"Based on the bank's increasing capitalization, we now assess the
stand-along credit profile (SACP) at 'bb'. However, we think that
the bank's creditworthiness is closely linked to the situation in
the Uzbek economy where it operates and to the creditworthiness of
the government. We therefore cap the long-term rating at the level
of the sovereign credit rating. Materially higher problem assets
and credit losses than we currently expect could mean we revise the
SACP downward, but are unlikely to put pressure on the ratings.

"We believe the bank will remain closely linked to the government
and continue playing an important role in implementing the economic
policies of the state. We think that the government will continue
to control the bank's strategy. In addition, unlike for other large
state-owned banks, we do not expect even partial privatization of
NBU in the next three-to-five years.

"The stable outlook on NBU reflects our view that ongoing state
support over the next 12 months largely balances high economic and
industry risks in Uzbekistan's banking sector.

"We are unlikely to raise the ratings over the next 12 months
unless our view of the sovereign's creditworthiness improves.

"We could downgrade NBU over the next 12 months if the sovereign's
creditworthiness deteriorates materially."


SAFMAR FINANCIAL: S&P Alters Outlook to Neg. & Affirms BB-/B ICR
----------------------------------------------------------------
S&P Global Ratings revised its outlook on Safmar Financial
Investments (SFI) to negative from stable and affirmed its 'BB-/B'
long- and short-term issuer credit ratings on the company.

S&P said, "The affirmation reflects our view of continued modest
leverage and the stable credit quality of SFI's investments. The
negative outlook reflects our doubts regarding the stability of the
financial policy, which we think has become higher-risk. We deem
the move to increase debt to our estimate of RUB18.7 billion gross
as rather aggressive, and notable since we previously anticipated
zero debt. We therefore see a risk that leverage could increase
further.

"In December 2019, SFI opened a RUB21 billion five-year credit line
with a Russian bank to finance a share buyback program. We
understand that SFI could pledge some investments as collateral
under this financing. However, we see a key risk that SFI would not
be able to reduce debt as planned in the event that dividend income
became lower than expected. Given the recent change in financial
policy, we do not fully rule out further changes in the coming
years.

"We understand that SFI is not planning to fully utilize this line,
and LTV is likely to stay below 15% based on the value of the
company's investments. We also note that, based on the current
provisions to the loan agreement, SFI is limited in terms of
raising additional debt. SFI intends to repay the line either via a
secondary public offering or recurrent dividend flow, and it
considers this leverage to be temporary. However, we view this
transaction as a significant deviation in its financial policy,
since we previously expected the company to commit to zero debt.

"Our ratings remain constrained by SFI's limited portfolio size
(about $1.6 billion) and diversification, as well as its sole
exposure to economic and business development in Russia (foreign
currency: BBB-/Stable/A-3; local currency: BBB/Stable/A-2). We also
note that SFI has a limited track record of operations, and no
portfolio turnover, given that the company was established in
2017."

The resilience of SFI's leasing segment, Europlan, supports the
credit quality of the investees. Europlan is showing strong
operational results and leveraging its expertise and business model
on the Russian leasing market. Additionally, Europlan has a limited
cost of risk that is lower than the system average for auto
leasing. This enables Europlan to upstream sizable dividends to
SFI.

S&P said, "We also note that SFI completed the planned merger of
its pension funds, Safmar and Doverie, in March 2019. It also
impaired assets in the portfolio and reallocated investments to
higher-quality assets. We think this conservative move, together
with recent changes in regulation stipulating flat fees for
nonstate pension funds, will reduce potential volatility in profits
and should support dividend capacity. We note that SFI received its
first dividend from Safmar in 2019.

"In addition, SFI's investment in insurer JSC VSK brought dividend
income in 2019. Although capitalization seems to be a relative
weakness--partly due to dividends to shareholders--we note an
improvement in VSK's weighted average credit quality and investment
portfolio concentrations.

"We still think the group's investment activities are critical to
SFI's underlying credit quality, given that SFI does not perform
any operations outside management of liquidity on its balance
sheet. We think none of the investees are core to SFI, and we
therefore expect SFI would dispose of assets to meet debt
obligations if needed.

"In our view, the substantial portfolio concentration of SFI's
assets in Russia continues to constrain its investment position.
Its portfolio now contains four holdings, which is fewer than most
peers', and these show significant concentration in Russia's
financial sector. Furthermore, all investments are unlisted, which
is atypical for investment holding companies. We expect it will
therefore take a longer time for SFI to dispose of assets if
needed. SFI's controlling stakes in three out of four companies
also weigh on our assessment of its business risk. In addition, we
think the company still has a limited track record of turning over
assets and investing in new ones. That said, we understand that
management intends to continue broadening its investment portfolio,
and we therefore expect diversification to increase.

"The negative outlook reflects our view that changes to the
financial policy are high-risk and we think leverage could increase
above previously anticipated levels, in turn increasing Safmar's
exposure to asset values."

S&P would likely take a negative rating action if:

--  S&P notes an increase in leverage at SFI, with the LTV ratio
sustainably increasing above 15%;

--  S&P sees deterioration in the credit quality of SFI's
subsidiaries, leading to significantly restricted capacity to
upstream dividends to SFI; or

-- SFI sells any of its sizable portfolio companies without
promptly investing in an entity with similar characteristics.

S&P said, "We could revise the outlook back to stable if SFI
returns to zero debt. However, this would likely require some track
record of operations. Upside potential is now more remote, but we
could consider it if we also saw a material improvement in the
liquidity of SFI's investees--companies becoming listed--and if SFI
were to increase diversification in terms of industry and
geography."




===========
S W E D E N
===========

PERSTORP HOLDING: S&P Alters Outlook to Negative & Affirms 'B' ICR
------------------------------------------------------------------
S&P Global Ratings revised the outlook on Sweden-headquartered
Perstorp Holding AB (Perstorp) to negative from stable and affirmed
the 'B' issuer credit and issue-level ratings.

The rating action follows S&P's revised forecast of Perstorp
Holding AB's (Perstorp's) earnings and leverage in 2019 and 2020,
following its operating performance year to date and the outlook
for its key end markets in 2020. So far in 2019, Perstorp's
operating performance was hurt by the weaker demand in several
product lines such as Trimethylolpropane (TMP) and Neopentyl Glycol
(NEO), lower selling prices, the unexpected shutdown of a key plant
in Stenungsund at the beginning of the year (which caused a SEK20
million drop in EBITDA), and increased competition particularly in
NEO. This was partially mitigated by relatively stable contribution
margin and positive impacts from of cost-saving initiatives and
currency rates.

S&P said, "As a result, under our revised base-case scenario, we
now forecast that Perstorp's adjusted EBITDA will amount to SEK1.5
billion-SEK1.6 billion in 2019, and SEK1.6 billion–SEK1.7 billion
in 2020. Based on an adjusted debt of SEK10 billion-SEK11 billion
in both years, this translates to an adjusted debt-to-EBITDA ratio
of 6.7x-6.9x in 2019, declining to below 6.5x in 2020. In our view,
this represents a material departure from our previous leverage
forecast of 5.8x in 2019 and 5.6x in 2020.

"Notwithstanding challenging market conditions, Perstorp's strategy
remains growth-oriented. As a result, we anticipate that the
company will generate about SEK200 million of negative free
operating cash flow (FOCF) in 2020, and healthy positive FOCF in
2021, once the investment phase is over. We understand that
Perstorp is in process of considering various financing options to
support the upcoming investments in India. Given the uncertainty
regarding the final financing option, we assume in our base case
that the company will finance capital expenditures (capex) with its
internal cash. Our forecast of the group's cash flow generation
therefore reflects Perstorp's growth capex of about SEK1.2 billion
associated with the Penta plant, as well as capacity expansions at
the existing facilities, the capex for which is flexible in nature.
Although we view the investments as supportive from a strategic
perspective and for future growth, they come amid weaker operating
performance and challenging market conditions.

"The negative outlook reflects that we may lower the rating if we
believe that Perstorp could generate negative FOCF of more than
SEK200 million in 2020, leading to limited prospects of restoring
its credit metrics to below 6.5x.

"Over the next one or two quarters, we will assess if there is a
likelihood that Perstorp's adjusted EBTIDA could decline to below
SEK1.6 billion in 2020, leading to leverage consistently above
6.5x, in which case we may lower the rating. Such a scenario could
stem from business underperformance due to weaker end market demand
or a lack of timely adjustments or prudent capex financing in the
case of continued challenging market conditions.
Higher-than-anticipated working capital outflows or a pressure on
liquidity would also lead to a downgrade.

"We could consider revising the outlook back to stable if we see
higher revenue growth, which could come from significant end market
improvements in general, such that the upcoming capex would be
largely supported by internally generated cash flows. Under such
scenario, we would likely observe faster deleveraging, with
adjusted debt to EBITDA of about 6.0x-6.5x."




===========================
U N I T E D   K I N G D O M
===========================

SURF INTERMEDIATE: S&P Assigns Prelim 'B-' Rating Following Buyout
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary 'B-' ratings to Surf
Intermediate I Ltd, the proposed $125 million first-lien senior
secured revolving credit facility (RCF), and the $1,430 million
first-lien senior secured term loans.

In October 2019, Thoma Bravo announced its offer to acquire Sophos
for $7.40 per share in an all-cash transaction valued at
approximately $4.1 billion. As part of the Thoma Bravo acquisition,
Sophos plans to issue:

-- A $1,430 million first-lien senior secured term loan;
-- A $520 million second-lien senior secured term loan; and
-- About $2.2 billion of preferred equity certificates.

The proceeds will be used to fund the buyout and refinance all
outstanding debt issued by Sophos' current holding company, Sophos
Group PLC.

Sophos has a highly leveraged capital structure, at about 10x S&P
Global Ratings-adjusted debt to cash-based EBITDA and breakeven
FOCF, pro forma full-year interest expense. The preliminary 'B-'
rating on the new holding company Surf Intermediate I Ltd, reflects
the highly leveraged capital structure but favorable growth
prospects in the business-to-business (B2B) cyber security segment.
S&P said, "Following the closing of the transaction, we expect
about 10x S&P Global Ratings-adjusted debt to cash-based EBITDA in
fiscal 2020, falling to 8.5x-9.0x in fiscal 2021. We also expect
limited FOCF generation of about 3% of S&P Global Ratings-adjusted
debt in fiscal 2020, reducing to 1.0%-1.5% in fiscal 2021. The
proposed capital structure will expose Sophos to U.S. dollar
interest-rate hikes that could significantly weigh on FOCF
generation. We estimate that a 1.5%-2.0% rise in U.S. dollar
interest rates could lead to breakeven FOCF in fiscal 2021. We
expect S&P Global Ratings-adjusted cash-based EBITDA interest
coverage of 1.4x-1.5x (pro forma full-year interest expense) in
fiscals 2020 and 2021."

S&P said, "Ownership by a financial sponsor with a track record of
aggressive financial policy limits the potential for leverage
reduction over the medium term. Our rating on Sophos is also
constrained because being owned by financial sponsors with a proven
appetite for acquisitions as part of the ownership strategy could
make it less likely to reduce debt in the medium term. We see an
ongoing risk that Sophos could undertake debt-funded shareholder
remuneration or acquisitions."

S&P expects high cash conversion on the back of long-term contracts
paid upfront and low capital expenditure (capex). Sophos benefits
from long-term contracts with a weighted-average duration of about
28 months, predominantly paid up front. As a result, the company
has positive working capital cycle forecast at $45 million-$50
million in fiscal 2020 and $60 million-$65 million in fiscal 2021
on the back of 6%-10% billing growth. Sophos also benefits from low
cash taxes, estimated at $20 million-$25 million, and low capex of
2.0%-2.5% of annual billings.

Sophos' limited scale and market share compared with global
cybersecurity peers' is balanced by favorable mid-market growth
prospects and good geographic diversity. Sophos mainly competes in
the fragmented B2B mid-market segments with low switching costs,
which limits its pricing power. About 90% of Sophos revenue comes
from companies with less than 5,000 workers. The company also
considerably lags in market share and scale compared with global
leaders in the B2B segment, McAfee and Broadcom. Nevertheless,
these weaknesses are somewhat offset by good B2B mid-market growth
prospects relative to the consumer segment, which is in secular
decline due to lower PC sales, increasing consumption of web and
digital content on mobile devices, and the proliferation of free or
"freemium" consumer security software such as Avast. On the other
hand, more businesses of all sizes are becoming a target of cyber
attacks, encouraging spending on IT security. This market segment
is currently underserved by dominant global players, which to some
extant protects Sophos' competitive position. Furthermore, the
company's focus on the mid-market segment means its customer base
is very well diversified, with no customers accounting for a
meaningful portion of total revenue. S&P also believes that Sophos'
business is supported by good geographic diversity with no single
country accounting for more than one- third of revenue. In fiscal
2019, the company generated 51% of total revenue in Europe, Middle
East, and Africa and 36% from the Americas (majority from the
U.S.), with the balance coming from Asia-Pacific.

High research and development (R&D) spending and a reliance on
sales partner networks leads to below-average profitability
compared with peers, although we expect operating efficiency to
improve if the cost-cutting measures are taken by Thoma Bravo.
Sophos has historically spent about 20% of annual revenue on R&D
and about 35% on sales and marketing. As a result, the company's
S&P Global Ratings-adjusted cash-based EBITDA margins were
historically at 20%-25%, significantly lower than other
software-as-a-service peers like Avast, IRIS, and Adavanced with
S&P Global Ratings-adjusted margins above 35%. Sophos relies on a
global network of more than 53,000 channel partners as part of its
go-to-market strategy. Nevertheless, S&P expects gradual
improvement in operating efficiency under Thoma Bravo ownership.
S&P estimates that potential savings could contribute to gradual
S&P Global Ratings-adjusted cash-based EBITDA margin expansion of
6%-8% over the next five years.

The company's wide cyber security product offering and R&D
capabilities enable high customer retention and an increasing share
of wallet. Sophos has a proven track record of successful new
product launches and high customer retention of about 106% in
fiscal 2019 on a net value basis, reflecting upselling and
cross-selling that more than offset customer losses. This was
clearly demonstrated in 2018 when Sophos released new endpoint
platform, Intercept X, greatly contributing to annual billing
growth of about 22%. The company's share of next-generation billing
increased to 53% in the 12 months to Sept. 30, 2019, from 2% in
fiscal 2015. S&P believes that Sophos' wide array of
next-generation products and cloud-based management platform Sophos
Central will enable it to maintain high customer retention,
increase wallet share, and win new clients over the medium term.
Currently only about 12% of existing customers use both endpoint
and network solutions, reflecting untapped cross-selling
opportunities.

High recurring revenue and long-term contract duration lead to good
revenue viability, which supports the rating. Sophos also benefits
from high revenue visibility, 85% being subscription-based. S&P
believes that solid growth in cloud-based next generation products
will enable Sophos to further increase the share of subscription
revenue. Revenue visibility is also supported by long-term contract
duration, of about 28 months. However, the majority of these
contracts being paid upfront also leads to rises and falls in
annual billings. This was demonstrated in fiscal 2019 when billing
declined by about 1%, mostly due to strong growth in the previous
year.

S&P said, "The final ratings will depend on our receipt and
satisfactory review of all final transaction documentation.
Accordingly, the preliminary ratings should not be construed as
evidence of final ratings. If S&P Global Ratings does not receive
final documentation within a reasonable time frame, or if final
documentation departs from materials reviewed, we reserve the right
to withdraw or revise our ratings. Potential changes include, but
are not limited to, use of loan proceeds, maturity, size and
conditions of the loans, financial and other covenants, and
ranking.

"The stable outlook indicates that Sophos' billings are predicted
to increase organically by 6%-10% and that its S&P Global
Ratings-adjusted cash-based EBITDA margins will increase to 26%-27%
on potential cost initiatives. This should enable it to reduce its
S&P Global Ratings-adjusted debt to cash-based EBITDA during fiscal
2021 to 8.5x-9.0x and generate reported FOCF of $20 million-$25
million.

"We could lower the rating if Sophos were to experience high and
prolonged customer churn, leading to breakeven FOCF before
exceptional costs and S&P Global Ratings-adjusted cash-based EBITDA
interest coverage falling closer to 1x, which would make the
proposed capital structure unsustainable."

This could happen if competition intensified and there were severe
macroeconomic headwinds or if Sophos doesn't increase S&P Global
Ratings-adjusted cash-based EBITDA margins above 24%.

S&P said, "We see an upgrade as unlikely over the next 12 months
due to our expectation that the company's private-equity ownership
will limit any significant reduction in debt. We could raise the
rating over the longer term if Sophos reduces S&P Global
Ratings-adjusted debt to cash-based EBITDA to less than 7.5x,
increases FOCF to debt above 5%, and increases S&P Global Ratings
cash-based EBITDA interest coverage above 2x on a sustainable
basis."

This could happen if Sophos successfully executes potential
cost-cutting initiatives, leading to S&P Global Ratings-adjusted
cash-based EBITDA exceeding 30%, supported by a clear financial
policy of maintaining S&P Global-Ratings-adjusted cash-based
leverage below 7.5x.



                           *********


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
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Information contained herein is obtained from sources believed to
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members of the same firm for the term of the initial subscription
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