/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200117.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, January 17, 2020, Vol. 21, No. 13 Headlines B U L G A R I A IHB ELECTRIC: To Undergo Liquidation Proceedings C Z E C H R E P U B L I C PAPCEL: Declared Bankrupt by Ostrava Regional Court I R E L A N D HENLEY CLO I: Fitch Affirms B-sf Rating on Class F Debt I T A L Y ALBA 10 SPV: Moody's Affirms Ba2 Rating on EUR75MM Class C Notes ASTALDI SPA: Creditors' Meeting Scheduled for March 26 MONTE DEI PASCHI: Sells Junior Bond to Meet Bailout Terms N E T H E R L A N D S LEBARA: Kirkland & Ellis Advises Bondholders on Restructuring S E R B I A BEKO: Bankruptcy Agency to Auction Office Premises on Feb. 11 S W E D E N ASSEMBLIN FINANCING: S&P Assigns 'B' ICR, Outlook Stable U K R A I N E OKEAN: Kyiv Court Seizes Property Complex, Bankruptcy Probed U N I T E D K I N G D O M AVON PRODUCTS: Egan-Jones Withdraws B Senior Unsecured Ratings CABLE & WIRELESS: S&P Rates Subsidiary's New $1.3BB Term Loan BB- INSPIRED ENTERTAINMENT: Fitch Assigns 'B' LongTerm IDR SERVICERESERVE LLC: Put on Provisional Administration TRAVELFAST LTD: Goes Into Administration X X X X X X X X [*] BOOK REVIEW: THE SUCCESSFUL PRACTICE OF LAW - - - - - =============== B U L G A R I A =============== IHB ELECTRIC: To Undergo Liquidation Proceedings ------------------------------------------------ A general meeting of shareholders, held on January 15, 2020, of the subsidiary company of Industrial holding Bulgaria PLC - IHB Electric AD, Sofia, decided to terminate the company and to open liquidation proceedings. The time limit for liquidation is 12 months from the announcement of the invitation to the creditors in the Commercial Register. =========================== C Z E C H R E P U B L I C =========================== PAPCEL: Declared Bankrupt by Ostrava Regional Court --------------------------------------------------- CTK, citing information from the insolvency register, reports that the Regional Court in Ostrava declared paper machinery producer Papcel bankrupt on Jan. 13. All of Papcel's creditors agreed at their meeting last week that the company should be declared bankrupt, CTK relates. Papcel has been insolvent since September 2018, CTK notes. Creditors have lodged claims worth almost CZK1.7 billion, and Papcel's assets have been evaluated at CZK492 million, CTK discloses. According to CTK, the insolvency administrator said CZK823 billion worth of the claims lodged are secured claims. Papcel's biggest creditors are export guarantee and insurance company EGAP (CZK266.7 million) and Commerzbank (CZK268.5 million), CTK states. ============= I R E L A N D ============= HENLEY CLO I: Fitch Affirms B-sf Rating on Class F Debt ------------------------------------------------------- Fitch Ratings affirmed Henley CLO 1 DAC following the correction of a model error. RATING ACTIONS Henley CLO I DAC Class A XS2008552999; LT AAAsf Affirmed; previously at AAAsf Class B-1 XS2008553377; LT AAsf Affirmed; previously at AAsf Class B-2 XS2008553708; LT AAsf Affirmed; previously at AAsf Class C XS2008555828; LT A+sf Affirmed; previously at A+sf Class D XS2008556123; LT BBB-sf Affirmed; previously at BBB-sf Class E XS2008555588; LT BB-sf Affirmed; previously at BB-sf Class F XS2008554342; LT B-sf Affirmed; previously at B-sf Class X XS2008552304; LT AAAsf Affirmed; previously at AAAsf TRANSACTION SUMMARY Henley CLO I DAC (the issuer) is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, and second-lien loans. A total note issuance of EUR406.2 million was used to fund a portfolio with a target par of EUR400 million. The portfolio is managed by Napier Park Global Capital ltd. The CLO envisages a 4.5-year reinvestment period and an 8.5-year weighted average life (WAL). KEY RATING DRIVERS Model Error Correction: The initial ratings Fitch assigned in July 2019 were based on incorrect note margins. The manager has decided to update the Fitch test matrices with respect to correct note margins. Fitch has affirmed all the tranches in line with the model-implied ratings following the update of the Fitch test matrices. 'B'/'B-'Portfolio Credit Quality: Fitch considers the average credit quality of obligors to be in the 'B'/'B-'range. The Fitch weighted average rating factor of the current portfolio is 33.63. High Recovery Expectations: At least 90% of the portfolio comprises senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rating (WARR) of the current portfolio is 66.54%. Stable Transaction Performance: The transaction is currently above target par with no exposure to any defaulted assets. The current portfolio complies with all the portfolio profile tests including Fitch-defined industry limits and collateral quality tests including maximum obligor concentration limit. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Cash Flow Analysis: Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. Portfolio Management: The transaction features a 4.5-year reinvestment period and includes reinvestment criteria similar to other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. RATING SENSITIVITIES A 25% default multiplier applied to the portfolio's mean default rate, and with this increase added to all rating default levels, would lead to a downgrade of up to three notches for the rated notes. A 25% reduction in recovery rates would lead to a downgrade of up to four notches for the rated notes. ========= I T A L Y ========= ALBA 10 SPV: Moody's Affirms Ba2 Rating on EUR75MM Class C Notes ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of Class C notes in Alba 9 SPV S.r.l. and Class B notes in Alba 10 SPV S.r.l. The rating actions reflect the increased levels of credit enhancement for the affected notes. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain the current rating on the affected notes. Maximum achievable rating is Aa3 (sf) for structured finance transactions in Italy, driven by the corresponding local currency country ceiling of the country. In these two transactions, the current Eligible Investments definition would also limit further upgrades above Aa3(sf) for the junior and mezzanine notes. Issuer: Alba 9 SPV S.r.l. EUR233.8M Class A2 Notes, Affirmed Aa3 (sf); previously on Apr 11, 2019 Affirmed Aa3 (sf) EUR145.8M Class B Notes, Affirmed Aa3 (sf); previously on Apr 11, 2019 Upgraded to Aa3 (sf) EUR100.2M Class C Notes, Upgraded to Baa1 (sf); previously on Apr 11, 2019 Upgraded to Ba1 (sf) Issuer: Alba 10 SPV S.r.l. EUR408.4M Class A1 Notes, Affirmed Aa3 (sf); previously on Nov 29, 2018 Definitive Rating Assigned Aa3 (sf) EUR200M Class A2 Notes, Affirmed Aa3 (sf); previously on Nov 29, 2018 Definitive Rating Assigned Aa3 (sf) EUR130M Class B Notes, Upgraded to A2 (sf); previously on Nov 29, 2018 Definitive Rating Assigned A3 (sf) EUR75M Class C Notes, Affirmed Ba2 (sf); previously on Nov 29, 2018 Definitive Rating Assigned Ba2 (sf) RATINGS RATIONALE The upgrade rating actions are prompted by an increase in credit enhancement for the affected tranches. Sequential amortization led to the increase of the credit enhancement available in these transactions. For instance, the credit enhancement for the tranche C in Alba 9 SPV S.r.l. has increased to 28.54% from 21.56% since the last rating action while the credit enhancement for the tranche B in Alba 10 SPV S.r.l. has increased to 29.18% from 23.19% since closing. The principal methodology used in these ratings was "Moody's Approach to Rating ABS Backed by Equipment Leases and Loans" published in March 2019. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement, (3) improvements in the credit quality of the transaction counterparties and (4) a decrease in sovereign risk. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. ASTALDI SPA: Creditors' Meeting Scheduled for March 26 ------------------------------------------------------ Vincenzo Mascolo, Enrico Proia, Piergiorgio Zampetti, the Judicial Commissioners of Astaldi S.p.A., disclosed that in accordance with art. 171, paragraphs 2 and 3 of the Italian Bankruptcy Law, by decree published on August 5, 2019, the Court of Rome admitted Astaldi, with registered office in Rome, Via Giulio Vincenzo Bona 65 (Tax code 00398970582 and VAT no. 00880281001) to the composition with creditors procedure, appointing Angela Coluccio to the procedure. A. The meeting of creditors The Court ordered the summoning of creditors for March 26, 2020, at 10:30 a.m. before the Delegated Judge Angela Coluccio at the Court of Rome - Bankruptcy Section, in Rome, Viale delle Milizie 3/E. B. The composition plan The composition plan is structured according to a composition with business continuity scheme pursuant to art. 186-bis of the Italian Bankruptcy Law, with the following main assumptions: -- the continuation of the business activities by the debtor company; -- a capital and financial strengthening transaction through: (i) a capital increase of Astaldi for EUR225,000,000.00, which will be subscribed and paid in cash by Salini Impregilo S.p.A., in accordance with the provisions of the irrevocable binding offer made by Salini Impregilo on February 13, 2019, confirmed by letter dated June 18, 2019, and definitively by letter dated July 15, 2019, the effectiveness of which is subject to certain conditions precedent and, in particular, through the issuance of 978,260,870 new ordinary shares (at a price of EUR0.23 each), with ordinary dividend rights and the same rights and characteristics as the ordinary shares in circulation; (ii) a further capital increase up to a maximum nominal amount of EUR98,653,846.00, to service the conversion into shares of Astaldi's unsecured debts through the issuance of a maximum number of 428,929,766 new ordinary dematerialized shares (at a price of EUR0.23 each), with regular dividend rights and the same rights and characteristics as the ordinary shares in circulation; (iii) the disbursement of additional loans for a total of EUR400,000,000.00; -- through the creation of dedicated assets for the purposes of art. 2447-bis et seq. of the Italian Civil Code: the segregation of a set of assets that are not required for business continuity and destined to be progressively liquidated and sold on the market, in some cases upon completion thereof, and whose net proceeds will be allocated to satisfy exclusively the unsecured creditors; -- a time horizon of 5 years (2019-2023), of which 4 years after the date of the potential homologation (omologa) of the composition. The applicant therefore intends to satisfy its creditors by means of: -- the cash flows that will become available as a result of the capital increase transaction under the terms of the proposal received from Salini Impregilo; these cash flows will be used in part to finance business continuity and to complete the works for which Astaldi is licensee, and, in part, to repay the super senior and preferred debts; -- the net proceeds from the sale of the assets allocated pursuant to art. 2447-bis et seq. of the Italian Civil Code, the income of which will be paid entirely and exclusively to unsecured creditors, to whom participative financial instruments will be allocated; -- the allocation of Astaldi shares to unsecured creditors. According to the provisions under the documents filed, the composition with creditors shall be deemed to have been fulfilled by the cash payment of the super senior and preferred debts and by the allocation of the newly issued shares and participative financial instruments to the unsecured creditors. C. The composition proposal. The timing and manner of satisfying creditors. According to the applicant, the implementation of the composition plan will make it possible to obtain the resources necessary to pay: -- the full amount of super senior debts and management costs when due, as regards the super senior claims relating to the loans granted pursuant to art. 182-quinquies of the Italian Bankruptcy Law by means of the related refinancing; -- the full amount of preferred debts (within the limits of the value of the assets covered by the guarantee, as regards VAT recoupment receivables) within one year from the homologation (omologa) of the composition with creditors, in compliance with the provisions of art. 186-bis of the Italian Bankruptcy Law, including the preferred component of tax and social security payables, as specified in the proposed tax and social security settlement pursuant to art. 182-ter of the Italian Bankruptcy Law; -- unsecured creditors (including the unsecured component of tax and social security payables) through the allocation of: (i) newly issued Astaldi shares, traded on the market managed by Borsa Italiana, allotted to creditors in the proportion of 12,493 shares for every EUR100 of debt; (ii) participative financial instruments that will give each holder the right to receive the net proceeds from the liquidation of the assets included in the assets under consideration and will be allotted to creditors in the proportion of 1 participative financial instrument for every EUR of debt. The allocation of shares and participative financial instruments to creditors will be completed within 120 days from the homologation (omologa) of the composition. No subordinated debts will be repaid. D. Participation in the creditors' meeting and voting Each creditor may be represented by a special representative with power of attorney, which may be drawn up informally in writing, even using the form available from the documentation referred to in letter H below. If the creditor is a company (or another entity having legal personality), it must provide evidence of the powers of the person representing it or of the person who received the power of attorney by means of an excerpt issued by the relevant chamber of commerce no more than 30 days in advance or any corresponding document. Pursuant to art. 178, last paragraph of the Italian Bankruptcy Law, creditors who have not exercised their vote at the meeting may submit it by means of certified electronic mail (PEC) to cp63.2018roma@pecconcordati.it or to the Court Clerk by filing the document or by telegram, letter or fax to the Court of Rome, Bankruptcy Section, Clerk of the Delegated Judge Angela Coluccio, Viale delle Milizie 3/E, 00192, Rome in the twenty days following the finalization of the minutes; otherwise, the provisions of art. 177 of the Italian Bankruptcy Law will apply. E. Debts allowed to vote and related amounts Since as part of their duties the Judicial Comissioners must verify the list of creditors prepared by the company, by January 10, 2020 the creditors are invited to send the Receivers a communication with the subject "Debt details" exclusively by means of a PEC certified email sent to p63.2018roma@pecconcordati.it, containing the amount of the receivable from Astaldi S.p.A. on September 28, 2018, (date of publication of the appeal pursuant to art. 161, paragraph 6 of the Italian Bankruptcy Law in the relevant Companies' Register), specifying the related reason and any pre-emptive cause, attaching the relevant supporting documentation. If no communication of "Debt details" (Precisazione del credito) is sent, the debt will be assessed on the basis of the debtor's accounting results, subject to any adjustments by the Judicial Commissioners. For foreign creditors only, the aforementioned communication may be sent by ordinary email to the email address creditori@cpastaldi.com. The communication can also be individually and personally signed by the party in the following ways (various alternatives): (i) with a digital signature; (ii) with an ordinary signature placed on the document in original form, then scanned digitally for the purpose of its electronic transmission. Communications received after January 10, 2020, by any means whatsoever will not be taken into consideration. All debts accrued from September 29, 2018, must be considered as super senior and do not confer the right to vote. Pursuant to art. 176 of the Italian Bankruptcy Law, the Delegated Judge may provisionally admit the challenged claims for the sole purpose of voting and the calculation of the majorities, without prejudice to the final decisions on the existence or otherwise of the debts themselves. F. Majority for approval of the composition The proposal for composition with creditors shall be deemed to have been approved if it receives the favourable vote of the majority of the debts admitted to the vote, pursuant to art. 177 of the Italian Bankruptcy Law. When calculating the majorities the following will be taken into account: -- the votes cast after the date of filing of the report pursuant to art. 172 of the Italian Bankruptcy Law; -- the votes validly cast at the creditors' meeting; -- the votes received within twenty days of the closing of the minutes of the creditors' meeting, in accordance with the procedures set out in letter D above. G. Subsequent communications The PEC certified email address of the Procedure is: cp63.2018roma@pecconcordati.it It is the responsibility of the creditor to inform the Judicial Commissioners of the PEC certified email address to contact for communications relating to the procedure and any changes thereto. By January 10, 2020, creditors are invited to submit to the PEC certified email address specified above the PEC certified email address at which they want to receive all communications relating to the Procedure, specifying that creditors without a PEC certified email address can use the PEC certified email address of a trusted third party (lawyer, consultant, professional, trade union, trade association, etc.), while communications received by ordinary email will not be considered valid, with the exception of what was specified above for foreign creditors. If no PEC certified email address is provided or if the message is not delivered for reasons attributable to the recipient, pursuant to art. 31-bis of the Italian Bankruptcy Law any subsequent communications will be made exclusively by filing with the Court Clerk. H. Viewing documentation The appeal with its attachments and any other documentation made available to creditors will be accessible on the company's website www.astaldi.com and in a reserved area at the address www.portalecreditori.it. I. The report as per art. 172 of the Italian Bankruptcy Law 45 days before the meeting of creditors, the Judicial Commissioners will file a detailed report with the Court Clerk on the causes of the financial distress, the conduct of the debtor, the proposals for composition with creditors and the guarantees offered to creditors pursuant to art. 172 of the Italian Bankruptcy Law. By the same term, the aforementioned report will be delivered pursuant to the applicable law. MONTE DEI PASCHI: Sells Junior Bond to Meet Bailout Terms --------------------------------------------------------- Valentina Za at Reuters reports that state-owned Monte dei Paschi joined fellow Italian banks in a start-of-year bond issuance rush on Jan. 15, paying an 8% coupon to sell a junior bond to fulfil commitments under its bailout agreement. Monte dei Paschi's Tier2 bond, a type of subordinated debt that ranks below senior debt in the repayment order, comes after Moody's last week raised its outlook on the bank's debt to "positive", acknowledging its restructuring progress, Reuters notes. Monte dei Paschi, for years at the forefront of Italy's banking crisis, was rescued by the state in 2017 in an EUR8 billion bailout that also hit the bank's shareholders and junior bondholders, Reuters recounts. According to Reuters, under the restructuring plan Italy agreed with the European Commission to clear the bailout, the bank had a commitment to issue EUR1.45 billion in subordinated debt to replenish its Tier2 capital following a debt-to-equity conversion carried out as part of its rescue. The Jan. 15 EUR400 million bond sale allows the bank to meet that commitment after being granted an extension by Brussels, Reuters states. In December, Italy won an extension to the end of January of a deadline for the state to submit an outline of how it plans to re-privatize Monte dei Paschi by the end of 2021, Reuters relates. The government is also discussing with Brussels a scheme that would allow Monte dei Paschi to reduce its impaired loans without excessively eating into its capital buffers, Reuters says. In an improvement cited by Moody's in its recent move, Monte dei Paschi has managed to reduce its soured loans to 12.5% of total lending, beating a 12.9% target set by its restructuring plan for 2021, Reuters notes. About Banca Monte dei Paschi di Siena Banca Monte dei Paschi di Siena SpA -- http://www.mps.it/-- is an Italy-based company engaged in the banking sector. It provides traditional banking services, asset management and private banking, including life insurance, pension funds and investment trusts. In addition, it offers investment banking, including project finance, merchant banking and financial advisory services. The Company comprises more than 3,000 branches, and a structure of channels of distribution. Banca Monte dei Paschi di Siena Group has subsidiaries located throughout Italy, Europe, America, Asia and North Africa. It has numerous subsidiaries, including Mps Sim SpA, MPS Capital Services Banca per le Imprese SpA, MPS Banca Personale SpA, Banca Toscana SpA, Monte Paschi Ireland Ltd. and Banca MP Belgio SpA. In February 2017, Italy's lower house of parliament approved a government bid to increase public debt by up to EUR20 billion (about US$21.3 billion) to fund a rescue package for Monte dei Paschi di Siena (MPS) and other ailing banks. The move comes after the European Union approved in December 2016 the Italian government's move to rescue MPS, the country's third-largest lender and the world's oldest bank. ===================== N E T H E R L A N D S ===================== LEBARA: Kirkland & Ellis Advises Bondholders on Restructuring ------------------------------------------------------------- Further to advising an ad hoc group of bondholders of Lebara on a contested, coercive share pledge enforcement, which was approved by a Dutch court on July 30, 2019, Kirkland & Ellis LLP has advised the ad hoc group on the subsequent restructuring of Lebara's capital structure. The restructuring was completed on January 9, 2020. Bondholders exchanged their existing bonds, issued by Vieo B.V., a Dutch entity, for new first lien bonds and tranche A second lien bonds, in each case issued by a new Jersey intermediate holding company ("Midco"). In addition, bondholders were issued warrants, which provide holders with the option of receiving class A share receipts in a new Jersey holding company ("Topco"). Certain bondholders who participated in a backstop arrangement have received tranche B second lien bonds issued by Midco, and class B shares issued by Topco. The new bonds are governed by Norwegian law. Kirkland & Ellis worked closely with BAHR, as Norwegian counsel, and Nauta, as Dutch counsel. Background and preparatory steps for enforcement Following certain events of default, over two-thirds of bondholders (by value) resolved, by written resolution on June 11, 2019, to accelerate the Bonds. The bondholders simultaneously instructed the bond trustee to apply to the Dutch court to approve an enforcement over the share pledge over Vieo's shares. In preparation for the hearing on July 16, 2019, Dutch counsel presented the court with an independent third-party valuation and the results of a market sounding exercise. This evidence demonstrated that the value of the equity was significantly less than the amount outstanding under the Bonds. Contested enforcement court hearing The hearing in the Dutch court was ground-breaking and, unusually for a Dutch share pledge enforcement, was contested. The bondholders asked the Dutch court to approve a "credit bid", in which bondholders agreed to set off EUR200 million of the outstanding amounts under the Bonds in consideration for the transfer of the shares to the Newco. Post-transfer, approximately EUR160 million of Bonds remain outstanding (representing EUR150 million of principal plus other accrued amounts). Vieo's former shareholder opposed the enforcement. In particular: * Abuse of power — The former shareholder argued that the trustee was abusing its power in seeking to enforce the share pledge. However, the Dutch court concluded that the trustee exercised its rights correctly. * Valuation and alternative offers — The former shareholder presented an alternative valuation that suggested that the value of the equity was in excess of outstanding amounts under the Bonds, arguing that this meant that surplus value could be realised. However, the former shareholder failed to present evidence of alternative offers for Vieo's shares. Whilst the former shareholder notified the Dutch court that some preliminary expressions of interests had been received with respect to the sale of certain parts of the business, the Dutch court held that this was not relevant, as the rights and application to enforce related to Vieo's shares only. The Dutch court concluded that there were no alternative offers or transactions presented that could reasonably be expected to result in higher proceeds than the bondholders' credit bid. Accordingly, the Dutch court approved the enforcement on July 30, 2019. The shares were transferred the following day to the Newco, a Dutch Stichting. Kirkland team The coercive nature of the enforcement required unique solutions to structuring, financing, governance, antitrust and tax issues, which involved teams across multiple practice areas. The Kirkland team was led by: Kon Asimacopoulos -- kon.asimacopoulos@kirkland.com , Matt Czyzyk -- matthew.czyzyk@kirkland.com , Ian Clarke, Gabe Harley and Peter Madden (restructuring); Aprajita Dhundia and James Hunn (corporate); Matthew Merkle, Michael Taufner, Ben Myers and Charles Osborne (debt finance); Thomas Sebastian Wilson and James Parkinson (antitrust & competition); and David Irvine and Anthony Antioch (tax). About Lebara Lebara is a telecommunications group that provides services to clients around the world. Lebara provides pay-as-you-go mobile SIM cards; its logo is a common sight in newsagents and other small retail outlets across Western Europe. =========== S E R B I A =========== BEKO: Bankruptcy Agency to Auction Office Premises on Feb. 11 ------------------------------------------------------------- SeeNews reports that Serbia's Bankruptcy Supervision Agency said it is offering for sale the office premises of insolvent textile company Beko in Vrbas, in the country's northern part, at an auction on Feb. 11. According to SeeNews, the Bankruptcy Supervision Agency said in a notice the starting price in the auction is set at EUR202,500 (US$225,300). The office premises have a floor area of 545,300 square metres and are valued at an estimated EUR405,000, SeeNews discloses. A deposit of EUR81,000 is required in order to participate in the tender, SeeNews states. Beko went bankrupt in February 2003 and the bankruptcy agency has so far carried out multiple auctions for the sale of its assets, SeeNews recounts. =========== S W E D E N =========== ASSEMBLIN FINANCING: S&P Assigns 'B' ICR, Outlook Stable -------------------------------------------------------- &P Global Ratings assigned its 'B' issuer credit rating to Assemblin Financing AB and its 'B' issue-level rating to its senior secured notes. The recovery rating is '3'. The 'B' issuer credit rating on Assemblin reflects the group's financial-sponsor ownership, geographical concentration relative to peers, and low but improving EBITDA margins. The company refinanced its debt with EUR250 million of senior secured notes, which the issuer expects to hedge into Swedish krona (SEK) in the near term. The financial sponsor received a dividend of EUR93 million (SEK1,000) as part of this transaction. S&P said, "Our assessment of Assemblin also reflects its solid market position in Sweden, where it generates 82% of revenue and is the No. 2 market player behind Bravida Holding AB. The company continues to diversify into Norway and Finland through core competencies in these countries, including heating and sanitation, particularly in Oslo, and automation in Finland. We expect further cross-selling opportunities as the company establishes itself in these markets." Assemblin's market position is supported by its large branch network, with 160 locations supporting local relationships, and its well-recognized brand. Assemblin benefits from its mix of end customers, which include municipalities, industrial and construction companies, small private businesses, and individuals. Almost two-thirds of the company's electrical, heating, and sanitation business falls within resilient end markets, which include service business, health care, education, and infrastructure. It has minimum exposure to the new residential construction market in those business areas, which account for less than 5% of revenue. Service assignments now represent 37% of total revenue in 2019, up from 36% in 2018, indicating improved recurring revenue. The company has a strong project backlog of over SEK8 billion, with a mix of customers including municipalities and industrial, providing strong revenue visibility. These strengths are constrained by the group's relatively small size compared with larger installation companies and international service companies such as Bravida and Spie S.A. The majority of revenue is focused on narrow installation services, with Sweden accounting for 82% of 2018 revenue. This could make the group vulnerable to increased competition if large international peers strengthen their presence in the Nordic region or service companies seek to expand in the installation market. S&P said, "We consider Assemblin's financial structure to be highly leveraged. We forecast adjusted debt to EBITDA of about 6.5x at year-end 2019. Although we anticipate deleveraging in the next two years, in the absence of discretionary spending or shareholder-friendly actions, we do not expect adjusted debt to adjusted EBITDA below 5x. Assemblin's ownership by financial sponsor Triton also influences our assessment. We anticipate improving EBITDA margins over the forecast period, supported by continued investment in the business to improve operational performance, with the majority completed in 2019. Growth in higher-margin geographies and segments, as well as the closure of nonperforming branches, is expected to support margin improvement. "We view positively the company's ability to generate stable funds from operations (FFO). We forecast underlying annual FFO of SEK380 million–SEK390 million in 2019, and about SEK500 million in 2020. This represents more than 9% of adjusted debt and allows the company to deleverage. We expect Assemblin to continue to invest in group opportunities supported by FFO. Furthermore, the group's comfortable FFO cash interest coverage above 3.2x helps sustain high leverage, in our view. Assemblin's senior secured notes are euro-denominated, not its functional currency. We view currency risk as sufficiently mitigated by management's commitment to hedge material currency mismatches to ensure that sufficient funds in the same currency are available to service the notes. "The stable outlook reflects our view that Assemblin will continue stable revenue growth of about 2% over the next 12 months, and EBITDA margins improving above 6.5% from operating efficiencies. As a result, we expect deleveraging below 6x and positive FOCF that supports growth in 2020. "We could lower our ratings because of a material decline in profitability or higher volatility in Assemblin's 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 that would result in S&P Global Ratings-adjusted debt to EBITDA of more than 7x 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 and maintain S&P Global Ratings-adjusted debt to EBITDA of less than 5x." Assemblin is a complete installation and service provider in the Nordic region, focusing on electrical, heating, sanitation, and ventilation. The company is headquartered in Sweden, with 160 branches throughout the Nordics, and employs about 6,000 people. In 2018, Assemblin generated SEK8.89 billion of revenue. ============= U K R A I N E ============= OKEAN: Kyiv Court Seizes Property Complex, Bankruptcy Probed ------------------------------------------------------------ UNIAN reports that Kyiv's Pechersky district court on Jan. 13 ruled to seize Public Joint-Stock Company (PJSC) Mykolaiv-based Okean shipyard's integral property complex. According to UNIAN, prosecutors are probing into the enterprise's illegal bankruptcy. =========================== U N I T E D K I N G D O M =========================== AVON PRODUCTS: Egan-Jones Withdraws B Senior Unsecured Ratings -------------------------------------------------------------- Egan-Jones Ratings Company, on January 6, 2020, withdrew its 'B' foreign currency and local currency senior unsecured ratings on debt issued by Avon Products, Incorporated to BB+ from BBB-. Headquartered in London, United Kingdom, Avon Products, Inc. is a multi-level marketing company in beauty, household, and personal care categories. Avon had annual sales of $5.5 billion worldwide in 2018. It is the fifth-largest beauty company and, with 6.4 million representatives, is the second-largest direct-selling enterprise in the world. CABLE & WIRELESS: S&P Rates Subsidiary's New $1.3BB Term Loan BB- ----------------------------------------------------------------- S&P Global Ratings assigned its 'BB-' issue-level rating on Coral-US Co-Borrower LLC's new $1.3 billion senior secured term loan B-5 due 2028. Coral-US Co-Borrower is a subsidiary of Cable & Wireless Communications Limited (CWC; BB-/Stable/B). S&P said, "We view the transaction to be debt neutral because CWC will use proceeds to repay part of the existing $1.64 billion secured term loan and pay any fees in connection with the new loan. The new loan will have several incurrence covenants calculated under a proportionate basis: net leverage ratio of maximum of 5.0x and senior secured net leverage ratio maximum of 4.0x. "We believe this transaction is consistent with company's debt refinancing strategy and will somewhat improve CWC's debt maturity profile to 7.5 years from 6.7 years, with a weighted average cost of debt at 6.1%." The rating on CWC reflects its leading position in the markets where it operates as a wired and wireless telecommunications and cable TV provider. The group also enjoys solid profitability and good geographic, product, and customer diversification. The rating also reflects S&P's concerns regarding the sluggish macroeconomic and strong competitive conditions in the Caribbean and Latin America, especially in Panama and the Bahamas for the residential mobile segment that could dent average revenue per user and churn, hampering the group's cash flows. S&P expects CWC to use most of its operating cash flows to finance capital expenditures, resulting in limited free operating cash flows and a debt-to-EBITDA ratio of 4.2x-4.4x for the next two years. INSPIRED ENTERTAINMENT: Fitch Assigns 'B' LongTerm IDR ------------------------------------------------------ Fitch Ratings assigned Inspired Entertainment, Inc. a final Long-Term Issuer Default Rating of 'B'. The Rating Outlook is Stable. Fitch has also assigned Inspired's GBP220 million equivalent term loan B (TLB; in tranches of GBP140 million and EUR90 million) a senior secured debt rating of 'BB-'/'RR2'. The IDR reflects Inspired's strong financial position that is balanced with a modest size compared with peers, some lack of diversification, both by customer and geography, and regulatory risk. The group has a strong market position as an innovative provider of virtual, mobile and served-based games. It has moderate leverage, satisfactory profitability with expected cost synergies offsetting the negative impact of UK government Triennial Review of maximum betting stakes, and a high portion of revenue derived from medium-term contracts. The Stable Outlook reflects moderate execution risk around integration of Novomatic's UK Gaming Technology Group (NTG) and delivery of synergies. Although the final debt documentation reflects a higher-than-expected coupon on the issued debt, it also set maximum capital expenditures that are below its previous forecasts. Fitch expects funds from operations (FFO) adjusted leverage to fall to around 3.7x in 2022 from 4.0x in 2020. This should result from positive free cash flow (FCF), helped by cost savings from NTG's integration. Sustained financial discipline and smooth integration would be positive for the rating. KEY RATING DRIVERS Recurring Revenue Enhances Credit Profile: Inspired has established itself in the global gaming sector as an innovative and reliable provider of virtual, mobile and served-based games. This enables the group to win new contracts for the supply of technology and the management of online games and virtual sports- betting in its markets. These contracts have a typical duration of three-to-five years, which support cash flow visibility. Its rating encapsulates a high share of recurring revenues, and the ability of Inspired to renew large contracts, as achieved in 2019 with William Hill. Moderate Size, Diversification: The rating is constrained to the 'B' rating category by the current small-to-moderate size of the group post-NTG merger. The combined group remains significantly smaller than competitors such as International Game Technology (IGT), Scientific Games (SGC) or Playtech, which all generate annual revenues in excess of USD1 billion. Fitch sees this as potentially constraining Inspired's ability to see off economic downturns or larger competitors' pricing pressures. However, if the integration is successful and leverage remains moderate, this will provide Inspired with sufficient financial flexibility to pursue further growth opportunities. High Client Concentration Decreasing: Fitch expects the combined group to derive a significant portion of its profitability from a small number of clients, with the top 10 representing around 50% of revenue (top-five clients generating around 35%). Fitch also expects some concentration in the UK pub and licensed betting-office sectors. Inspired has nevertheless concluded medium-term contracts with these companies, and churn risk is mitigated by high switching costs. However, the loss of a key customer would materially affect revenue while competitive pressure remains intense. Material Exposure to UK Market: Fitch expects the UK market to have generated a significant 70% of estimated pro-forma revenue for 2019. The continuing decline of the number of pubs in the UK (17% of 2018 pro-forma revenue), and the recent UK government Triennial Review (maximum GBP2 stake for B2 machines) has put pressure on B2B gaming technology companies in the UK. Additionally, Fitch believes that with responsible gaming increasingly under political scrutiny in the UK and the EU, further potential regulatory changes could impact growth prospects and profitability of gaming operators. Growth Potential in Certain Markets: The liberalisation of gaming markets, governments' eagerness to find new tax-raising avenues and an increasing supply of new games should all provide opportunities for Inspired, be it in the gaming machine sector or virtual sport segments. The group should be able to leverage its expertise and reputation and benefit from a limited number of suppliers in the industry, allowing it to expand in new countries. Inspired is well-positioned to take advantage of the nascent U.S. online gaming market, further to recent changes in legislation, although competition will be intense from native gaming software providers such as IGT and SGC. Adequate Cash Flow Expected: Fitch has revised down funds from operations (FFO) on higher interest costs, and lower EBITDA due to delayed Virtual Sports growth and lower demand for analogue machines. However, Fitch continues to expect the complementarity of Inspired's and NTG's businesses to drive cost efficiency. Inspired should be able to generate sizeable cost synergies of around USD10 million per year within 12 months of the NTG merger to offset both the weaker profitability of NTG and the impact of the Triennial Review. Fitch forecasts FFO margin to stabilise at around 22% from 2022, which is solid for the rating. High Capex to Decline: Fitch believes that Inspired will comply with its new maximum capex covenant. Fitch estimates that the combined group's normalised capex would be USD35 million-USD40 million from 2020. This is due to both the now completed capex related to the Greek OPAP contract (USD27 million capex in 2017-2018) and a change in NTG's business model from revenue participation arrangements to rental agreements. These rental agreements require less capex, due to the digitisation of the business and the longer life of new machines. Moderate Execution Risks: Inspired could be contemplating further large acquisitions after NTG, at a time when headcount reduction may put pressure on operational efficiencies. It has successfully re-negotiated contracts with six of its eight biggest UK pub customers. In its view, this will drive NTG's margin improvement over the next four years. Opportunistic Financial Policy: Management has a public long-term target of net debt/EBITDA trending towards 2.0x (consistent with FFO adjusted net leverage of 3.0x-3.5x). However, Fitch does not rule out any opportunistic, further debt-funded acquisitions that could push leverage higher, even though this may be temporary. Fitch currently does not factor in further M&A-driven growth, or dividends, in its projections; therefore Fitch assumes that FFO adjusted gross leverage could decrease to 3.7x by 2022 from an estimated 4.0x in 2020 and pro-forma 4.7x in 2019 (excluding NTG synergies). DERIVATION SUMMARY The merger between Inspired and NTG creates a growing, moderately-sized B2B gaming technology company, with higher EBITDAR margin and FFO capabilities than that of peers such as Intralot S.A. (CCC). Inspired is smaller and has slightly weaker profitability than global peers such as International Game Technology plc (IGT) and Scientific Games Corporation (SGC). This constrains its ability to compete should these larger groups decide on aggressive marketing and pricing policies. Inspired has a strong presence in the fast-growing gaming software market in a diverse number of countries. Moderate leverage and a reasonably solid financial profile underpin Inspired's 'B' IDR. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue to have been negatively impacted by the fixed odds-betting terminal (FOBT) GBP2 maximum stake in the UK in 2019. Fitch estimates 2%-5% p.a. revenue growth from 2020 onwards, due to the digitisation of NTG, the execution of the OPAP contract, ramp-up of operations within the US, and increasing virtual sport revenue; - Profitability to have been impacted by the FOBT GBP2 maximum stake in 2019, before being enhanced by synergies (around USD10 million run-rate), cost discipline and digitisation of NTG. Fitch expects FFO margin of around 20% from 2020; - Capex should decline from 2020 and stabilise at around USD35 million, in line with debt documentation; - No dividends; - No acquisitions; and - GBP/USD exchange rate stable at 1.3 for the next four years KEY RECOVERY ASSUMPTIONS Fitch assumes that Inspired would be considered a going concern in bankruptcy and that it would be re-organised rather than liquidated. In its bespoke going-concern recovery analysis Fitch considered an estimated post-restructuring EBITDA available to creditors of around USD49 million. Fitch applied a distressed enterprise value (EV)/ EBITDA multiple of 5x. Both Inspired's GBP20 million senior secured revolving credit facility (RCF) and GBP220 million senior secured TLB rank equally with each other. After deducting 10% for administrative claims, its principal waterfall analysis generated a ranked recovery in the 'RR2' band, indicating a 'BB-' instrument rating. The waterfall analysis output percentage on current metrics and assumptions was 72%, at the low-end of the 'RR2' band. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Improvement in the business profile through further diversification of customers and geographies, increased scale without compromising profitability, smooth renewal of contracts at existing, or even more favourable terms, together with a stabilised regulatory environment in the UK and other key markets - Maintenance of financial policies and structure with FFO adjusted gross leverage below 4.0x on a sustained basis - Sustained positive FCF margin of at least 3% - FFO fixed charge cover remaining above 3.0x Developments That May, Individually or Collectively, Lead to Negative Rating Action - Lack of financial discipline, including opportunistic financing or investment activities, leading to FFO adjusted gross leverage above 5.5x on a sustained basis especially if combined with downward pressure on or increased volatility in FCF generation - Loss of contracts with main customers, leading to shrinking EBITDA - Failure to achieve synergies and/or cost discipline resulting in FFO margin materially below 20% for a sustained period - FFO fixed charge cover falling below 1.8x on a sustained basis LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: The acquisition of NTG was fully debt-funded. The new debt structure debt includes a GBP220 million-equivalent secured TLB and a GBP20 million RCF, both due in 2024. Fitch forecasts the RCF to remain fully undrawn for the next four years. Fitch views Inspired's liquidity as satisfactory and improving over the next four years, due to positive FCF generation. ESG CONSIDERATIONS Inspired has an ESG Relevance Score of 4 for Customer Welfare - Fair Messaging, Privacy & Data Security - due to increasing regulatory scrutiny on the sector, in the context of a greater awareness around social implications of gaming addiction and increasing focus on responsible gaming. This has a negative impact on the credit profile, as already reflected in the assigned rating, and is relevant to the rating in conjunction with other factors. SERVICERESERVE LLC: Put on Provisional Administration ----------------------------------------------------- Following the violations by Limited Liability Company Insurance Company SERVICERESERVE (hereinafter, the Company) of the insurance requirements established by the Bank of Russia, the regulator, by virtue of its Orders No. OD-1944 and No. OD-1945, dated August 26, 2019, revoked the Company's insurance licenses, appointed a provisional administration to manage the Company (hereinafter, the provisional administration) and suspended the powers of its executive bodies. The provisional administration established facts suggesting that the Company's owners and officials had committed actions causing property damage to the Company. The provisional administration estimates the value of the Company's property (assets) to be insufficient to meet its liabilities to creditors and make mandatory payments. In view of the above, on November 5, 2019, the provisional administration applied to the Arbitration Court of the Vladimir Region to declare the Company insolvent (bankrupt). Given a threat to the rights and legitimate interests of policy holders, the insured and beneficiaries, the Bank of Russia submitted the information to the Prosecutor General's Office of the Russian Federation and the Investigative Department of the Ministry of Internal Affairs of the Russian Federation for consideration and procedural decision-making. TRAVELFAST LTD: Goes Into Administration ---------------------------------------- The Board of CEPS on Jan. 15 disclosed that Travelfast Limited has been placed in administration. Travelfast Limited is based in Batley, West Yorkshire. =============== X X X X X X X X =============== [*] BOOK REVIEW: THE SUCCESSFUL PRACTICE OF LAW ----------------------------------------------- Author: John E. Tracy Publisher: Beard Books Soft cover: 470 pages List Price: $34.95 Order a copy today at https://is.gd/fSX7YQ Originally published in 1947, The Successful Practice of Law still ably serves as a point of reference for today's independent lawyer. Its contents are based on a series of non-credit lectures given at the University of Michigan Law School, where the author began teaching after 26 years of law practice. His wisdom and experience are manifest on every page, and will undoubtedly provide guidance for today's hard-pressed attorney. The Successful Practice of Law provides timeless fundamental guidelines for a successful practice. It is intended neither as a comprehensive reference work, nor as a digest of law. Rather, it is a down-to-earth guide designed to help lawyers solve everyday problems -- a ready-to-tap source of tested proven methods of building and maintaining a sound practice. Mr. Tracy talks at length about developing a client base. He contends that a firemen's ball can prove just as useful as an exclusive party at the country club in making contacts with future clients. He suggests seeking work from established firms as a way to get started before seeking collections work out of desperation. In his chapter on keeping clients, Mr. Tracy gives valuable lessons in people skills: "(I)f a client tells you he cannot sleep nights because of worry about his case, you will ease his mind very much by saying, 'Now go home and sleep. I am the one to do the worrying from now on.'" Rather than point out to a client that his legal predicament is partly his fault, "concentrate on trying to work out a program that will overcome his mistakes." He cautions against speculating aloud to clients on what they could have done differently to avoid current legal problems, lest they change their stories and suddenly claim, falsely, that they indeed had done that very thing. He also advises against deciding too quickly that a client has no case: "After you have been in practice for a few years you will be surprised to find how many seemingly desperate cases can be won." Mr. Tracy advises studying as the best use of downtime. He quotes Mr. Chauncey M. Depew: "The valedictorian of the college, the brilliant victors of the moot courts who failed to fulfill the promise of their youth have neglected to continue to study and have lost the enthusiasm to which they owed their triumphs on mimic battle fields." Mr. Tracy advises against playing golf with one's client every time he asks: "My advice would be to accept his invitation the first time, but not the second, possibly the third time but not the fourth." Other topics discussed by Mr. Tracy, with the same practical, sound advice, include fixing fees, drafting legal instruments, examining an abstract of title, keeping an office running smoothly, preparing a case for trial, and trying a jury case. But some of best counsel he offers is the following: You cannot afford to overlook the fact that you are in the practice of law for your lifetime; you owe a duty to your client to look after his interests as if they were your own and your professional future depends on your rendering honest, substantial services to your clients. Every sound lawyer will tell you that straightforward conduct is, in the end, the best policy. That kind of advice never ages. John E. Tracy was Professor Emeritus and Member of University of Michigan Law School Faculty from 1930 to 1969. Professor Tracy practiced law for more than a quarter century in Michigan, New York City, and Chicago before joining the Law School faculty in 1930. He retired in 1950. He was born in 1880. He died in December 1969. ********* 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 * * *