/raid1/www/Hosts/bankrupt/TCREUR_Public/200401.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, April 1, 2020, Vol. 21, No. 66
Headlines
A Z E R B A I J A N
AZERBAIJAN: S&P Affirms BB+/B Sov. Credit Rating, Outlook Stable
F R A N C E
B&B HOTELS: Moody's Cuts CFR to Caa1 & Alters Outlook to Negative
FINANCIERE TOP: S&P Cuts ICR to B on Increased Financial Leverage
YOUNI 2019-1: Moody's Affirms EUR6.8MM Class F Notes at B1
G E R M A N Y
CBR SERVICE: Moody's Affirms B2 CFR, Alters Outlook to Negative
PLATIN 1425: Moody's Affirms B3 CFR, Alters Outlook to Neg.
TAKKO FASHION: Moody's Cuts CFR to B3, On Review for Downgrade
I T A L Y
AEROPORTI DI ROMA: S&P Affirms BB+ Rating; On CreditWatch Negative
BANCA POPOLARE: S&P Alters Outlook to Neg. & Affirms 'BB+/B' ICR
ICCREA BANCA: S&P Alters Outlook to Negative & Affirms 'BB/B' ICRs
MOBY SPA: Administrators Seize Account of Ferry Operator
[*] Moody's Takes Actions on 15 Italian Banks
K A Z A K H S T A N
NATIONAL COMPANY: Moody's Affirms B1 CFR, Outlook Stable
S L O V A K I A
MSK ZILINA: Fin'l. Impact of Coronavirus Scare Prompts Liquidation
S P A I N
GRUPO ANTOLIN: S&P Downgrades Rating to 'B-' on COVID-19 Impact
INTERNATIONAL PARK: Moody's Cuts CFR to Caa1, Outlook Negative
PROMOTORA DE INFORMACIONES: S&P Lowers ICR to 'B-', On Watch Neg.
S W I T Z E R L A N D
GATEGROUP HOLDING: Moody's Cuts CFR to B3, Outlook Negative
T U R K E Y
TURK HAVA: Moody's Cuts CFR to B2 & Reviews Ratings for Downgrade
U N I T E D K I N G D O M
AQUA EIGHT: Goes Into Liquidation Amid Coronavirus Crisis
CANADA SQUARE 2020-1: Moody's Gives Caa3 Rating to Class X Notes
CANADA SQUARE 2020-1: S&P Assigns B (sf) Rating to X-Dfrd Notes
CHESTER B1: Moody's Gives (P)Ba3 Rating to Class E Notes
COOKEZE LIMITED: Enters Administration, 72 Jobs Affected
DME LTD: Fitch Downgrades LT IDR to BB, Outlook Negative
EI GROUP PLC: S&P Downgrades ICR to CCC+, Outlook Negative
EI GROUP: Moody's Withdraws B1 CFR After Sec. Notes Repayment
FRANKLIN UK: Moody's Cuts CFR to B3 & Alters Outlook to Negative
MARKS & SPENCER: Moody's Cuts Senior Unsec. LT Ratings to Ba1
MARKS & SPENCER: S&P Cuts Sr. Unsec. Debt to 'BB+', On Watch Neg.
MARSTON'S ISSUER: Fitch Cuts Class B Notes Rating to BB; On RWN
MASSARELLA GELATERIE: Goes Into Administration, Halts Trading
NEW LOOK: Moody's Cuts CFR to Caa3 & Alters Outlook to Negative
PUNCH TAVERNS: Fitch Puts 'B' Class A3, A6 & A7 Notes Rating on RWN
SIGNET UK: Moody's Cuts Senior Notes Rating to B2 & CFR to Ba3
TUI: Temporary Lays Off 11,000 UK Staff Despite EUR1.8BB Bailout
TURNSTONE MIDCO 2: S&P Lowers ICR to 'CCC' on COVID-19 Uncertainty
UNIQUE PUB: Fitch Places BB+ Rating on Class A, M, & N Notes on RWN
X X X X X X X X
[*] Moody's Reviews 14 EU Automotive Parts Suppliers for Downgrade
- - - - -
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A Z E R B A I J A N
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AZERBAIJAN: S&P Affirms BB+/B Sov. Credit Rating, Outlook Stable
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On March 26, 2020, S&P Global Ratings affirmed its 'BB+/B' long-
and short-term foreign and local currency sovereign credit ratings
on Azerbaijan. The outlook is stable.
As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009
"EU CRA Regulation"), the ratings on Azerbaijan are subject to
certain publication restrictions set out in Art 8a of the EU CRA
Regulation, including publication in accordance with a
pre-established calendar. Under the EU CRA Regulation, deviations
from the announced calendar are allowed only in limited
circumstances and must be accompanied by a detailed explanation of
the reasons for the deviation. In this case, the reason for the
deviation is a sharp drop in hydrocarbon prices and S&P's revised
price assumptions for 2020 and 2021. The next scheduled publication
on the sovereign rating on Azerbaijan will be on July 24, 2020.
Outlook
S&P said, "The stable outlook indicates our view that the
sovereign's fiscal and external position will not materially
deteriorate beyond our current expectations, even though prospects
for volume production in the oil sector appear limited and prices
could remain low. We assume the de facto manat exchange rate peg to
the U.S dollar will remain in place, supported by the government's
large external assets."
Downside scenario
S&P said, "We could lower the ratings if Azerbaijan's public
finances, external position, or growth expectations materially
weakened compared with our forecasts." This could happen, for
example, as a result of hydrocarbon revenues declining further and
beyond our assumptions, without fiscal spending being pared back in
response. Such weakening could also entail larger or prolonged
current account deficits and quicker drawings on liquid external
assets, due to the high vulnerability of external flows to terms of
trade volatility.
The ratings could also come under pressure if challenges emanating
from Azerbaijan's exchange rate regime destabilized the
macroeconomic environment, including higher credit risks in the
financial system and highly leveraged state-owned enterprises.
Upside scenario
S&P said, "Conversely, we could consider an upgrade if external
surpluses were higher than base-line projections, resulting in a
faster accumulation of the government's fiscal assets. This could
happen, for example, if hydrocarbon revenues markedly increased in
contrast to our assumptions and we expected the higher level to be
sustained."
Upside to the ratings could also build if the government devised
and implemented reforms addressing a number of Azerbaijan's
structural impediments, such as limited economic diversification
and substantial constraints to monetary policy effectiveness.
Rationale
On March 19, 2020, S&P Global Ratings materially lowered its oil
price assumption for 2020. This follows an earlier significant
downward revision of its price assumptions on March 9, 2020. Prices
for crude oil in spot and futures markets are more than 55% lower
than levels observed during the summer of 2019 when prices
increased due to rising geopolitical tensions. S&P said, "When we
last reviewed Azerbaijan, we expected Brent oil prices to average
$60 per barrel (/bbl) in 2020 and to gradually decline to $55/bbl
from 2021. We now assume an average Brent oil price of $30/bbl in
2020, $50 in 2021, and $55/bbl from 2022."
Oil prices plummeted following OPEC's failure to agree on further
production cuts during meetings on March 6. OPEC+ did not agree to
a proposed reduction of 1.5 million barrels per day (mmbbl/d) to
address an expected significant drop in global demand partly due to
the spread of the coronavirus. The proposed reduction was in
addition to the current 2.1 mmbbl/d production decrease set to
expire at the end of March. Shortly after the meetings, Saudi
Arabia announced that it was immediately slashing its official
selling price and would increase its production to over 12 mmbbl/d
in April after the current production cut expires. These actions
possibly signal that, despite a collapse in global demand and
shrinking physical markets, Russia and OPEC have engaged in a price
war to try and maintain market share and market relevance. Oil
markets are now heading into a period of a severe supply-demand
imbalance in second-quarter 2020. S&P said, "In line with our
economic outlook, we anticipate a recovery in both GDP and oil
demand through the second half of 2020 and into 2021 as the most
severe effects from the coronavirus outbreak moderate."
Azerbaijan derives about 40% of its GDP, 50% of government
revenues, and more than 90% of exports from the hydrocarbons
sector. This makes Azerbaijan's undiversified economy and credit
profile vulnerable to a steep and sustained decline in oil prices,
notwithstanding government's policy to encourage non-oil
private-sector growth. S&P said, "We expect lower oil prices will
weigh on Azerbaijan's economic prospects. Risks to growth in the
short term could be exacerbated by reduced activity due to the
COVID-19 pandemic, which could exert significant pressure on the
economy, specifically the trade, retail, and hospitality sectors.
We expect a mild economic contraction in 2020 and project a rebound
with growth averaging about 2.5% over the remainder of our forecast
period 2020-2023."
Nevertheless, the ratings are supported by Azerbaijan's very strong
external and fiscal positions, which are underpinned by relatively
low central government debt and significant foreign assets built up
over several years. S&P said, "In view of our revised oil price
assumptions, we project that the general government balance will
record a deficit of 4.8% of GDP in 2020, before reverting to small
surpluses, with net government assets averaging 49% of GDP over
2020-2023. Mirroring developments on the fiscal side, Azerbaijan's
external balance will record a deficit of about 7.6% of GDP this
year before reverting to a surplus of 5.3% on average through 2023.
Azerbaijan's strong external balance sheet will remain a core
rating strength, reinforced by the large amount of foreign assets
accumulated in the sovereign wealth fund, SOFAZ. We now estimate
external liquid assets will surpass external debt by 74% of current
account payments in 2020 and gradually rise to 93% by 2023."
S&P said, "In our view, amid the volatile oil price environment,
pressure on the manat has increased. Nonetheless, we assume
Azerbaijan will retain the manat's de facto peg to the U.S dollar
at AZN1.7 manat to $1, supported by the authorities' regular
interventions in the foreign currency market. In our view, should
oil prices remain low for a prolonged period, the authorities could
allow the exchange rate to adjust to avoid a similar substantial
loss of foreign currency reserves as in 2015."
The ratings remain constrained by Azerbaijan's still-weak
institutional effectiveness, narrow and concentrated economic base,
limited monetary policy flexibility, and shortcomings in relation
to the completeness and accuracy of external sector data.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
Azerbaijan
Sovereign Credit Rating BB+/Stable/B
Transfer & Convertibility Assessment BB+
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F R A N C E
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B&B HOTELS: Moody's Cuts CFR to Caa1 & Alters Outlook to Negative
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Moody's Investors Service has downgraded the corporate family
rating of Casper MidCo SAS, the holding company of the French hotel
operator B&B Hotels, to Caa1 from B3 and the probability of default
rating has been downgraded to Caa1-PD from B3-PD. Concurrently,
Casper BidCo SAS instrument ratings on EUR715 million 1st lien
senior secured term loan B3 (TL-B3) and EUR120 million equivalent
1st lien senior secured multicurrency revolving credit facility was
downgraded to B3 from B2 while the rating on EUR155 million 2nd
lien Senior Secured TLB was downgraded to Caa3 from Caa2. The
rating outlook has been changed on both entities to negative from
stable.
"Our decision to downgrade B&B's ratings reflects the rapid and
widening spread of the coronavirus (COVID-19) outbreak with
unprecedented restrictions on travel across Europe. Moody's expects
this will significantly impact B&B's earnings in 2020, leading to
materially weaker credit metrics, negative free cash flow
generation and impair its liquidity position" says Vitali
Morgovski, a Moody's Assistant Vice President-Analyst and lead
analyst for B&B.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The lodging sector
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, B&B's hotel operations are severely affected by
travel restrictions and lockdowns implemented across Europe and the
company remains vulnerable to the outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action reflects the impact on B&B of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
B&B's revised ratings and negative outlook reflect the heightened
vulnerability of the company to the impact of the coronavirus on
the travel and leisure sectors. As a consequence, B&B's already
significant financial leverage (Moody's adjusted gross debt/ EBITDA
of around 7.3x in 2019) is unlikely recover to the required levels
even once the travel bans are lifted and the business will return
into a more normal stance.
The rating is still supported by B&B's relatively flexible cost
structure with high proportion of variable costs due to mandate
management model under which the company uses third party
entrepreneurial management firms to operate the majority of its
hotels. With its focus on local business travelers (65% of customer
base) in France and Germany, generating over 80% of the group
EBITDA in normal times, the company is less dependent on
international leisure travel where restrictions will likely remain
in place for longer. Furthermore, the economy & budget segment,
where B&B is active in, proved to be more resilient to the economic
downturns than the overall hospitality sector.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the uncertainties in terms of the
duration of the operational disruption caused by the coronavirus
outbreak, the uncertainties in regards to liquidity and the likely
covenant bridge under the RCF as well as the company's measures to
counterbalance the negative impact on credit metrics arising from
an expected period of negative free cash flows.
LIQUIDITY
B&B's liquidity will tighten substantially this year, driven by
anticipated negative free cash flow and challenges to meet
covenants under the revolving credit facility (RCF). At the end of
2019, B&B had EUR56 million of cash on balance sheet and a fully
available EUR120 million revolving credit facility. The liquidity
was improved by the EUR50 million add-on on B&B's 1st lien TL B3
executed in February 2020. Due to the business seasonality Moody's
expects a large portion of cash to be consumed by the end of Q1 and
the company to drawdown fully its available RCF. Those liquidity
sources together with the company's cost cutting measures should
allow it to stay liquid until the year-end, assuming that travel
bans are lifted in the summer. However, B&B will highly likely
breach the springing covenant required under RCF (net leverage
below 8.5x, tested quarterly in case over 40% of the RCF is drawn,
December 2019 at around 5.6x) due to a sharp drop in earnings in
2020.
Moody's has not included in its liquidity analysis the budgeted
sales and leaseback of assets or any support the company can
receive from state agencies or its shareholder Goldman Sachs
Merchant Banking.
WHAT COULD MOVE THE RATINGS - UP
Positive rating pressure would not arise until the coronavirus
outbreak is brought under control, travel restrictions are lifted.
A stabilization of the market situation leading to a recovery in
metrics to pre-outbreak levels could lead to positive rating
pressure.
WHAT COULD MOVE THE RATINGS -- DOWN
Inability to preserve a sufficient liquidity profile in light of
the expected period of negative free cash flow. A prolonged and
deeper slump in demand than currently anticipated leading to more
balance sheet deterioration and a longer path to restoring credit
metrics could also lead to further negative pressure on the
rating.
STRUCTURAL CONSIDERATION
In the loss-given-default (LGD) assessment for B&B hotels, based on
the structure post refinancing, Moody's ranks pari passu the senior
secured EUR715 million TLB and EUR120 million RCF, which share the
same security and are guaranteed by certain subsidiaries of the
group accounting for at least 80% of consolidated EBITDA. The term
loan is covenant-light with a spring net leverage covenant set at
8.5x only applicable to the revolver if it is drawn over 40%
(undrawn in December 2019). The B3 ratings on these instruments
reflect their priority position in the group's capital structure
and the benefit of loss absorption provided by the junior ranking
debt.
The EUR155 million of senior secured second lien loans are ranked
junior to the 1st lien TL B3 and RCF, they share the same security
with 1st lien TL B3 and RCF and are also guaranteed by subsidiaries
of the group accounting for at least 80% of consolidated EBITDA.
This is reflected in the Caa3 rating on these loans.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
PROFILE
Based in Paris, France, B&B Hotel Group is a limited-service hotel
chain with 518 hotels in eleven European countries and Brazil. B&B
focuses on the "econo-chic" concept -- the more upscale part of the
budget segment. The company follows an asset-light business
strategy leasing almost all its hotels. In 2019, B&B generated
EUR632 million in revenues.
FINANCIERE TOP: S&P Cuts ICR to B on Increased Financial Leverage
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S&P Global Ratings lowered its long-term issuer credit rating on
Financiere Top Mendel SAS to 'B' from 'B+'; and the issue rating on
the EUR2 billion term loan B to 'B' from 'B+', with the '3'
recovery rating unchanged.
The shareholder payment increased financial leverage from an
already-high level and leaves limited headroom for
underperformance. S&P said, "We forecast S&P Global
Ratings-adjusted debt to EBITDA of 8.5x in 2020 and 8x in 2021. Our
debt calculation includes EUR600 million of new PIK notes and
excludes new convertible instruments (ORA/ORANBSA). Despite the
deeply subordinated nature of the instruments and very restrictive
payments conditions allowed under the senior facilities agreement,
they do not fully comply with our criteria for equity-like
treatment. Including the convertible bonds (ORA/ORANBSA) and
including the PIK instrument, financial leverage would be about
12x. The term loan B matures in 2026 and the PIK notes in 2027.
Consequently, there is no liquidity pressure nor refinancing at
risk now, but we believe high leverage limit headroom for any
unforeseen setback."
Ceva remains a fast-growing company but lacks a track record of
positive free operating cash flow. As of Dec. 31 2019, the
company's sales reached EUR1.22 billion, up 14.6% from the previous
year. Contribution from acquisitions IDT Biologika and Thunderworks
was about EUR33 million and EUR9 million, respectively. Organic
growth reached a strong 10.4%, not only from the recovery from the
Biomune issue, which had an impact of EUR101 million on 2018 sales
and EUR70 million on EBITDA in 2018, but also strong demand across
all divisions. Poultry grew by 26% with a strong contribution from
strategic vaccines such as Cevac Ibird, Vectormune ND, Ultifend IBD
ND, and above all recovery of the autogenous vaccines (produced
after identification and diagnosis of the disease serotype by a
qualified veterinarian). Swine grew by 13% despite the impact from
African Swine Fever (ASF) supported by Europe and other countries;
ruminants grew by 7%; and companion animal, by 9%. Reported
profitability fell slightly in 2019 to 22.9% vs. 23.5% in 2018
while reported EBITDA increased to EUR278.6 million from EUR250
million the previous year. Management's business plans assumes
profitability improvement that should be driven by geo-expansions
of products, strict operational expenditure control, and lower
commercial expenses.
Despite EBITDA growth, free operating cash flow (FOCF) remains
negative. S&P estimates the outflow in 2019 to be negative EUR50
million-EUR 70 million. Large capex and large working capital
outflows have constrained FOCF over the years. The company's
ability to generate meaningful FOCF will depend on its ability to
accelerate EBITDA growth and to manage working capital and capex.
S&P assumes this would mostly materialize from 2021 onward.
S&P said, "At this stage, we take the view that ASF and COVID-19
will not jeopardize the company's growth, but uncertainties remain.
China is not a key market for Ceva, the country represents 3% of
group sales, among which 1% only is produced locally. Still, the
company estimated the impact from ASF in the country to EUR25
million on sales and EUR17 million on EBITDA. Nevertheless,
potential substitution of swine meat by other proteins, in
particular, poultry where the company is a leader, could offset
potential decline in swine. The companion animal is likely to be
the most affected segment as veterinary visits drop with
confinement. However, we take the view that the majority (70%) of
company's sales are linked to the food chain and most of growth is
still driven by poultry. We also understand that the company is
working on an action plan that includes costs savings from travel
restrictions, IT, R&D, and potential capex postponement. We believe
lower R&D would not result in lower revenue because growth should
be driven by geographic extension of already approved products."
A key risk could lay in the supply of the active pharmaceuticals
ingredients (APIs). Ceva relies on China and India for 70% of its
APIs. Management highlights that it is mainly the pharmaceutical
products (53% of the sales) that depends on these APIs, while
exposure of the Biological products (47% of sales) is less
important. Above all, according to management, the equivalent of
two-to-five years' inventory on key APIs have been secured. This
step came a few months ago given the situation in China at that
time, when many plants were closing down due to new environmental
requirements in the country. Given the magnitude of the COVID-19
pandemic, uncertainties are high and S&P will monitor the company's
performance in this context.
S&P said, "We could revise our assessment of Ceva's earnings
quality and stability if profitability were to deteriorate. The
size of the veterinary health market is estimated at EUR36 billion
and has been growing at 5% per year. We believe Ceva has benefited
from favorable market trends. Over the next 12-18 months, the
company will have to demonstrate its ability to grow well above
market, which will depend on the ramp-up of recently approved
products and increase the return on R&D and capex. Our assessment
of Ceva's competitive position remains supported by the company's
sound performance, its leading position in the poultry's drug
market (where it has a 17% market share in biologics and 9%
globally, including bio and pharmaceutical drugs) and overall good
geographic and product diversification. The group manufactures
3,500 products, with no exposure to single blockbusters, because
the best-selling product represents less than 6.6% of total sales.
The top 15 products (including versions approved in various
countries) represent less than 40% of sales. Nevertheless, we see
the company at the low end of the satisfactory business risk
profile assessment because of limited scale, and small market share
outside of the poultry segment. Ceva has a market share of 3% in
each of the swine, ruminants, and pet segments. Profitability is
lower compared with that of peers. Furthermore, in our opinion, the
pipeline of new products in recent years have been limited. Still,
the group has been investing 10% of its sales per year in R&D."
Over the next years, the company will mainly focus on geographical
extension for existing products. The company notably seeks to
make Forceris a blockbuster. The drug, approved in April 2019, is
an injectable combination of Gletofferon and Toltrazuril to treat
coccidiosis (an intestinal disease) while protecting pigs from
deficiency anaemia. In ruminants, the company should extend the
sales of Zeleris (approved in 2017) used to treat cattle with
bovine respiratory disease (BRD). Ceva forecasts that key launches
should occur beyond 2025 except potentially for the PCV/MHYO for
swine. PCV/MHYO is a combination of pneumococcal vaccine and
vaccine against mycoplasma hyopneumoniae (M. hyo), which is
considered a primary contributor to porcine respiratory disease.
The negative outlook reflects the increased risk that Ceva would
not be able to achieve S&P Global Ratings-adjusted debt to EBITDA
(excluding the convertible bonds) of close to 8x by 2021. S&P
estimates that improvements in profitability will depend on the
fast and successful uptake of products' geographical extensions,
sound integration of IDT and Thunderworks, and fast delivery of
synergies from distribution.
S&P said, "In our base-case scenario, we forecast the leverage
ratio at about 8.5x in in 2020 and potentially improving to about
8.0x in 2021, thanks to strong organic growth and a gradual
increase in the operating margin. Under this scenario, FOCF turns
positive by 2021.
"We would consider lowering the ratings if weaker-than-expected
performance reduces Ceva's deleveraging prospects and its ability
to achieve adjusted debt to EBITDA of about 8x and positive FOCF by
year-end 2021. The most likely cause of would be inability to ramp
up the sales of existing products or if envisaged operating
efficiencies do not fully materialize, while the company continues
to incur costs and working capital requirements.
"We could revise the outlook to stable if Ceva deleverages faster
than expected and the debt to EBITDA declines sustainably below 8x
and FOCF is restored to comfortably positive levels. This can
happen if the announced measures improve profitability and contain
working capital requirements."
YOUNI 2019-1: Moody's Affirms EUR6.8MM Class F Notes at B1
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Moody's Investors Service has upgraded the ratings of three Classes
of Notes in Youni 2019-1. The rating action reflects the increased
levels of credit enhancement for the affected Notes.
EUR 20.5M Class B Asset-Backed Floating Rate Notes due April 2032,
Upgraded to Aaa (sf); previously on May 29, 2019 Definitive Rating
Assigned Aa1 (sf)
EUR 11.7M Class C Asset-Backed Floating Rate Notes due April 2032,
Upgraded to Aa2 (sf); previously on May 29, 2019 Definitive Rating
Assigned Aa3 (sf)
EUR 11.5M Class D Asset-Backed Floating Rate Notes due April 2032,
Upgraded to A1 (sf); previously on May 29, 2019 Definitive Rating
Assigned A3 (sf)
Moody's affirmed the ratings of the Notes that had sufficient
credit enhancement to maintain the current ratings on the affected
Notes.
EUR 88.4M Class A Asset-Backed Floating Rate Notes due April 2032,
Affirmed Aaa (sf); previously on May 29, 2019 Definitive Rating
Assigned Aaa (sf)
EUR 5.1M Class E Asset-Backed Floating Rate Notes due April 2032,
Affirmed Baa3 (sf); previously on May 29, 2019 Definitive Rating
Assigned Baa3 (sf)
EUR 6.8M Class F Asset-Backed Floating Rate Notes due April 2032,
Affirmed B1 (sf); previously on May 29, 2019 Definitive Rating
Assigned B1 (sf)
RATINGS RATIONALE
The rating action is prompted by the increase in credit enhancement
for the affected tranches.
The sequential amortization and trapping of excess spread led to
the increase in the credit enhancement available in this
transaction. For instance, the credit enhancement for the Classes
B, C and D, affected by the rating action increased to 48.35%,
36.09% and 24.04% from 30.19%, 22.69% and 15.32% respectively,
since closing.
As part of the rating action, Moody's reassessed its default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date.
The performance of the transaction has been in line with its
expectation since closing. Total delinquencies have increased, with
90 days plus arrears currently standing at 0.88% of current pool
balance. Cumulative defaults currently stand at 3.63% of original
pool balance.
Moody's maintained default assumption of the original balance at 9%
translating into default probability of the current balance at
8.87%. Moody's also maintained the assumption for the fixed
recovery rate and the portfolio credit enhancement at 25% and 32.5%
respectively.
The analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the French economy as
well as the effects that the announced government measures, put in
place to contain the virus, will have on the performance of
consumer assets. Moody's regards the coronavirus outbreak as a
social risk under its ESG framework, given the substantial
implications for public health and safety. It is a global health
shock, which makes it extremely difficult to provide an economic
assessment. The degree of uncertainty around its forecasts is
unusually high.
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" 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; and (3) improvements in the credit quality of
the transaction counterparties.
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.
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G E R M A N Y
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CBR SERVICE: Moody's Affirms B2 CFR, Alters Outlook to Negative
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Moody's Investors Service has changed the outlook of CBR Service
GmbH, a holding company owner of German apparel retailer CBR
Fashion, to negative from stable. Concurrently, Moody's has
affirmed the company's B2 corporate family rating and its
probability of default rating at B2-PD. At the same time, Moody's
has affirmed CBR Fashion Finance B.V.'s B2 rating assigned the
senior secured notes and CBR Fashion GmbH's Ba2 rating assigned to
the super senior Revolving Credit Facility, and changed their
outlooks to negative from stable.
"The decision reflects Moody's expectations that the spread of the
coronavirus and store closures will negatively impact CBR's results
and key credit metrics in the first half of 2020. The company could
have sustainably weaker credit metrics as it emerges from the
crisis, but these key credit metrics could remain in line with a B2
rating given the headroom the company had in the rating category to
date" said Guillaume Leglise, Assistant Vice President and Moody's
lead analyst on CBR.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The apparel retail
sector is one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, CBR's exposure to store-based discretionary spending,
has left it vulnerable to shifts in market sentiment in these
unprecedented operating conditions.
The rating action reflects Moody's expectation that the nationwide
lockdown imposed by many European governments will materially and
negatively affect revenues with a consequent impact on future
EBITDA and cash flow generation in 2020. Moody's believes that CBR
is vulnerable considering its large store base exposure through
direct retail and wholesale customers, which together represent
8,181 stores, although relative to peers, the company does have a
stronger online presence. Depending on customers' willingness to
spend on non-discretionary products during a time of lockdown, this
online presence could limit losses incurred by the company.
Most governments in Europe, including Germany, have announced a
package of measures to support corporates, which will help smooth
out the negative effects during the lockdown period. Despite these
measures Moody's expects that CBR could emerge with weaker credit
metrics and liquidity post the crisis. Moody's recognizes the
company's strong performance to date, relative to peers and
especially in 2019, including its track record of generating solid
free cash flow (FCF). However, Moody's expects that there is likely
to be fierce competition and pricing pressure once stores reopen,
and potentially weaker demand for discretionary products, notably
apparel products, in the medium-term.
The negative outlook reflects the uncertainty surrounding the
losses, demand and potential impact on the supply chain as a result
of the coronavirus outbreak. The outlook also considers that CBR
remains vulnerable to a potential prolonged period of lockdown in
Europe, unfavorable discretionary consumer spending and the
uncertainty regarding the pace at which consumer spending will
recover once stores reopen.
LIQUIDITY
CBR currently has adequate liquidity, with a cash balance of EUR105
million and full availability under its EUR30 million revolving
credit facility (RCF) as at end-December 2019. The company has no
immediate debt maturities, with its RCF maturing in April 2022
while its bond will mature in October 2022. The RCF is subject to a
super senior net leverage covenant, with ample capacity today,
tested quarterly if more than 35% of the facilities are drawn.
Moody's expects this covenant to be potentially tested during 2020,
and CBRs headroom under this covenant is likely to deteriorate
owing to drop in sales and earnings, and likely working capital
needs.
ESG CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Also, the structural shift towards e-commerce has
increased pressure on apparel retail companies to increase their
online sales. This risk is partly mitigated by the fact that CBR
has already developed strong omni-channel capabilities, with online
sales representing around 16% of the group's 2019 revenue. As an
apparel retailer, CBR is also subject to social factors such as
responsible sourcing, product and supply sustainability, privacy
and data protection. The company strives to adhere to high ethical
standards vis-à-vis its suppliers and their working conditions.
CBR is controlled by Alteri Investors (Alteri) which, as is often
the case in highly levered, private equity sponsored deals, has a
high tolerance for leverage. Governance can be less transparent
compared to public companies. In addition, the company has
shareholder-friendly financial policies.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Positive rating pressure is unlikely to arise until the coronavirus
outbreak has been brought under control, store closure restrictions
have been lifted, and it is evident that consumer sentiment has not
materially affected demand for CBR's products.
Overtime, positive pressure could emerge if CBR grows sales and
profits to enable (1) its adjusted gross debt/EBITDA to trend below
4.5x on a sustainable basis; (2) for it to generate positive FCF
and maintain an adequate liquidity profile while it demonstrates
more balanced financial policies.
Conversely, negative pressure on the rating could materialize if
(1) CBR's FCF generation weakens and its liquidity deteriorates, or
(2) its adjusted gross/EBITDA increases above 5.5x, or (3) its
Moody's adjusted EBITA/interest expense falls below 2.5x.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Apparel
Methodology published in October 2019.
COMPANY PROFILE
Headquartered in Isernhagen, Germany, with revenue of EUR607
million and reported EBITDA of EUR152 million in 2019, CBR is one
of the top five German womenswear apparel companies. The company
operates under two independent brands: Street One (casual,
fashionable clothing) and Cecil (sporty, less figure accentuating
clothing), which account for around 58% and 42% of revenue,
respectively.
As of 30 December 2019, CBR had 8,181 points of sales, across 19
countries, with a focus on the Germany, which represented 70% of
revenues, Austria, Switzerland and the Benelux. CBR's sales
channels are mainly concentrated within its wholesale business
(around 74% of sales), but it is also expanding its e-commerce
(around 16% of sales) and own retail network (representing around
10% of sales) businesses.
PLATIN 1425: Moody's Affirms B3 CFR, Alters Outlook to Neg.
-----------------------------------------------------------
Moody's Investors Service affirmed the B3 corporate family rating
and the B3-PD probability of default rating of Platin 1425. GmbH,
an intermediate holding company of German industrial equipment
manufacturer Schenck Process Holding GmbH. Moody's also affirmed
the B3 instrument ratings on the EUR425 million backed senior
secured notes due 2023 and the EUR125 million senior backed secured
notes due 2023, issued by Platin 1426. GmbH. The outlook on both
entities has been changed to negative from positive.
RATINGS RATIONALE
The outlook change to negative reflects SPG's persistent high
leverage for the B3 rating category and Moody's expectation of a
marked deterioration of the group's credit metrics over the coming
months against a more challenging operating environment. SPG's
Moody's-adjusted leverage at the end of 2019 was about 6.8x
debt/EBITDA, compared with the rating agency's forecast of around
6x and its defined 7x maximum leverage for a B3 rating. The higher
than anticipated leverage was driven by a slowdown in organic
earnings due to lower volumes and a weaker product mix as well as
larger scale restructuring after the group's fully debt-financed
acquisition of Raymond Bartlett Snow (RBS) in 2018.
Moody's expects market conditions to significantly worsen over the
next few months or even quarters in light of the continued rapid
spreading of the Coronavirus in Europe and the Americas regions,
which together accounted for almost two-thirds of SPG's total
turnover in 2019, while the length of the crisis and its final
implications for the group's operating performance are uncertain at
this time. Moody's forecast of SPG's credit metrics for 2020 and
next year therefore are susceptible to a high degree of uncertainty
as the spreading of the virus may not be successfully contained in
the upcoming months as currently expected. Moody's view of a
significant cooling in global economic growth this year will likely
weigh on SPG's order intake, topline growth and profitability over
the next quarters, given the group's high exposure to cyclical end
markets such as mining, cement, steel or chemical, among others.
While SPG's cost base is fairly flexible (around three quarters of
total costs are deemed variable by management) and parts of its
more profitable aftermarket businesses might help mitigate the
impact of a potential short-term demand shock in the new equipment
business, profitability and cash flows could be further burdened by
additional restructuring needs. Moody's expects SPG's leverage
therefore to increase to levels much higher than required for a B3
rating during 2020, and potentially also next year. Nevertheless,
forecast continued positive Moody's-adjusted free cash flow
generation (EUR17 million in 2019) thanks to disciplined capital
expenditure and working capital spending should support the group
to sustain its currently adequate liquidity position.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The manufacturing
sector has been one of the sectors moderately to strongly affected
by the shock given its sensitivity to consumer demand and
sentiment. More specifically, the weaknesses in SPG's credit
profile, including its exposure to cyclical end-markets across the
world, have left it vulnerable to shifts in market sentiment in
these unprecedented operating conditions and SPG remains vulnerable
to the outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Its action reflects the impact on SPG of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
LIQUIDITY
Moody's considers SPG's liquidity as adequate, taking into account
cash on the balance sheet of EUR71 million (of which EUR37 million
pledged as collateral to banks) and the almost fully available
EUR70 million committed revolving credit facility (RCF), maturing
in December 2022, as of 31 December 2019. The group has no material
debt maturities before its bonds are due in June 2023. Main cash
uses comprise seasonal working capital needs and modest capital
spending requirements of around 2%-3% of group sales.
SPG has to comply with one springing senior leverage covenant, if
the RCF is drawn by more than 40%, under which Moody's currently
expects the group to ensure consistent adequate capacity.
OUTLOOK
The negative outlook indicates SPG's weakened positioning at the B3
rating level, particularly considering its very high leverage
combined with Moody's view of a materially worsening operating
environment and further deteriorating of credit metrics over 2020.
The negative outlook also mirrors significant forecast uncertainty
at this stage owing to the ongoing spreading of the Coronavirus and
potential more severe associated implications for SPG's operating
and financial performance.
WHAT COULD CHANGE THE RATING
Negative pressure on the rating would develop, if (1) SPG's
operating performance were to materially deteriorate over the
coming months, (2) leverage exceeded 7x Moody's-adjusted
debt/EBITDA for a prolonged time due to material profit erosion or
debt-funded growth; (3) free cash flow turned negative; (4)
liquidity deteriorated materially.
Upward pressure on the ratings would build, if (1) SPG's leverage
declined sustainably towards 6x Moody's-adjusted debt/EBITDA; (2)
free cash flow generation remained consistently positive with
Moody's-adjusted FCF/metrics in the mid-single-digit percentage
area.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
Methodology published in March 2020.
PROFILE
Headquartered in Darmstadt, Germany, Schenck Process Group (SPG) is
one of the world's largest providers of industrial weighing,
screening, conveying, automation, filtration and
loading/transportation equipment. In 2019, SPG generated EUR632
million revenues and EBITDA (company-adjusted) of EUR102 million
(16.1% margin).
TAKKO FASHION: Moody's Cuts CFR to B3, On Review for Downgrade
--------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of German apparel retailer Takko Fashion S.a.r.l. to B3 from
B2, and its probability of default rating to B3-PD from B2-PD. At
the same time, Moody's has downgraded Takko Luxembourg 2 S.C.A.'s
senior secured notes to B3 from B2. The ratings have also been
placed on review for further downgrade.
"The decision to downgrade Takko reflects Moody's expectations that
the spread of the coronavirus will negatively impact the company's
results and financial profile at least in the first half of 2020"
said Guillaume Leglise, Moody's lead analyst on Takko and Assistant
Vice President. "Operational disruptions from store closures will
lead to an increase in leverage, cash burn and strain liquidity",
adds Mr. Leglise.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The apparel retail
sector is one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, the weaknesses in Takko's credit profile, including
its high fixed cost structure and exposure to store-based
discretionary spending, have left it vulnerable to shifts in market
sentiment in these unprecedented operating conditions.
The rating action reflects Moody's expectation that the nationwide
lockdown imposed by many European governments will materially and
negatively affect revenues with a consequent impact on EBITDA and
cash flow generation. Moody's believes that Takko is particularly
vulnerable considering its large store base (1,956 stores at
end-October 2019) in Germany and across Europe, and its very
limited online channel capabilities.
Most governments in Europe, including Germany, have announced a
package of measures to support corporates, which will limit the
negative effects during the lockdown period. Despite these measures
Moody's expects that Takko will emerge with weaker credit metrics
and liquidity post the crisis. Moody's expects that there is likely
to be fierce competition and pricing pressure once stores reopen
and weaker demand for discretionary products, notably apparel
products, in the medium-term.
With a cash balance of EUR76.9 million and availability of EUR62.3m
under its EUR71.4 million revolving credit facility (RCF) as at
end-October 2019, Takko's liquidity is currently adequate. However,
Moody's expects the company to face significant operational
headwinds which will weigh on its liquidity and covenant headroom.
Takko's RCF has a single minimum EBITDA covenant set at EUR110
million. While Takko has regained some capacity under this covenant
in 2019, with EBITDA (as adjusted by the company) of EUR155 million
in the 12 months ended 31 October 2019, Moody's believes that
headroom under this covenant may decline significantly in 2020.
The review for downgrade reflects uncertainty regarding the losses,
demand and supply chain impact of the coronavirus outbreak. During
the review period, Moody's will assess more precisely how the
operational disruption of the coronavirus will affect Takko's
credit metrics and ability to preserve its liquidity.
ESG CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Also, the structural shift towards e-commerce has
increased pressure on apparel retail companies to increase their
online sales. Takko is less present on online than many of its
peers, which to some extent is mitigated by Takko's focus on the
discount segment, which tends not to be present online channels
because of the low prices of products and the economical
non-viability of shipping products online.
Takko is majority owned by Apax Partners. As is often the case in
highly levered, private-equity sponsored deals, there can be a
higher tolerance for leverage. Governance can be less transparent
when compared with publicly rated companies.
WHAT COULD CHANGE THE RATINGS UP/DOWN
The ratings are unlikely to be upgraded in the short term. A
stabilisation of the rating is unlikely to arise until the
coronavirus outbreak has been brought under control, store closure
restrictions are lifted, and it is evident that consumer sentiment
has not materially affected demand for Takko's products. Upward
pressure could arise over time if Takko's debt/EBITDA (as adjusted
by Moody's) is sustainably below 5.5x and the company generate
positive free cash flow.
Moody's could downgrade Takko in case its liquidity deteriorates
further such that total liquidity sources fall below EUR65 million.
Quantitatively, downward pressure on the rating would occur if
earnings decline and Moody's-adjusted (gross) leverage deteriorates
and approaches 6.5x.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Retail Industry
published in May 2018.
COMPANY PROFILE
Founded in 1982, Takko Fashion S.a.r.l. (Takko) is a German
discount fashion retailer, offering a range of own-label apparel
products and accessories for women, men and children. Takko
operates a portfolio of 1,956 retail stores, principally in
out-of-town locations. For the 12 months ended 31 October 2019,
Takko reported net sales of around EUR1.1 billion and
company-adjusted EBITDA of EUR155.2 million, of which 62% and 69%
came from Germany, respectively. The company also has a presence in
16 other European countries, including Austria, the Netherlands,
the Czech Republic, Hungary, Romania, Poland, Slovakia and Italy.
=========
I T A L Y
=========
AEROPORTI DI ROMA: S&P Affirms BB+ Rating; On CreditWatch Negative
------------------------------------------------------------------
The airport sector in Europe is facing an unprecedented plunge in
air traffic as Europe has become the epicenter of the COVID-19
pandemic, and the governments have introduced travel restrictions
and quarantine orders. In addition, S&P Global Ratings now expects
a eurozone and U.K. recession in 2020, which will likely slow the
recovery in passenger traffic. As a result, S&P expects European
airports to have materially weaker cash flows and credit ratios,
while suffering from a highly uncertain business environment with
an uncertain and more prolonged recovery than seen in the past.
S&P said, "We acknowledge that there is high degree of uncertainty
about the rate of the spread and peak of coronavirus outbreak.
Under our current base case, we forecast that the number of
passengers for European airports could fall by up to 35% compared
with 2019. This takes into account an average drop of at least 70%
decline in traffic over three peak months (based on what we are
seeing in the peak weeks of the outbreak in China and in Aeroporti
di Roma in the first week of March). We assume continued severe
disruption in the next three months, with a recovery starting from
the fourth quarter. Even after the outbreak is contained, we expect
global airports to see a slower resurgence in air traffic over the
following 24 months. As the situation evolves, we may update our
assumptions and estimates accordingly."
As a result, S&P is taking the following rating actions:
-- S&P is lowering by one notch the ratings on Heathrow Funding
Ltd., Gatwick Funding Ltd., and Avinor AS. The outlooks on these
ratings are negative.
-- S&P is placing the ratings on Flughafen Zurich AG, Royal
Schiphol Group N.V., and daa PLC on CreditWatch with negative
implications.
-- S&P is affirming the ratings on Aeroporti di Roma SpA and
regulated air traffic controller NATS (En Route) PLC. Aeroporti di
Roma's stand-alone credit profile (SACP) is being lowered by two
notches.
-- S&P recently lowered our ratings on Aeroports de Paris.
The rapid spread of COVID-19 in most European countries will
significantly affect air traffic and airport performance in 2020.
Most governments are rapidly escalating the measures they are
imposing to contain the spread of the disease. In S&P's current
base case, it assumes year-on-year passenger air traffic through
European airports will fall by up to 35% in 2020 and 25% on
average, compared with 2019. On this basis, EBITDA generation for
airports in Europe could decline by 30% on average or more over
this period. For Gatwick Airport, S&P forecasts EBITDA could fall
by about 20%, but Avinor and daa could see a contraction of 50%,
depending on the airports' revenue mix and the flexibility of their
cost bases.
Airlines are cancelling flights to high-risk countries, many
European citizens are at or near lockdown, and the U.S. has imposed
restrictions on anyone who has been in 28 European states in the
prior 14-day period from entering the U.S. S&P expects the economic
fallout, and our expectation of a global and eurozone recession in
2020, to mean the recovery in passenger traffic will be weaker,
further eroding cash flows at rated airports in EMEA.
The airports' clients--airlines, retailers, hotels, and
restaurants--are among the industries most affected by the spread
of the new coronavirus. This lessens the protections normally
available to airports in times of economic downturn. The airlines'
financial difficulties have led the European Commission to suspend
rules governing landing slots until Oct. 24, 2020. To avoid flying
empty planes, airlines no longer need to use slots to retain them.
Although airports' contracts with their retail tenants include
minimum revenue guarantees, S&P expects airports to adapt the
payment conditions that apply to them, and cooperate with airlines
and retail partners by relieving them of some of their contractual
obligations. Retail revenue is directly correlated with the number
of passengers and economic activity, so S&P predicts it will also
shrink.
Certain airports, such as Heathrow and Schiphol, have previously
benefitted from high-expenditure customers. For them, the fall in
retail revenue could be more severe and result in 20%-35% decline
in retail EBITDA. For now, S&P has not assumed a cut in their real
estate revenue, which is mainly derived from renting office space.
Much of this space is rented to larger clients and many governments
have pledged significant extraordinary aid to struggling
businesses. S&P will revisit these revenue streams if the companies
renting the space start to defer or renegotiate their lease terms.
For Zurich Airport and Schiphol, this is a significant revenue
stream, comprising about 15%-20% of revenue per passenger.
The credit impact of the pandemic on airports is not uniform. It
depends on the asset-specific features, the financial flexibility,
liquidity cushion, and measures taken by each airport to mitigate
passenger decline. Rating downgrades reflect operating and credit
metrics that were already close to downgrade thresholds. These
airports had limited financial headroom because they had made large
investments or international acquisitions, or because of Brexit
contingencies or relatively harsh regulatory decisions on allowed
returns.
The negative outlooks indicate a one-in-three possibility of a
further downgrade over a longer period, depending on the depth and
longevity of the pandemic, and the global and European recessions.
CreditWatch placements indicate a one-in-two chance of a downgrade
over a shorter timeframe--in these cases, the risks to S&P
forecasts are firmly to the downside. For example, closing borders
between European countries might mean closing airports or limiting
flights to rescue and return operations for a time.
S&P said, "We expect airports to take measures to save costs, such
as closing down terminals and piers, operating for fewer hours
during the day, and cutting staff and maintenance expenditure.
Staff expenses account for about 30%-50% of the cost base, the
highest single operating cost. Historically, we have seen
noncommitted capital expenditure being deferred, and dividends
scaled down in periods of stress. Although investor-owned airports
typically bear the full extent of traffic risk, air traffic
controller NATS already has a mechanism to partly limit volume
exposure in case of traffic drop.
"At present, we don't anticipate that people's attitude to flying
will undergo a secular change.
"We plan to publish individual write-ups for many of these
companies as soon as practical."
Ratings List
Aeroporti de Roma SpA
Ratings Affirmed
Aeroporti di Roma SpA
Issuer Credit Rating BB+/Watch Neg/B
Aeroporti di Roma SpA
Senior Unsecured BB+/Watch Neg
Recovery Rating 3(65%)
To From
Avinor AS
Downgraded; Outlook Action
To From
Avinor AS
Issuer Credit Rating A+/Negative/A-1 AA-/Stable/A-1+
Senior Unsecured A+ AA-
To From
Flughafen Zurich AG
Ratings Affirmed; CreditWatch Action
To From
Flughafen Zurich AG
Issuer Credit Rating AA-/Watch Neg/-- AA-/Stable/--
Senior Unsecured AA-/Watch Neg AA-
Gatwick Airport Ltd.
Downgraded
To From
Gatwick Funding Ltd.
Senior Secured BBB/Negative BBB+/Negative
Heathrow (SP) Ltd.
Downgraded
To From
Heathrow Funding Ltd.
Senior Secured BBB-/Negative BBB/Negative
Senior Secured BBB+/Negative A-/Negative
NATS (En Route) PLC
Ratings Affirmed
NATS (En Route) PLC
Issuer Credit Rating A+/Negative/--
NATS (En Route) PLC
Senior Secured A+
Senior Secured AA/Stable
Royal Schiphol Group N.V.
Ratings Affirmed; CreditWatch Action
To From
Royal Schiphol Group N.V.
Schiphol Nederland B.V.
Issuer Credit Rating A+/Watch Neg/A-1 A+/Stable/A-1
Royal Schiphol Group N.V.
Senior Unsecured A+/Watch Neg A+
Schiphol Nederland B.V.
Senior Unsecured A+/Watch Neg A+
daa PLC
Ratings Affirmed; CreditWatch Action
To From
daa PLC
Issuer Credit Rating A/Watch Neg/A-1 A/Stable/A-1
Senior Unsecured A/Watch Neg A
daa Finance PLC
Senior Unsecured A/Watch Neg A
BANCA POPOLARE: S&P Alters Outlook to Neg. & Affirms 'BB+/B' ICR
----------------------------------------------------------------
S&P Global Ratings revised its outlook on Italy-based Banca
Popolare dell'Alto Adige - Volksbank to negative from stable and
affirmed its 'BB+/B' long- and short-term issuer credit ratings.
S&P said, "The outlook revision reflects the sharp reduction in
economic activity we anticipate for Italy in 2020 and our view that
there are downside risks to the ratings given the material
uncertainties associated with the COVID-19 pandemic. The longer and
deeper the economic contraction, the more this could impair
Volksbank's asset quality, increase credit losses, reduce business
and revenue generation, and potentially erode its capital. The
bank's structural exposures to local small and midsize enterprises
(SMEs)--including tourism which we view as a more vulnerable sector
in the current context--and its relatively modest business and
revenue diversification compared to some larger and stronger
domestic peers, also pose downside risks for Volksbank. We
generally believe that small-to-midsize regional banks with loan
concentrations to SMEs in regions that are strongly affected by the
coronavirus outbreak are most susceptible in the near term to the
deteriorating environment.
"The ratings affirmation reflects our expectation that Volksbank's
capitalization will be able to withstand the negative effects of an
unprecedented shock to the economy and private sector in the first
half of this year. In our base case, we assume that this will be
followed by a gradual recovery in economic activity from the second
part of 2020, continued through 2021." S&P considers several
supporting factors in its assessment:
-- First, the measures introduced by the Italian Government and
European Central Bank will provide liquidity support to affected
SMEs, individuals, and financial institutions while calming
volatility in the capital markets;
-- Second, more than half of Volksbank's activities are
concentrated in the wealthy, and likely more resilient, province of
Bolzano. S&P expects this will continue to support the bank's asset
quality despite the slowdown in the local tourism sector in
particular; and
-- Third, legacy asset quality issues are smaller than for most
other regional banks, with net nonperforming exposures (NPEs) to
total adjusted capital of around 35% as of year-end 2019 compared
to 50%-80% for most of its peers.
S&P said, "Nevertheless, we expect the current crisis will have a
meaningful effect on the bank's earnings in 2020 and 2021,
depending on when the recognition of credit losses occurs. We
anticipate that the bank might be moderately loss making in 2020
due to sharply rising loan loss provisions, though we expect
earnings to recover in 2021. This primarily reflects the likely
rise in the stock of NPEs and the contraction of core revenues,
both net interest income and commissions. Under the above
assumption, we forecast that Volksbank's risk-adjusted capital will
remain comfortably above 5% over the next two years while its asset
quality will remain stronger than that of most domestic banks.
"We acknowledge a high degree of uncertainty about the rate of
spread and peak of the coronavirus outbreak. Some government
authorities estimate the pandemic will peak about midyear, and we
are using this assumption in assessing the economic and credit
implications. We believe the measures adopted to contain COVID-19
have pushed the global economy into recession. As the situation
evolves, we will update our assumptions and estimates accordingly.
"The negative outlook on Volksbank primarily reflects our view that
the economic contraction in the areas in which the bank operates
could impair its asset quality and capitalization beyond our
current expectations over the next 12-18 months.
"Consequently, we would most likely lower the ratings over the next
12 months if we observed a further material deterioration in
economic and operating conditions, either because the downturn is
deeper and longer, or the recovery weaker, than we currently
anticipate. We could also lower the ratings if we observed that
NPEs and credit losses were rising faster, and had a stronger
impact on Volksbank's capitalization, than we currently expect.
"We could revise the outlook back to stable if we considered that
economic and operating conditions had stabilized and anticipated
limited downside risks to our base-case expectations."
ICCREA BANCA: S&P Alters Outlook to Negative & Affirms 'BB/B' ICRs
------------------------------------------------------------------
S&P Global Ratings revised its outlook on Italy-based Iccrea Banca
and Iccrea BancaImpresa, core subsidiaries of Gruppo Bancario
Cooperative Iccrea (GBCI), to negative from stable. At the same
time, S&P affirmed the 'BB/B' long- and short-term issuer credit
ratings. S&P bases its ratings and outlook on GBCI's aggregated
creditworthiness because S&P considers the BCC members (banche di
credito cooperativo) and their parent company a single banking
group.
The outlook revision reflects the sharp reduction in economic
activity S&P anticipates for Italy in 2020 and its view that there
are downside risks to the ratings given the material uncertainties
associated with the COVID-19 pandemic.
The longer and deeper the economic contraction, the more this could
impair GBCI's asset quality and profitability. This stems from the
group's structurally high exposure to small and midsize enterprises
(SMEs), mainly in Northern Italy, which represent about 45% of the
group's loan portfolio and appear more vulnerable in the current
context. S&P generally believes that small-to-midsize regional
banks with loan concentrations to SMEs in regions that are strongly
affected by the coronavirus outbreak are most susceptible in the
near term to the deteriorating environment. The group's relatively
modest business and revenue diversification, and weak cost
efficiency compared to some larger and stronger domestic peers,
also make the group more vulnerable to the economic downturn.
S&P said, "We consider that the group's comparatively high level of
nonperforming exposures (NPEs) and historically weaker risk culture
of its BCC members represent a tail risk for the group if the
expected economic fallout from the COVID-19 outbreak in Italy is
deeper and more prolonged than we currently expect. We now
anticipate that the expected sharp economic downturn in 2020 could
reverse GBCI's efforts to reduce its large stock of NPEs
accumulated during the previous recession. We therefore expect
GBCI's stock of NPEs to increase from 12.7% and credit loss
provision to rise sharply from about 80 bps that we estimate for
2019.
"Amid the nationwide lockdown, we also consider that the less
advanced digitalization of the group's BCC channels, and the more
granular physical presence in Italy than larger players, could slow
down the group's activities more than peers. As such, in our
base-case scenario for 2020-2021, we anticipate that
higher-than-previously expected credit losses and reduced business
volumes will likely strain GBCI's already modest internal capital
generation. In our view, a sharp contraction of GBCI's core
revenues, both net interest income and commissions, and higher
credit losses could potentially trigger a net loss in 2020, before
recovering some profitability in 2021, though this also depends on
when the recognition of credit losses occurs.
"The ratings affirmation reflects our assumption that GBCI's
capitalization will be able to withstand the short-term economic
shock. As such, we forecast the group's risk-adjusted capital (RAC)
ratio before adjustments will likely remain comfortably above 5%
over the next two years. We also anticipate that the ongoing
operational integration of independent BCC members within the group
will create further cost synergies, although the benefits will only
be visible in the longer term."
S&P considers a few supporting factors in its assessment:
-- First, the measures introduced by the Italian Government and
European Central Bank will provide liquidity support to affected
SMEs, individuals, and financial institutions while calming
volatility in the capital markets;
-- Second, S&P expects GBCI's stronger-than-peers' funding and
liquidity profile will continue to support the ratings. As of June
2019, GBCI's stable funding ratio was a high 122%, according to its
calculations, compared to about 105% on average for most of its
European peers. This is because the BCC members' large and sticky
retail customer base supports their business activity. BCC members
also have a considerably larger liquidity surplus than most
domestic players; and
-- Third, S&P believes the risks embedded in the group's loan
portfolios are now comparatively lower than during the previous
economic recession. This is because BCCs have since tightened their
underwriting standards and have significantly deleveraged their
loan portfolios (by about 35% cumulatively), having previously
showed higher-than-system-average growth (40% cumulatively) before
and during the beginning of the crisis (2007-2011).
S&P said, "We acknowledge a high degree of uncertainty about the
rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly.
"The negative outlook on Iccrea Banca and Iccrea BancaImpresa
reflects our view that the economic contraction in the areas in
which the banks operate could impair the group's overall asset
quality and capitalization beyond our current expectations over the
next 12-18 months.
"Consequently, we would most likely lower the ratings over the next
12 months if we observed a further material deterioration in
economic and operating conditions in Italy, either because the
downturn is deeper and longer, or the recovery weaker, than we
currently anticipate. We could also lower the ratings if we
observed that NPEs and credit losses were rising faster, and had a
stronger impact on GBCI's capitalization, than we currently expect,
or if that jeopardized the benefits of closer integration within
the group. Similarly, although unlikely at this stage, we could
lower our ratings if the group's outstanding funding and liquidity
profile deteriorated.
"We could revise the outlook back to stable if we considered that
economic and operating conditions had stabilized and anticipated
limited downside risks to our base-case expectations."
MOBY SPA: Administrators Seize Account of Ferry Operator
--------------------------------------------------------
Antonio Vanuzzo and Alberto Brambilla at Bloomberg News report that
supplies to Sardinia and other Italian islands are at risk after
ferry operator Moby SpA suspended some of its services.
Italy's officials called for an emergency meeting with
administrators of Tirrenia, an insolvent company whose assets were
bought by Moby in 2011, after they seized the accounts of one of
the operator's unit on March 30, Bloomberg relays, citing a
statement from the ministry of transport.
Moby has failed to pay a deferred installment for the acquisition,
Bloomberg discloses. The company, as cited by Bloomberg, said in
an emailed statement it responded to the seizure by halting ferry
services.
Moby defaulted on its bonds and loans this month, Bloomberg
recounts.
[*] Moody's Takes Actions on 15 Italian Banks
---------------------------------------------
Moody's Investors Service took rating actions on 15 Italian banks.
The outlooks on the long-term deposit ratings of four Italian banks
and on the senior unsecured debt ratings for five Italian banking
groups were changed to negative from stable. The outlook on one
Italian banking group was changed to developing from positive. The
rating agency placed on review for downgrade or direction uncertain
some of the ratings and / or assessments of another four Italian
banks (see details below) and affirmed with stable outlook the
ratings of one Italian bank.
The rating actions reflect the deteriorating operating environment
from the coronavirus outbreak in Italy and the associated downside
risks to Italian banks' standalone credit profiles. The Baseline
Credit Assessments (BCAs) of most Italian banks are particularly
exposed to:
- Worsening asset quality: despite the large support package put in
place by the Italian government as well as the supervisory measures
decided by the European Central Bank, the rating agency expects a
material increase in problem loans and the cost of risk as
companies and individuals struggle to deal with their sudden change
in economic circumstances;
- Deteriorating capitalization: capital ratios are likely to
decline given wider spreads on Italian government bonds together
with an increase of risk-weighted assets (RWAs) as companies draw
down loans and their probability of default increases; and
- Tighter funding: high volatility will make access to market
funding difficult even though measures taken by the ECB ensure
ample liquidity for now (ECB measures will provide limited economic
offset to coronavirus weakness;
Moody's has identified two principal groups within its coverage of
Italian banks:
(1) those banks whose Baseline Credit Assessments will very likely
be affected by an expected deterioration in the operating
environment and associated rising problem loans, declining capital
and falling profitability. The BCAs and some ratings of these banks
have been placed on review for downgrade or review uncertain; and
(2) those banks whose BCAs could be affected by the expected
deterioration in the operating environment. The agency has affirmed
the BCAs and ratings of these banks but changed a number of
outlooks to negative or developing.
The ratings of a small number of other banks were unaffected or
affirmed with stable outlooks, as idiosyncratic reasons continue to
outweigh the systematic downward pressure for the moment.
RATING ACTIONS OVERVIEW
REVIEWS
- Banca Sella Holding S.p.A.: all ratings and assessments were
placed on review for downgrade.
- Cassa Centrale Raiffeisen S.p.A.: the BCA and Adjusted BCA of
baa3 alongside its issuer and senior unsecured ratings at Baa2 were
placed on review for downgrade. All other ratings and assessments,
currently constrained by the rating on the Italian government, were
affirmed; the outlook on the long-term deposit ratings remains
stable.
- Credit Agricole Italia S.p.A.: the BCA and Adjusted BCA (ba1 and
baa1 respectively) were placed on review for downgrade. All other
ratings and assessments, currently constrained by the rating on the
Italian government, were affirmed; the outlook on the long-term
deposit ratings remains stable.
- Cassa Centrale Banca S.p.A. (CCB): the BCA and Adjusted BCA of
ba1 alongside its long-term issuer ratings of Ba1 were placed on
review for downgrade. The direction of the review on bank's deposit
ratings and assessments was changed to uncertain. The review
uncertain reflects the rapidly deteriorating macroeconomic
environment in Italy which could be potentially mitigated by CCB's
larger deposit base on a group consolidated basis.
CHANGES IN OUTLOOKS
- Intesa Sanpaolo S.p.A. (Intesa Sanpaolo): the outlooks on the
bank's and Banca IMI S.p.A.'s long-term senior unsecured debt
ratings were revised to negative from stable. The outlook on both
the bank's and Banca IMI's long-term deposit ratings remain stable,
while the banks' deposit and senior debt ratings of Baa1 and their
BCAs of baa3 were affirmed.
The actions reflect likely downward pressure on the bank's BCA and
the potential for a reversal of its previously improving trend in
asset quality. The outlook remains stable on the bank's long-term
deposit ratings because these ratings are currently capped by
Italy's government bond rating of Baa3 and therefore unlikely to be
downgraded in the event of a lower BCA.
- Mediocredito Trentino-Alto Adige S.p.A.: the outlooks on the
long-term deposit rating of Baa3 and senior unsecured debt ratings
of Ba1 were changed to negative from stable. All assessments and
ratings were affirmed.
- Credito Valtellinese S.p.A.: the outlook on the senior unsecured
debt rating of B2 was changed to negative from stable. All
assessments and ratings were affirmed.
- Banco BPM S.p.A.: the outlook on the long-term deposit ratings
was changed to negative from stable. The bank's BCA of ba3, deposit
ratings of Baa3/Prime-3 and issuer and senior unsecured ratings of
Ba2 were affirmed.
- BPER Banca S.p.A.: the outlooks on the long-term deposit, issuer
and senior unsecured ratings were changed to negative from stable.
The bank's BCA of ba2, deposit ratings of Baa3/Prime-3 and issuer
and senior unsecured ratings of Ba3 were affirmed.
- Credito Emiliano S.p.A.: the outlook on the long-term deposit
rating was changed to negative from stable. The bank's BCA of baa3
and deposit ratings of Baa3/Prime-3 were affirmed.
- Banca Monte dei Paschi di Siena S.p.A. (MPS): the outlooks on the
long-term deposit and senior unsecured ratings were changed to
developing from positive, reflecting both downside risks and upward
pressure on the ratings. The outlooks on the deposit ratings of the
bank's subsidiary MPS Capital Services S.p.A. were also changed to
developing from positive. The bank's BCA of b3, deposit ratings of
B1/Not Prime and senior unsecured rating of Caa1 were affirmed.
- Mediobanca S.p.A.: The outlooks on the issuer and senior
unsecured ratings were changed to negative from stable. The outlook
on the long-term deposit ratings remains stable because these
ratings are currently capped by Italy's government bond rating of
Baa3 and therefore unlikely to be downgraded in the event of a
lower BCA. The bank's BCA of baa3, deposit ratings of Baa1/Prime-2
issuer and senior unsecured ratings of Baa1 were affirmed.
RATINGS AFFIRMATION WITH A STABLE OUTLOOK
- UniCredit S.p.A. (UniCredit): the bank's deposits of Baa1/Prime-2
and senior unsecured debt ratings of Baa1were affirmed, as was its
BCA of baa3. The outlook on the long-term deposit and senior
unsecured debt ratings remains stable.
Although UniCredit's BCA of baa3 benefits from the bank's
pan-European footprint with strong presence in Germany, Austria and
CEE countries, the BCA could still be affected by a deterioration
in the operating environment. However, the outlooks on the
long-term deposit and senior unsecured ratings remain stable
because these ratings are currently capped by Italy's government
bond rating of Baa3 and therefore unlikely to be downgraded in the
event of a lower BCA.
BANKS NOT AFFECTED BY TODAY'S RATING ACTION
The ratings and assessments of Banca Carige S.p.A., Unione di
Banche Italiane S.p.A, Banca Nazionale Del Lavoro S.p.A., Banca
Farmafactoring S.p.A. and Banca del Mezzogiorno -- MCC S.p.A (Banca
del Mezzogiorno) are not affected by the rating actions. For Banca
del Mezzogiorno: the review for downgrade on the bank's deposit and
senior unsecured debt ratings (Baa3/Prime-3 and Ba1 respectively)
was extended. The review initiated on 31 December 2019 followed the
announcement by the Italian government that the bank would be
involved in the rescue of the troubled Banca Popolare di Bari
S.p.A.
RATINGS RATIONALE
The global spread of the coronavirus will result in simultaneous
supply and demand shocks. As of 24 March, Italy had put in place
sweeping and stringent measures designed to stem the spread of
coronavirus. These measures are highly disruptive to economic
activity.
The negative outlooks assigned to the aforementioned ratings and
assessments reflect the pressure on these banks' intrinsic
financial strength (or BCAs) given this deteriorating environment.
Moody's has placed on review for downgrade the ratings and/or
assessments of banks that the agency views as more vulnerable to a
deterioration of their credit profiles, which could be revealed in
the short term. This additional vulnerability could be driven by
one or more of a number of factors, including the composition of
their loan portfolios (greater exposure to more vulnerable sectors
such as tourism, retail, and SMEs more generally), reduced
likelihood of problem loan disposals, a weaker starting point in
terms of capital or profitability, or more limited
diversification.
ASSET QUALITY AND PROFITABILITY WILL WORSEN
The very rapid spread of the coronavirus outbreak has led Italy to
enforce widespread limitations on movement which will have a
material impact on the country's economy, affecting both corporate
and individuals, with more acute consequences for the important SME
sector.
Moody's therefore expects Italian banks' asset quality and
profitability to weaken due to higher problem loans, even though
the duration of the disruption and its implications for the overall
economy and the Italian banking system are dependent upon the
spread of the virus, which remains difficult to predict. Some
anticipated problem loan disposals will likely be delayed or
cancelled.
To some extent, the economic consequences will be mitigated by
government action. On 17 March 2020, the Italian government
approved a package ("Decreto Cura Italia"), which could be amended
via the legislative process, including support for individuals,
SMEs and self-employed. The new package includes specific measures
for the banking system, including a six-month bank loan moratoria
for companies under specific conditions and the introduction of
state guarantees on part of the loan losses that could be faced by
banks during this period.
In Moody's view these measures, in particular the introduction of a
state guarantee mechanism, are unlikely to fully shield the Italian
economy and banks from all the negative consequences of an
unprecedented turmoil and are more limited in scope than those in
some other large European countries.
Moody's also expects that banks' profitability will further suffer
due to the combination of lower revenues and increased credit
costs.
BANKS' CAPITAL WILL BE AFFECTED
Italian banks' capital ratios will be affected by rising spreads on
sovereign yields, despite the supporting measures taken by the ECB,
which will weigh on the value of their government securities and
hence their equity, depending on how these assets are accounted.
Italian banks' exposure to the Italian government totaled EUR385
billion as of end-February 2020, equivalent to 10% of the system's
total assets.
The Italian 10-year sovereign bond spread relative to the German
10-year bond increased to over 280 basis points (bps) on 18 March
from below 130 bps before the coronavirus outbreak, and then
decreased to around 190 bps on 20 March, showing a high degree of
volatility. Capital ratios may also be diluted by a deterioration
in the quality of bank's loans, which could prompt an increase in
RWAs.
WHOLESALE FUNDING IS MORE CONSTRAINED
The negative outlook on Italian banks' debt and deposit ratings
also reflects Moody's view that current market conditions will
constrain banks wholesale funding plans.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's does not apply any corporate behavior adjustment to Italian
banks part of the rating action except for MPS, and does not have
any specific concerns about their corporate governance, which is
nevertheless a key credit consideration, as for most banks. MPS's
BCA of b3 incorporates one-notch negative adjustment for corporate
behavior to reflect the continued uncertainty over the bank's
strategy going forward. Corporate governance is a key credit
consideration for MPS, as weak governance in the past had led to
poor strategic decisions.
WHAT COULD MOVE THE RATINGS UP/DOWN
The ratings of Cassa Centrale Banca S.p.A. could be upgraded should
the group's deposit base be sufficiently large to reduce
loss-given-failure for this instrument.
For other banks, upgrades in deposit and senior unsecured debt
ratings are unlikely given the current negative outlooks or reviews
for downgrade.
A downgrade in ratings would likely be driven by a lower BCA. A BCA
downgrade could be driven by an expectation of a material
deterioration in the operating environment for banks in Italy,
leading to a worsening of banks' asset quality and profitability
and reduced loss-absorption capacity. A downgrade of banks' BCAs
could also be triggered by significantly reduced capitalization or
a material deterioration in liquidity if measures approved by the
ECB were not sufficient to preserve their liquidity and funding
positions.
The developing outlook on MPS's ratings reflects both the downside
risks common to other Italian banks from the coronavirus outbreak
described below, and also the upward potential from the disposal of
problem loans which the bank is negotiating and which would
materially improve its financial profile.
A downgrade of Italy's sovereign rating would also lead to a
downgrade of banks' ratings capped by the sovereign rating.
Changes to the banks' liability structures could also have an
impact of the banks' ratings.
LIST OF AFFECTED RATINGS
Issuer: Banca Monte dei Paschi di Siena S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Ba3
Short-term Counterparty Risk Ratings, affirmed NP
Long-term Bank Deposits, affirmed B1, outlook changed to Developing
from Positive
Short-term Bank Deposits, affirmed NP
Long-term Counterparty Risk Assessment, affirmed Ba3(cr)
Short-term Counterparty Risk Assessment, affirmed NP(cr)
Baseline Credit Assessment, affirmed b3
Adjusted Baseline Credit Assessment, affirmed b3
Senior Unsecured Regular Bond/Debenture, affirmed Caa1, outlook
changed to Developing from Positive
Senior Unsecured Medium-Term Note Program, affirmed (P)Caa1
Subordinate Regular Bond/Debenture, affirmed Caa1
Subordinate Medium-Term Note Program, affirmed (P)Caa1
Other Short Term affirmed (P)NP
Outlook Action:
Outlook changed to Developing from Positive
Issuer: Banca Italease S.p.A.
Affirmations:
Senior Unsecured Regular Bond/Debenture, affirmed Ba2, outlook
remains Negative
No Outlook assigned
Issuer: Banco Popolare Societa Cooperativa
Affirmations:
Senior Unsecured Regular Bond/Debenture, affirmed Ba2, outlook
remains Negative
Subordinate Regular Bond/Debenture, affirmed B1
Preferred Stock Non-cumulative, affirmed B3(hyb)
No Outlook assigned
Issuer: BPER Banca S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa2
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposit Ratings, affirmed Baa3, outlook changed to
Negative from Stable
Short-term Bank Deposit, affirmed P-3
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Long-term Issuer Rating, affirmed Ba3, outlook changed to Negative
from Stable
Baseline Credit Assessment, affirmed ba2
Adjusted Baseline Credit Assessment, affirmed ba2
Senior Unsecured Regular Bond/Debenture, affirmed Ba3, outlook
changed to Negative from Stable
Senior Unsecured Medium-Term Note Program, affirmed (P)Ba3
Subordinate Regular Bond/Debenture, affirmed Ba3
Subordinate Medium-Term Note Program, affirmed (P)Ba3
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Mediobanca S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Long-term Issuer Ratings, affirmed Baa1, outlook changed to
Negative from Stable
Baseline Credit Assessment, affirmed baa3
Adjusted Baseline Credit Assessment, affirmed baa3
Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook
changed to Negative from Stable
Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Junior Senior Unsecured Regular Bond/Debenture, affirmed Baa3
Junior Senior Unsecured Medium-Term Note Program, affirmed (P)Baa3
Subordinate Medium-Term Note Program, affirmed (P)Ba1
Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook changed to Stable(m) from Stable
Issuer: Mediobanca International (Luxembourg) SA
Affirmations:
Backed Commercial Paper, affirmed P-2
Backed Other Short Term, affirmed (P)P-2
Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Backed Senior Unsecured Regular Bond/Debenture , affirmed Baa1,
Negative outlook assigned
Outlook Action:
Outlook changed to Negative from No Outlook
Issuer: MPS Capital Services S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Ba3
Short-term Counterparty Risk Ratings, affirmed NP
Long-term Bank Deposits, affirmed B1, outlook changed to Developing
from Positive
Short-term Bank Deposits, affirmed NP
Long-term Counterparty Risk Assessment, affirmed Ba3(cr)
Short-term Counterparty Risk Assessment, affirmed NP(cr)
Baseline Credit Assessment, affirmed b3
Adjusted Baseline Credit Assessment, affirmed b3
Outlook Action:
Outlook changed to Developing from Positive
Issuer: Credito Emiliano S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa3, outlook changed to Negative
from Stable
Short-term Bank Deposits, affirmed P-3
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Baseline Credit Assessment, affirmed baa3
Adjusted Baseline Credit Assessment, affirmed baa3
Junior Senior Unsecured Regular Bond/Debenture, affirmed Ba1
Subordinate Regular Bond/Debenture, affirmed Ba1
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Banco BPM S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa3
Short-term Counterparty Risk Ratings, affirmed P-3
Long-term Bank Deposits, affirmed Baa3, outlook changed to Negative
from Stable
Short-term Deposit Rating, affirmed P-3
Long-term Counterparty Risk Assessment, affirmed Baa3(cr)
Short-term Counterparty Risk Assessment, affirmed P-3(cr)
Long-term Issuer Rating, affirmed Ba2, outlook remains Negative
Baseline Credit Assessment, affirmed ba3
Adjusted Baseline Credit Assessment, affirmed ba3
Senior Unsecured Regular Bond/Debenture, affirmed Ba2, outlook
remains Negative
Senior Unsecured Medium-Term Note Program, affirmed (P)Ba2
Junior Senior Unsecured Regular Bond/Debenture, affirmed B1
Junior Senior Unsecured Medium-Term Note Program, affirmed (P)B1
Subordinate Regular Bond/Debenture, affirmed B1
Subordinate Medium-Term Note Program, affirmed (P)B1
Preferred Stock Non-cumulative, Affirmed B3(hyb)
Outlook Action:
Outlook changed to Negative from Stable(m)
Issuer: Banca Popolare di Milano S.C. a r.l.
Subordinate Regular Bond/Debenture, affirmed B1
No Outlook assigned
Issuer: UniCredit S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Baseline Credit Assessment , Affirmed baa3
Adjusted Baseline Credit Assessment, affirmed baa3
Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook
remains Stable
Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Junior Senior Unsecured Regular Bond/Debenture, affirmed Baa2
Junior Senior Unsecured Medium-Term Note Program, affirmed (P)Baa2
Subordinate Regular Bond/Debenture, affirmed Baa3
Subordinate Medium-Term Note Program, affirmed (P)Baa3
Preferred Stock Non-cumulative, affirmed Ba3(hyb)
Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook remains Stable
Issuer: UniCredit Bank Ireland p.l.c.
Affirmations:
Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1,
outlook remains Stable
Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Backed Commercial Paper, affirmed P-2
Backed Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook remains Stable
Issuer: UniCredit Delaware Inc.
Affirmation:
Backed Commercial Paper, affirmed P-2
No Outlook assigned
Issuer: UniCredit S.p.A., London Branch
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Commercial Paper, affirmed P-2
No Outlook assigned
Issuer: UniCredit S.p.A., New York Branch
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Outlook Action:
Outlook remains Stable
Issuer: Intesa Sanpaolo S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposit, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Long-term Issuer Rating, affirmed Baa1, outlook changed to Negative
from Stable
Baseline Credit Assessment, affirmed baa3
Adjusted Baseline Credit Assessment, affirmed baa3
Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook
changed to Negative from Stable
Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1,
outlook changed to Negative from Stable
Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Subordinate Regular Bond/Debenture, affirmed Ba1
Subordinate Medium-Term Note Program, affirmed (P)Ba1
Preferred Stock Non-cumulative, affirmed Ba3(hyb)
Preferred Stock Non-cumulative Medium-Term Note Program, affirmed
(P)Ba3
Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook changed to Stable(m) from Stable
Issuer: Intesa Funding LLC
Affirmation:
Backed Commercial Paper, affirmed P-2
No Outlook assigned
Issuer: Intesa Sanpaolo Bank Ireland p.l.c.
Affirmations:
Backed Short-term Deposit Note/CD Program, affirmed P-2
Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1,
outlook changed to Negative from Stable
Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Backed Commercial Paper, affirmed P-2
Backed Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Intesa Sanpaolo Bank Luxembourg S.A.
Affirmations:
Backed Short-term Deposit Note/CD Program, affirmed P-2
Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1,
outlook changed to Negative from Stable
Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1
Backed Commercial Paper, affirmed P-2
Backed Other Short Term, affirmed (P)P-2
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Intesa Sanpaolo S.p.A., Hong Kong Branch
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Deposit Note/CD Program, affirmed (P)Baa1
Short-term Deposit Note/CD Program, affirmed (P)P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
No Outlook assigned
Issuer: Intesa Sanpaolo S.p.A., New York Branch
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Outlook Action:
Outlook remains Stable
Issuer: Intesa Sanpaolo S.p.A., London Branch
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Commercial Paper, affirmed P-2
No Outlook assigned
Issuer: Sanpaolo IMI S.p.A.
Affirmations:
Senior Unsecured Regular Bond/Debenture , affirmed Baa1, outlook
changed to Negative from Stable
Backed Senior Unsecured Regular Bond/Debenture , affirmed Baa1,
outlook changed to Negative from Stable
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Intesa Bank Ireland p.l.c.
Affirmations:
Backed Senior Unsecured Regular Bond/Debenture, affirmed Baa1,
outlook changed to Negative from Stable
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Banca IMI S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Baseline Credit Assessment, affirmed baa3
Adjusted Baseline Credit Assessment, affirmed baa3
Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook
changed to Negative from Stable
Outlook Action:
Outlook changed to Stable(m) from Stable
Issuer: Credit Agricole Italia S.p.A.
Placed on Review for Downgrade:
Baseline Credit Assessment, currently ba1
Adjusted Baseline Credit Assessment, currently baa1
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa1(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Outlook Action:
Outlook remains Stable
Issuer: Credito Valtellinese S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Ba2
Short-term Counterparty Risk Ratings, affirmed NP
Long-term Bank Deposits, affirmed Ba3, outlook remains Negative
Short-term Bank Deposits, affirmed NP
Long-term Counterparty Risk Assessment, affirmed Ba1(cr)
Short-term Counterparty Risk Assessment, affirmed NP(cr)
Baseline Credit Assessment, affirmed b1
Adjusted Baseline Credit Assessment, affirmed b1
Senior Unsecured Regular Bond/Debenture, affirmed B2, outlook
changed to Negative from Stable
Senior Unsecured Medium-Term Note Program, affirmed (P)B2
Subordinate Medium-Term Note Program, affirmed (P)B2
Other Short Term, affirmed (P)NP
Outlook Actions:
Outlook changed to Negative from Negative(m)
Issuer: Mediocredito Trentino-Alto Adige S.p.A.
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa3
Short-term Counterparty Risk Ratings, affirmed P-3
Long-term Bank Deposits, affirmed Baa3, outlook changed to Negative
from Stable
Short-term Bank Deposits, affirmed P-3
Long-term Counterparty Risk Assessment, affirmed Baa3(cr)
Short-term Counterparty Risk Assessment, affirmed P-3(cr)
Long-term Issuer Ratings, affirmed Ba1, outlook changed to Negative
from Stable
Baseline Credit Assessment, affirmed ba3
Adjusted Baseline Credit Assessment, affirmed ba3
Senior Unsecured Regular Bond/Debenture, affirmed Ba1, outlook
changed to Negative from Stable
Outlook Action:
Outlook changed to Negative from Stable
Issuer: Banca Sella Holding S.p.A.
Placed on Review for Downgrade:
Long-term Counterparty Risk Ratings, currently Baa2
Short-term Counterparty Risk Ratings, currently P-2
Long-term Bank Deposits, currently Baa3, outlook changed to Ratings
under Review from Positive
Short-term Bank Deposits, currently P-3
Long-term Counterparty Risk Assessment, currently Baa2(cr)
Short-term Counterparty Risk Assessment, currently P-2(cr)
Baseline Credit Assessment, currently ba2
Adjusted Baseline Credit Assessment, currently ba2
Outlook Action:
Outlook changed to Ratings under Review from Positive
Issuer: Cassa Centrale Raiffeisen S.p.A.
Placed on Review for Downgrade:
Baseline Credit Assessment, currently baa3
Adjusted Baseline Credit Assessment, currently baa3
Long-term Issuer Ratings, currently Baa2, outlook changed to
Ratings under Review from Stable
Senior Unsecured Regular Bond/Debenture, currently Baa2, outlook
changed to Ratings under Review from Stable
Affirmations:
Long-term Counterparty Risk Ratings, affirmed Baa1
Short-term Counterparty Risk Ratings, affirmed P-2
Long-term Bank Deposits, affirmed Baa1, outlook remains Stable
Short-term Bank Deposits, affirmed P-2
Long-term Counterparty Risk Assessment, affirmed Baa2(cr)
Short-term Counterparty Risk Assessment, affirmed P-2(cr)
Outlook Action:
Outlook changed to Ratings under Review from Stable
Issuer: Cassa Centrale Banca S.p.A.
Placed on Review for Downgrade:
Baseline Credit Assessment, currently ba1
Adjusted Baseline Credit Assessment, currently ba1
Long-term Issuer Ratings, currently Ba1, outlook change to Ratings
under Review from Stable
Placed on Review direction Uncertain:
Long-term Counterparty Risk Ratings, currently Baa3
Short-term Counterparty Risk Ratings, currently P-3
Long-term Bank Deposits, currently Baa3, outlook remains Ratings
under Review
Short-term Bank Deposits, currently P-3
Long-term Counterparty Risk Assessment, currently Baa3(cr)
Short-term Counterparty Risk Assessment, currently P-3(cr)
Affirmations:
Short-term Issuer Ratings, affirmed NP
Outlook remains unchanged at Ratings under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
Methodology published in November 2019.
===================
K A Z A K H S T A N
===================
NATIONAL COMPANY: Moody's Affirms B1 CFR, Outlook Stable
--------------------------------------------------------
Moody's Investors Service affirmed the B1 corporate family rating
and B1-PD probability of default rating of National Company Food
Contract Corporation JSC, a state-controlled grain trader in
Kazakhstan. Concurrently, Moody's has upgraded the company's
baseline credit assessment, which is a measure of its standalone
credit strength, to b3 from caa1. The outlook remains stable.
RATINGS RATIONALE
The affirmation of FCC's rating reflects improvement in the
company's standalone creditworthiness, as measured by its BCA of
b3, upgraded from caa1, under Moody's Government-Related Issuers
(GRI) rating methodology. At the same time, the rating remains
constrained by the company's small size and short track record of
solid operating performance under its revamped business model. In
addition, the coronavirus outbreak and recent oil price shocks
somewhat supress the final rating.
FCC's B1 rating continues to factor in a sizeable uplift to its BCA
based on Moody's assumption of the strong probability of state
support to the company in the event of financial distress, and the
high default dependence between the company and the government.
Moody's views FCC as a GRI because it is controlled by the
Government of Kazakhstan (Baa3 positive) via KazAgro National
Management Holding JSC (KazAgro, Ba1 positive).
FCC's standalone credit quality has materially improved over the
last 18 months after a pronounced downturn in 2017, and will remain
solid in 2020. The company's net debt reduced to negative KZT20
billion as of September 2019 from positive KZT36 billion in 2017,
although Moody's expects it to increase to around KZT5 billion by
the end of 2020. EBITDA amounted to KZT6.5 billion in the last 12
months ended 30 September 2019, compared with negative KZT6.0
billion in 2017, and the agency estimates it to be around KZT5.0
billion in 2020. FCC's robust operating and financing performance
was driven by the company selling its previously accumulated large
stock of grain, which was procured at low prices, improving its
payment collection, cutting costs, and favourable market
conditions. Moody's expects the company's net leverage, measured as
Moody's adjusted net debt/EBITDA, to be at around 0.8x-1.0x in
2019-20.
At the same time, FCC is likely to generate negative free cash flow
of around KZT5 billion a year in 2019-20, after high free cash flow
of KZT30 billion in 2018. This is driven by the need to replenish
its grain stock at higher prices and less-abetting market
conditions. However, the company's liquidity should be adequate in
2020 thanks to accumulated cash, deposits and short-term
investments, as well as ample available credit facilities.
FCC's credit quality remains constrained by its small scale and
heavy dependence on the Kazakh grain sector, which exacerbate its
exposure to the inherent cyclicality of the agricultural industry
and the volatility of commodity prices. This exposure results in
lack of visibility and significant swings in the company's earnings
and cash flow, and, hence, its financial metrics.
Moody's believes that the company has yet to demonstrate its
ability to sustain the improvements in operations, and positive
EBITDA and free cash flow. The sustainability of the company's
business model still remains uncertain, given the prolonged period
of losses and liquidity issues in 2017 and 1H 2018, and relatively
short track record of solid operating performance to date. The
company also remains an important tool for the government to
support the agricultural sector, which may involve substantial
non-commercial market interventions.
At the same time, FCC benefits from its status as the state grain
trader, with a long track record of operations in domestic and
international markets, and its established relationships with
farmers, grain storage companies, key grain importers and foreign
banks. Under its mandate to ensure food security in Kazakhstan, the
company is also the owner and operator of the country's grain
reserves.
The expected transfer of ownership of the company directly to the
government from KazAgro in 2020, shall this happen, will strengthen
the state's commitment to the company and the likelihood of support
in case of need. On the other hand, this may trigger a revision of
FCC's financial policies and strategic directions, extending the
volatility in its business model.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. Therefore, the
global deterioration in credit conditions also weighs on FCC's
credit quality.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS
FCC's rating takes into account the company's developing corporate
governance. Moody's positively notes the state's oversight through
KazAgro over strategic decisions at the company, as well as its
relative transparency through publication of audited financial
reports and annual reports. However, recent frequent changes in
FCC's management remain a concern. The potential change in
ownership of the company also leads to the uncertainty regarding
the evolution of its corporate governance.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook on FCC's rating reflects the company's currently
comfortable positioning in the rating category and Moody's
expectation that it will continue to maintain its solid credit
metrics and healthy liquidity. The stable outlook also factors in
Moody's assumption of the strong probability of sovereign support
to FCC in case of need.
WHAT COULD CHANGE THE RATING UP / DOWN
Moody's could upgrade the rating if the company (1) demonstrates a
consistent track record of stable financial and operating
performance, (2) pursues predictable and sustainable managerial
practices and adheres to high standards of corporate governance (3)
maintains its Moody's-adjusted net debt/EBITDA below 2.5x on a
sustainable basis, (4) maintains strong liquidity, and (5) pursues
a conservative financial policy and generates sustainable positive
post-dividend free cash flow. An upgrade of the sovereign rating
could also lead to an upgrade of the company's rating.
The rating could be downgraded if (1) FCC's revamped business model
does not prove viable, resulting in a deterioration in the
company's operating and financial performance; (2) its liquidity
deteriorates; (3) Moody's revises its assessment of strong
government support for the company downwards; or (4) Kazakhstan's
sovereign rating is downgraded.
PRINCIPAL METHODOLOGY
The methodologies used in these ratings were Trading Companies
published in June 2016, and Government-Related Issuers Methodology
published in February 2020.
National Company Food Contract Corp JSC (FCC) is the Kazakh state
grain trader fully owned by the government of Kazakhstan through
KazAgro National Management Holding JSC. FCC's principal activities
are to purchase grain from domestic producers and sell it
domestically and for export to ensure food security in Kazakhstan,
the stability of the domestic grain market, and the development of
the export potential of domestic grain. FCC is also engaged in
commercial operations, including the storage, transshipment and
sale of grain. For the 12 months ended 30 September 2019, FCC
generated revenue of KZT35 billion (around $93 million).
===============
S L O V A K I A
===============
MSK ZILINA: Fin'l. Impact of Coronavirus Scare Prompts Liquidation
------------------------------------------------------------------
PA reports that former Slovakian Fortuna Liga champions MSK Zilina
have been placed into liquidation having released 17 players due to
the financial impact of the current season being on hold due to the
coronavirus outbreak.
Zilina sat second in the table when the 2019/20 season was halted
with 22 games played and before the league was split into two, PA
notes.
According to PA, in a statement, the seven-time champions explained
why they had taken the drastic steps to release much of their
first-team squad -- but insisted they would look to complete the
current campaign if it were to restart.
"The liquidator dismissed the players with the highest salaries and
those whose contracts were finishing this summer or winter," PA
quotes a statement on the club's official website as saying.
=========
S P A I N
=========
GRUPO ANTOLIN: S&P Downgrades Rating to 'B-' on COVID-19 Impact
---------------------------------------------------------------
S&P Global Ratings lowered to 'B-' from 'B' its ratings on Grupo
Antolin Irausa SA (Group Antolin) and its debt.
S&P said, "Falling demand following the outbreak of COVID-19 has
led major auto original equipment manufacturers to close their
plants across Europe and the U.S., which we expect will cause
significant damage to Grupo Antolin Irausa SA's operating results
in 2020. We now forecast Grupo Antolin's sales in 2020 will
decline by 14%-17% and its S&P Global Ratings-adjusted debt to
EBITDA will increase to above 6.5x, from an estimated 5.0x-5.5x in
2019. This is in spite of the company's countermeasures to compress
costs and investments. In Europe, where Grupo Antolin derives about
50% of its sales, we expect GDP will decline by 0.5%-1.0% in 2020.
Given our expectation of further social-distancing measures related
to the pandemic, and a progressive shutdown of commercial
activities throughout Europe in an effort to curb the virus'
spread, we believe light vehicle sales are likely to decline by
15%-20% this year. We expect only a limited recovery in 2021, with
anticipated sales of about 19 million units (from 20.7 million in
2019). In the U.S., where the company generates about 39% of its
sales, revised GDP forecasts indicate marginally negative growth in
first-quarter 2020, followed by a more significant decline in the
second quarter. Recovery should begin in the second half of the
year. Considering falling consumer sentiment, stock market
declines, declining oil market-related demand, a liquidity crunch,
and higher-than-expected unemployment claims, we forecast vehicle
sales in 2020 will fall by 15%-20%, the same as in Europe. We
forecast a low double-digit recovery in 2021, before the market
settles at about 16 million units in 2022.
The severity of the fall in auto production in second-quarter 2020
could lead to tight headroom under financial covenants for the rest
of 2020. Grupo Antolin's senior facility agreement contains
financial maintenance covenants stipulating reported EBITDA to net
financial expenses of more than 4x, and reported net debt to EBITDA
of less than 3.5x. At the end of September 2019, the company's net
leverage ratio stood at 2.65x, providing comfortable headroom under
the covenant. However, S&P believes that the headroom under the net
leverage ratio could tighten, particularly in second-quarter 2020,
based on its expectation of a material decline of activity in the
next three months.
Grupo Antolin has limited refinancing needs in 2020 and 2021. At
the end of September 2019, Grupo Antolin had cash balances of
EUR232 million and an undrawn EUR200 million revolving credit
facility maturing in June 2023. The group's flexible cost
structure, combined with material restructuring measures
implemented over 2019, leads S&P to believe the company's sources
of liquidity will cover its needs over the next twelve months. In
addition, Grupo Antolin has only limited debt maturities of EUR49
million coming due in 2020 (of which EUR25 million is credit lines
in China) and EUR31 million in 2021.
S&P said, "The negative outlook reflects our view that uncertainty
surrounding the full impact of the COVID-19 pandemic could put
further pressure on the group's 2020 performance, resulting in weak
credit metrics, and its ability to meet its financial maintenance
covenants.
"We could lower the rating over the next 12 months if the economic
impact of the COVID-19 pandemic is more significant than we
currently expect, and leads to a more severe cut in auto production
volumes. This would result in lower EBITDA and cash flow
generation, turn free operating cash flow (FOCF) negative, and
constrain liquidity, such that the group's capital structure
becomes unsustainable in the medium term.
"We could revise the outlook to stable if global auto production
levels normalize in second-half 2020, and Grupo Antolin restores
comfortable headroom under its covenants. We could raise our
ratings on Grupo Antolin if its funds from operations to debt
increases to above 12% and its debt to EBITDA decreases to below
5x, and FOCF generation is materially positive."
INTERNATIONAL PARK: Moody's Cuts CFR to Caa1, Outlook Negative
--------------------------------------------------------------
Moody's Investors Service downgraded International Park Holdings
B.V. corporate family rating to Caa1 from B2. Concurrently Moody's
has downgraded PortAventura's probability of default rating to
Caa1-PD from B2-PD and the EUR620 million senior secured term loan
maturing 2024 to Caa1 from B2. The outlook on all ratings were
maintained at negative.
The rating action reflects the rapid spread of the coronavirus
outbreak across many regions and markets which will have a
significant negative impact on PortAventura's financial metrics and
liquidity position.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The leisure
industry has been one of the sectors most significantly affected by
the extensive measures and restrictions taken to contain the virus.
More specifically, the weaknesses in PortAventura's credit profile,
including its exposure to a single site location and high
seasonality, make its more vulnerable to external factors and
shifts in market sentiment in these unprecedented operating
conditions. Moody's regards the coronavirus outbreak as a social
risk under its ESG framework, given the substantial implications
for public health and safety. Its action reflects the impact on
PortAventura of the breadth and severity of the shock, and the
broad deterioration in credit quality it has triggered.
While PortAventura's credit quality remained relatively weakly
positioned in the previous B2 rating category, Moody's recognises
that its operating performance significantly improved in 2019. The
company benefited from its multiday ticket strategy as well as the
significant capital investments made in 2019, including the opening
of the new hotel Colorado Creek. As a result, the company achieved
higher spend per room and per visitor, and continued to increase
the number of visits, which supported a revenue and EBITDA growth
of 4.8% and 7%, respectively. The positive performance in 2019
enabled the company to delever to 5.9x from 6.5x in 2018.
However, the current market environment is expected to result in a
sharp decline in revenue in at least the first half of 2020 as the
coronavirus pandemic continues to spread. Moody's base case assumes
that the coronavirus pandemic will lead to the closure of the parks
until end of Q2 with a slow recovery in attendance starting from
Q3. However, there are risks of more challenging downside scenarios
with the full closure of its parks for the summer season. Given the
high seasonality of the business, with more than 85% of EBITDA
generated from April to September, a prolonged closure of its parks
beyond Q2 could severely affect the company's liquidity profile and
lead to an unsustainable capital structure.
Based on its base case assumptions, Moody's expects revenues to
decline by around 50% in 2020 with a significant impact on
profitability. Moody's acknowledges management's proactive approach
in mitigating the impact with cost and capex reductions. The
company is delaying its main discretionary capital spending and
reducing its fixed cost base structure through maintenance and
marketing costs reductions, as well as the initiation of a
temporary employee dismissal plan. Moody's understands that this
could represent 15-20% of fixed cost reduction, which should help
limit the impact on its profitability to a certain degree. The
overall decline in attendance will negatively affect the free cash
flow generation and weaken the company's liquidity profile.
Consequently, credit metrics are expected to weaken below the
requirements for the single B rating category in 2020. At the same
time, Moody's recognizes that Q3 represents more than 50% of the
company's EBITDA and therefore, a timely reopening of the parks for
the summer season with strong attendance could result in an upward
pressure on the ratings.
Governance risks mainly relate to the company's private-equity
ownership which tends to tolerate a higher leverage, a greater
propensity to favits shareholders over creditors as well as a
greater appetite for M&A to maximise growth and their return on
their investment.
LIQUIDITY
PortAventura's liquidity is weak as it is strained by the
seasonality of the business and the current market environment. The
first quarter of each year is typically a seasonal low point in
terms of the company's liquidity position because capex is spent
off-season. Under normal market conditions, liquidity would improve
in the following months as the parks' visitors increases. However,
in the current situation this will depend on the timing of the
opening of its parks and the return of domestic and international
visitors, which remain highly uncertain at this point. Moody's
understands that the company had around EUR75 million cash on the
balance sheet as of February 2020, which includes a fully drawn
revolving credit facility (RCF) of EUR50 million maturing in 2023.
Moody's believes it to be sufficient to cover a full closure of the
parks until the end of Q2. However, a more severe downside with
extended closure of the parks beyond Q2 will significantly put
pressure on the company's current resources as well as the need to
reset its financial covenants.
STRUCTURAL CONSIDERATIONS
The EUR620 million term loan is rated in line with the CFR. The
instrument is senior secured and guaranteed by guarantors that
represent around 90% of the group's EBITDA and total assets. The
senior secured term loan also holds a security over certain bank
accounts and shares of the issuer and the subsidiary guarantors.
The RCF (unrated) is secured by the same collateral as the senior
secured term loan.
RATING OUTLOOK
The negative outlook reflects the uncertainties related to the
length and severity of the spread, which in a more challenging
downside scenario, could further deteriorate PortAventura's
liquidity profile and lead to an unsustainable capital structure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure could develop if the impact from the pandemic is
less severe than Moody's anticipates and that the company will be
able to open its parks for the summer season with strong attendance
that will lead to an improvement in its profitability and
liquidity, and an increase in Moody's adjusted EBITA/interest to at
least 1x. In addition, a strengthening of the capital structure
could support gradual positive rating pressure.
Downward pressure could develop if the pandemic results in a more
severe impact on the operating performance, which could further
deteriorate PortAventura's liquidity profile and lead to an
unsustainable capital structure.
COMPANY PROFILE
Based in Vila-seca, Spain, PortAventura is a fully integrated
destination resort that consists of three main theme parks: (1) the
PortAventura World Park with 41 rides, 42 shows and a number of
food and beverage points of sale; (2) the PortAventura Caribe
Aquatic Park; and (3) the Ferrari Land Park. These resorts are
complemented by a Convention Centre and six themed hotels. The
company generated revenues of around EUR246 million in 2019 and the
park attracted around 5.2 million visits in 2019.
PROMOTORA DE INFORMACIONES: S&P Lowers ICR to 'B-', On Watch Neg.
-----------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Promotora de
Informaciones S.A. (Prisa) to 'B-' from 'B' and placed it on
CreditWatch with negative implications.
Prisa is unlikely to deleverage this year, owing to weaker than
expected profitability, exacerbated by the impact of COVID-19.
S&P said, "We lowered the ratings because we forecast our adjusted
leverage ratio for Prisa will reach 8.4x-8.9x in 2020, an increase
compared with our previous expectation of leverage reducing to
5.0x-5.5x. Prisa will not be able to partially repay its debt since
its disposal of Media Capital failed. The group will most likely
start the disposal process again, which can take a long time given
Media Capital's underperformance in 2019, subdued prospects for TV
advertising in 2020, and the weak economic environment as a result
of the COVID-19 pandemic. In addition, we don't expect deleveraging
in 2020 because we forecast weakening of operating performance and
EBITDA generation in 2020 versus 2019. We expect absolute EBITDA
will decrease because of the declining profitability of Prisa's
operations in structurally pressured media sectors (TV advertising,
radio, and print media); anticipated volatility in Prisa's book
business; and expected negative foreign currency impact on
earnings, exacerbated by the impact of COVID-19.
"We also anticipate further deterioration of FOCF in 2020 will
weaken Prisa's credit quality.
"We expect Prisa's FOCF to turn negative in 2020 due to lower
earnings, expected working capital outflows due to Prisa's
Santillana business (some cash collections for books will shift to
the first quarter of 2021), and sizeable consolidated capital
expenditure (capex). Our forecast of weakened FOCF also
incorporates an increase in interest payments on the company's
loans by an estimated EUR5 million–EUR6 million for 2020 versus
2019. A margin step-up of 50 basis points will kick in in April
2020 because Prisa will not achieve a debt reduction of EUR275
million predefined in the debt documentation. Although we expect
EBITDA interest coverage to remain above 2x in 2020, we forecast
euro-denominated earnings, generated in Spain and Portugal, to only
roughly cover interest, and foresee a risk of a currency mismatch
between earnings and debt."
There is a risk of a breach of Prisa's net leverage covenant in the
second half of 2020 due to high debt and subdued earnings.
S&P said, "We put the ratings on CreditWatch negative because
Prisa's leverage is increasing, due to the company's failure to
sell Media Capital, combined with the impact of COVID-19. As a
result, we need to assess the sustainability of its capital
structure relative to its future free cash flow generation profile.
In addition, in our view, the likelihood of a breach of the
leverage covenant linked to the company's revolving credit facility
(RCF) will increase during the second half of 2020 when the
leverage covenant testing level steps down to 5.1x as of Dec. 31,
2020, from the current 5.6x. We nonetheless expect that Prisa's
liquidity sources, including cash from the now fully drawn EUR80
million RCF, and positive funds from operations will cover the
company's cash uses until Dec. 31, 2020.
"The CreditWatch indicates that we could lower the rating by at
least one notch if the group's covenant headroom diminished over
the next few months, increasing the risk of a covenant breach
without a plan to prevent it; or if we believed that Prisa's
capital structure has become unsustainable.
"We intend to resolve the CreditWatch over the next few months
after reassessing Prisa's operating performance, cash flow
generation, and liquidity position, as well as the sustainability
of its capital structure."
=====================
S W I T Z E R L A N D
=====================
GATEGROUP HOLDING: Moody's Cuts CFR to B3, Outlook Negative
-----------------------------------------------------------
Moody's Investors Service has downgraded gategroup Holding AG's
corporate family rating to B3 from B1 and probability of default
rating to B3-PD from B1-PD. Outlook on all ratings changed to
negative from stable.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The passenger
airline sector has been one of the sectors most significantly
affected by the shock given its exposure to travel restrictions and
sensitivity to consumer demand and sentiment. The action reflects
the impact on gategroup of the breadth and severity of the shock,
and the broad deterioration in credit quality it has triggered.
Vast majority of gategroup's revenue is directly linked to the
passenger traffic. The downgrade was prompted by the very sharp
decline in passenger traffic since the outbreak of coronavirus
started during January 2020, which will result in a significant
negative free cash flow in 2020, a weakening liquidity profile and
a significantly higher leverage. From a regionally contained
outbreak the virus has rapidly spread to many different regions
severely denting air travel. On a full-year basis, Moody's expects
global industry capacity to fall 25% to 35%, assuming the spread of
the virus slows by the end of June and, subsequently, passenger
demand returns.
Moody's base case assumptions are that the coronavirus pandemic
will lead to a period of severe cuts in passenger traffic over at
least the next three months with partial or full flight
cancellations and aircraft groundings, with all regions affected
globally. The base case assumes there is a gradual recovery in
passenger volumes starting in the third quarter. However there are
high risks of more challenging downside scenarios and the severity
and duration of the pandemic and travel restrictions is uncertain.
Moody's analysis assumes around a 50-60% reduction in gategroup's
revenue in the second quarter and a 20% fall for the full year,
whilst also modelling significantly deeper downside cases including
a full fleet grounding during the course of Q2.
Moody's acknowledges that gategroup has taken a number of measures
to build up its liquidity in anticipation of a significant decline
in revenue:
- The company's liquidity is supported by CHF172 million of cash
and CHF230 million available RCF as of December 2019
- Moody's expects that the company's shareholders will further
support gategroup
- The acquisition of LSG's European operations should bring
material net cash proceeds, although the transaction is still
subject to regulatory approvals and expected to close in April at
the earliest
- gategroup has flexibility to cut most of its capex for the year,
which is estimated at around CHF120 million savings
Moody's also understands that the company has pro-actively started
to reduce personnel costs with staff layoffs and applied for
government support programmes and also introduced enhanced health
and safety protocols across its networks to ensure continued
ability to operate.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the uncertainties related to the
length and severity of the spread, which in a more challenging
downside scenario, could further deteriorate gategroup's liquidity
profile and lead to a balance sheet with elevated leverage.
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings are unlikely to be upgraded in the short term. Positive
rating pressure would not arise until the coronavirus outbreak is
brought under control, travel restrictions are lifted, and
passenger volumes return to more normal levels. At that stage
Moody's would evaluate the balance sheet and liquidity strength of
the company and positive rating pressure would require evidence
that the company is capable of substantially recovering its
financial metrics and restoring liquidity headroom within a 1-2
year time horizon.
Moody's could downgrade gategroup's rating if there are
expectations of deeper and longer declines in airport passenger
volumes including a material extension into Q3 2020 as a result of
the coronavirus outbreak, particularly if not matched by additional
sources of liquidity; wider liquidity concerns increase, for
instance due to cost inflexibility; or a prolonged period of
significantly negative free cash flow generation coupled with a
material deterioration of the key credit ratios.
LIQUIDITY
gategroup's liquidity is challenged by a decline in free cash flow
generation. The company had CHF172 million of cash and CHF230
million available on its RCF as of December 2019. The EUR415
million RCF which is due in October 2021 also has maintenance
covenants, which are tested semi-annually and include a maximum net
leverage ratio of 3.75x and a minimum interest cover ratio of 3.5x
and will likely come under pressure later this year.
STRUCTURAL CONSIDERATIONS
gategroup's debt capital structure consists of a EUR250 million
unsecured term loan, a EUR415 million unsecured RCF both due
October 2021 and CHF350 million unsecured bonds due February 2022,
all of which are unrated.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety, and as detailed above the impact of the crisis on the
company's credit quality has been the key driver of the downgrade
and review.
Moody's would like to draw attention to certain governance
considerations related to gategroup. The company is 50% owned by a
private equity sponsor RRJ, which may lead to somewhat higher
tolerance for leverage and appetite for debt-funded acquisitions.
PRINCIPAL METHDOLOGY
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
LIST OF AFFECTED RATINGS:
Downgrades:
Issuer: gategroup Holding AG
LT Corporate Family Rating, Downgraded to B3 from B1
Probability of Default Rating, Downgraded to B3-PD from B1-PD
Outlook Actions:
Issuer: gategroup Holding AG
Outlook, Changed To Negative From Stable
COMPANY PROFILE
gategroup Holding AG (gategroup) is a Switzerland-based independent
provider of airline catering and logistic services. As of 31
December 2019, gategroup operated more than 200 facilities in 60
countries and territories in six continents, serving more than 700
million passengers annually and more than 300 customers worldwide.
Its core activities are located in the US, France and Switzerland,
which together accounted for 51% of the company's revenue in 2019.
In 2019, the company generated around CHF5 billion in revenue and
reported EBITDA of CHF441 million. gategroup is owned by the
private equity investors RRJ Capital (based in Hong Kong) and the
investment company Temasek (based in Singapore).
===========
T U R K E Y
===========
TURK HAVA: Moody's Cuts CFR to B2 & Reviews Ratings for Downgrade
-----------------------------------------------------------------
Moody's Investors Service has downgraded Turk Hava Yollari Anonim
Ortakligi's corporate family rating to B2 from B1 and probability
of default rating to B2-PD from B1-PD. The company's baseline
credit assessment, a measure of standalone credit quality, has been
downgraded to b3 from b1. The ratings have been placed on review
for further downgrade.
Moody's also placed on review for downgrade its ratings on the two
Enhanced Equipment Trust Certificates of Turkish Airlines its
rates: Bosphorus Pass Through Trust 2015-1A rated Ba3 and the
Japanese Yen-denominated, Anatolia Pass Through Trust, Class A
rated Ba3 and Class B rated Ba3.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The passenger
airline sector has been one of the sectors most significantly
affected by the shock given its exposure to travel restrictions and
sensitivity to consumer demand and sentiment. More specifically,
the weaknesses in Turkish Airlines' credit profile, including its
exposure to many key destinations across the world have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions and the airline remains vulnerable to the
outbreak continuing to spread. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the
substantial implications for public health and safety. The action
reflects the impact on Turkish Airlines of the breadth and severity
of the shock, and the broad deterioration in credit quality it has
triggered.
The downgrade was prompted by Moody's view that there will be a
very sharp decline in passenger traffic from March onwards because
of the coronavirus outbreak and this will lead to the company's
liquidity profile and leverage metrics to significantly weaken.
From a regionally contained outbreak the virus has rapidly spread
to many different regions severely denting air travel. The
International Air Travel Association's (IATA) latest scenario
analysis forecasts a decline in passenger numbers of between 11%
and 19% for the full year 2020.
Moody's base case assumptions are that the coronavirus pandemic
will lead to a period of severe cuts in passenger traffic over at
least the next three months with partial or full flight
cancellations and aircraft groundings, with all regions affected
globally. The base case assumes there is a gradual recovery in
passenger volumes starting in the third quarter. However, there are
high risks of more challenging downside scenarios and the severity
and duration of the pandemic and travel restrictions is uncertain.
Moody's analysis assumes around a 50%-60% reduction in Turkish
Airlines' passenger traffic in the second quarter and a 20% fall
for the full year, whilst also modelling significantly deeper
downside cases and a more extended period of severely depressed
volumes.
Unlike some of its European peers, Turkish Airlines' operational
data for February was healthy with available seat capacity (ASK)
and revenue passenger kilometers (RPK) for the month increasing
5.1% and 2.1% respectively year-over-year. This reflected a low
level of direct exposure to China. However, with the international
spread of the virus, the airline has had to cancel flights to a
number of geographies, particularly in Europe to which it has high
exposure. In 2019, 29% of revenues were derived from Europe and
another 24% from the Far East. Moody's expects travel restrictions
to deepen globally, which exposes the airline to further downside
risks.
Moody's acknowledges that Turkish Airlines is currently focusing on
managing its way through this very volatile market environment. The
review process will focus on the current market situation and
evolution of passenger traffic conditions and pre-booking trends.
The review will also focus on the measures that the company is
likely to take to manage the difficult operating environment and to
support liquidity, including reducing operating costs and capital
spending, managing capacity, and if required deferring aircraft
pre-delivery payments and deliveries. Any measures the Turkish
government may take to alleviate pressures on the airline will also
be assessed.
Moody's classifies Turkish Airlines as a government-related issuer
(GRI) because of the Government of Turkey's (B1 negative) 49.12%
ownership stake held through its sovereign wealth fund. The CFR
incorporates a one-notch uplift from the b3 BCA given Moody's
'strong' government support assumption and 'high' dependence
assumption.
TURKISH AIRLINES RELATED EETCS
The review of the EETC ratings accompanies the review of the
corporate family rating. Moody's assigns ratings to EETCs by
notching above an airline's corporate family rating, based on
certain legal protections, its opinion of the importance of the
aircraft collateral to the airline's network, whether there is a
liquidity facility, its estimates of the size of the projected
equity cushion, and each Classes' position in the waterfall.
Moody's estimates the equity cushions of the Bosphorus 777-300ER
transaction at about 25% and at about 50% for the Class as of the
Anatolia JPY-denominated A321-200 transaction. For the Class Bs on
the Anatolia transaction, Moody's estimates the equity cushion at
about 40%. Three aircraft serve as the collateral in each
transaction.
The transactions are each subject to the Cape Town Convention as
implemented in Turkish law, which is intended to facilitate the
timely repossession of the collateral should a payment default
occur. The Ba3 ratings on each transaction are one notch above
Moody's Foreign Currency Ceiling ("FCC") for Turkey of B1. Each
transaction's separate 18-month liquidity facility is external to
the Turkish banking system and provides sufficient support to
pierce the FCC. The reviews for downgrade reflect the uncertain
impacts of the coronavirus on the global aviation market and
Turkish Airlines' fleet. Notwithstanding the current environment,
Moody's believes that Turkish Airlines will remain important to the
Turkish economy, and its reliance on the global aircraft financing
market make it unlikely that the government would prevent the
airline from servicing its aircraft financing obligations should it
otherwise impose a moratorium on the banking system.
Changes in the EETC ratings can result from any combination of
changes in the underlying credit quality or ratings of the company,
Moody's opinion of the importance of the aircraft collateral to the
operations and/or its estimates of current and projected aircraft
market values, which will affect estimates of loan-to-value.
LIQUIDITY
Moody's liquidity analysis assesses a company's ability to meet its
funding requirements under a scenario of not having access to new
funding, including rollover of existing loans, over the next 12-18
months. Under this approach, Turkish Airlines' liquidity is weak in
light of the very challenging market conditions the airline and the
broader industry is currently facing.
As at December 31, 2019, the airline had $2.5 billion of cash
relative to short term debt of $1.3 billion and current portion of
long-term debt of $1.9 billion ($3.1 billion in total).
Significantly lower pre-bookings and very depressed passenger
traffic will lead to material cash burn at the least in the short
term.
Turkish Airlines does not have any undrawn long-term committed
facilities that in Moody's view can provide a solid liquidity
buffer. However, the airline has strong banking relationships with
local banks, including state owned banks, as evidenced by $2.5
billion of available uncommitted credit lines.
LIST OF AFFECTED RATINGS
Downgrades:
Issuer: Turk Hava Yollari Anonim Ortakligi
Probability of Default Rating, Downgraded to B2-PD from B1-PD;
placed Under Review for further Downgrade
Corporate Family Rating, Downgraded to B2 from B1; placed under
Review for further Downgrade
On Review for Downgrade:
Issuer: Anatolia Pass Through Trust
Senior Secured Enhanced Equipment Trust, placed on Review for
Downgrade, currently Ba3
Issuer: Bosphorus Pass Through Trust 2015-1A
Senior Secured Enhanced Equipment Trust, placed on Review for
Downgrade, currently Ba3
Outlook Actions:
Issuer: Turk Hava Yollari Anonim Ortakligi
Outlook, Changed To Rating Under Review From Negative
Issuer: Anatolia Pass Through Trust
Outlook, Changed To Rating Under Review From Negative
Issuer: Bosphorus Pass Through Trust 2015-1A
Outlook, Changed To Rating Under Review From Negative
PRINCIPAL METHODOLOGIES
The principal methodologies used in rating Turk Hava Yollari Anonim
Ortakligi were Passenger Airline Industry published in April 2018,
and Government-Related Issuers Methodology published in February
2020. The principal methodologies used in rating Anatolia Pass
Through Trust and Bosphorus Pass Through Trust 2015-1A were
Enhanced Equipment Trust and Equipment Trust Certificates published
in July 2018, and Passenger Airline Industry published in April
2018.
COMPANY PROFILE
Founded in 1933, Turkish Airlines is the national flag carrier of
the Republic of Turkey and is a member of the Star Alliance network
since April 2008. Through the Istanbul Airport acting as the
airline's primary hub since early 2019, the airline operates
scheduled services to 268 international and 50 domestic
destinations across 126 countries globally. It operates a fleet of
230 narrow-body, 97 wide-body and 23 cargo planes.
The airline is 49.12% owned by the Government of Turkey through the
Turkey Wealth Fund while the balance is public on Borsa Istanbul
stock exchange. For the last 12 months ending 31 December 2019, the
company reported revenues of $13.2 billion and a net profit of $790
million.
===========================
U N I T E D K I N G D O M
===========================
AQUA EIGHT: Goes Into Liquidation Amid Coronavirus Crisis
---------------------------------------------------------
Emily Townsend at Ipswich Star reports that liquidators have been
appointed to Aqua Eight, a popular pan-Asian restaurant in
Ipswich.
Aqua 8 Limited based in Lion Street is being wound up voluntarily,
Ipswich Star relays, citing a notice published in the London
Gazette.
Kieran Bourne, of Cromwell & Co Insolvency Practitioners, has been
appointed liquidator of the company, Ipswich Star discloses.
According to Ipswich Star, following the Prime Minister's
announcement that restaurants must shut their doors due to the
coronavirus, Aqua Eight bosses said they would see customers "on
the other side".
Announcing they would be closing the restaurant's doors until
further notice, they added: "We want to take this opportunity to
thank all of our loyal guests and customers and we'll see you on
the other side."
However, after a meeting on March 23, liquidators were appointed,
Ipswich Star relates.
CANADA SQUARE 2020-1: Moody's Gives Caa3 Rating to Class X Notes
----------------------------------------------------------------
Moody's Investors Service has assigned definitive credit ratings to
the following Notes issued by Canada Square Funding 2020-1 PLC:
GBP 244,373,000 Class A Mortgage Backed Floating Rate Notes due
2056, Definitive Rating Assigned Aaa (sf)
GBP 24,153,000 Class B Mortgage Backed Floating Rate Notes due
2056, Definitive Rating Assigned Aa2 (sf)
GBP 8,524,000 Class C Mortgage Backed Floating Rate Notes due 2056,
Definitive Rating Assigned A3 (sf)
GBP 4,262,000 Class D Mortgage Backed Floating Rate Notes due 2056,
Definitive Rating Assigned Baa3 (sf)
GBP 2,841,000 Class E Mortgage Backed Floating Rate Notes due 2056,
Definitive Rating Assigned B2 (sf)
GBP 9,945,000 Class X Mortgage Backed Floating Rate Notes due 2056,
Definitive Rating Assigned Caa3 (sf)
The GBP 15,479,000 VRR Loan Note due 2056, the Class S1
Certificate, the Class S2 Certificate and the Class Y Certificates
have not been rated by Moody's.
The Notes are backed by a pool of UK buy-to-let ("BTL") mortgage
loans originated by Fleet Mortgages Limited ("Fleet", NR), Topaz
Finance Limited ("Topaz", NR) and Landbay Partners Limited
("Landbay", NR). The pool was acquired by Citibank N.A., London
Branch (Aa3/(P)P-1 & Aa3(cr)/P-1(cr)) from: (1) Hart Funding
Limited following its purchase from Fleet for Fleet-originated
loans; (2) Zephyr Funding Limited following its purchase from Topaz
for Topaz-originated loans; and (3) Broadway Funding Limited
following its purchase from Landbay for Landbay-originated loans.
The securitised portfolio consists of 1,253 mortgage loans with a
current balance of GBP 299.1 million as of 29 February 2020. The
VRR Loan Note is a risk retention Note which receives 5% of all
available receipts, while the remaining Notes and Certificates
receive 95% of the available receipts on a pari-passu basis.
RATINGS RATIONALE
The ratings of the Notes are based on an analysis of the
characteristics and credit quality of the underlying buy-to-let
mortgage pool, sector wide and originator specific performance
data, protection provided by credit enhancement, the roles of
external counterparties and the structural features of the
transaction.
The analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the UK economy as well as
the effects that the announced government measures, put in place to
contain the virus, will have on the performance of consumer assets.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. It is a global health shock, which makes it extremely
difficult to provide an economic assessment. The degree of
uncertainty around its forecasts is unusually high.
MILAN CE for this pool is 13.0% and the expected loss is 2.0%.
The portfolio's expected loss is 2.0%, which is in line with other
UK BTL RMBS transactions owing to: (i) the performance of
comparable originators; (ii) the current macroeconomic environment
in the UK; (iii) some historical track record, evidencing good
performance for the Fleet portion of the pool; and (iv)
benchmarking with similar UK BTL transactions.
MILAN CE for this pool is 13.0%, which is in line with other UK BTL
RMBS transactions, owing to: (i) the WA current LTV for the pool of
71.29%; (ii) top 20 borrowers constituting 10.5% of the pool; (iii)
static nature of the pool; (iv) the fact that 97.5% of the pool are
interest-only loans; (v) the share of self-employed borrowers of
31.2%, and legal entities of 44.6%; (vi) the presence of 20.0% of
HMO and MUB loans in the pool; and (vii) benchmarking with similar
UK BTL transactions.
At closing, the transaction benefits from a fully funded,
amortising liquidity reserve fund that equals 1.5% of 100/95 of the
outstanding Class A Notes with a floor of 1.00% of 100/95 prior to
and no floor post the step-up date in March 2025 supporting the
Class S1 Certificate, Class S2 Certificate and Class A Notes. The
release amounts from the liquidity reserve fund will flow through
the revenue waterfall prior to and through the principal waterfall
post the step-up date. There is no general reserve fund.
There is limited liquidity support for Class B to E notes. As long
as Class A is outstanding relatively high senior payments including
servicing fees, swap payments and S Certificate payments (in total
approx. 0.9%), spread on Class A and a relatively low portfolio
yield (3.48% on average) limit the liquidity available for the more
junior classes of notes. In case of extensive payment holidays due
to current government initiatives on Coronavirus relief measures or
a servicer disruption event this could lead to interest payment
deferrals on the Class B to E notes. This risk is partially
mitigated by the principal to pay interest mechanism applicable to
Class B to E notes available in many scenarios. However, low
scheduled portfolio amortisation amounts and low expected
prepayments limit this benefit. Other mitigants are certain
portfolio characteristics like the fact that a large number of
loans in the portfolio were recently originated to professional
landlords and have good interest coverage ratios. Moody's also
notes that the interest on these notes is deferrable and such
shortfall will not result in the event of default under the notes.
The interest will accrue on any interest shortfall experienced by
the notes.
Operational Risk Analysis: Fleet, Topaz and Landbay are the
servicers in the transaction whilst Citibank N.A., London Branch,
acts as the cash manager. In order to mitigate the operational
risk, CSC Capital Markets UK Limited (NR) acts as back-up servicer
facilitator. To ensure payment continuity over the transaction's
lifetime, the transaction documentation incorporates estimation
language whereby the cash manager can use the three most recent
servicer reports available to determine the cash allocation in case
no servicer report is available. The transaction also benefits from
approx. 2 quarters of liquidity for Class A based on Moody's
calculations. Finally, there is principal to pay interest as an
additional source of liquidity for the Classes A to F (if relevant
tranches PDL does not exceed 10%, unless it is the most senior
Class of Notes outstanding).
Interest Rate Risk Analysis: 96.74% of the loans in the pool are
fixed rate loans reverting to three months LIBOR with the remaining
portion linked to three months LIBOR. The Notes are floating rate
securities with reference to daily compounded SONIA. To mitigate
the fixed-floating mismatch between fixed-rate assets and
floating-rate liabilities, there is a scheduled notional
fixed-floating interest rate swap provided by Citibank Europe plc,
UK Branch (Aa3(cr)/P-1(cr)).
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
July 2019.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage. Please see "Moody's Approach to Rating RMBS Using the MILAN
Framework" for further information on Moody's analysis at the
initial rating assignment and the on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the ratings:
Significantly different actual losses compared with its
expectations at close due to either a change in economic conditions
from its central scenario forecast or idiosyncratic performance
factors would lead to rating actions. For instance, should economic
conditions be worse than forecast, the higher defaults and loss
severities resulting from a greater unemployment, worsening
household affordability and a weaker housing market could result in
a downgrade of the ratings. Deleveraging of the capital structure
or conversely a deterioration in the Notes available credit
enhancement could result in an upgrade or a downgrade of the
ratings, respectively.
CANADA SQUARE 2020-1: S&P Assigns B (sf) Rating to X-Dfrd Notes
---------------------------------------------------------------
S&P Global Ratings has assigned final credit ratings to Canada
Square Funding 2020-1 PLC's (CSF 2020-1's) class A notes and class
B-Dfrd to X-Dfrd interest deferrable notes.
CSF 2020-1 is a static RMBS transaction that securitizes a
portfolio of GBP299.1 million buy-to-let (BTL) mortgage loans
secured on properties located in the U.K. The loans in the pool
were originated by Fleet Mortgages Ltd. (52.9%), Landbay (31.9%),
and Zephyr Homeloans (15.2%) between 2018 and 2020.
At closing, the issuer used the issuance proceeds to purchase the
full beneficial interest in the mortgage loans from the seller. The
issuer granted security over all of its assets in favor of the
security trustee.
Citibank, N.A., London Branch, retained an economic interest in the
transaction in the form of a vertical risk retention (VRR) loan
note accounting for 5% of the pool balance at closing. The
remaining 95% of the pool were funded through the proceeds of the
mortgage-backed rated notes.
S&P considers the collateral to be prime, based on the overall
historical performance of Fleet Mortgages', Landbay Partners' and
Zephyr Homeloans' respective BTL residential mortgage books as of
February 2020, the originators' conservative lending criteria, and
the absence of loans in arrears in the securitized pool.
Credit enhancement for the rated notes consists of subordination
from the closing date and overcollateralization following the
step-up date, which will result from the release of the liquidity
reserve excess amount to the principal priority of payment.
The class A notes benefit from liquidity support in the form of a
liquidity reserve, and the class A and B-Dfrd through E-Dfrd notes
benefit from the ability of principal to be used to pay interest,
provided that, in the case of the class B-Dfrd to E-Dfrd notes, the
respective tranche's PDL does not exceed 10% unless they are the
most senior class outstanding.
There are no rating constraints in the transaction under our
counterparty, operational risk, or structured finance sovereign
risk criteria. S&P considers the issuer to be bankruptcy remote.
Ratings List
Class Rating* Class size (%)*
A AAA (sf) 86.0
B-Dfrd AA- (sf) 8.5
C-Dfrd A (sf) 3.0
D-Dfrd BBB+ (sf) 1.5
E-Dfrd BBB (sf) 1.0
X-Dfrd B (sf) 3.5
VRR loan note NR 5.0
S1 certificates NR N/A
S2 certificates NR N/A
Y certificates NR N/A
*As percentage of 95% of the pool for the class A to X-Dfrd
notes.
NR--Not rated.
N/A—Not applicable.
CHESTER B1: Moody's Gives (P)Ba3 Rating to Class E Notes
--------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to Notes
to be issued by Chester B1 PLC:
GBP 1,290,392,000 Class A Mortgage Backed Floating Rate Notes due
2058, Assigned (P)Aaa (sf)
GBP 129,850,000 Class B Mortgage Backed Floating Rate Notes due
2058, Assigned (P)Aa3 (sf)
GBP 56,810,000 Class C Mortgage Backed Floating Rate Notes due
2058, Assigned (P)A1 (sf)
GBP 48,694,000 Class D Mortgage Backed Floating Rate Notes due
2058, Assigned (P)Baa3 (sf)
GBP 32,462,000 Class E Mortgage Backed Floating Rate Notes due
2058, Assigned (P)Ba3 (sf)
GBP 48,694,000 Class X Mortgage Backed Floating Rate Notes due
2058, Assigned (P)Caa3 (sf)
The GBP 87,991,000 VRR Loan Note due 2058, the GBP 64,925,000 Class
Z Mortgage Backed Floating Rate Notes due 2058, the Class S1
Certificate due 2058, the Class S2 Certificate due 2058, and the
Class Y Certificates due 2058 have not been rated by Moody's.
The Notes are backed by a pool of UK Prime residential mortgage
loans previously held by NRAM Limited (NR). The pool was acquired
by Citibank, N.A., London Branch (Aa3/P-1; Aa3(cr)/P-1(cr)) from
NRAM Limited. The securitized portfolio consists of [18,758]
mortgage loans with a current balance of GBP [1,708] million. The
VRR Loan Note is a risk retention Note which receives 5% of all
available receipts, while the remaining Notes and Certificates
receive 95% of the available receipts.
RATINGS RATIONALE
The ratings of the Notes are based on an analysis of the
characteristics of the underlying mortgage pool, sector wide and
originator specific performance data, protection provided by credit
enhancement, the roles of external counterparties including the
backup servicer and the structural features of the transaction.
its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the UK economy as well as
the effects that the announced government measures, put in place to
contain the virus, will have on the performance of consumer assets.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. It is a global health shock, which makes it extremely
difficult to provide an economic assessment. The degree of
uncertainty around its forecasts is unusually high.
Moody's determined the MILAN CE of 17% and the portfolio expected
loss of 4.0% as input parameters for Moody's cash flow model, which
is based on a probabilistic lognormal distribution.
Portfolio expected loss of 4.0%: This is higher than the UK Prime
sector average of 1% and is based on Moody's assessment of the
lifetime loss expectation for the pool taking into account: (i) the
collateral performance of NRAM Limited originated loans to date, as
provided by NRAM Limited; (ii) [2.52]% of loans that were
previously restructured and [10.59]% of loans in arrears in the
portfolio; (iii) the current macroeconomic environment in the UK
and the potential impact of future interest rate rises on the
performance of the mortgage loans; and (iv) benchmarking with
comparable transactions in the UK market.
MILAN Credit Enhancement of 17%: This is higher than the UK Prime
sector average of 8% and follows Moody's assessment of the
loan-by-loan information taking into account the following key
drivers: (i) the weighted average current loan-to-value of [92.9]%,
which is higher than the average seen in the sector; (ii) [2.52]%
of loans that were previously restructured and [10.59]% of loans in
arrears in the portfolio; and (iii) the historical performance of
the loans with [70.28]% of the loans in the pool having never been
more than 1 payment in arrears over the last five years.
Topaz Finance Limited (NR; subsidiary of Computershare Limited
(NR)) is the servicer. Citibank, N.A., London Branch is appointed
as cash manager, while CSC Capital Markets UK Limited (NR) is
appointed as back-up servicer facilitator. To help ensure
continuity of payments the deal contains estimation language
whereby the cash flows will be estimated from the three most recent
servicer reports should the servicer report not be available.
As there are no swaps in the transaction, Moody's has modelled the
spread taking into account the minimum margin covenant of SONIA +
[3.4]%. Due to uncertainty on enforceability of this covenant,
Moody's has taken the view not to give full credit to this
covenant. Instead, Moody's has stressed the interest rate of the
pool by assuming that loans revert to an SVR yield equal to SONIA +
[2]%.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed, but
may have a significant effect on yield to investors.
Principal Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
July 2019.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage. Please see "Moody's Approach to Rating RMBS Using the MILAN
Framework" for further information on Moody's analysis at the
initial rating assignment and the on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the ratings:
Significantly different loss assumptions compared with its
expectations at close, due to either a change in economic
conditions from its central scenario forecast or idiosyncratic
performance factors would lead to rating actions. For instance,
should economic conditions be worse than forecast, the higher
defaults and loss severities resulting from a greater unemployment,
worsening household affordability and a weaker housing market could
result in a downgrade of the ratings. Deleveraging of the capital
structure or conversely a deterioration in the Notes available
credit enhancement could result in an upgrade or a downgrade of the
ratings, respectively.
COOKEZE LIMITED: Enters Administration, 72 Jobs Affected
--------------------------------------------------------
David Nowell at Lancashire Post reports that Dean Watson --
dean.watson@btguk.com -- of the Manchester office of Begbies
Traynor and Neil Dingley -- neil.dingley@moorestoke.co.uk -- of
Moore in Stoke were appointed Joint Administrators of Cookeze
Limited on March 24, after the company ceased trading.
According to Lancashire Post, a total of 72 employees have been
made redundant.
The company's failure has been attributed to the coronavirus
pandemic which has led to widespread closures and cancellation of
major sporting events, Lancashire Post relates.
The administrators are seeking interested parties who may be
attracted by recent major investment in state-of-the-art commercial
kitchen space at its 48,000 sg ft headquarters in Chorley,
Lancashire Post discloses.
DME LTD: Fitch Downgrades LT IDR to BB, Outlook Negative
--------------------------------------------------------
Fitch Ratings has downgraded DME Ltd's (the group) Long-Term Issuer
Default Rating to 'BB' from 'BB+'. Fitch has also downgraded DME
Airport Designated Activity Company's USD350 million loan
participation notes due 2021 and USD300 million loan participation
notes due 2023 to 'BB' from 'BB+'. The Outlooks are Negative.
RATING RATIONALE
The downgrade reflects DME's projected average Fitch-adjusted net
debt/EBITDAR increasing sustainably above 4.0x. This is a result of
expected severe volume shock in 2020 driven by significant
restrictions on mobility, together with the weakening macroeconomic
environment in Russia, including rouble depreciation and low oil
prices. However, Fitch believes that DME has sufficient liquidity
to meet short-term needs and some financial flexibility to
partially offset the expected revenue shortfall.
The Negative Outlook reflects the ongoing uncertainty around the
duration and severity of the current coronavirus crisis, the policy
response of the government and weakening airline financial
positions, including potential bankruptcies, which could hamper
volume recovery.. The Outlook also reflects increasing refinancing
risk given the approaching bullet maturity of USD350 million in
2021.
KEY RATING DRIVERS
Volume Shock due to Coronavirus Response
Fitch projects DME's traffic to decrease around 20% yoy in 2020 due
to changes in passenger (pax) behavior relating to business and
leisure travel, together with travel bans introduced by the Russian
and the EU governments, which will result in plunging pax numbers
and significant stress for airlines.
Until May 2020 foreigners are not allowed to enter Russia with rare
exceptions, while Russian citizens returning to Moscow from abroad
must undergo self-isolation for two weeks. Although Fitch does not
have DME's pax data for March, evidence from European airports
suggests that the international pax volume in airports of Moscow
aviation hub will face an unprecedented drop over the next few
months. Direct foreign traffic represented around 45% of DME's
volume in 2019. In case of full lock-down of domestic travel in
Moscow, air travel volume is likely to be slashed even more
severely with drop in domestic flights.
Secondary Shock due to Rouble Depreciation and Potential Airline
Bankruptcies
The coronavirus effect on volumes was exacerbated by rouble
depreciation of around 30% between January and March 2020 amid the
oil price drop to USD25 from USD60 per barrel. These macroeconomic
conditions may hamper traffic recovery and prolong volume shock
after the virus is contained. The depreciation also increases DME's
mostly USD-denominated debt in rouble terms, adding pressure to the
credit profile.
Fitch assumes DME's 2021 traffic will still remain below 2019
levels due to difficult macroeconomic conditions, alongside
additional risks relating to potential airline bankruptcies and
stiff competition from two other airports in the Moscow aviation
hub. Air traffic is likely to recover much faster in competing
Sheremetyevo airport (SVO) as most of its traffic comes from the
majority state-owned national carrier Aeroflot (BB/Negative) . As
evident in the previous rouble currency crisis of 2014,
DME-residing airlines (e.g. Transaero, Vim-Avia) went bankrupt,
while lost traffic and slots were mostly picked up by Aeroflot to
the benefit of SVO.
Liquidity and Refinancing Risks
Despite the expected shock in 2020, DME has sufficient liquidity to
cover the next 12-18 months. As of the beginning of March DME had
RUB7 billion in unrestricted cash (around USD90 million) and
approximately EUR80 million in committed credit lines with only
minor EUR-denominated debt maturities in 2020. However, in 2021 DME
has a USD350 million Eurobond maturity, which management expects to
partly cover by placement of rouble bonds. Turmoil on financial
markets makes it challenging at present to make significant
placements, but Fitch believes that DME still has sufficient time
to refinance its 2021 bullet maturity in advance.
Fitch Cases
Its updated Fitch rating case (FRC) reflecting its assumptions on
the coronavirus impact includes a volume decline of around 20% yoy
in 2020 with March to June being most affected. Fitch also assumes
that the secondary effects of rouble depreciation will slow traffic
recovery in 2021 amid potential airlines bankruptcies. In the FRC
DME's traffic will fully recover to 2019 levels only by 2023. Fitch
also assumes DME will take mitigating measures by decreasing capex
to 50% of its original plan for 2020-2021 and 80% thereafter, no
dividends in 2020 and only 30% of its original plan for 2021.
Variable costs were assumed at 30% of total operating costs.
The Fitch stress case (FSC) is similar to FRC except for in
2021-2023 when Fitch applies volume stress comparable to actual
performance after the 2014 currency crisis.
Financial Profile
The updated FRC resulted in a five-year average leverage of 5.3x
with a spike in 2020 to 8.1x and gradual stabilisation at 4.6x by
2023, which is still above its downgrade sensitivity of 4.0x. The
FSC results in a similar profile except that leverage decreases at
a slower pace, to 5.4x by 2023.
ESG Influence
DME has an ESG Relevance Score of 4 for Governance Structure due to
the absence of an independent board of directors and ownership
concentration, which, in combination with other factors, affects
the rating.
Risk Assessments
Fitch assesses DME's revenue risk (volume and price) as 'Midrange',
infrastructure renewal as 'Midrange' and debt structure as
'Weaker'.
RATING SENSITIVITIES
Future developments that may, individually or collectively, lead to
negative rating action include:
- Projected Fitch-adjusted net debt/EBITDAR sustainably above 5x
under the FRC, due to, among other factors, a further decrease in
volumes, high shareholder returns or the rouble weakening.
- Failure to refinance the November 2021 bullet maturity well
ahead of schedule.
Developments that may, individually or collectively, lead to
positive rating action include:
- Fitch does not anticipate an upgrade as reflected in the
Negative Outlook. Quicker-than-assumed recovery from the COVID-19
shock supporting sustained credit metrics recovery may, however,
result in a revision of the Outlook to Stable.
TRANSACTION SUMMARY
DME operates Domodedovo Airport, one of three main airports in
Moscow. DME Airport Designated Activity Company, formerly DME
Airport Limited, an Irish SPV, is the issuer of the notes, with the
proceeds on-lent to borrower, Hacienda Investments Ltd (Cyprus).The
loans are guaranteed by the holding company DME and a majority of
DME operational subsidiaries on a joint and several basis. The
group owns the terminal buildings and leases the runways and other
airfield assets from the Russian government.
As indicated, the coronavirus pandemic and related government
containment measures worldwide create an uncertain global
environment for air travel in the near term. While DME's most
recent performance data may not have indicated significant
impairment so far, material changes in revenue and cost profile are
occurring across the EMEA airports sector and likely to worsen in
the coming weeks and months as economic activity suffers and
government restrictions are maintained or broadened. Fitch's
ratings are forward-looking in nature, and Fitch will monitor
developments in the sector for the severity and duration of the
crisis and its impact, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on
expectations for future performance and assessment of key risks.
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.
DME has an ESG Relevance Score of 4 for Governance Structure due to
the absence of an independent board of directors and ownership
concentration, which has a negative impact on the credit profile,
and is relevant to the ratings in conjunction with other factors.
EI GROUP PLC: S&P Downgrades ICR to CCC+, Outlook Negative
----------------------------------------------------------
S&P Global Ratings said that it has taken the following rating
actions on four U.K.-based pub and casual dining restaurant
operators.
S&P said, "We downgraded our long-term issuer credit rating on
Mabel Topco Ltd. by one notch to 'B-', and placed the ratings on
CreditWatch with negative implications.
"We downgraded our long-term issuer credit rating on Stonegate Pub
Co. Ltd. by one notch to 'CCC+', and assigned a negative outlook.
We equalized the issuer credit rating on Ei Group PLC to that of
Stonegate following the completion of Stonegate's acquisition of Ei
Group on March 3, 2020, placing it at 'CCC+' with a negative
outlook. We plan to withdraw our ratings on Ei Group shortly after
this rating action.
"We downgraded our long-term issuer credit rating on PizzaExpress
Financing 1 PLC to 'CC' from 'CCC-', and placed the ratings on
CreditWatch with negative implications, following the announcement
of a distressed debt issuance."
Rating Actions Rationale
The COVID-19 pandemic will severely harm pubs' and restaurants'
results for 2020, and could result in rapid deterioration of their
credit metrics and liquidity positions. U.K. Prime Minister Boris
Johnson recently introduced new measures to ensure British
residents avoid unnecessary social interaction, in light of the
rapid growth of confirmed COVID-19 cases across the country.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. S&P said,
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly."
Rapid escalation of the COVID-19 pandemic, the recent mandatory
social distancing announced by the government, and the closure of
all dine-in businesses across the U.K. will lead to subdued
earnings and cash flow generation for industry participants. These
developments will significantly harm the fragmented U.K. casual
dining industry in 2020, and possibly beyond. Although demand could
pick up relatively quickly once the outbreak is contained, there is
significant uncertainty around pubs' and restaurants' ability to
withstand the liquidity stress posed by a stalled topline over an
extended period of time.
On March 20, 2020, the U.K. government announced the latest raft of
measures aimed at mitigating the impact of COVID-19 on U.K.
businesses in the hardest hit sectors. The measures include the
government's intention to pay up to 80% of the salary of workers in
the most affected sectors (which includes pubs and restaurants) for
at least three months, which in S&P's view will be key to
alleviating some of the short-term liquidity pressure on these
businesses. While the timing and mechanism of such support is yet
to be confirmed, the announcement indicated it could become
effective within a few weeks.
The U.K. government has offered a 12-month holiday in business
rates and a three-month deferral on value-added tax (VAT) payments,
but the cost structure and cash charges typical for the pub and
restaurant operators remain highly fixed. Rent, staff, and interest
costs will weigh heavily on the issuers' liquidity during this time
of sharp revenue decline. S&P therefore expectd the companies to
roll out various cost-cutting and cash-preservation measures, such
as temporary staff reductions, deferral of rent payments, and
capital expenditure (capex) cuts.
S&P said, "The potential timing of a recovery is highly uncertain,
but we currently assume that the first quarter of the year will be
affected only by a much-weaker March, with the second quarter being
the toughest for operators (with heavy operating losses). We assume
that the third quarter will see a slow recovery in footfall (over
the crucial summer period), and that the fourth quarter of the year
will approach normal market conditions. However, this recovery
could be delayed, weighing further on credit metrics. We anticipate
negative free operating cash flow, even after the likely deferrals
in rent payments and capex.
"An additional aggravating factor is the temporary stress on credit
ratios, which could test the companies' ability to comply with
their maintenance covenants. As a result, we expect pub and
restaurant operators' immediate focus to be on protecting their
liquidity positions in the short term, which might include seeking
covenant relief or additional liquidity facilities from lenders."
Ratings List
Ei Group PLC
Downgraded; CreditWatch/Outlook Action
To From
Ei Group PLC
Issuer Credit Rating CCC+/Negative/-- B/Watch Neg/--
PIZZAEXPRESS FINANCING 1 PLC
Downgraded; CreditWatch/Outlook Action
To From
PIZZAEXPRESS FINANCING 1 PLC
Issuer Credit Rating CC/Watch Neg/-- CCC-/Negative/--
Restaurant Group PLC (The)
Downgraded; CreditWatch/Outlook Action
To From
Mabel Topco Ltd.
Issuer Credit Rating B-/Watch Neg/-- B/Positive/--
Stonegate Pub Co. Ltd.
Downgraded; CreditWatch/Outlook Action
To From
Stonegate Pub Co. Ltd.
Issuer Credit Rating CCC+/Negative/-- B-/Watch Dev/--
NB: This list does not include all the ratings affected.
EI GROUP: Moody's Withdraws B1 CFR After Sec. Notes Repayment
-------------------------------------------------------------
Moody's Investors Service withdrew the ratings of Ei Group Plc
including its outlook.
RATINGS RATIONALE
Moody's has withdrawn the ratings after the recent repayment of its
Moody's rated senior secured notes following the acquisition of the
company by Stonegate Pub Company Limited (B2, developing outlook).
LIST OF AFFECTED RATINGS.
Withdrawals:
Issuer: Ei Group Plc
LT Corporate Family Rating, Withdrawn , previously rated B1 placed
on review for downgrade
Senior Secured Regular Bond/Debenture, Withdrawn , previously rated
B1 placed on review for downgrade
Outlook Actions:
Issuer: Ei Group Plc
Outlook, Changed To Rating Withdrawn From Rating Under Review
FRANKLIN UK: Moody's Cuts CFR to B3 & Alters Outlook to Negative
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Franklin UK
Midco Limited, the holding company of Franklin UK Bidco Limited and
Fintrax International Holdings Limited, including Planet's
corporate family rating to B3 from B2 and the senior secured
instrument ratings consisting of (i) a Term loan B of EUR258
million due 2024 and EUR65 million RCF due 2023 issued by Franklin
UK Bidco Limited and (ii) an acquisition facility of EUR97 million
due 2024 issued by Fintrax International Holdings Limited, to B3
from B2, as well as Planet's probability of default rating to B3-PD
from B2-PD. The rating outlook for all ratings has been changed to
negative from stable.
RATINGS RATIONALE
This rating action reflects the rapid and widening spread of the
coronavirus outbreak, deteriorating global economic outlook,
falling oil prices, and asset price declines which are creating a
severe and extensive credit shock across many sectors, regions and
markets. The combined credit effects of these developments are
unprecedented. The travel sector has been one of the sectors most
significantly affected by the shock given its sensitivity to
consumer demand and sentiment. More specifically, Planet's exposure
to global travel has left it vulnerable to shifts in market
sentiment in these unprecedented operating conditions and the
company remains vulnerable to the outbreak continuing to spread.
Moody's expects Planet's leverage to rise sharply from less than 6x
debt/EBITDA to over 8.0x or higher as a result of earnings pressure
from the coronavirus. Moody's also anticipates that its coverage
will reduce from close to 5.0x EBITA/interest to less than 3.0x and
that the company will generate only limited free cash flow (after
capex) in 2020 and 2021
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Its action reflects the impact on Planet of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
Currently, Planet's liquidity is adequate with EUR71 million of
cash and EUR30 million capacity on revolving lines as of the end of
February 2020. The company has no near-term debt maturities.
However, Moody's anticipates that Planet's liquidity may come under
pressure from weakened performance in the wake of the coronavirus.
The agency also notes the presence of a springing RCF leverage
covenant in Planet's facilities; whilst the covenant headroom is
comfortable in the near term, this could rapidly tighten in the
event of a sustained sharp fall in EBITDA. Still, Moody's notes
that on March 26, 2020 Bank of England Prudential Regulation
Authority issued guidance encouraging lenders to carefully consider
their responses to covenant breaches arising from coronavirus
including considering waiving the resultant covenant breach.
RATIONALE FOR NEGATIVE OUTLOOK
The negative rating outlook reflects Moody's expectations of a
severe and prolonged downturn in the travel segment that will
significantly pressure Planet's credit metrics and require a longer
term to recover to a credit profile commensurate with a higher
rating.
STRUCTURAL CONSIDERATIONS
Moody's rates the senior secured term loan B maturing in 2024,
representing EUR258 million borrowed at the level of Franklin UK
Bidco Limited, and a senior secured acquisition term loan B
maturing in 2024, representing EUR97 million borrowed at the level
of Fintrax International Holdings Limited at B3 in line with the
CFR.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Although considered unlikely in the near term, Moody's could revise
the rating outlook to stable if Planet (1) sustains an adequate
liquidity profile and (2) once there is greater clarity with
respect to a recovery in travel demand.
Conversely, Moody's could downgrade the ratings if Planet's
liquidity profile is further weakened or if the company fails to
evidence recovery in demand.
Domiciled in the UK with headquarters in Galway, Ireland, Planet is
a leading provider of VAT refunds to travellers, as well as
currency conversion services. In 2018, the company reported revenue
and EBITDA (as adjusted by the company) of around EUR338 million
and EUR65 million, respectively.
MARKS & SPENCER: Moody's Cuts Senior Unsec. LT Ratings to Ba1
-------------------------------------------------------------
Moody's Investors Service has downgraded and placed on review for
further downgrade the senior unsecured long-term ratings of Marks &
Spencer p.l.c. to Ba1 from Baa3 and the company's long term MTN
Program rating to (P)Ba1 from (P)Baa3. Concurrently, Moody's has
assigned and placed on review for downgrade a corporate family
rating of Ba1 and a probability of default rating of Ba1-PD. The
outlook has been revised to ratings under review from negative.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. Consumers'
discretionary spending will be significantly curtailed during these
unprecedented times. In the immediate future apparel sales will be
severely constrained by government requirements for retailers of
non-essential products to close their stores amid significant
restrictions on people leaving their homes. Beyond this uncertain
timeframe demand is also likely to be adversely affected by
consumer concerns about how the economic downturn will affect their
income.
Moody's anticipates demand within the Food business (including the
'Simply Food' concept) will be solid through the crisis, even
though, as stated by the company, its heavy bias towards chilled
and fresh means they have not benefited from stockpiling as much as
other grocers.
However, Moody's expects the company's Clothing & Home business
will endure a significant fall in sales in the weeks ahead and that
its profitability will be dented further by discounting of surplus
stock later in the year. Government support by way of the announced
business rates holiday and partial payment of the salaries of
employees that would otherwise have been laid off will mitigate
partially. But ultimately, Moody's expects the company's
profitability to fall significantly in its next fiscal year, to the
end of March 2021.
In addition, the need to focus on minimising the impact of
Coronavirus on the company's operations in the short term will
necessarily delay many of the initiatives that had been planned to
reposition the business for growth. As such, even with a return to
more normal operating conditions in due course, Moody's expects the
company's profit before tax in fiscal 2022 to be at best no more
than in fiscal year 2020, which the company now expects to be at or
below the bottom end of the GBP440-460 million range it previously
guided.
In aggregate, the considerations of the action to downgrade the
company's ratings and place on review for downgrade. In its review
process Moody's will be focusing on (i) the extent and length of
store closures in the coming weeks; (ii) the impact of liquidity
measures taken by the company on its balance sheet; and (iii) any
implications the Coronavirus crisis may have for the company's
credit profile over the medium term, including on demand and its
supply chain. In addition the rating agency will undertake a
comprehensive review of the company's debt structure to assess the
ranking of unsecured debt in a scenario where M&S's credit rating
would remain below investment grade for a prolonged period of
time.
LIQUIDITY
Moody's acknowledges the company is taking steps to conserve cash
in the months ahead to sustain its long track record of good
liquidity. Actions announced include postponements to capital
spending, reducing stock purchasing, and signaling that the final
dividend will be cancelled.
Moreover, M&S will retain full access to its currently undrawn
GBP1.1 billion revolving credit facility through and beyond the
first half of fiscal 2021. The facility's single financial covenant
in is tested semi-annually on a last twelve-month basis. As such
Moody's believes the March test will be passed comfortably and
while a breach cannot be ruled out at the half year test the rating
agency believes (a) the potential need to rely on the facility
would have passed by then and (b) the company's banks would grant a
waiver or holiday if necessary.
Lastly on liquidity, Moody's believes that M&S meets the qualifying
criteria to access the joint HM Treasury and Bank of England Covid
Corporate Financing Facility.
ENVIRONMENTAL, SOCIAL & GOVERNANCE CONSIDERATIONS
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. In terms of governance the rating agency positively
recognises the steps already taken and contemplated by M&S to
support its liquidity and credit quality.
WHAT COULD CHANGE THE RATING UP/DOWN
Positive rating pressure is unlikely for at least the next 18
months but in due course would develop if M&S is able to record
sustained positive LFLs in both its Food and C&H divisions and
return to pre-2020 levels of profitability, both in absolute terms
and it respect of margins. A positive rating action of this nature
would also require the company to sustain Moody's-adjusted credit
metrics commensurate with the Baa3 rating, including a ratio of
retained cash flow to net debt in the high-teens and gross debt to
EBITDA of below 3.5x.
Conversely, negative rating pressure would build in the event of a
continued slide in profitability or a deterioration in credit
metrics, such that its Moody's adjusted gross leverage would remain
sustainably above 4.0x, after the effects of the Coronavirus have
ceased being a direct drag. A deterioration in the company's
liquidity would likely result in a downgrade.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Retail Industry
published in May 2018.
COMPANY PROFILE
M&S is a leading UK clothing and food retailer with annual sales of
about GBP10 billion. The company is listed on the London Stock
Exchange, with a market capitalisation of approximately GBP2
billion as of the date of this publication.
MARKS & SPENCER: S&P Cuts Sr. Unsec. Debt to 'BB+', On Watch Neg.
-----------------------------------------------------------------
S&P Global Ratings downgrades U.K.-based Marks & Spencer (M&S or
the group) and its senior unsecured debt to 'BB+' from 'BBB-' and
putting all ratings on CreditWatch with negative implications. S&P
also assigned a '3' recovery rating to its senior unsecured debt,
indicating its expectation of meaningful (50%-70%; rounded
estimate: 65%) recovery to creditors in the event of a payment
default. S&P applies unsecured debt rating cap at '3' due to the
unsecured nature of the rated debt and uncertainty regarding
potential changes in the capital structure before a hypothetical
default.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. S&P believes the measures adopted to
contain COVID-19 have pushed the global economy into recession. As
the situation evolves, it will update its assumptions and estimates
accordingly.
The coronavirus outbreak will result in a sharp drop in nonfood and
international sales, only partially offset by e-commerce and
resilient food sales.
S&P said, "The downgrade reflects our view that M&S's earnings and
cash generation will decline sharply at least over the remaining
part of this calendar year. We believe the outbreak of coronavirus
will cause a substantial decline in non-food sales in the U.K. and
also internationally. Although the U.K. government has mandated
that shops selling "non-essential goods" including clothes should
be closed, most M&S stores in the U.K. selling food are expected to
remain open (as of this date). At the same time, through its
Clothing & Home (C&H) sections in co-located stores, M&S is likely
to offer a range of essentials en route to food halls. Despite
this, we foresee a contraction in footfall because of the
introduction of movement restrictions and social distancing
measures.
"M&S will likely be supported by its well-developed online offer
for clothing and home products, although the benefits will be
limited if consumer discretionary spending wanes. We expect the
food segment to remain resilient, although not as strong as other
full-scale grocers such as Tesco, whose product mix includes more
non-perishable and long-life foods and a wider assortment of
household essentials. We believe demand for M&S's food range will
remain high, even after the initial stockpiling phase, given that
it offers ready to eat and ready-prepared foods, and restaurant
closures will force people to cook and eat at home more often. From
September 2020, M&S's food sales should also benefit from the
launch of its partnership with Ocado, the U.K.'s fastest growing
pure-play online retailer. However, in our view, these supportive
factors will only partially relieve the pressure on the group's
topline, which we forecast will decline by over 5% in the financial
year ending March 31, 2020, and 5%-10% in FY2021 depending on the
duration and the spread of the coronavirus outbreak. We expect any
rebound in operating performance to be gradual, reflected
meaningfully only as of FY2022 results."
Cash-preserving measures and available facilities will support
M&S's adequate liquidity, but prolonged distressed trading will
reduce internal cash generation.
The group recently announced measures to preserve its liquidity
buffer, including the suspension of the FY2020 final dividend
payment, a capital expenditure (capex) reduction for FY2021, a
redeployment of staff from C&H to Food, and cuts to the budget for
stock purchases. M&S also maintains a healthy cash balance of about
GBP185 million as of March 2020, supported by a committed GBP1.1
billion revolving credit facility (RCF) currently undrawn and a
number of uncommitted facilities.
However, despite its adequate liquidity base currently, prolonged
distressed trading could potentially lead to a cash drag on the
group's finances. Periodic rent payments and workforce salaries are
relatively fixed costs, which could undermine M&S's cash generation
ability. The U.K. government's decision to extend the
business-rates holiday to all retail businesses in Great Britain
should also help M&S save around GBP150 million-GBP180 million. The
group could also benefit from other supportive government measures
and a lending facility from the Bank of England, which helps
support liquidity among larger firms.
There is no imminent refinancing risk, but weak earnings could
reduce covenant headroom.
M&S's refinancing risk is relatively limited because most of its
debt is maturing on or after FY2023, with only GBP300 million
medium-term notes (MTN) coming due toward the end of FY2021.
However, M&S's RCF contains a maintenance financial covenant of
EBITDA to net interest--including the operating lease-related
portion--and right-of-use depreciation at minimum 2.6x. Under our
base case, we estimate that covenant-adjusted EBITDA could decline
to about GBP1,000 million in FY2020 and FY2021, from GBP1,300
million at first-half 2020. While we expect the group should be
able to comply with the next covenant test for FY2020, we note a
substantial reduction in headroom. Furthermore, covenant headroom
may be constrained if the group experiences a worse-than-expected
drop in sales due to the prolonged nature of the pandemic, or if it
is not successful in cutting costs.
Restrictions on people's movements and store opening times in the
U.K. and internationally are putting a severe dent in economic
activity and could result in a longer path to recovery than earlier
crises.
COVID-19 is affecting all aspects of life. Travel is being
curtailed. Schools, restaurants, and shops are being closed. Mass
gatherings are being postponed. Offices and factories are being
shuttered as companies move to remote work. And, most recently,
cities and parts of countries are in or moving toward lockdowns
with all but basic societal functions on hold.
All this will severely affect discretionary demand in the near
term, and weigh on retail throughout 2020. S&P believes that
significant downside risks remain given the uncertainty about when
the spread of the virus will peak and whether the pandemic will
persist beyond second-quarter 2020; the effects on the global
economy and consumer spending could certainly persist well beyond
the second quarter.
S&P said, "In resolving the CreditWatch, we will evaluate new
information regarding the spread of COVID-19 and the effect it is
having on M&S's earnings, liquidity, and cash flows.
"We could affirm the 'BB+' ratings once we have more certainty
regarding the duration and severity of COVID-19 and its effect on
trading activities, consumer demand, and M&S's operating
performance, liquidity, and cash flow. We could also consider an
affirmation if food performance proves stronger than we currently
expect, or if consumer spending on general merchandise rebounds in
the second half of FY2021 and we saw the group reducing costs,
thereby maintaining S&P Global Ratings-adjusted debt to EBITDA
below 4.0x, S&P Global Ratings-adjusted funds from operations (FFO)
above 20%, and adequate liquidity.
"We could downgrade M&S to 'BB' or lower if COVID-19 and any
resulting restrictions and social distancing measures looked likely
to extend into second-half 2020. This would further weaken the
group's ability to restore its credit metrics and sustain
comfortable headroom under its maintenance covenants. In
particular, we could downgrade M&S if its adjusted debt to EBITDA
remains higher than 4x, adjusted FFO to debt falls below 20%, or
adjusted free operating cash flow (FOCF) to debt falls below 10%.
We could also lower the rating if liquidity weakens, primarily
because of tightening covenant headroom."
MARSTON'S ISSUER: Fitch Cuts Class B Notes Rating to BB; On RWN
---------------------------------------------------------------
Fitch Ratings has downgraded Marston's Issuer PLC's class A notes
to 'BBB-' from 'BBB' and class B notes to 'BB' from 'BB+'. The
agency has placed both ratings on Rating Watch Negative (RWN).
RATING RATIONALE
The rating actions consider the limited visibility of Marston's
future cash flow generation resulting from the recent UK government
introduction of restrictions on public gatherings and social
interactions in order to curb spread of coronavirus (lockdown).
In this context, Fitch expects Marston's coverage levels to be
impact by a severe but relatively short-lived demand shock related
to the COVID-19 pandemic although the scale and duration of the
impact is still broadly uncertain.
Marston's liquidity position, which includes a liquidity facility,
is comfortable throughout 2020. The company has some financial
flexibility to partially offset any potential short term revenue
shortfall. Fitch currently assumes the 2020 shock to be
progressively recovered by 2021-22 but if the severity and duration
of the outbreak is longer than expected Fitch will revise the
rating case accordingly.
KEY RATING DRIVERS
Coronavirus Affecting Demand
The rapid spread of the coronavirus is leading to an unprecedented
impact on pub businesses as government lockdown measures are
enforced that prevent people from visiting pubs. These measures
mean revenues may fall to zero while they remain in place. The
potential extent of the near term stresses is unprecedented. During
early March, many pubs were experiencing significant declines in
revenues as people voluntarily started to limit their movement. The
impact on revenue increased during the month as the UK government
ordered all pubs to close and a full countrywide lockdown.
Under its revised Fitch rating case (FRC), Fitch assumes yoy
substantial revenue declines in 2Q20, with some knock-on effect
through to end-2020 and a progressive recovery by 2021. The 2020
annual yoy revenue decline is around 15%.
Defensive Measures
Marston's has some flexibility to partially offset the impact of
the expected significant revenue shortfall. In its revised rating
case, for managed pubs Fitch assumes a significant reduction in
fixed costs, to reflect the period of full pub closure, during
which Fitch understands it will be possible to significantly reduce
most elements of opex. Fitch expects tenanted pubs to have some
cost flexibility at the pub level. Fitch also assumes some
reduction in maintenance capex as it can be reduced to minimum
covenanted levels, and it may be possible to reduce capex further
as any shortfall versus covenant could be made up later in the year
as pubs start to re-open.
Credit Metrics - Recovery from 2021
Under the updated FRC, free cash flow debt service coverage ratios
(FCF DSCRs) to legal final maturity now stand at 1.3x for class A
and 1.2x for class B compared with 1.4x for class A and 1.3x for
class B in its previous forecast. After the 2020 shock, Marston's
projected cash flows progressively recover. This reflects its
current view that demand levels within the pub sector will return
to normal in the medium to long term. Fitch is closely monitoring
the development in the sector as Marston's operating environment
has substantially worsened and Fitch will revise the FRC if the
severity and duration of coronavirus is longer than expected.
Liquidity Position Comfortable in the Short-Term
The borrower has ca.GBP20 million of cash available as of March
2020. In addition, the issuer benefits from a GBP120 million
liquidity facility that covers 18 months of debt service.
Fitch estimates that the issuer has sufficient funds available for
the next interest payment date in April 2020. However, some other
sources of funds or drawings on the liquidity facility may be
needed for the subsequent interest payment dates if closure of the
pubs and social distancing measures are protracted.
Sensitivity Case
Fitch has also run a more severe sensitivity case which builds on
the rating case, and assumes the crisis worsens materially from
current levels with a longer demand shock versus the revised rating
case, resulting in significant revenue reductions of around 40%
during 2020. Mitigation measures are unchanged compared with the
FRC. The sensitivity shows that under this scenario projected FCF
DSCRs for the class A and B notes fall to 1.2x and 1.1x. If the
severity and duration of the coronavirus outbreak is longer than
expected Fitch may revise the FRC to be closer to this sensitivity
case.
Key Rating Drivers - Summary Assessments
Industry Profile - Midrange
Sub-KRDs: Operating Environment: Weaker, Barriers to Entry:
Midrange, Sustainability: Midrange
Company Profile - Midrange
Sub-KRDS: Financial Performance: Midrange, Company Operations:
Midrange, Transparency: Midrange, Dependence on Operator: Midrange,
Asset Quality: Midrange
Debt Structure: Class A: Stronger, Class B: Midrange
Sub-KRDs: Debt Profile: Class A - Stronger, Class B - Midrange,
Security Package: Class A - Stronger, Class B - Midrange,
Structural Features: Class A - Stronger, Class B - Stronger
The recent outbreak of coronavirus and related government
containment measures worldwide creates an uncertain global
environment for the UK pub sector in the near term. While Marston's
performance data through most recently available issuer data may
not have indicated impairment, material changes in revenue and cost
profile are occurring across the broader UK eating- and
drinking-out sector and likely to worsen in the coming weeks and
months as economic activity suffers and government restrictions are
maintained or expanded. Fitch's ratings are forward-looking in
nature, and Fitch will monitor developments in the sector as a
result of the virus outbreak as it relates to severity and
duration, and incorporate revised base and rating case qualitative
and quantitative inputs based on expectations for future
performance and assessment of key risks.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
Fitch does not anticipate an upgrade as reflected in the RWN. A
quicker-than-assumed recovery from the COVID-19 shock, supporting a
sustained recovery in credit metrics to levels stronger than
outlined in the negative sensitivity below would allow us to review
the RWN and potentially assign a Stable Outlook.
Development That May, Individually or Collectively, Lead to
Negative Rating Action
A slower-than-assumed recovery from the COVID-19 shock resulting in
a sustained deterioration of the Fitch rating case DSCR below 1.3x
for class A and 1.2x for class B.
BEST/WORST CASE RATING SCENARIO
Ratings of Public Finance issuers have a best-case rating upgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of three notches over three
years. The complete span of best- and worst-case scenario credit
ratings for all rating categories ranges from 'AAA' to 'D'. Best-
and worst-case scenario credit ratings are based on historical
performance.
TRANSACTION SUMMARY
The transaction is a securitisation of both managed and tenanted
pubs operated by Marston's comprising 274 managed pubs and 704
tenanted pubs as at December 28, 2019.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
MASSARELLA GELATERIE: Goes Into Administration, Halts Trading
-------------------------------------------------------------
Robert Sutcliffe at YorkshireLive reports that the Massarella
Catering Group which is based in Sheffield said: "On March 24,
2020, Massarella Catering Group Ltd placed its subsidiary company
Massarella Gelaterie Ltd into administration.
"Andrew Nichols & John Butler of Redman Nichols Butler were
appointed joint administrators.
"Massarella Gelaterie Ltd ran coffee shops in various House of
Fraser stores.
"All locations ceased trading on Friday, March 20, in line with
government guidelines.
"Regrettably due to the current health and economic crisis,
Massarella Catering Group Ltd was left with no other option other
than to appoint administrators over Massarella Gelaterie Ltd.
"Massarella Catering Group Ltd can confirm that it and its
remaining subsidiary companies (‘the group') are unaffected by
this administration."
NEW LOOK: Moody's Cuts CFR to Caa3 & Alters Outlook to Negative
---------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating and probability of default rating of UK fashion retailer New
Look Retail Holdings Limited to Caa3 from Caa1 and to Caa3-PD from
Caa1-PD, respectively. Concurrently, the rating agency has
downgraded the rating of New Look's GBP400 million equivalent
senior secured (new money) notes maturing in 2024 issued by New
Look Financing plc, a subsidiary of New Look Retail Holdings
Limited, to Ca from Caa2. The outlook on all ratings of New Look
are changed to negative from stable.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook and falling retail sales are
creating a severe and extensive credit shock across many sectors,
regions and markets. The combined credit effects of these
developments are unprecedented. Moody's expects the UK clothing
retail sector will be one of the sectors to be significantly
affected by the shock given its exposure to increasing restrictions
on movement and sensitivity to consumer demand and sentiment. The
action reflects the expected impact on New Look of the breadth and
severity of the shock, and the broad deterioration in credit
quality Moody's expects it will trigger. Moody's regards the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
The rating action was prompted by Moody's expectation of a sharp
decline in retail sales, both offline and online, over the course
of fiscal 2021 (ending March 2021), which will result in a
significant decline in EBITDA, a weakening liquidity profile and a
significantly higher leverage.
LIQUIDITY
At the end of December 2019 (end of Q3 fiscal 2020) and pro-forma
for the coupon of GBP22 million paid in January 2020, New Look had
limited levels of liquidity of GBP140 million, including GBP100
million drawn under a revolving credit facility due in June 2021
and an operating credit facility of GBP80 million due 30 June 2020,
which Moody's understands is currently drawn. Moody's considers New
Look's current liquidity capable of supporting the company through
Q1 and Q2 of fiscal 2021 under the base case assumptions. However,
a more severe or extended downside with severely depressed sales
into Q3 would likely put pressure on the company's current
liquidity. New Look's coupon interest payments of around GBP22
million fall due in July and January each year, and the company has
the option to toggle the 8% cash interest and pay-in-kind.
In this context, Moody's expects New Look to take further actions
to strengthen its liquidity, including any available funding
support from the UK Government in the form of delayed value added
tax payments, salary contributions and business rates relief. Like
many other retailers, some financial support may potentially also
materialize from ongoing discussions with landlords in the form of
rent deferrals.
The company's financial flexibility is likely to be very limited in
terms of its ability to raise cash from its real estate property or
other assets. The company holds freehold property with a reported
net book value of GBP7.1 million, with the remaining GBP51.8
million property value consisting of fixtures and equipment as at
28 December 2019, and as such unlikely to provide meaningful
additional financial flexibility.
STRUCTURAL CONSIDERATIONS
New Look's capital structure consists of GBP400 million equivalent
(split in a GBP364 million tranche and a EUR41 million tranche) of
senior secured notes due May 2024, a GBP100 million revolving
credit facility due June 2021 and GBP80 million available under one
operating facility providing trade finance and supplier credit.
The senior secured notes are rated one notch below the CFR
reflecting their contractual subordination behind the revolving
credit facility and the operating facilities (which are both
unrated) upon enforcement of security.
RATING OUTLOOK
The negative outlook reflects the uncertainties related to the
length and severity of the spread, which in a more challenging
downside scenario, could further deteriorate New Look's liquidity
profile and lead to an unsustainable capital structure.
WHAT COULD CHANGE THE RATING UP / DOWN
The ratings are unlikely to be upgraded in the short term. Positive
rating pressure would not arise until the coronavirus outbreak is
brought under control, the risks associated with movement
restrictions lowered, and footfall returns to more normal levels.
At this point Moody's would evaluate the balance sheet and
liquidity strength of the company and positive rating pressure
would require evidence that the company is capable of substantially
recovering its financial metrics and restoring liquidity headroom
within a 1-2 year time horizon.
Downward pressure could develop if the pandemic results in a more
severe impact on the operating performance, which could further
deteriorate New Look's liquidity profile and lead to an
unsustainable capital structure with expectations of lower recover
rates for creditors.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
One of the most important ESG considerations for clothing retailers
is sustainable sourcing of raw materials. In a recent analysis
performed by New Look, the most important raw materials the company
will need to focus on in the next few years were polyester, cotton
and viscose in textiles and polyurethane in footwear. Management
intends to sharply increase sourcing of more environmentally
friendly fibres over the next three years. The company does not
directly operate the factories that manufacture its product ranges,
and currently has 196 suppliers in 25 countries with over 770
factories involved. Moody's understands that New Look has a
zero-tolerance policy towards any form of modern slavery, forced or
compulsory labour and human trafficking within its operations or
anywhere in its supply chain - in fiscal 2019, the company's top 20
suppliers accounted for 84% of Its production. From a governance
perspective the main risks are the highly leveraged capital
structure and the lower reporting requirements typical of private
companies compared with listed ones.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Retail Industry
published in May 2018.
LIST OF AFFECTED RATINGS:
Downgrades:
Issuer: New Look Retail Holdings Limited
LT Corporate Family Rating, Downgraded to Caa3 from Caa1
Probability of Default Rating, Downgraded to Caa3-PD from Caa1-PD
Issuer: New Look Financing plc
Backed Senior Secured Regular Bond/Debenture, Downgraded to Ca from
Caa2
Outlook Actions:
Issuer: New Look Retail Holdings Limited
Outlook, Changed To Negative From Stable
Issuer: New Look Financing plc
Outlook, Changed To Negative From Stable
COMPANY PROFILE
With revenues of GBP845.9 million in the first nine months of
fiscal 2020 ending 28 March 2020, New Look is a value fashion
retailer selling a range of apparel, accessories and footwear. The
company principally targets fashion conscious women aged 16 to 45,
although its product ranges also include men and teens wear.
PUNCH TAVERNS: Fitch Puts 'B' Class A3, A6 & A7 Notes Rating on RWN
-------------------------------------------------------------------
Fitch Ratings has placed Punch Taverns Finance B Limited's (Punch
B) class A3, class A6 and class A7 notes' B rating on Watch
Negative (RWN).
RATING RATIONALE
The RWN reflects the limited visibility of Punch B's future cash
flow generation resulting from the recent UK government
introduction of restrictions on public gatherings and social
interactions in order to curb the spread of coronavirus
(lockdown).
In this context, Fitch expects Punch B's coverage and leverage
levels to be affected by a severe but relatively short-lived demand
shock related to the COVID-19 pandemic although the scale and
duration of the impact is still broadly uncertain.
Punch B's liquidity position, which includes a liquidity facility,
is comfortable throughout 2020 and the company has some financial
flexibility to partially offset any potential short term revenue
shortfall. Fitch currently assumes the 2020 shock to be
progressively recovered by 2021-2022 but if the severity and
duration of the outbreak is longer than expected, Fitch will revise
the rating case accordingly.
KEY RATING DRIVERS
Coronavirus Affecting Demand
The rapid spread of the coronavirus is leading to an unprecedented
impact on pub businesses as government lockdown measures are
enforced that prevent people from visiting pubs. These measures
mean publicans' revenues may fall to zero while they remain in
place. The potential extent of the near term stresses is
unprecedented. During early March, many pubs were experiencing
significant declines in revenues as people started to limit their
movement voluntarily. The impact on revenue increased during the
month as the UK government ordered all pubs to close and a full
countrywide lockdown.
Under its revised Fitch rating case (FRC), Fitch assumes yoy
substantial revenue declines in 2Q20, with some knock-on effect
through to end-2020 and a progressive recovery by 2021-2022. The
2020 annual yoy revenue decline is around 15%.
Defensive Measures
Punch B has some flexibility to partially offset the impact of the
expected significant revenue shortfall. In its revised rating case,
Fitch expects tenanted pubs to have some cost flexibility at the
pub level. Fitch also assumes some reduction in maintenance capex
as it can be reduced to minimum covenanted levels, and it may be
possible to reduce capex further as any shortfall versus covenant
could be made up later in the year as pubs start to re-open.
Credit Metrics - Recovery from 2021
Under the updated FRC, the projected minimum of average and median
synthetic free cash flow debt service coverage ratios (FCF DSCR)
remain unchanged at 0.8x for the class A notes. However, Fitch
forecasts net debt-to-EBITDA to increase to 7.0x from 5.9x for the
class A notes in 2020 due to the demand shock. This could thus
potentially breach the net senior leverage covenant. Fitch expects
that the covenant breach would be waived and no payment default
will occur. After the 2020 shock, Punch B's metrics will
progressively recover. This reflects its current view that demand
levels within the pub sector will return to normal in the medium to
long term. Fitch is closely monitoring the development in the
sector as Punch B's operating environment has substantially
worsened and Fitch will revise the FRC if the severity and duration
of the coronavirus outbreak is longer than expected.
Solid Liquidity Position
The borrower had around GBP65.8 million of cash available as of
end-February 2020. In addition, the issuer benefits from a GBP57.2
million liquidity facility, which will cover 18 months of debt
service. However, this is effectively only interest payments and
scheduled principal excluding final bullets.
Sensitivity Case
Fitch has also run a more severe sensitivity case, which builds on
the rating case, and assumes the crisis worsens materially from
current levels with a longer demand shock versus the revised rating
case, resulting in significant revenue reductions of around 40%
during 2020. Mitigation measures are unchanged compared with the
FRC. The sensitivity shows the projected minimum of average and
median synthetic FCF DSCRs drop to 0.7x for the class A notes and
leverage peaks at 9.0x. If the severity and duration of coronavirus
is longer than expected, Fitch may revise the FRC to be closer to
this sensitivity case.
Summary Assessments
Industry Profile - Midrange
Sub KRDs: Operating environment - Weaker; Barriers to entry -
Midrange; Sustainability - Midrange,
Company Profile - Midrange
Sub-KRDs: Financial performance - Weaker; Company operations -
Midrange; Transparency -Weaker; Dependence on operator - Midrange;
Asset quality - Weaker
Debt Structure: Midrange
Sub-KRDs: Debt profile: Weaker; Security package: Stronger;
Structural features: Midrange
The recent outbreak of coronavirus and related government
containment measures worldwide creates an uncertain global
environment for the UK pub sector in the near term. While Punch B's
performance data through most recently available issuer data may
not have indicated impairment, material changes in revenue and cost
profile are occurring across the broader UK eating- and
drinking-out sector and likely to worsen in the coming weeks and
months as economic activity suffers and government restrictions are
maintained or expanded. Fitch's ratings are forward-looking in
nature, and Fitch will monitor developments in the sector as a
result of the virus outbreak as it relates to severity and
duration, and incorporate revised base and rating case qualitative
and quantitative inputs based on expectations for future
performance and assessment of key risks.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- The notes are unlikely to be upgraded at present due to the
refinancing risk of the maturing debt tranches.
- A quicker-than-assumed recovery from the COVID-19 shock,
supporting a sustained recovery in credit metrics to pre-crisis
levels would allow us to review the RWN and potentially assign a
Stable Outlook
Development That May, Individually or Collectively, Lead to
Negative Rating Action
- A slower-than-assumed recovery from the COVID-19 shock
resulting in a sustained deterioration of projected coverage and
leverage metrics for the class A notes.
- Failure to refinance maturing debt tranches.
TRANSACTION SUMMARY
The transaction is a securitisation of tenanted pubs in the UK,
owned by Punch Taverns Limited. As of December 2019, the
transaction consisted of 1,170 pubs (1,040 pubs in the core estate
and 130 in the non-core).
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, 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
the way in which they are being managed by the entity.
SIGNET UK: Moody's Cuts Senior Notes Rating to B2 & CFR to Ba3
--------------------------------------------------------------
Moody's Investors Service downgraded Signet UK Finance plc's senior
notes to B2 from Ba3 and downgraded Signet's Corporate Family
Rating to Ba3 from Ba2 and its Probability of Default Rating to
Ba3-PD from Ba2-PD. The company's Speculative Grade Liquidity
Rating remains an SGL-2. The outlook is changed from negative to
stable.
"The downgrade reflects the risk to Signet's operating performance
as it confronts the negative effects of Covid-19 and the potential
for ongoing lower consumer demand," Moody's Vice President
Christina Boni stated. "Nonetheless, the company's refinancing of
its secured credit facility last year which it has recently drawn
down by approximately $900 million, supports its good liquidity
profile" Boni further stated.
Downgrades:
Issuer: Signet UK Finance plc
Probability of Default Rating, Downgraded to Ba3-PD from Ba2-PD
Corporate Family Rating, Downgraded to Ba3 from Ba2
Senior Unsecured Regular Bond/Debenture, Downgraded to B2 (LGD5)
from Ba3 (LGD5)
Outlook Actions:
Issuer: Signet UK Finance plc
Outlook, Changed to Stable from Negative
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The non-food
retail sector has been one of the sectors most significantly
affected by the shock given its sensitivity to consumer demand and
sentiment. More specifically, the weaknesses in Signet's UK Finance
plc's credit profile, have left it vulnerable to shifts in market
sentiment in these unprecedented operating conditions and Signet UK
Finance plc remains vulnerable to the outbreak continuing to
spread. Moody's regards the coronavirus outbreak as a social risk
under its ESG framework, given the substantial implications for
public health and safety. Its action reflects the impact on Signet
UK Finance plc's of the breadth and severity of the shock, and the
broad deterioration in credit quality it has triggered.
Signet's Ba3 Corporate Family Rating reflects the company's
position as the world's largest retailer of diamond jewelry, with
its well-recognized brand names and solid market position in the
U.S., Canada and U.K. The company, which continues to work to
turnaround its recent losses of market share, expand its online
capabilities and reduce its store square footage will be affected
negatively by the disruption posed by Covid-19 as well as a
potential reduction in consumer demand. Its credit offering remains
integral to its business model. Carval Investors, which provided
approximately 70% of its subprime funding partners has terminated
its relationship with Signet but has provided a transition
agreement for 30 days. The company is in negotiations with its
remaining subprime funder, Castlelake, to provide future funding.
Approximately 7% of its sales are subprime.
The rating is supported by governance considerations specifically
its Signet's capital allocation policy which includes the
suspension of common dividends, paying its preferred dividend in
kind, and its good liquidity. Signet is committed to reducing
leverage. Most of the company's assets are encumbered with the
refinancing of its unsecured revolver and term loan. The company's
narrow focus on a discretionary product with a demonstrated
sensitivity to weak economic conditions is also reflected in the
rating. Social risks include the need to continue responsible
sourcing of its products as well as the effect of future
demographic shifts that may affect demand for its jewelry.
The stable outlook reflects Moody's view that Signet will maintain
a conservative financial policy which prioritizes debt reduction as
it works to transform its business, reduce its store footprint and
contend with the negative impact of Covid-19. The outlook also
assumes the company will continue to make progress on stabilizing
its market position and will be able to mitigate any reduction in
demand through further cost initiatives.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that could result in an upgrade over the long term include
consistent profitable sales and operating income growth and margin
expansion while maintaining good liquidity, conservative financial
policy and a consistent track record of success with its
outsourcing arrangements. Quantitatively, rating could be upgraded
if adjusted EBIT/Interest (including preferred) approaches 2.5x.
Factors that could result in a downgrade include a continued
decline in sales or operating margins, disruption to its credit
outsourcing arrangements that negatively impacts its business
profile, more aggressive financial policies or meaningful erosion
in liquidity. Quantitatively, ratings could be downgraded if
adjusted EBIT/Interest (including preferred) is below 2.0x.
Signet UK Finance plc is an indirect subsidiary of Bermuda-based
Signet Jewelers Limited. Signet Jewelers Limited is the world's
largest retailer of diamond jewelry. Signet operates approximately
3,208 stores primarily under the name brands of Kay Jewelers,
Zales, Jared, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and
JamesAllen.com. As of February 1, 2020, the North American segment
operated 2,639 locations in the US and 118 locations in Canada,
while the international segment operated 451 stores in the United
Kingdom, Republic of Ireland, and Channel Islands.
TUI: Temporary Lays Off 11,000 UK Staff Despite EUR1.8BB Bailout
----------------------------------------------------------------
Laura Onita at The Telegraph reports that package holiday titan Tui
has temporarily laid off 11,000 UK staff despite securing a EUR1.8
billion (GBP1.6 billion) bailout from the German state.
Almost 4,500 travel agency staff and more than 6,500 pilots, cabin
crew and head officer workers have been furloughed, it was
announced on March 31, taking advantage of a scheme where 80% of
their wages are covered by the taxpayer, The Telegraph relates.
Around 2,000 employees will be kept on, The Telegraph discloses.
According to The Telegraph, Tui UK and Ireland managing director
Andrew Flintham said: "The travel industry is facing unprecedented
pressure.
"It is therefore imperative that we make these difficult cost
decisions and also look after our colleagues during such
unprecedented uncertainty."
The announcement came as budget clothing chain Matalan allowed all
its warehouse staff to stand down during the coronavirus crisis
after a backlash over working conditions, The Telegraph notes.
TURNSTONE MIDCO 2: S&P Lowers ICR to 'CCC' on COVID-19 Uncertainty
------------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Turnstone Midco 2 to 'CCC' from 'B-'. S&P also lowered its issue
ratings on Turnstone Midco 2's SSRCF to 'B-' from 'B+', and on its
senior secured notes due August 2022 to 'CCC' from 'B-'.
Uncertainty from the escalating coronavirus pandemic, very high
debt leverage, and insufficient availability under committed bank
lines makes U.K.-based dental chain Integrated Dental Holdings,
which is owned by Turnstone Midco 2 Ltd. (together, IDH Group)
dependent on a favorable external economic environment to meet its
financial obligations. On March 17, 2020, IDH Group announced
that it had drawn down the remaining GBP73.2 million under its
committed super senior revolving credit facility (SSRCF), as the
ongoing coronavirus pandemic poses huge risks for dentists in the
U.K. On March 25, 2020, NHS England advised all dentists to
effectively stop all routine check-ups and consolidate, where
necessary, the provision of essential treatments, following the
latest measures by the U.K. government to contain the spread of the
virus.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. S&P said,
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly."
NHS England is providing IDH Group and other dental chains with
funding relief in the form of monthly payments in line with their
current annual contract values. S&P views this funding relief
positively, but in its view, it only partially mitigates IDH
Group's operational risks over the next 12-18 months. For a start,
the NHS-contracted business only accounted for about 53% of the
group's total revenues as of the third quarter of the fiscal year
ending March 31, 2020.
The group's private dentistry unit is its main area of growth and
contributed about 19% of total revenues as of the third quarter of
fiscal 2020. This unit is particularly exposed to the cessation of
all routine dental activity, because it caters to patients who fund
their treatments themselves. Therefore, a prolonged shutdown will
likely lead to a significant reduction in patient volumes,
revenues, and earnings for IDH Group in 2021, with the magnitude of
the reductions dependent on the duration of the pandemic.
The decline in EBITDA in 2021 is likely to be particularly
noticeable in the event of a prolonged shutdown of clinincs,
because we understand that for dental chains to receive the
aforementioned relief from NHS England, all associates, nonclinical
staff, and other employees should continue to be paid at their
previous rates. There is also uncertainty over what will happen in
2022 with regard to the units of dental activity (UDA) that dental
practices have not been able to deliver under their standard
contractual arrangements with NHS England in 2021. Normally, the
practices would need to pay back to NHS England fee payments
corresponding to the shortfall in UDA the following year. This
could result in heavy working capital absorption in 2022. As a
result, IDH Group's liquidity could remain under pressure,
especially if volumes and EBITDA do not recover sufficiently.
S&P said, "We anticipate that IDH Group's S&P Global
Ratings-adjusted debt leverage will be about 10.2x in fiscal 2020,
potentially rising to 11.0x-12.0x in 2021. We have factored in a
potential drop in revenues of 3.0%-5.0% in fiscal 2021 and a drop
in reported operating margins to about 8.0%-8.5%." The drop in
revenues could be higher if the U.K. is in lockdown for more than a
full quarter and patient volumes in the private dentist segment
fall to zero.
The drawdown under the SSRCF means that IDH Group now has to comply
with the financial maintenance covenant on this facility throughout
2021, with no other committed credit lines at its disposal. While
the covenant test will take place at the end of March this year, we
expect that the group will pass it with headroom, with super senior
net leverage of about 1.65x, as we understand that the group did
not see a reduction in volumes until mid-March. However, there is
uncertainty around the duration of the pandemic and the additional
measures the U.K. government and NHS England could take to further
contain the spread of the virus, if the existing measures do not
help contain it. S&P therefore estimates that a deviation from our
base case of 100 basis points could lead EBITDA to decline below
GBP44 million. This would lead to a breach of the covenant
depending on the level of drawdown under the SSRCF.
The group's current capital structure and the narrowing window of
opportunity to deleverage will likely test its ability to refinance
its debt once the due date approaches. The coronavirus outbreak
comes at an inconvenient time for IDH Group as it faces a large
refinancing risk in August 2022, when its GBP100 million SSRCF,
GBP275 million senior secured fixed-rate notes, and GBP150 million
floating-rate notes are due. S&P said, "We think that the group's
ability to refinance its capital structure will be challenged,
based on its leverage of above 9.0x on a reported basis (9.3x as of
Dec. 31, 2019) and our expectations that its leverage will be even
higher by the end of fiscal 2021."
S&P said, "In our fully adjusted debt figures, we include GBP655
million of long-term borrowings; about GBP94 million of operating
leases resulting from the implementation of International Financial
Reporting Standard 16; GBP736.7 million of shareholder loan notes;
and GBP56.9 million of preference shares at Turnstone Equity Co 1
Ltd., Turnstone Midco 2's parent. We do not deduct cash from debt,
reflecting the group's majority-ownership by private equity groups
Carlyle Group and Palamon Capital Partners."
Recent operational improvements and a shift in the service mix have
allowed the group to improve its operating margins, but associated
investments have prevented it from improving its credit metrics.
Over the past two fiscal years, IDH Group has focused its efforts
on improving its cost structure and shifting its service mix toward
private dentistry, due to the inherent recruitment issues in its
NHS-contracted business. The NHS-contracted business accounted for
about 53% of the group's total revenue as of the third quarter of
2020. Cost-structure optimization efforts have mainly revolved
around closing or merging about 42 nonprofitable clinics since
March 2018.
Simultaneously, the group has been investing in the expansion of
its private dentistry offering, which accounted for about 19% of
total revenues in the third quarter of fiscal 2020, up from about
16% in fiscal 2018, in line with market trends. S&P said, "To
support this shift, the group has successfully rolled out the
affordable private treatment range "{my}options", capturing both
patients from other dental chains and those unable to access NHS
dental services. The group estimates that around 50% of new
patients cannot access the NHS services because they do not meet
certain criteria. We understand that about 50,000 patients have
taken advantage of the {my}options offering to date."
Within the {my}dentist division, the group has opened 14 specialist
treatment centers under the Advanced Oral Health brand since spring
2018, and expects to open three more in the near future. In
addition, the group has also expanded its DD division (formerly
known as Dental Directory), with new corporate contracts with
dental providers in Ireland, and with Galderma, the former
dermatology treatment and skin care product subsidiary of Nestle.
S&P said, "We expect the shift toward private dentistry to continue
in the near-to-medium term, due to the unfavorable market
conditions in the NHS-contracted business. IDH Group's operating
margin has improved recently, to what we expect to be about 10% on
a reported basis in 2020 from 8.4% in 2018. However, this
improvement is rather modest, and the group still has a sizable
dependence on NHS business. This has ultimately prevented it from
deleveraging to more sustainable levels, with adjusted debt to
EBITDA of around 9.5x over 2018-2019.
"The negative outlook reflects the possibility that we could lower
our ratings on IDH Group again within the next 12 months if we see
a worse decline than we expect in the group's revenue and earnings
generation capacity. This could put pressure on the group's
liquidity position because there is insufficient availability under
committed bank lines. A reduction in the group's earnings
generation capacity will likely happen if the coronavirus pandemic
persists such that the U.K. government prolongs the lockdown
period, thereby leading to significantly reduced patient volumes
across the group's practices.
"We could raise the issuer credit rating on IDH to CCC+' if risks
from the coronavirus pandemic subside, with only a temporary
shutdown of dental practices, and therefore a lower drop in patient
volumes than we expect. In our view, this would alleviate the
pressure on the group's liquidity position in light of the
committed bank lines being already fully drawn. It would also allow
senior management to continue to work on the ongoing turnaround
plan and address the upcoming refinancing needs."
UNIQUE PUB: Fitch Places BB+ Rating on Class A, M, & N Notes on RWN
-------------------------------------------------------------------
Fitch Ratings has placed Unique Pub Finance plc's class A, class M
and class N notes on Rating Watch Negative.
RATING ACTIONS
Unique Pub Finance Company Plc
Unique Pub Finance Company Plc/Debt/2 LT
-- LT BB+; Rating Watch On
Unique Pub Finance Company Plc/Debt/3 LT
-- LT B+; Rating Watch On
Unique Pub Finance Company Plc/Debt/4 LT
-- LT B+; Rating Watch On
RATING RATIONALE
The RWN reflects the limited visibility of Unique's future cash
flow generation resulting from the UK government's recent
restrictions on public gatherings and social interactions in order
to curb the spread of coronavirus.
Fitch therefore expects Unique's debt coverage to be impacted by a
severe but fairly short-lived demand shock related to the pandemic
although the scale and duration of the impact is still broadly
uncertain.
Liquidity position is comfortable throughout 2020 and Unique has
some financial flexibility to partially offset potential short-term
revenue shortfall. Fitch currently assumes a progressive recovery
by 2021 but will revise its rating case if the severity and
duration of the pandemic is longer than expected.
KEY RATING DRIVERS
Coronavirus Affecting Demand
The rapid spread of the coronavirus is leading to an unprecedented
impact on pub businesses as government lockdown measures are
enforced that prevent people from visiting pubs. These measures
mean revenues may fall to zero while they remain in place. The
potential extent of the nea- term stresses is unprecedented. During
early March, many pubs were experiencing significant declines in
revenues as people were starting to voluntarily limit their
movement. The impact on revenue increased during the month as the
UK government ordered all pubs to close and a full countrywide
lockdown.
Under its revised Fitch rating case (FRC), Fitch assumes yoy
substantial revenue declines in 2Q20, with some knock-on effect
through to end-2020 and a progressive recovery by 2021-2022 to
levels broadly similar to 2019 levels. Fitch estimates the 2020
annual yoy revenue decline at around 15%.
Defensive Measures
Unique has some flexibility to partially offset the impact of the
expected significant revenue shortfall. In its revised rating case,
for managed pubs Fitch assumes a significant reduction in fixed
costs to reflect the period of full pub closure, during which Fitch
understands it will be possible to significantly reduce most
components of operating expenditure. Fitch expects tenanted pubs to
have some cost flexibility at the pub level. Fitch also assumes
some reduction in maintenance capex.
Credit Metrics - Recovery from 2021
The updated FRC results in lower free cash flow debt service cover
ratios (FCF DSCR) in 2020 and 2021 for all notes classes before
recovering to previous levels. Projected minimum average and median
FCF DSCRs from March 2020 to maturity are as follows: class A4
(2.5x), class M (0.9x) and class N (1.7x). This compares with its
previous 2019 FCF DSCRs: class A4 (2.6x), class M (0.9x), class N
(1.7x). Resilience of Unique's metrics is attributable to a period
of high coverage until end-2021, which resulted from early full
prepayment of the A3 notes and partial repayment of the A4 notes in
2019 after the disposal of 354 pubs (173 of these pubs worth
GBP176.1 million were within Unique securitisation).
After the 2020 shock, Unique's projected cash flows progressively
should recover from the impact, which indicates a temporary
impairment of the group's credit profile. This reflects its view
that demand levels within the pub sector will return to normal in
the medium- to long-term. However, Fitch is closely monitoring
developments in the sector as Unique's operating environment has
substantially worsened and Fitch will revise the FRC if the
severity and duration of the pandemic is longer-than- expected.
Solid Liquidity Position
Unique has sufficient liquidity to cover at least 2020 needs. As of
the beginning of March Unique had GBP126 million in cash (including
GBP65 million reserve account cash) and liquidity facility totaling
GBP152 million, while scheduled debt service stood at GBP62.3
million in 2020 and GBP119.4 million in 2021.
Sensitivity Case
Fitch has also run a more severe sensitivity case, which builds on
FRC, and assumes the crisis worsens materially from current levels
with a longer demand shock versus the revised FRC, resulting in
significant revenue reductions of around 40% during 2020.
Mitigation measures remain unchanged compared with the FRC. The
sensitivity shows that under this scenario projected FCF DSCRs fall
to following levels: class A4 (2.3x), class M (0.9x) and class N
(1.6x). If the severity and duration of the pandemic is
longer-than- expected Fitch may revise the FRC to be closer to this
sensitivity case.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Fitch does not anticipate an upgrade as reflected in the RWN. A
quicker-than-assumed recovery from the demand shock, supporting a
sustained recovery in credit metrics to levels stronger than
outlined in the negative sensitivity below would allow us to
resolve the RWN and potentially assign a Stable Outlook.
Development That May, Individually or Collectively, Lead to
Negative Rating Action
- A slower-than-assumed recovery from the demand shock resulting
in projected FCF DSCRs below the current downgrade triggers of
1.3x, 0.9x and 1x for the class A4, M, and N notes, respectively.
BEST/WORST CASE RATING SCENARIO
Ratings of global infrastructure issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of three notches over three
years. The complete span of best- and worst-case scenario credit
ratings for all rating categories ranges from 'AAA' to 'D'. Best-
and worst-case scenario credit ratings are based on historical
performance.
TRANSACTION SUMMARY
Unique is a whole business securitisation of a portfolio of 1,894
tenanted in the UK, owned and operated by Stonegate Pub Company.
Key Rating Drivers - Summary Assessments
- Industry Profile - Midrange
- Sub-KRDs: Operating Environment - Weaker; Barriers to Entry -
Midrange; Sustainability - Midrange
- Company Profile - Midrange
- Sub-KRDS: Financial Performance - Weaker; Company Operations -
Midrange; Transparency - Weaker; Dependence on Operator - Midrange;
Asset Quality - Midrange
- Debt Structure: Class A - Midrange; Class M and N - Weaker
- Sub-KRDs: Debt Profile: Class A - Midrange; Class M and N -
Weaker; Security Package: Class A - Stronger; Class M and N -
Midrange; Structural Features: Class A - Midrange; Class M and N -
Weaker.
As indicated, the coronavirus pandemic and related government
containment measures worldwide create an uncertain environment for
the UK pub sector in the near term. While Unique's most recent
performance data may not have indicated significant impairment so
far, material changes in revenue and cost profile are occurring
across the broader UK eating- and drinking-out sector and likely to
worsen in the coming weeks and months as economic activity suffers
and government restrictions are maintained or broadened. Fitch's
ratings are forward-looking in nature, and Fitch will monitor
developments in the sector for the severity and duration of the
crisis and its impact, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on
expectations for future performance and assessment of key risks.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, 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
the way in which they are being managed by the entity.
===============
X X X X X X X X
===============
[*] Moody's Reviews 14 EU Automotive Parts Suppliers for Downgrade
------------------------------------------------------------------
Moody's Investors Service has placed the ratings of 14 European
Automotive parts suppliers under review for downgrade. This
includes the following eight issuers: Aptiv Plc, Autoliv Inc,
Faurecia, Hella GmbH & Co KGaA, Kongsberg Automotive ASA, Novem
Group GmbH, Schaeffler AG and Valeo S.A.
Concurrently, Moody's downgraded the ratings of the following six
issuers by one notch: Adler Pelzer Holding GmbH's CFR from B1 to
B2, Garrett Motion's CFR from Ba3 to B1, Gestamp Automocion, S.A.'s
CFR from Ba2 to Ba3, Grupo Antolin's CFR from B2 to B3,
IHO-Verwaltungs GmbH's CFR from Ba1 to Ba2, and ZF Friedrichshafen
AG from Baa3 to Ba1. As a result of the downgrades, Moody's has
withdrawn the issuer rating and assigned corporate family rating to
ZF Friedrichshafen AG, in line with the rating agency's policy for
non-financial corporates with non-investment grade ratings
downgraded from investment grade ratings. The ratings of these six
issuers are under review for further downgrade.
"The rapid and widening spread of the coronavirus outbreak is
creating a severe and extensive credit shock for European
automotive parts suppliers," said Matthias Heck, a Vice President
and Senior Credit Officer at Moody's. "We have downgraded ratings
of companies which were already weakly positioned in their
respective ratings ahead of the current market stress, and its
review for downgrade processes will focus on the impact on
manufacturing operations, consumer demand, as well as governmental
support and mitigating measures being taken by the individual
issuers."
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The auto sector
(and issuers within other sectors that relay on the auto sector)
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, the weaknesses in the companies' credit profiles,
including their exposure to final consumer demand for light
vehicles have left them vulnerable to shifts in market sentiment in
these unprecedented operating conditions and the companies remain
vulnerable to the outbreak continuing to spread. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
The action reflects the impact on the companies of the breadth and
severity of the shock, and the broad deterioration in credit
quality it has triggered.
The six companies that have been downgraded today have been weakly
positioned in their respective ratings ahead of the current market
stress and hence had very limited ability to weather additional
challenges on top of an already weak sector environment.
The reviews for downgrade will consider (i) the outbreak's impact
on the manufacturing operations of the European automotive parts
suppliers and related issuers listed herein, as these issuers
largely have global operations. A number of automotive original
equipment manufacturers and auto parts suppliers have already
temporarily closed facilities in order to ensure the safety of
their employees. The review will assess the impact from facility
closures and global automotive production declines these issuers
are experiencing and will experience in the coming quarters. The
review will also consider (ii) the lingering impact of diminished
consumer demand, resulting from consumer concerns over contracting
coronavirus, and regional government policies restricting consumer
movement over coming quarters, (iii) the impact of governmental
action to support corporates and consumers in the companies' main
markets, and (iv) the impact of potential self-help measures of the
individual issuers. The review will aggregate these effects in
conjunction with the liquidity profiles of these issuers placed
under review for downgrade. The level of cash, availability under
liquidity facilities, financial maintenance covenant pressure, and
the pressure of refinancing debt maturities coming due over the
next 12-24 months will be major considerations in Moody's review.
Moody's expects to conclude the review within 90 days.
WHAT COULD CHANGE ADLER PELZER'S RATINGS UP/DOWN
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure for Adler Pelzer. A
stabilization of the market situation leading to a recovery in
metrics to pre-outbreak levels could lead to positive rating
pressure. More specifically adjusted Debt/EBITDA would have to drop
back sustainably below 4x with an EBITA margin sustainably above
5%.
Further negative pressure would build if Adler Pelzer fails to
return to meaningful operating profit generation of the second half
of 2020 allowing it to stabilize its liquidity situation by
reducing the cash burn rate. A prolonged and deeper slump in demand
than currently anticipated leading to more balance sheet
deterioration and a longer path to restoring credit metrics in line
with a B2 credit rating (EBITA margin at least 4%, debt/EBITDA 5x)
could also lead to further negative pressure on the rating.
WHAT COULD CHANGE GARRETT MOTION'S RATINGS UP/DOWN
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure for Garrett Motion. A
stabilization of the market situation leading to a recovery towards
metrics to pre-outbreak levels could lead to positive rating
pressure. More specifically adjusted Debt/EBITDA would have to drop
back sustainably below 4x with an EBITA margin sustainably above
8%.
Further negative pressure would build if Garrett Motion fails to
return to meaningful operating profit generation of the second half
of 2020, thus sustaining adjusted debt/EBITDA above 5x and an
adjusted EBITA margin trending below 5%. Furthermore, a
deterioration in Garrett's liquidity profile would also excerpt
negative ratings pressure.
WHAT COULD CHANGE GESTAMP AUTOMOCION'S RATINGS UP/DOWN
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure for Gestamp Automocion. A
stabilization of the market situation leading to a recovery in
metrics to pre-outbreak levels could lead to positive rating
pressure. More specifically adjusted Debt/EBITDA would have to drop
back sustainably below 3.5x with an EBITA margin sustainably above
6%.
Further negative pressure would build if Gestamp fails to return to
meaningful operating profit generation of the second half of 2020
allowing it to stabilize its liquidity situation by reducing the
cash burn rate. A prolonged and deeper slump in demand than
currently anticipated leading to more balance sheet deterioration
and a longer path to restoring credit metrics in line with a Ba3
credit rating (EBITA margin at least 5%, debt/EBITDA not exceeding
4.0x on a sustained basis) could also lead to further negative
pressure on the rating.
WHAT COULD CHANGE GRUPO ANTOLIN'S RATINGS UP/DOWN
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure for Grupo Antolin. A
stabilization of the market situation leading to a recovery in
metrics to pre-outbreak levels could lead to positive rating
pressure. More specifically adjusted Debt/EBITDA would have to drop
back sustainably below 5.5x with an EBITA margin sustainably above
2.5%.
Further negative pressure would build if Grupo Antolin fails to
return to meaningful operating profit generation of the second half
of 2020 allowing it to stabilize its liquidity situation by
reducing the cash burn rate. A prolonged and deeper slump in demand
than currently anticipated leading to more balance sheet
deterioration and a longer path to restoring credit metrics in line
with a B3 credit rating (EBITA margin at least 2%, debt/EBITDA not
exceeding 6.5x on a sustained basis) could also lead to further
negative pressure on the rating.
WHAT COULD CHANGE IHO VERWALTUNG'S RATINGS UP/DOWN
Moody's could downgrade IHO-V's ratings if its (1) net market
value-based leverage remains above 40% on a sustained basis
(approximately 50%, based on share prices of Continental AG and
Schaeffler AG on March 24, 2020); (2) FFO interest cover
deteriorates below 2.0x (approximately 3.2x, based on proposed
dividends for 2019) on a sustained basis; (3) Moody's adjusted
debt/EBITDA remains above 3.0x (approximately 3.1x for 2019)
sustainably and Moody's adjusted EBITA margin fails to recover to
above 8% (approximately 6% in 2019), both based on INA-Holding
Schaeffler GmbH & Co. KG statements that fully consolidate
Schaeffler AG and Continental AG; or (4) liquidity deteriorates.
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure. An upgrade of IHO-V's ratings
would require (1) a clearly formulated financial policy aimed to
preserve a conservative capital structure, (2) a market value-based
net leverage of 30% or less, and (3) FFO interest cover above 2.5x
on a sustained basis. An upgrade would also require (4) Moody's
adjusted debt/EBITDA to be sustained below 2.5x and Moody's
adjusted EBITA margin to be improved to around 10%, both based on
INA-Holding Schaeffler GmbH & Co. KG's financial statements that
fully consolidate Schaeffler AG and Continental AG. An upgrade
would also require (5) improved reporting at IHO-V level.
WHAT COULD CHANGE ZF FRIEDRICHSHAFEN'S RATINGS UP/DOWN
Given the current market situation, Moody's does not anticipate any
short term positive rating pressure for ZF Friedrichshafen. A
stabilization of the market situation leading to a recovery in
metrics to pre-outbreak levels could lead to positive rating
pressure. More specifically adjusted Debt/EBITDA would have to drop
back sustainably below 3x with an EBITA margin sustainably above
7%.
Further negative pressure would build if ZF fails to return to
meaningful operating profit generation of the second half of 2020.
A prolonged and deeper slump in demand than currently anticipated
leading to more balance sheet deterioration and a longer path to
restoring credit metrics in line with a Ba1 credit rating (EBITA
margins of at least 5.0%; debt/EBITDA not exceeding 3.5x on a
sustainable basis) could also lead to further negative pressure on
the rating.
The principal methodology used in these ratings was Automotive
Supplier Methodology published in January 2020.
LIST OF AFFECTED RATINGS
On Review for Downgrade:
Issuer: Aptiv Plc
Multiple Seniority Shelf, Placed on Review for Downgrade, currently
(P)Baa2
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa2
Issuer: Delphi Corporation
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa2
Issuer: Valeo S.A.
LT Issuer Rating, Placed on Review for Downgrade, currently Baa3
Commercial Paper, Placed on Review for Downgrade, currently P-3
Multiple Seniority Medium-Term Note Program, Placed on Review for
Downgrade, currently (P)Baa3
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa3
Issuer: Autoliv ASP, Inc.
Senior Unsecured Commercial Paper, Placed on Review for Downgrade,
currently P-2
Issuer: Autoliv, Inc.
Senior Unsecured Commercial Paper, Placed on Review for Downgrade,
currently P-2
Issuer: Faurecia
LT Corporate Family Rating, Placed on Review for Downgrade,
currently Ba1
Probability of Default Rating, Placed on Review for Downgrade,
currently Ba1-PD
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Ba1
Issuer: HELLA GmbH & Co. KGaA
LT Issuer Rating, Placed on Review for Downgrade, currently Baa1
ST Issuer Rating, Placed on Review for Downgrade, currently P-2
Senior Unsecured Bank Credit Facility, Placed on Review for
Downgrade, currently Baa1
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa1
Issuer: Novem Group GmbH
LT Corporate Family Rating, Placed on Review for Downgrade,
currently Ba3
Probability of Default Rating, Placed on Review for Downgrade,
currently Ba3-PD
Backed Senior Secured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Ba3
Issuer: Schaeffler AG
LT Issuer Rating, Placed on Review for Downgrade, currently Baa3
Senior Unsecured Medium-Term Note Program, Placed on Review for
Downgrade, currently (P)Baa3
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa3
Issuer: Schaeffler Finance B.V.
Backed Senior Secured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Baa3
Issuer: Kongsberg Automotive ASA
LT Corporate Family Rating, Placed Under Review for Downgrade,
currently B1
Probability of Default Rating, Placed Under Review for Downgrade,
currently B1-PD
Issuer: Kongsberg Actuation Systems B.V.
Backed Senior Secured Regular Bond/Debenture, Placed Under Review
for Downgrade, currently B1
Downgrades:
Issuer: Gestamp Automocion, S.A.
LT Corporate Family Rating, Downgraded to Ba3 from Ba2; Placed
Under Review for further Downgrade
Probability of Default Rating, Downgraded to Ba3-PD from Ba2-PD;
Placed Under Review for further Downgrade
Backed Senior Secured Regular Bond/Debenture, Downgraded to B1 from
Ba3; Placed Under Review for further Downgrade
Issuer: Gestamp Funding Luxembourg S.A.
Backed Senior Secured Regular Bond/Debenture, Downgraded to B1 from
Ba3; Placed Under Review for further Downgrade
Issuer: Grupo Antolin-Irausa, S.A.
LT Corporate Family Rating, Downgraded to B3 from B2; Placed Under
Review for further Downgrade
Probability of Default Rating, Downgraded to B3-PD from B2-PD;
Placed Under Review for further Downgrade
Senior Secured Regular Bond/Debenture, Downgraded to B3 from B2;
Placed Under Review for further Downgrade
Issuer: IHO Verwaltungs GmbH
LT Corporate Family Rating, Downgraded to Ba2 from Ba1; Placed
Under Review for further Downgrade
Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD;
Placed Under Review for further Downgrade
Senior Secured Regular Bond/Debenture, Downgraded to Ba2 from Ba1;
Placed Under Review for further Downgrade
Issuer: TRW Automotive Inc.
Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from
Baa3; Placed Under Review for further Downgrade
Issuer: ZF Europe Finance B.V.
Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1
from Baa3; Placed Under Review for further Downgrade
Issuer: ZF North America Capital, Inc.
Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1
from Baa3; Placed Under Review for further Downgrade
Issuer: Adler Pelzer Holding GmbH
LT Corporate Family Rating, Downgraded to B2 from B1; Placed Under
Review for further Downgrade
Probability of Default Rating, Downgraded to B2-PD from B1-PD;
Placed Under Review for further Downgrade
Senior Secured Regular Bond/Debenture, Downgraded to B2 from B1;
Placed Under Review for further Downgrade
Issuer: Garrett Motion Inc.
LT Corporate Family Rating, Downgraded to B1 from Ba3; Placed Under
Review for further Downgrade
Probability of Default Rating, Downgraded to B1-PD from Ba3-PD;
Placed Under Review for further Downgrade
Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-2
Issuer: Garrett LX I SARL
Backed Senior Unsecured Regular Bond/Debenture, Downgraded to B3
from B2; Placed Under Review for further Downgrade
Issuer: Garrett LX III SARL
Senior Secured Bank Credit Facility, Downgraded to B1 from Ba3;
Placed Under Review for further Downgrade
Issuer: Honeywell Technologies Sarl
Backed Senior Secured Bank Credit Facility, Downgraded to B1 from
Ba3; Placed Under Review for further Downgrade
Senior Secured Bank Credit Facility, Downgraded to B1 from Ba3;
Placed Under Review for further Downgrade
Assignments:
Issuer: ZF Friedrichshafen AG
LT Corporate Family Rating, Assigned Ba1; Placed Under Review for
further Downgrade
Probability of Default Rating, Assigned Ba1-PD; Placed Under Review
for further Downgrade
Withdrawals:
Issuer: ZF Friedrichshafen AG
Issuer Rating, Withdrawn , previously rated Baa3
Outlook Actions:
Issuer: Aptiv Plc
Outlook, Changed To Rating Under Review From Stable
Issuer: Delphi Corporation
Outlook, Changed To Rating Under Review From Stable
Issuer: Valeo S.A.
Outlook, Changed To Rating Under Review From Stable
Issuer: Autoliv ASP, Inc.
Outlook, Changed To Rating Under Review From Stable
Issuer: Autoliv, Inc.
Outlook, Changed To Rating Under Review From Stable
Issuer: Faurecia
Outlook, Changed To Rating Under Review From Stable
Issuer: Gestamp Automocion, S.A.
Outlook, Changed To Rating Under Review From Negative
Issuer: Gestamp Funding Luxembourg S.A.
Outlook, Changed To Rating Under Review From Negative
Issuer: Grupo Antolin-Irausa, S.A.
Outlook, Changed To Rating Under Review From Stable
Issuer: HELLA GmbH & Co. KGaA
Outlook, Changed To Rating Under Review From Negative
Issuer: IHO Verwaltungs GmbH
Outlook, Changed To Rating Under Review From Negative
Issuer: Novem Group GmbH
Outlook, Changed To Rating Under Review From Stable
Issuer: Schaeffler AG
Outlook, Changed To Rating Under Review From Stable
Issuer: Schaeffler Finance B.V.
Outlook, Changed To Rating Under Review From Stable
Issuer: ZF Friedrichshafen AG
Outlook, Changed To Rating Under Review From Negative
Issuer: TRW Automotive Inc.
Outlook, Changed To Rating Under Review From Negative
Issuer: ZF Europe Finance B.V.
Outlook, Changed To Rating Under Review From No Outlook
Issuer: ZF North America Capital, Inc.
Outlook, Changed To Rating Under Review From Negative
Issuer: Adler Pelzer Holding GmbH
Outlook, Changed To Rating Under Review From Stable
Issuer: Kongsberg Actuation Systems B.V.
Outlook, Changed To Rating Under Review From Stable
Issuer: Kongsberg Automotive ASA
Outlook, Changed To Rating Under Review From Stable
Issuer: Garrett Motion Inc.
Outlook, Changed To Rating Under Review From Stable
Issuer: Garrett LX I SARL
Outlook, Changed To Rating Under Review From Stable
Issuer: Garrett LX III SARL
Outlook, Changed To Rating Under Review From Stable
Issuer: Honeywell Technologies Sarl
Outlook, Changed To Rating Under Review From Stable
*********
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
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or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
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