/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200116.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 Thursday, January 16, 2020, Vol. 21, No. 12 Headlines A U S T R I A CRYSTALSOL GMBH: Files for Insolvency, Owes EUR6.7 Million B E L A R U S MIKRO LEASING: Fitch Affirms B- LongTerm IDR, Outlook Stable G E R M A N Y CALYXO TS: Files for Insolvency for Second Time in Aachen INEOS STYROLUTION: Moody's Rates New EUR500MM Term Loan B 'Ba2' INEOS STYROLUTION: S&P Lowers Sr. Secured Debt Rating to 'BB' SOLIBRO HI-TECH: German Court Opens Insolvency Proceedings I R E L A N D C&W SENIOR: S&P Cuts $1.7BB Debt Rating to B+ Amid Reorganization ENERGIA GROUP: Fitch Corrects Sept. 27 Ratings Release N E T H E R L A N D S VINCENT TOPCO: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable P O R T U G A L ENERGIAS DE PORTUGAL: Moody's Rates Sub. Notes Due 2080 'Ba2' R U S S I A GFH SUKUK: S&P Assigns Prelim. 'B' Rating on New Sukuk Trust Certs S P A I N CELLNEX TELECOM: S&P Affirms 'BB+' ICR on $800MM Portugal Deal U N I T E D K I N G D O M ELITE INSURANCE: In Administration, PwC Named as Administrators FLYBE: IAG Files Complaint to EU Over Rescue Deal FLYBE: UK Government Reaches Rescue Deal with Shareholders FRONERI INT'L: S&P Affirms 'B+' ICR Amid $4BB Nestle Acquisition LEVEN CARS: Administrators In Advanced Talks Over Possible Sale PIONEER HOLDING: S&P Affirms 'B-' LT ICR, Off Watch Positive - - - - - ============= A U S T R I A ============= CRYSTALSOL GMBH: Files for Insolvency, Owes EUR6.7 Million ---------------------------------------------------------- Sandra Enkhardt at PV Magazine reports that Austria's Osterreichischer Verband Creditreform (OVC) has revealed that Crystalsol GmbH, an Austrian flexible module manufacturer, has filed for insolvency. According to PV Magazine, Ulla Reisch was appointed to serve as insolvency administrator. The OVC said the liabilities amount to around EUR6.7 million, PV Magazine relates. Nine employees in Vienna and 40 creditors will be affected, PV Magazine discloses. The leading insolvency officer at the OVC, Stephan Mazal, pointed to long development periods and high startup costs as the reason for the insolvency claim, PV Magazine notes. "With the help of investors, a restructuring plan for the creditors and a new market entry are to be financed," PV Magazine quotes Mr. Mazal as saying. Creditors must file their claims by Feb. 12, as the restructuring plan is scheduled for a vote on April 1, PV Magazine states. Crystalsol GmbH is headquartered in Vienna and has a subsidiary in Talinn, Estonia. Crystalsol specializes in the development of flexible thin-film PV modules. ============= B E L A R U S ============= MIKRO LEASING: Fitch Affirms B- LongTerm IDR, Outlook Stable ------------------------------------------------------------ Fitch Ratings affirmed FLLC Mikro Leasing's Long-Term Issuer Default Rating at 'B-' with Stable Outlook. The ratings reflect Mikro Leasing's narrow franchise, monoline business model in a niche segment, elevated risk appetite, sizeable exposure to direct and indirect foreign exchange (FX) risks, and a concentrated funding profile. The ratings also factor in the company's acceptable financial metrics. KEY RATING DRIVERS Mikro Leasing is exposed to a volatile operating environment. It has a monoline narrowly focused business model with its franchise limited to finance leases in Belarus with a focus on the capital, Minsk and several other cities. Due to competition from banks and other non-bank financial institutions, Fitch views Mikro Leasing's pricing power as limited. Its competitive advantages are its swift decision-making, client-focused approach and flexibility. Mikro Leasing's risk appetite profile reflects a higher-risk client base, rudimentary risk controls, an underdeveloped corporate governance framework and a growth pattern that can at times be rapid. Targeted clients are mainly under-banked small- and medium-sized enterprises and individual entrepreneurs, which indicates an above-average risk appetite for credit risk. Mikro Leasing's receivables are mostly in foreign currency (93% of the lease book at end-2018), which gives rise to considerable direct and indirect market risks. Such market risks could negatively affect asset quality due to the inherent volatility of the local currency. Mikro Leasing's asset quality is acceptable for the rating. In 3Q19 non-performing loans (NPL)s grew to BYN1.4 million (from BYN0.5 million at end-2018) and represented a moderate 1.9% of gross receivables (0.9% at end-2018). Defaults peaked at 6.3% in 2015, and have since gradually decreased to around 1% in 2018, yielding a 2014-2018 average of 3.2%. Residual risk was manageable, indicated by a positive record of sales of foreclosed assets, due to an average portfolio down-payment of 28%. Fitch sees Mikro Leasing's concentrated funding profile as a credit constraint. The company has taken steps towards funding diversification; however, related-party borrowings remained substantial at 65% at end-3Q19. These are loans from its parent holding company, which in turn are backed by bonds privately placed in the EU. Its tangible leverage ratio increased substantially to 6.4x at end-2018 from 4x at end-2017. This was driven by asset growth and a one-off fair-value adjustment for capital. Fitch expects leverage to moderately grow further following portfolio expansion. Sizable related-party exposure - a two-year lease of passenger vehicle fleet for a car-sharing start-up - amounting to 44% of equity weighs on its assessment of capital adequacy. This exposure is, however, mitigated by liquid collateral Mikro Leasing's capital base is small in absolute terms, making the company sensitive to funds being upstreamed to the holding company, particularly given a lack of regulatory restrictions on capital flows. RATING SENSITIVITIES Leverage sustainably above 7x on a gross debt/tangible equity basis would put pressure on Mikro Leasing's rating, as would a marked weakening of solvency via increase in assets with significant valuation risk, such as assets held for sale, restructured leases, problematic receivables, etc. Material deterioration in the operating environment would also weigh on ratings. Upside for the Mikro Leasing's ratings is limited and would require an improvement of the operating environment coupled with a strengthening of the franchise, diversification of assets and liabilities away from related parties and a moderation of the company's market risk exposure, particularly of FX risk. ============= G E R M A N Y ============= CALYXO TS: Files for Insolvency for Second Time in Aachen --------------------------------------------------------- Sandra Enkhardt at PV Magazine reports that Calyxo TS Solar GmbH, a German cadmium telluride solar module manufacturer, has filed for insolvency for the second time in the district court in Aachen, Germany, despite the recent emergence of new prospective investors. The court has appointed Christoph Niering from the law firm Niering Stock Tomp to serve as the provisional insolvency administrator, PV Magazine relates. According to PV Magazine, talks on the possible arrival of new strategic partners are still ongoing, so management has been forced to open new proceedings. Mr. Niering, as cited by PV Magazine, said on Jan. 10 that it is still possible to maintain operations and process existing orders. The talks with potential investors will continue and expand with the participation of the provisional administrator and international advisers, PV Magazine discloses. In April 2018, Calyxo filed for insolvency for the first time due to payment difficulties, following the cancelation of a major order, PV Magazine recounts. In July 2018, TS Group GmbH took over the company's business operations and assumed responsibility for its 130 employees, PV Magazine relays. The current report notes 110 employees who were employed in production at the Bitterfeld-Wolfen site during peak periods, according to PV Magazine. INEOS STYROLUTION: Moody's Rates New EUR500MM Term Loan B 'Ba2' --------------------------------------------------------------- Moody's Investors Service assigned Ba2 ratings to the new EUR500 milllion and US$202 million senior secured term loan B facilities due 2027 to be entered into by INEOS Styrolution Group GmbH and INEOS Styrolution US Holding LLC and a Ba2 rating to the EUR500 million senior secured instrument to be issued by INEOS Styrolution Group GmbH. Concurrently, Moody's affirmed the Ba2 corporate family rating and Ba2-PD probability of default rating of INEOS Styrolution Holding Limited as well as the Ba2 ratings assigned to the outstanding senior secured term loan B facilities due March 2024, borrowed by INEOS Styrolution Group GmbH and INEOS Styrolution US Holding LLC. The outlook remains stable. The instrument ratings were assigned in the context of Styrolution's proposed transaction to refinance its existing TLB and drawings under the securitisation facility, as well as fund a EUR300 million shareholder distribution and future expansion capex. This will enable the group to extend its maturity profile and maintain a liquidity buffer. RATINGS RATIONALE The Ba2 ratings reflect Styrolution's leading global market share in the styrenics market in terms of capacity, global operational footprint and cost leadership position benefiting from its integration within the wider INEOS Limited group of companies. These positive credit attributes help mitigate Styrolution's inherent exposure to economic cycles and feedstock price volatility, as a significant proportion of its customers operate in cyclical end-markets such as automotive, construction and electronics. These positive factors also mitigate Styrolution's lack of product diversification because of its narrow focus on the styrenics chain and the threat of substitution by other types of plastic affecting its polystyrene and most standard acrylonitrile butadiene styrene (ABS) products. However, as a result of Styrolution upstreaming total dividends of EUR870 million to its owner during 2019-2020, Moody's estimates that the group's pro-forma leverage (as measured by adjusted total debt to EBITDA) would be around 1.8x at year-end 2019. Looking ahead, more challenging conditions in the global styrenics market amid sizeable capacity additions in China are likely to weigh on the group's operating profitability. Moody's expects annual EBITDA to drop to a mid-to-bottom-of-the-cycle level of around EUR600 million in the next 2-3 years. Combined with increased growth capex, this will likely lead to an increase in leverage towards 3.0x by 2022, thereby reducing the group's headroom within the Ba2 rating category. In this context, Moody's expects that the group's owners will show restraint and keep future dividends to a level that does not jeopardise the group's financial policy to keep unadjusted net leverage under 3.0x through the cycle. ESG CONSIDERATIONS Environmental considerations are a material factor in this rating action. Soil, water and air pollution regulations continue to represent the key environmental risks to the chemical sector, with petrochemical companies such as Styrolution particularly exposed to carbon emission regulations. The packaging sector is the largest end market for polystyrene. This is a sector that is under pressure from both regulations and changing consumer behaviour around single-use plastics. Moody's believes this is a risk that will result in lower volumes in the medium term. In this context, Moody's notes the group's intent to support the shift to a circular economy by trying to reduce post-consumer styrenic waste and actively participating in the various stages of the recycling process. To this end, Styrolution has been developing new chemical recycling technology for polystyrene packaging waste and new styrenics products such as the Terluran ECO grade of mechanical post-recycled ABS. The group also has a solid safety track record based on the total case injury rate that it has reported in recent years in accordance with US Occupational Safety and Health Administration standard. This rate has remained well below the average OSHA rate recorded for petrochemicals and polymers manufacturers by the US Department of Labor. Styrolution is a private company that is part of the INEOS family of companies ultimately 100% owned by James Ratcliffe (61.8%), Andrew Currie (19.2%) and John Reece (19.0%), 95% of which is held through INEOS Limited. Styrolution's stated financial policy is to keep unadjusted net leverage under 3.0x through the cycle. In this context, the low leverage exhibited at year-end 2018 (0.4x on a Moody's adjusted basis) gave the group the flexibility to pay total dividends of EUR870 million in 2019-2020 in order to support investments made by other companies within the INEOS family. However, given the growth projects Styrolution plans to undertake in coming years, Moody's expects its owners to show restraint and keep future dividends to a level that does not jeopardise the group's financial policy and liquidity at any time. LIQUIDITY Moody's views Styrolution's liquidity profile as adequate. As of the end of September 2019, the group had cash balances of EUR289 million, availabilities of EUR153 million under committed credit facilities and headroom of EUR189 million, reflecting over-collateralisation under its EUR450 million trade receivables securitisation programme, which expires in July 2021. Assuming the successful execution of the proposed refinancing, Styrolution will have no material debt maturity before 2027, when its new TLB and senior secured instrument fall due. While Styrolution does not have any committed revolving credit facilities, it will be able to use debt proceeds raised through the proposed refinancing to repay some of the outstandings under the securitisation programme and cover the negative free cash flow after capex and dividend (FCF) Moody's expects the group to generate in 2020. However, depending on future operating performance, Moody's considers that Styrolution may have to raise additional debt in 2021-2022 in order to fund its planned growth capex. STRUCTURAL CONSIDERATIONS The Ba2 ratings assigned to the first lien term loans (TLB) and senior secured instrument of INEOS Styrolution Group GmbH and INEOS Styrolution US Holding LLC reflect the fact that obligations under the TLB and senior secured instrument rank pari passu with each other, sharing the same guarantee and security packages. The TLB and senior secured instrument are (1) guaranteed on a senior secured basis by INEOS Styrolution Holding Limited and some of its material subsidiaries representing at least 85% of the restricted group's consolidated EBITDA and assets, and (2) secured by first ranking liens (to the extent possible and subject to permitted liens) on substantially all of the assets of those entities. RATING OUTLOOK The stable outlook reflects Moody's expectations that the group will maintain satisfactory margins above 10% while keeping Moody's-adjusted gross leverage below 3.0x. The stable outlook also assumes that the group will maintain sound liquidity. WHAT COULD CHANGE THE RATING - UP Given the group's size and exposure to a cyclical industry, as well as ambitious medium-term capital spending plans, Moody's considers a rating upgrade unlikely in the short term, unless: (i) the group's share of specialty products markedly increases, leading to more stable EBITDA through the cycle; and (ii) Moody's-adjusted total debt to EBITDA remains below 2.0x through the cycle. WHAT COULD CHANGE THE RATING - DOWN The rating could be downgraded if Moody's-adjusted EBITDA margin declines to 10% for a prolonged period; Moody's-adjusted total debt to EBITDA stays above 3.0x because of a prolonged deterioration in operating profitability, material increase in debt to fund capex or acquisitions or departure from its conservative financial policy framework. A rating downgrade could also result from a material change in the relationship between Styrolution and the wider INEOS Limited group of companies. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Chemical Industry published in March 2019. CORPORATE PROFILE INEOS Styrolution Holding Limited, with management based in Frankfurt, Germany, is a leading global styrenics supplier, especially in Europe and North America. INEOS Styrolution is focused on the production and sale of polystyrene, acrylonitrile butadiene styrene, styrene monomer, and other styrenic specialities. The group is a wholly owned subsidiary of INEOS AG (unrated). In 2018, INEOS Styrolution's revenues and Moody's-adjusted EBITDA were EUR5.4 billion and EUR861 million, respectively. INEOS STYROLUTION: S&P Lowers Sr. Secured Debt Rating to 'BB' ------------------------------------------------------------- S&P Global Ratings lowered the issue-level ratings on INEOS Styrolution Holding Ltd.'s secured debt, including new debt, to 'BB' from 'BB+', and affirmed its 'BB' long-term issuer credit rating (ICR) on the company. The affirmation reflects Styrolution's proposed transaction, by which the company is planning to refinance all its term loans and issue additional secured debt. S&P said, "We expect EUR1.18 billion in debt post-transaction. The company plans to optimize financing cost, improve its maturity profile, provide sources to fund a EUR300 million upstream dividend to parent Ineos, and provide for cash on the balance sheet to fund upcoming capex. The transaction--mainly a dividend recap and capex funding--is affecting credit metrics negatively. The EUR300 million dividend follows sizable dividends in 2019 (EUR590 million for the year) including a EUR450 million exceptional dividend to Ineos. We therefore view the dividend policy as fairly volatile and aggressive. We factor in, however, that top-of-the-cycle conditions in styrenics had built in very significant rating leeway in recent years. We therefore view the releveraging as opportunistic and bringing credit metrics more in line with the rating, at about 2x adjusted debt to EBITDA in 2020, and with the company's stated financial policy of maintaining less than 2.5x unadjusted net leverage through the cycle. This compares with only 0.8x at year-end 2018. We therefore estimate that metrics leeway is being partially consumed through the transaction versus the 'bb+' SACP, but remains material versus the 'BB' rating." S&P said, "Operational performance continues supporting the rating, in our view, despite deteriorating market conditions. Our base-case scenario incorporates headroom for market volatility, notably in recent years' top-of-the-cycle conditions. Reported EBITDA reached EUR729 million for the 12 months ended Sept. 30, 2019, which we forecast will land at about EUR700 million for all of 2019. This is down versus our initial forecast of about EUR800 million, and 2018's slightly higher level. Our base-case scenario factors in capacity additions in polystyrene with the two plants acquired in China, despite destocking effects in second-half 2019, lower demand, and slight overcapacities. Acrylonitrile butadiene styrene (ABS) and specialties were particularly affected by weaker macroeconomics in 2019, following U.S.-China trade conflicts and slowing auto markets. Styrene margins have also contracted materially in the second and third quarters, and we expect further weakening of demand typically for the fourth quarter. EBITDA for 2019 will therefore reflect moderate headwinds in the second half of the year. For 2020, we expect the global economic slowdown to continue weigh on EBITDA performance, which we forecast at about EUR600 million. That compares with our current estimate of bottom-of-cycle EBITDA of about EUR500 million. "In that context of softer markets, we expect Styrolution to fine tune its budgeted investments, including sizing and sequencing of projects to match with the market environment. We understand this prudent approach to capex addresses market uncertainties, level of capacities, and destocking phases, as opposed to accommodating for the dividend payment. We factor in however that level of investments will remain relatively high in 2020-2021 at about EUR500 million per year, compared with about EUR400 million for 2019. These projects include notably the new ASA plant in the U.S., the new ABS plant in China, polystyrene capacity conversion to ABS in France, and debottlenecking investments in its styrene monomer plant in the Netherlands. These figures compare with about EUR150 million yearly average capex over the past three years, of which we consider EUR80 million-EUR90 million maintenance capex. "The stable outlook reflects our expectation that Styrolution will maintain adjusted debt to EBITDA of about 2.0x in 2020-2021. This incorporates our view that there will be a further softening of markets and margins, underway since second-half 2019, and results from a large capacities expansion policy in the coming years (although fine-tuned to market fundamentals), and a moderated dividend policy after recent high exceptional distributions. We believe adjusted debt to EBITDA could deteriorate toward 4x under down-cycle conditions, meaning a possible deterioration in the SACP, but without changing the rating." Rating pressure might arise from a further market downturn, resulting from building overcapacities, a prolonged destocking phase, or lagging underlying demand. The related EBITDA downside toward the EUR500 million estimated as bottom-of-the-cycle, if combined with aggressive capex policy or dividend distributions, could put pressure on the rating. S&P would consider a downgrade if adjusted debt to EBITDA exceeded 4x, or if Ineos Ltd.'s credit profile deteriorated. Rating upside is constrained by Ineos Ltd. group's credit profile. Upside potential would therefore arise from an improvement of the parent's credit quality. A higher rating would also depend on Styrolution's ability and willingness to keep leverage sustainably below 2x (or well below 4x in the trough) alongside improvement in product diversity, for example, through further expansion into higher-value-added products. With revenues of about EUR5.1 billion, Germany-based Styrolution (Ineos Styrolution Holding Ltd.)is the global leader in styrenics--the no. 1 supplier of polystyrene globally and no. 2 in styrene monomer. It is also among the top three suppliers of ABS. The company operates in four business segments Polystyrene (about 27% of last-12-month EBITDA), Global Styrene Monomer (34%), ABS Standard (12%), and Specialties (26%) to serve end-markets of the auto, health care, and building and construction industries, some of which S&P considers relatively cyclical. The company is geographically diversified with 29% of its EBITDA coming from the Americas; 25% from Europe, the Middle East, and Africa; and 14% from Asia, while the remaining (33%) styrene monomer profits reported separately is considered global. It operates 18 manufacturing sites in nine countries, and has a broad customer base in over 106 countries worldwide serving all styrenics applications in a wide range of industries. Styrolution is a fully owned indirect subsidiary of Ineos Ltd., which operates and is financed stand-alone. SOLIBRO HI-TECH: German Court Opens Insolvency Proceedings ---------------------------------------------------------- Sandra Enkhardt at PV Magazine reports that a German court opened insolvency proceedings for Solibro Hi-Tech GmbH on Jan. 10, with attorney Henning Schorisch chosen to serve as the preliminary administrator. Mr. Schorisch informed employees about the proceedings on Jan. 10, PV Magazine relates. He reportedly said that employees' wages would be secured for a period of three months via funds provided for the insolvency proceedings, PV Magazine notes. Salaries have not yet been paid for December, PV Magazine has learned. The company, which is a unit of Hanergy Thin Film Power Group, ordered a two-week shutdown over the Christmas and new year period, PV Magazine recounts. Management control of Solibro Hi-Tech GmbH is currently in the hands of Kai-Ye Fung, who has officially filed for insolvency, PV Magazine relays, citing a company announcement. Solibro GmbH applied for insolvency in August, with Mr. Schorisch also serving as provisional administrator, PV Magazine discloses. At the time, Hanergy told PV Magazine that it had not held a stake in Solibro GmbH since December 2015, but acknowledged that it owned parts of two subcontractors, Solibro Hi Tech GmbH and Solibro Research. Solibro GmbH halted business operations after the opening of the regular insolvency proceedings in November, PV Magazine states. A restructuring proposal failed because shareholders only provided a small portion of the promised funds, according to PV Magazine. ============= I R E L A N D ============= C&W SENIOR: S&P Cuts $1.7BB Debt Rating to B+ Amid Reorganization ----------------------------------------------------------------- S&P Global Ratings lowered its issue-level ratings on C&W Senior Financing Designated Activity Company's $1.22 billion senior notes due 2027 and its $500 million senior notes due 2026 to 'B+' from 'BB-' after the company's recent announcement of its corporate and legal structure reorganization. The ultimate parent company, Cable & Wireless Communications Limited (CWC; BB-/Stable/B), recently announced that C&W Senior Finance Limited, CWC's indirect subsidiary, will now be the issuer of the existing $1.72 billion notes, which C&W Senior Financing Designated Activity originally issued in 2017. Given that C&W Senior Finance Limited is the indirect parent company of C&W Senior Financing Designated Activity, the debt is structurally subordinated to Coral-US Co-Borrower, LLC and Sable International Finance Ltd.'s obligations, consisting of $1.64 billion term loan B, $625 million undrawn revolving credit facility, and $400 million senior secured notes due 2027. Additionally, the priority debt ratio is over 50%, reflecting the significant amount of prior ranking debt in CWC's capital structure As a result, S&P lowered the issue-level ratings on C&W Senior Financing Designated Activity, reflecting the structural subordination. ENERGIA GROUP: Fitch Corrects Sept. 27 Ratings Release ------------------------------------------------------ Fitch Ratings replaced a ratings release published on September 27, 2019 to correct the name of the obligor for the bonds. The amended press release is as follows: Fitch Ratings has revised Energia Group Limited's Outlook to Stable from Negative, while affirming the Irish-based utilities group's Long-Term Issuer Default Rating at 'B+'. The change in Outlook reflects lower-than-expected leverage metrics in financial year ended March 2019 and its expectation that funds from operations (FFO) adjusted net leverage in FY20 remain within its rating sensitivities. While there is scope for substantial deleveraging, it is Fitch's view that there is a steady shift in business mix towards unregulated EBITDA, within the restricted group. The challenge to ensure longer-term sustainability of generation and a new growth strategy with potentially substantial investments limit its long-term forecast visibility. Rating upside may emerge should Energia's growth and shareholder return plans allow sustainably stronger credit metrics especially if accompanied by a high share of regulated and quasi-regulated earnings. KEY RATING DRIVERS Wind Build, New Capex: Consolidated group capex, including development and acquisition costs, peaked with completion of the wind build in FY19 at EUR112.8 million. However, some capex scheduled for FY19 has been delayed, while the development of Coolberrin and likely spending on development & acquisitions in FY20 imply an increase in consolidated wind capex in future. Energia also plans to increase capex elsewhere, within restricted group (and rating scope) notably in customer solutions, which accounts for 45% of the FY20-FY24 total, particularly on Ireland's single electricity market (I-SEM)-related billing and smart metering, and outside the restricted group in anaerobic digestion (AD). Mix Shift to Unregulated: On Fitch estimates, regulated and quasi-regulated EBITDA is set to decline to 52% of total in FY24 from 67% in FY19. Its rating case is for supply at Power NI to remain regulated after the end of the current price control in March 2021. However, its view is that the shift in the restricted group's EBITDA mix to unregulated reflects growth in residential & commercial supply, growth in Power NI's unregulated supply at a faster rate than regulated entitlement, and expected return of Huntstown2 CCGT to the energy market, based on winning a new reliability contract (RO) contract in October 2019. The shift in EBITDA mix may reduce the debt capacity of the restricted group in future. Generation's Longer-term Sustainability: I-SEM commenced in October 2018. Both Huntstown plants won transmission reserve contracts in 4Q18, partly mitigating the financial impact of the market transition from capacity payments to competitive reliability auctions. However, Huntstown1 did not win a RO contract in April 2019 for capacity year 2022-2023 and unless it obtains an RO contract in future, profitability from October 2022 would be adversely affected. Energia is looking at a range of various options at Huntstown to ensure the plant's long-term sustainability. Growth Strategy Sees Acquisitions: Following a peak in consolidated capex in FY19, Fitch expects to see further substantial investments, most likely outside the restricted group, shortly. Energia said on its last results call that it was looking at a significant acquisition opportunity and did not set a short-term leverage target, after having paid an FY19 dividend of EUR33.4 million. Major Investments Uncertain: Its understanding from management is that much larger investment ambitions of up to EUR3 billion on a range of renewables projects is unlikely to substantially materialise before 2025. None of this is included in its rating case, but Fitch forecasts some headroom for additional investments in the restricted group, assuming a steady dividend. However, uncertainty around large-scale investments limits rating upside. DERIVATION SUMMARY With its view of decreasing share of regulated and quasi-regulated EBITDA, Energia's business mix is viewed as more comparable to that of Drax Group Holdings Limited (Drax, BB+/Stable) and Techem Verwaltungsgesellschaft 674 mbH (B/Stable). The latter has substantially weaker credit metrics than Energia, but has 90%-95% of contracted EBITDA while Drax operates with substantially lower leverage rating sensitivity. KEY ASSUMPTIONS Fitch's Key Assumptions within its Rating Case for the Issuer - Power NI new regulation from FY22, with EBITDA margin of 6% - ROI residential supply estimated at EBITDA margin of 9%-10% - Commercial supply estimated at EBITDA margin of 1.5% - Renewable power purchase agreement's estimated load factor at 29% - Energia Wind Assets' estimated load factor at 25.5% - Giant's Park (Belfast)'s anaerobic digestion project excluded (no final investment decision) - Dividends from Energia Wind Assets lowered in line with load factor assumption above - Huntstown's capacity income, ancillary services & energy margin based on Energia's guidance - Working capital reversal in line with management guidance - Dividends paid in FY20 of EUR33 million, in line with FY19's - Capex of restricted group as per management guidance, adjusted for Coolberrin. For investments in renewables, Fitch has assumed 30% and 40% of consolidated investments in wind and bioenergy (Huntstown only) respectively. Key Rating Recovery Assumptions - Energia would be considered a going-concern in bankruptcy and that the company would be reorganised rather than liquidated. Fitch has assumed an administrative claim of 10%. - Energia's going concern EBITDA is based on LTM March 2019 EBITDA and includes pro-forma adjustments for dividends from wind assets from FY21, paid at a one-year time lag on assets in operation in FY19. Based on a 20% discount, the going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases valuation. - Fitch uses an enterprise value (EV) multiple of 6x to calculate a post-reorganisation valuation. - Its waterfall analysis generated a ranked recovery in the 'RR1' band, indicating a 'BB+' instrument rating for Energia's first-lien super senior revolving credit facility (RCF) of GBP225 million. The waterfall analysis output percentage on current metrics and assumptions was 100%. The corresponding output for the 'BB-' senior secured notes was 'RR3'/59%. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - A decrease in FFO adjusted net leverage to below 4x on a sustained basis - A decrease in business risk accompanied by an increase in share of EBITDA from regulated and quasi-regulated assets Developments That May, Individually or Collectively, Lead to Negative Rating Action - Large debt-funded expansion or deterioration in operating performance, resulting in FFO adjusted net leverage above 5x and FFO interest cover below 2x on a sustained basis. - A significant reduction of the proportion of regulated and quasi-regulated earnings leading to a reassessment of maximum debt capacity LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: As at June 31, 2019, Energia had GBP214 million of unrestricted cash and short-term deposits as well as GBP75 million undrawn liquidity available on the cash portion of the RCF expiring in September 2023. The group has no material short-term debt and its senior secured notes are not due until 2024-25. Wind capacity assets and debt financed through project-finance facilities are excluded from its debt calculation as the debt is held outside the restricted group on a non-recourse basis. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity. ===================== N E T H E R L A N D S ===================== VINCENT TOPCO: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable ------------------------------------------------------------------- S&P Global Ratings noted that U.K.-based private-equity company Bridgepoint acquired a majority stake in Dutch premium catering and hospitality provider Vermaat, via Vincent Topco BV (NL), from Partners Group. Vincent Topco issued EUR522 million of new credit facilities via Vincent Bidco BV (NL) to finance the deal, including a EUR110 million multicurrency revolving credit facility (RCF), a EUR320 million first-lien term loan, and a EUR92 million second-lien term loan. S&p is assigning its 'B' issuer credit ratings to Vincent Topco BV (NL) and Vincent Bidco BV (NL), its wholly owned subsidiary, and its 'B' issue-level rating and '3' recovery rating to the first-lien revolving credit facility (RCF) and term loan. Vermaat is a market leader in the Netherlands' premium catering segment. In S&P's view, Vermaat's business risk profile is supported by its sustained leading market position as a premium catering and hospitality provider across a number of end markets. This is supported by its strong customer relationships with high renewal rates but constrained by its smaller scale compared with peers, geographical concentration in the Netherlands, and supplier concentration, with its largest supplier providing more than 50% of purchases. The company is one of the largest premium catering companies in the Netherlands and almost three times the size of its next competitor. It is also No. 1 in terms of market share in hospital, leisure, and multi-tenant facilities and No. 2 in corporate and travel combining for a total market share of 35%. However, the industry is highly fragmented, with relatively low barriers to entry and strong competition constraining pricing flexibility, particularly on contract renewals. Vermaat faces competition from large global players such as Compass & Sodexo and local players such as Albron, Hutten, and Appel. In the industry, economic uncertainty could also result in increased cyclicality of revenue, particularly in the corporate or travel segments. S&P expects stable organic growth supported by new contract wins. Vermaat has strong growth, both organically and inorganically, in recent years, with locations increasing to 383 from 124. It also averaged 36 new contract wins each of the past three years. Furthermore, Vermaat has successfully integrated strategic acquisitions to support growth in specific business segments and built a solid information technology platform. In addition, the company used its joint venture platform to expand into Germany, where its presence remains relatively small. Vermaat has adequate operating efficiency, driven by its flexible cost base. Given the company's niche offering in the premium service market, flexible cost base, good product mix, and efficient operations, it has sustained strong S&P Global Ratings-adjusted EBITDA margins. Although they are expected to decline, primarily from a change in product mix and new store openings, margins remain far higher than both global and local competitors'. In addition, margins are protected, with 65% of rent from lease contracts linked to turnover, which provides downside protection. Although the company recently renegotiated a contract with its largest supplier with a fixed price increase, S&P expects this to be offset by the achievement of certain key performance indicators included within the renegotiated contract terms. The company has a diverse customer base with high retention rates. Vermaat's client base adds to its earnings diversity, with more than 383 sites to support its corporate, leisure, hospital, and retail segments. Vermaat's top five customers represent about a quarter of total revenue and span the travel, corporate, and leisure business segments, with a remaining contract length of 2-8 years. Its retention rate is consistently 90%. S&P said, "We consider Vermaat's capital structure highly leveraged at closing. Our assessment of the group's financial profile takes into account the group's private-equity ownership and tolerance for high leverage which closed at 7.7x on an S&P Global Ratings-adjusted debt to adjusted EBITDA. Part of the equity contribution at this transaction, was provided by way of a shareholder loan from Bridgepoint and Partners Group, who maintained minority ownership in this transaction. We have excluded the shareholder loans from our financial analysis, including our leverage and coverage calculations, since we believe the common-equity financing and the noncommon-equity financing are sufficiently aligned. We forecast adjusted funds from operations (FFO) to debt of 8%-9% in the coming years and anticipate that a considerable portion of FOCF will be used to fund acquisitions. We expect that adjusted debt to EBITDA will decline to 6.9x by 2020, supported by increased revenue but offset by lower margins due to changes in product mix and acquisition-related integration costs. The potential for debt-funded acquisitions or dividends could also put downward pressure on credit metrics in the medium term. "The stable outlook reflects our view that Vermaat will continue stable revenue growth of about 14% over the next 12 months as the company ramps up new contract wins and integrates acquisitions. We expect adjusted EBITDA margins will marginally decline because of the changing product mix and new store openings. As a result, we expect deleveraging to 6.9x and positive FOCF, which will support future growth in 2020. "We could lower our ratings amid a material decline in profitability or higher volatility in margins from unexpected operational issues or increased competition. This would include FOCF turning negative or FFO cash interest coverage declining below 2x on a sustained basis. Alternatively, financial policy decisions, including debt-funded dividends or acquisitions, which would result in S&P Global Ratings-adjusted debt to EBITDA remaining above 7.5x on a sustained basis, could result in a downgrade. "Although we consider an upgrade unlikely over the next 12 months, we could raise the ratings if shareholders commit to and sustain a prudent financial policy, with S&P Global Ratings-adjusted debt to EBITDA of less than 5x." Established in 1978, Vermaat operates 383 sites with almost 2,500 full-time employees. It is a market leader in premium catering and hospitality services in the Netherlands, holding No. 1 or No. 2 market positions within each of its business units--hospital, leisure, corporate, and travel facilities. The company generated EUR254 million in 2018 revenue. =============== P O R T U G A L =============== ENERGIAS DE PORTUGAL: Moody's Rates Sub. Notes Due 2080 'Ba2' ------------------------------------------------------------- Moody's Investors Service assigned a Ba2 long-term rating to the Fixed to Reset Rate Subordinated Notes due 2080 (the junior subordinated "Hybrid") to be issued by EDP - Energias de Portugal, S.A. The rating outlook is stable. RATINGS RATIONALE The Ba2 rating assigned to the Hybrid is two notches below EDP's issuer rating of Baa3, reflecting the features of the Hybrid. Its maturity is in excess of 60 years, it is deeply subordinated and EDP can opt to defer coupons on a cumulative basis. The rating is in line with that of the existing hybrid notes issued by the company. In Moody's view, the Hybrid has equity-like features which allow it to receive basket 'C' treatment (i.e. 50% equity and 50% debt) for financial leverage purposes. As the Hybrid's rating is positioned relative to another rating of EDP, a change in either (1) Moody's relative notching practice or (2) the senior unsecured rating of EDP could affect the Hybrid's rating. EDP's Baa3 rating is supported by (1) its position as Portugal's largest utility and diversified business and geographical mix; (2) its high share of regulated and contracted activities; (3) the group's track record of rotating assets; (4) the recently announced disposal of certain hydro assets in Portugal for EUR2.2 billion, which will allow it to reduce leverage; and (5) the 23.3% ownership by China Three Gorges Corporation (A1 stable). These positives help offset certain potential risks, including (1) the earnings volatility stemming from variations in hydro output in Iberia; (2) the execution risks associated with a significant step-up in capital spending over 2019-22; (3) moderate economic growth prospects in Brazil; (4) a difficult political and regulatory environment for EDP in Portugal; and (5) a relatively high dividend payout and leverage, notwithstanding the aforementioned disposal. RATIONALE FOR STABLE OUTLOOK The stable outlook is based on EDP's delivery of its strategic plan and the resulting expected deleveraging in the medium term, so that funds from operations (FFO)/net debt rises over time to the midteens and retained cash flow (RCF)/net debt is sustainably in the low double digits (both in percentage terms). WHAT COULD CHANGE THE RATING UP/DOWN Given EDP's weak credit metrics compared with the ratio guidance, a rating upgrade is unlikely in the medium term. Nevertheless, the ratings could be upgraded if EDP's progress on the delivery of its strategy were to result in a sustained strengthening of its financial profile, with FFO/net debt around 20% and RCF/net debt in the midteens in percentage terms. The ratings could be downgraded if EDP's credit metrics appeared likely to remain persistently below the guidance for the Baa3 rating, which includes FFO/net debt in the midteens and RCF/net debt in the low double digits (both in percentage terms). =========== R U S S I A =========== GFH SUKUK: S&P Assigns Prelim. 'B' Rating on New Sukuk Trust Certs ------------------------------------------------------------------ S&P Global Ratings assigned its preliminary 'B' issue rating to a proposed issuance of U.S. dollar-denominated senior unsecured sukuk trust certificates by GFH Sukuk Company Ltd. (GFH Sukuk). Under the sukuk documents, GFH Sukuk will use no less than 51% of the face amount of sukuk certificates to purchase certain real estate assets from GFH Financial Group B.S.C. (GFH) or its subsidiaries and will subsequently lease them to GFH under the lease agreement. The remaining issue proceeds, no more than 49% of the face value of certificates, will be invested into commodities to be sold to GFH on a deferred payment basis pursuant to a murabaha agreement. The rating on the trust certificates reflects the rating on GFH because the transaction fulfils our conditions for rating sukuk at the same level as the rating on its sponsor. -- GFH will provide sufficient and timely contractual obligations to pay principal and the periodic distribution amounts. The latter will be covered by the rental under the lease agreement and by profit amount under murabaha. Principal payments will be covered by the combination of the exercise price under the purchase undertaking agreement and deferred sale price under the murabaha contract. -- GFH's obligations under the murabaha and lease contracts are irrevocable. -- These obligations will rank pari passu with GFH's other senior unsecured financial obligations. -- GFH will undertake to cover all the costs related to the transaction, through the additional supplementary rent under the leasing and the service agency agreements. -- S&P views the total loss event as remote. S&P's opinion is underpinned by its understanding that the portfolio of underlying real estate assets is diversified. S&P said, "We therefore equalize the rating on the sukuk with the long-term issuer credit rating on GFH. The rating on the sukuk transaction is based on draft documentation dated December 17, 2019. Should final documentation differ substantially from the draft version, we could change the rating on the sukuk." ========= S P A I N ========= CELLNEX TELECOM: S&P Affirms 'BB+' ICR on $800MM Portugal Deal -------------------------------------------------------------- S&P Global Ratings noted that Spain-based Cellnex Telecom S.A. has recently agreed to acquire 3,000 telecommunications sites in Portugal for EUR800 million. In S&P's view, the transaction in Portugal, combined with other deals across Europe in 2019, enhances Cellnex's business risk profile through expanded scale and broader client and geographic diversification. After the acquisition in Portugal, S&P expects a temporary rise in the company's leverage to about 6.2x pro forma in 2020, versus 5.5x in 2018, pro forma previous acquisitions. S&P is thus affirming its 'BB+' long-term issuer credit rating on Cellnex Telecom S.A. Cellnex's increased scale and diversity balances the expected temporary spike in leverage in 2020. Based in Spain, Cellnex is a wireless telecom infrastructure operator. Since 2019, the company has made several acquisitions, including the EUR2.7 billion transactions in France, Italy, and Switzerland; 8,300 telecom sites (of which it owns 7,400) acquired in the U.K. for GBP2 billion (EUR2.2 billion); and 1,500 towers acquired in Spain for EUR260 million. The announced deal in Portugal will further enhance Cellnex's client and geographic diversification, assuming the smooth integration of acquired assets. The forecast leverage increase is also mitigated by capital injections during 2019 totaling EUR3.7 billion. S&P said, "We now expect the company's leverage to reach about 6.2x pro forma in 2020. This compared with 4.6x pro forma in 2019, when the capital injections resulted in a drop in leverage from the reported 5.9x in 2018 (5.5x pro forma previous acquisitions that did not fully contribute to the 2018 fiscal year). We think leverage would decline organically thereafter, mainly because ongoing investments on custom-made sites for clients will contribute additional EBITDA, and Cellnex will benefit from efficiency gains as it optimizes its global network, increases its colocation ratio, and extracts cost synergies." S&P said, "The acquisitions will strengthen Cellnex's business risk profile. If the acquisition in the U.K. completes as expected after regulatory approval, we expect to raise our assessment of Cellnex's business risk profile to excellent and our maximum leverage threshold for the current rating to 6.5x from 6.0x currently. This would reflect the company's significant increase in scale over the past few years, higher operating margin, extensive geographic and client diversity, strong backlog, and supportive industry characteristics. We acknowledge, however, that European mobile telecom markets are less mature than the more consolidated U.S. market, and Cellnex's assets are more widely scattered geographically compared with focused tower players like Operadora de Sites Mexicanos S.A. de C.V. (BB+/Stable/--). After the recent deals, including in the U.K., we estimate that the number of Cellnex sites has more than doubled to about 50,000 as of year-end 2019, from about 20,000 at year-end 2017, excluding projects under construction. The acquisitions also reduce the share of lower-margin, weaker-growth TV and radio broadcasting business to about 15% of revenue from about 25%. "We continue to view the telecom tower industry as credit supportive. Telecom services benefit from long-term and protective contracts, strong local market shares, high barriers to entry, and steadily increasing demand from telecom operators to expand 4G coverage. There is also the need to increase the density of capillary cellular networks (local networks using short-range radio-access technologies to provide local connectivity to things and devices) to facilitate timely 5G deployments. Recent 5G frequency auctions across Europe have also come with added coverage obligations for operators, which further enhances the high revenue visibility of tower companies. "Aggressive growth entails execution risks, but the company's track record is solid. We see potential execution risks related to the significant influx of new assets and delivery of a large number of planned custom-made projects to clients. Cellnex is pursuing an aggressive mergers and acquisitions strategy to drive industry consolidation across Europe. Nevertheless, Cellnex has a strong operating track record and a supportive financial policy so far, as illustrated by the two capital increases in 2019. "The outlook is stable because we anticipate that Cellnex will benefit from its increasing scale and diversity, smoothly integrate recently acquired businesses or transferred sites, and maintain its adjusted debt to EBITDA at less than 6x, commensurate with its current scope, or less than 6.5x if it completes the U.K. acquisition. We also forecast sustainable ratios of funds from operations (FFO) to debt higher than 12% and discretionary cash flow (DCF) to debt at more than 7%, or 10% and 6% respectively once the U.K. transaction closes. "We could lower our rating on Cellnex if we anticipated that our adjusted debt to EBITDA metric would not stay below 6x, our adjusted FFO-to-debt ratio would fall below 12%, or DCF to debt would remain below 7%. Once the U.K. transaction closes, those guidelines would be 6.5x, 10%, and 6% respectively, reflecting a stronger business risk profile. We think underperformance could result from additional debt-funded acquisitions, higher-than-expected shareholder remuneration, or weaker organic revenue growth than we currently anticipate in our base case, owing in particular to setbacks in integrating acquired assets. "We could raise the rating if our adjusted debt to EBITDA metric for Cellnex stayed consistently lower than 5x, FFO to debt above 15%, and DCF to debt above 10%. Once the U.K. transaction closes, those guidelines would be 5.5x, 13%, and 9% respectively, reflecting a stronger business risk profile. We see ratings upside as remote at this stage, however, based on our view of likely additional consolidation opportunities in the European towers market and Cellnex's aggressive stance toward mergers and acquisitions, along with the current financial policy." =========================== U N I T E D K I N G D O M =========================== ELITE INSURANCE: In Administration, PwC Named as Administrators --------------------------------------------------------------- Following application to the Courts in Gibraltar, Elite Insurance Company Ltd. was placed into administration on Dec. 11, 2019. Edgar Lavarello -- edgar.c.lavarello@pwc.com -- of PwC Gibraltar and Dan Schwarzmann of PwC UK were appointed as joint administrators of Elite by the Supreme Court of Gibraltar on Dec. 11, 2019 under Sections 45(a) and 59(2) of the Insolvency Act 2011. Elite is an insurance firm authorised and regulated by the Gibraltar Financial Services Commission (GFSC). It operates in the UK on a freedom of services basis which means that some UK customers may have a policy with the firm. Elite was established in Gibraltar in 2004 to offer insurance products in both the commercial and retail markets across Europe. Elite was authorised to carry out business in Belgium, France, Germany, Greece, Ireland, Luxembourg, Malta, Netherlands, Norway, Portugal, Romania, Spain and the UK. Elite was also authorised to carry out business on a branch basis in France, Italy, Spain and the UK. The Company was a specialist in after-the-event legal expense insurance and also had a wide range of policy covers including French construction, Italian and Spanish surety bonds, Greek, Irish and UK motor and UK professional indemnity, pet and warranty policies. A significant majority of the insurance business underwritten by Elite was reinsured by CBL Insurance Limited (CBL). On July 4, 2017, Elite ceased to be authorised to enter into new contracts of insurance or renew existing contracts of insurance. In January 2018, Armour Group Limited, a specialist run-off provider, acquired Elite. In November 2018, CBL entered liquidation and this matter, together with continued reserve deterioration experienced in a number of business lines as well as issues with the collection of some of the assets base, has led to the Company becoming balance sheet insolvent. Early Steps Following its appointment, the Administrators noted that they have: (a) retained Armour to ensure that the conduct of the run-off remains orderly with minimal disruption to creditors; (b) secured the cash assets and investments of Elite and brought them under our control; and (c) interacted with the Financial Services Compensation Scheme ("FSCS") in the UK to discuss any compensation available to UK policyholders and commenced analysis of possible policyholder protection for the Company's policyholders in other European jurisdictions. Queries and Correspondence If one is an Elite policyholder, one should note that your policy remains in force and is currently still valid, however one should contact your broker in the first instance to seek advice on what you should do, and the options available for arranging alternative cover. It may be considered prudent to take out alternative cover with another insurer. If you have a claim with Elite, then policyholders and brokers should continue to correspond with the offices of Elite at the following address: Elite Insurance Company Limited (in Administration) c/o Armour Risk Management 20 Old Broad Street London EC2N 1DP Further information on the case is available online at pwc.co.uk/elite-insurance or at helpline numbers +44(0)207-129-8147. Administrators can be reached at: Edgar Lavarello E-mail: edgar.c.lavarello@pwc.com Dan Schwarzmann PricewaterhouseCoopers LLP 1 Embankment Place London, WC2N 6RH, United Kingdom FLYBE: IAG Files Complaint to EU Over Rescue Deal ------------------------------------------------- BBC News reports that British Airways' owner IAG has filed a complaint to the EU arguing Flybe's rescue breaches state aid rules. The move comes amid a growing backlash against the government's plan to defer some of Flybe's air passenger duty payments, thought to top GBP100 million, BBC relates. According to BBC, EasyJet and Ryanair said taxpayer funds should not be used to save a rival. Meanwhile, the government's proposal to cut Air Passenger Duty (APD), was attacked by the rail industry's trade body and climate campaign groups, BBC discloses. The government has said the review of the tax will be consistent with its zero-carbon targets, BBC relays. Ahead of filing the state aid complaint, Willie Walsh, the outgoing chief executive of IAG, wrote to Transport Secretary Grant Shapps, criticizing the government's involvement in its rescue, BBC recounts. In a letter, Mr. Walsh, as cited by BBC, said: "Prior to the acquisition of Flybe by the consortium which includes Virgin/Delta, Flybe argued for tax payers to fund its operations by subsidising regional routes. "Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline. This is a blatant misuse of public funds. "Flybe's precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built." But Downing Street has said the government is "fully compliant" with state aid rules, BBC notes. According to BBC, the Prime Minister's spokesman said "there has been no state aid to Flybe," adding that "any future funding will be made on strictly commercial terms." British Airways' owner IAG's decision to make a state-aid complaint to the European Commission underlines its determination to shine a light on -- and if possible, overturn -- the government's assistance to Flybe, BBC states. Ministers have not published the details of the arrangement, but it is understood to include a "time-to-pay" arrangement for the company's airline passenger duty liabilities, BBC discloses. Three Cabinet ministers, namely Mr. Shapps, Business Secretary Andrea Leadsom and Chancellor Sajid Javid, signed off on the deal that will keep Flybe operating, BBC relates. Although the terms of the direct assistance were not disclosed, they are understood to include forbearance on Flybe's APD payments, according to BBC. FLYBE: UK Government Reaches Rescue Deal with Shareholders ---------------------------------------------------------- Sarah Young and Alistair Smout at Reuters report that regional airline Flybe was rescued on Jan. 14 after the British government promised to review taxation of the industry and shareholders pledged more money to prevent its collapse. The agreement comes a day after the emergence of reports suggesting it needed to raise new funds to survive through its quieter winter months, Reuters notes. After crunch talks with shareholders, Britain's finance ministry said that it would review both air passenger duty (APD) and Britain's regional connectivity as part of the plan, Reuters relates. Prime Minister Boris Johnson had said earlier that Flybe was important for Britain's transport links and that the government would do what it could to help the carrier, Reuters recounts. Flybe, as cited by Reuters, said it was delighted with how the discussions had gone. Reuters relates that the Flybe shareholders agreed to put in tens of millions of pounds to keep the airline running under the agreement. Flybe's network of routes includes more than half of UK domestic flights outside London. Based in Exeter in the south west of England, it carries eight million passengers a year between 71 airports in the United Kingdom and Europe. FRONERI INT'L: S&P Affirms 'B+' ICR Amid $4BB Nestle Acquisition ---------------------------------------------------------------- S&P Global Ratings affirmed its 'B+' rating on Froneri International Ltd. Froneri is acquiring Nestle USA's (NUSA's) ice cream business for $4 billion and refinancing its entire capital structure, significantly increasing adjusted debt leverage to 7.6x in 2020. The company is using a EUR5.7 billion financing package to pay for the acquisition, refinance existing debt, and pay transaction fees. The package includes the issuance of a EUR4.3 billion equivalent term loan B (EUR2,300 million $1,680 million in U.S. dollars, and GBP415 million in British pounds) maturing in 2027, a EUR753 million-equivalent second-lien term loan B (EUR430 million in euros and $355 million in U.S. dollars) maturing in 2028, and a EUR600 million new revolving credit facility (RCF). S&P said, "In addition, Nestle and PAI Partners will each inject EUR170 million of new equity, and Nestle will provide a new shareholder loan of $600 million that we treat as debt. The company has revised the clauses of the EUR1.2 billion shareholder loan that was issued in 2016 and that we treated as half-debt, half-equity. Given that some key conditions have been revised, we now treat the entire amount as equity--this marginally mitigates the increase in debt leverage caused by the acquisition. Despite considerably increasing the size of the S&P Global Ratings-adjusted EBITDA base to about EUR710 million in 2020 from about EUR475 million in 2019, we estimate that S&P Global Ratings-adjusted debt leverage will increase to about 7.6x in 2020 (from about 5.5x in 2019)." S&P said, "The stable outlook reflects our view that Froneri will integrate NUSA's ice cream business, and that it will benefit from its enhanced portfolio of branded ice cream products to strengthen its position as the No. 2 global player. We forecast that the group's profitability will be diluted in the first year, due to the lower profitability of the acquired business and a time lag in realizing the full benefits of synergies. We forecast adjusted EBITDA margin of about 16% in 2020, adjusted debt to EBITDA of 7x-8x, and FOCF generation of close to EUR100 million. "We could lower our ratings if the group experienced significant difficulties integrating NUSA's ice cream business, leading to large integration and restructuring costs, which would lead to higher leverage and lower FOCF generation. We could also lower the rating if the group engaged in large debt-financed acquisitions that could disrupt the existing supply chain and lead to restructuring issues, or if we no longer believed Nestle would support Froneri if it fell into financial difficulty. "We could raise our ratings if Froneri generated positive organic growth and if we saw a sustainable deleveraging path. In addition, we would need to see a successful integration of the acquisition, such that the combined group's profitability increased to close to 18%, which would allow deleveraging to less than 7x and FOCF generation above EUR130 million per year. To raise our ratings, we would also need to see a financial policy commitment to maintain levels of adjusted debt to EBITDA below 7x." LEVEN CARS: Administrators In Advanced Talks Over Possible Sale --------------------------------------------------------------- Scott Reid at The Scotsman reports that administrators for Leven Cars Group, the collapsed motor dealership that was Scotland's only Aston Martin and Rolls-Royce franchise holder, are in "advanced talks" over a possible sale of parts of the business. However, they also confirmed that the company's Kia and Suzuki dealerships in Selkirk have closed with immediate effect after a lack of interest in the operations, The Scotsman relates. All 23 employees have been made redundant, The Scotsman discloses. Last week, Leven, which had employed about 140 staff across its dealerships, appointed administrators at Leonard Curtis Business Rescue & Recovery, The Scotsman recounts. According to The Scotsman, directors said they had taken the decision to call in administrators following a difficult couple of years for the motor trade. In an update, the administrators, as cited by The Scotsman, said they were "continuing to adopt a hold strategy across the company's remaining sites, at Sighthill and Corstorphine, whilst discussions with interested parties are ongoing". "We appreciate that this is disappointing news for the staff based at Selkirk. Our focus is to ensure that those employees affected by redundancy there receive the best support possible," The Scotsman quotes joint administrator Stuart Robb as saying. "In terms of the remaining parts of the business, there has been significant interest and we are in advanced discussions with a number of parties. "We would like to thank the employees for their continued patience and support during this difficult period. Rest assured, we will endeavour to provide them with an update as soon as possible." PIONEER HOLDING: S&P Affirms 'B-' LT ICR, Off Watch Positive ------------------------------------------------------------ S&P Global Ratings said that it removed its 'B-' long-term issuer credit rating on Pioneer Holdings (Pattonair) from CreditWatch positive, and then affirmed and withdrew this rating. S&P also affirmed and withdrew the 'B-' issue rating on Pattonair's senior secured debt. The outlook at the time of the withdrawal was stable. The withdrawal was at the issuer's request following the full repayment of all outstanding rated debt. The rating actions follow the merger between Wesco Aircraft Holdings (Wesco) and Wolverine Intermediate Holding II Corp. (Wolverine), the parent of Pattonair. In a separate rating action, S&P has assigned its 'B-' long-term issuer credit rating to Wesco. S&P said, "We originally placed the issuer credit rating on Pattonair on CreditWatch with positive implications on Aug. 24, 2019. The removal of the CreditWatch placement and the affirmation of the issuer credit and issue ratings reflects the combined credit quality of Wesco and Wolverine, as outlined in our article "Wesco Aircraft Holdings Downgraded To 'B-' On Close Of Merger With Pattonair, Outlook Stable; Debt Ratings Lowered," published on Jan. 10, 2020." ********* 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 2020. 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 * * *