/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200409.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, April 9, 2020, Vol. 21, No. 72 Headlines D E N M A R K OBOYA HORTICULTURE: Files for Bankruptcy of Danish Subsidiary F R A N C E 3AB OPTIQUE: Moody's Affirms B2 CFR, Alters Outlook to Negative G E R M A N Y SGL CARBON: Moody's Cuts CFR to Caa1, Outlook Negative I T A L Y FIRE SPA: Moody's Cuts CFR & EUR650MM Sr. Sec. Notes Rating to Caa1 L U X E M B O U R G ARD FINANCE: Moody's Cuts CFR to B3, Outlook Stable S P A I N ABENGOA SA: Creditors Extend Interest Payment Deadline EDREAMS ODIGEO: Moody's Cuts CFR to B3, On Review for Downgrade EL CORTE: Moody's Places Ba1 CFR on Review for Downgrade S W I T Z E R L A N D SELECTA GROUP: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. U N I T E D K I N G D O M CLARKS: To Permanently Close Some Stores; Calls in Bankers GVC HOLDINGS: Moody's Affirms Ba2 CFR, Outlook Negative KCA DEUTAG: Moody's Cuts CFR to Caa2 & Alters Outlook to Negative NMC HEALTH: Fights Lender's Administration Bid STAVELEY HEAD: One Sure Buys Business Out of Administration TORO PRIVATE II: Moody's Cuts CFR to Caa1, Outlook Negative - - - - - ============= D E N M A R K ============= OBOYA HORTICULTURE: Files for Bankruptcy of Danish Subsidiary ------------------------------------------------------------- Oboya Horticulture Industries AB ("Oboya" or the Company) has taken write-downs and provisions and filed for bankruptcy of its Danish subsidiary. Concluded write-downs and provisions amounted to SEK54 million, of which SEK0 million has a liquidity effect. Over the past year, the Danish subsidiary has shown unsatisfactory results, accentuated by the outbreak and spread of COVID-19 (coronavirus) the last few weeks. The sharp decline in the flower industry has had a strong negative impact on Oboya's Danish operations, with the Board having to file for that part of the business to go bankrupt as of March 31, 2020. Oboya's sales on the Danish market are heavily weighted towards the flower industry, which, with COVID-19, has shown a very sharp decline in demand for the past two weeks. The Board of Directors considers that the downturn is relatively lasting and will significantly damage the business and is thus forced to take these drastic measures. Resolved write-downs and provisions negatively affect Oboya's equity by SEK54 million, of which SEK0 million negatively affects the Company's liquidity. This affects all employees in Denmark, who will be made redundant. The measures adopted are expected to have a positive impact on cash flow for the full year 2020. "It is very sad to be forced into this measure that puts employees, suppliers and customers in a difficult situation. At the same time, we see no other option when the demand for our products in Denmark has decreased dramatically in a very short time. We will now put all our efforts into supporting and developing our other parts within the Company. It is reassuring for us to see increased demand in Norway, Sweden and Finland, especially for fruit and vegetables," says Martin Dahlberg, CEO of Oboya Horticulture Industries AB. =========== F R A N C E =========== 3AB OPTIQUE: Moody's Affirms B2 CFR, Alters Outlook to Negative --------------------------------------------------------------- Moody's Investors Service has changed the outlook of 3AB Optique Developpement ('Afflelou'), a holding company owning 100% of French optical retailer Alain Afflelou, 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 the company's B2 rating assigned to the senior secured notes due 2023 (consisting of fixed and floating rate tranches). "Affelou's negative outlook reflects its expectations that the spread of the coronavirus and store closures will negatively impact Afflelou's operating profits, cash flows and key credit metrics in the first half of 2020", said Guillaume Leglise, Assistant Vice President and Moody's lead analyst on Afflelou. 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 retail sector is one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, Afflelou's exposure to store-based discretionary spending have left it vulnerable to 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 Afflelou of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Moody's expects that the nationwide lockdown imposed by many European governments, including in France and Spain, will materially and negatively affect revenues with a consequent impact on EBITDA and cash flow generation. Moody's believes that Afflelou is vulnerable because of its large network of franchisees, which consisted of 1,417 stores as at end-January 2020 and limited prospects for online sales. Most governments in Europe, including France and Spain, 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 Afflelou is likely to 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 optical 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 Afflelou remains vulnerable to a potential prolonged period of lockdown in France and Spain, unfavorable discretionary consumer spending and the uncertainty regarding the pace at which consumer spending will recover once stores reopen. LIQUIDITY Afflelou has adequate liquidity, with a cash balance of EUR58.5 million and full availability under its EUR30 million revolving credit facility as at end-January 2020. There is no debt amortization until the notes of the restricted group mature in October 2023. Moody's expects the company to face significant operational headwinds, which will weigh on earnings and free cash flows and the company might face large working capital needs in the next few months, because Afflelou would likely have to support some franchisees during the lockdown, for example through trade receivable payment extensions. Afflelou's RCF has a single minimum EBITDA maintenance covenant set at EUR45 million that is activated if it is drawn by more than EUR5 million. While Afflelou had large capacity under this covenant, with EBITDA (as adjusted by the company) of EUR84.4 million in the 12 months ended January 31, 2020, Moody's believes that headroom under this covenant may decline significantly in 2020. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS 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 Afflelou's products over the medium-term. Upward pressure could arise over time if (1) Afflelou demonstrates a sustainable improvement in its earnings; (2) its ratio of (gross) debt/EBITDA (as adjusted by Moody's) were to be below 4.5x on a sustainable basis; (3) it generates sustainable positive free cash flow and (4) it demonstrates a more balanced financial policy between creditors and shareholders. Downward pressure could arise if (1) there is a significant decline in sales and earnings, (2) its free cash flows were to turn negative; and (3) its ratio of (gross) debt/EBITDA (as adjusted by Moody's) were deteriorate above 6.0x in the next 12-18 months. Also, any weakening of the liquidity profile would exert downward pressure on the rating. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail Industry published in May 2018. COMPANY PROFILE Headquartered in Paris, France, Afflelou is the third-largest optical retailer in the French market by total sales volume and number two in Spain by number of stores and sales. It operates a franchise model, mainly under the commercial names Alain Afflelou and Optical Discount. The company also has smaller operations in eight other countries and is also present in the hearing aid segment since 2016. At the end of January 2020, the company had 1,417 stores of which 1,264 were franchisees and 153 were directly-owned. In the 12 months ended January 31, 2020, Afflelou's revenue amounted to EUR361 million (against EUR832 million of total sales for the entire store network) and its reported EBITDA was EUR84.4 million. Afflelou is currently owned by Lion Capital (40.6%), Caisse de Depot et Placement du Quebec (30.8%) and Apax France (14.5%). Mr. Alain Afflelou and his family also retains 14.2% of the share capital (as at July 2019). ============= G E R M A N Y ============= SGL CARBON: Moody's Cuts CFR to Caa1, Outlook Negative ------------------------------------------------------ Moody's Investors Service has downgraded SGL Carbon SE's corporate family rating to Caa1 from B3 and downgraded the company's probability of default rating to Caa1-PD from B3-PD. Concurrently the rating of the senior secured notes issued by SGL Carbon SE has been downgraded to B3 from B2. The outlook remains negative. RATINGS RATIONALE The downgrade of SGL's rating reflects weak credit metrics that have already been weak in 2019 exemplified by the company's high Moody's adjusted leverage of 7.6x and weak Moody's adjusted EBIT/Interest expense of 0.6x as at December 2019. These weak credit metrics in its view represent an unsustainable capital structure, in the context of a product portfolio geared towards future growth applications which only will materialize midterm. A weakening of the macro environment triggered by the current Covid-19 outbreak will further challenge the company's topline and profitability at least through 2020 resulting in a further weakening of the company's credit profile. SGL's low profitability is mainly a reflection of the underperformance of the company's CFM business unit, driven by low capacity utilization at its textile fiber and carbon fiber production, structural challenges in the market for textile fibers (which the company addresses through various earnings improvement measures), weaker demand for industrial applications and a product mix containing more lower margin sales to the wind industry. At the same time the company's GMS segment continued to perform well in 2019, recording record levels in sales revenue and earnings. In GMS the company expects to be negatively impacted by changes in the supply chain for lithium ion batteries, resulting in a decrease of reported EBIT in 2020. In Moody's view weakening demand for industrial applications, poses a further downside risk. Moody's currently forecasts Moody's adjusted EBITDA to be in the range of EUR75-EUR90 million in 2020. Depressed profitability consequently will translate into FCF being negative in the range of EUR10-EUR20 million, although Moody's notes that FCF should be supported by a release of working capital and a reduction of capex spending to less than EUR70 million with some further headroom to reduce capex spending in 2020, if needed. Negative FCF in combination with the repayment of the outstanding purchase price for SGL composites amounting to $62 million might result in a situation where the covenant headroom under its EUR175 million RCF will be tight. However, Moody's understands that the company is currently in the process of disposing non-core assets such as real estate's assets not used and looking into other means strengthening its liquidity profile. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook on the rating reflects the vulnerability of the company's credit profile to a prolonged COVID-19 driven downturn, and highlights the risks to the company's liquidity profile in such a scenario. LIQUIDITY SGL's liquidity profile is adequate; however, its further evolvement depends on the company's progress of disposing non-core assets and maintenance of a comfortable covenant headroom. SGL's liquidity sources consist of an undrawn EUR175 million RCF, around EUR137 million cash on balance sheet (including time deposits) as at December 31, 2019 and forecasted internal cash generation. These sources are sufficient to cover the company's capital expenditure (less than EUR70 million forecasted for 2020), working cash needs and to accommodate unexpected swings in working capital in the next 12-18 month. Furthermore, it modeled a cash outflow for the outstanding payment for shares of SGL Composites USA amounting to EUR55 ($62) million during Q4-2020. Moody's forecasts that following the payment to BMW covenant headroom under its net leverage covenant will be tight and highlight the risk of covenants to be renegotiated. (covenant requirement of below 3.85x). ESG CONSIDERATIONS 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. More specifically, the weaknesses in SGL Carbon's credit profile, including its exposure to the automotive and general industry end markets have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and SGL Carbon 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. Factors that could lead to an upgrade or downgrade of the ratings: Moody's could downgrade SGL Carbon's ratings if its liquidity profile became inadequate and if continued operational underperformance would lead to an increased likelihood of a debt restructuring. Moody's could consider upgrading SGL Carbon's rating if leverage would decrease to below 7x on a sustainable basis, supported by a sustainable EBITDA contribution of its CFM business. An upgrade would furthermore require that the company consistently generates at least break even FCF and maintains an adequate liquidity profile including comfortable covenant headroom under its revolving credit facility. ========= I T A L Y ========= FIRE SPA: Moody's Cuts CFR & EUR650MM Sr. Sec. Notes Rating to Caa1 ------------------------------------------------------------------- Moody's Investors Service downgraded to Caa1 from B3 the corporate family rating, to Caa1-PD from B3-PD the probability of default rating and to Caa1 from B3 the EUR650 million Senior Secured Floating Rate Notes instrument rating for Fire S.p.A (Italmatch). Fire is the ultimate parent of companies trading under the name Italmatch. The outlook remains stable. RATINGS RATIONALE Moody's has downgraded the rating to reflect the increasing leverage and the potential weakening of the liquidity profile of Italmatch, both as a result of expected negative revenue and profitability development due to weakening customer industries, most prominently the US fracking industry (which accounts for about ~8-9% of group revenue). The sharp fall of oil prices, with WTI trading at levels of around $20/barrel, will result in lower completion by US fracking companies and heightened focus on cost savings, including for chemicals required for fracking. As a result, Moody's expects that the weaker performance -- precipitated by lower volumes and prices -- in Italmatch's AWS O&G segment will not be fully offset by (1) mitigating actions such as contributions from new products and new signed contracts (2) variable cost cuts or potential support from the Italian government for certain personnel cost in the event of production stoppages (considered by Italmatch management as very unlikely at this point in time); or (3) more resilient demand for industrial water, desalination additives, geothermal, certain lubricant applications, for instance for wind turbines, and its performance and personals care products that include compounds for agricultural chemicals. It is also worth noting that all of Italmatch's key production facilities remain operational. Consequently, Moody's expects EBITDA to fall to around EUR94 million, resulting from pricing pressure of fracking customers, and Moody's-adjusted gross leverage to increase to 8.3x in 2020. In addition, Italmatch has during March 2020 fully drawn its EUR100 million revolving credit facility after it had already utilized EUR44.5 million of it as of December 31, 2019. Italmatch maintains high cash balances in excess of EUR90 million. Whilst this is a precautionary measure to manage liquidity in times of market volatility, it also reflects the need to secure liquidity sources at a time when the company's free cash flows (FCF) is vulnerable to the current environment. Moody's expects Italmatch to positive FCF in 2020, with a risk of FCF to turn break even or negative should the current situation remain unchanged for an extended period of time. Italmatch has optionality to reduce its cash requirements by reducing its capital spending to maintenance levels of around EUR20 million in 2020 and deferring expansion investments. Trade working capital remains at high levels, EUR102.4 million at the end of December 2019, and more working capital is normally consumed during the first calendar half. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects the still adequate liquidity position which should support the company at times of high uncertainty with the risk of FCF turning negative during the course of the year. The coronavirus outbreak will have a negative demand impact from customers in other end markets such as manufacturing, plastics, electronics and autos. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, given the substantial implications for public health and safety. Its 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. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: Moody's could upgrade the ratings if debt/EBITDA were to move to below 7.0x and if the company's liquidity profile strengthens. Moody's could downgrade ratings if the strength of Italmatch's liquidity and its operating performance deteriorated further. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Chemical Industry published in March 2019. COMPANY PROFILE Fire (BC) S.p.A is the parent company of operating companies that trade under the name Italmatch Chemicals ("Italmatch"), with head offices in Genova, Italy. Italmatch is a global chemical additives manufacturer, selling lubricants as well as additives for the water & oil, detergents and plastics products. In 2018 Italmatch had revenues of EUR422.5 million. Bain Capital Private Equity acquired Italmatch from Ardian, a private equity fund, in October 2018. Italmatch acquisitions of BWA and WST in 2019 increased the company's exposure to the oil and gas industry. =================== L U X E M B O U R G =================== ARD FINANCE: Moody's Cuts CFR to B3, Outlook Stable --------------------------------------------------- Moody's Investors Service has downgraded ARD Finance S.A.'s corporate family rating to B3 from B2 and its probability of default rating to B3-PD from B2-PD. ARD Finance S.A. is the top entity with rated debt within the restricted group of Luxembourg-based metal and glass packaging manufacturer Ardagh Group S.A. Moody's has also downgraded the ratings on Ardagh Packaging Finance plc's senior secured notes to B1 from Ba3 and its senior unsecured notes to Caa1 from B3. Moreover, Moody's has downgraded the senior secured PIK toggle notes to Caa3 from Caa2 of ARD Finance S.A. Concurrently, Moody's has assigned a B1 rating to the proposed $500 million senior secured notes due 2025 to be issued by Ardagh Packaging Finance Plc. Proceeds from this issuance will be used to refinance a $300 million credit facility raised on March 20, 2020 and for general corporate purposes. The outlook for both entities is stable. "Today's downgrade reflects the further expected increase in Ardagh's already high financial leverage at a time when the company may face some business and operational disruption due to the coronavirus outbreak across its key regions, hampering prospective gross deleveraging in 2020," says Donatella Maso, a Moody's Vice president -- Senior Analyst and lead analyst for Ardagh. "The downgrade also reflects Moody's expectation for negative free cash flow in 2020 due to lower earnings and incremental investments". RATINGS RATIONALE The proposed transaction, as announced by the company on April 3, 2020 [1], while strengthening liquidity, will increase its already elevated leverage by 0.4x to 8.3x based on December 2019 pro forma figures, which has the potential to further increase in 2020, depending on the severity and the length of the coronavirus outbreak. Prior to its downgrade, Ardagh was weakly positioned in its rating category, primarily due to its high leverage, which was well above the downward trigger of 7.0x for the B2 rating, and the reliance on improving cash flow generation to support debt reduction. Although Ardagh's operations are viewed as relatively resilient to the economic cycle and with low to moderate exposure to the risks posed to the global economies by the coronavirus outbreak, the demand for some of the company's products, particularly in the glass division, may decline, and the production activities or the supply chain could be temporarily disrupted due to restrictive measures imposed by most countries where Ardagh or its customers operate. The company serves the stable food and the beverage end-markets and does not focus on less resilient premium products. However, the demand for spirits, which accounted for 7% of revenues in 2019, and to a lesser extent wine and beer could be impacted as a portion of them are sold to duty free shops or to the HORECA segment. This could be mitigated by increased demand for household consumption. Moreover, the sharp decline in raw material prices such as aluminum and steel could hit the company's metal division revenues due to the contractual pass through of raw material price changes embedded in the customer contracts. While Moody's expects the company to take actions in order to protect its earnings in line with the previous downturn, some of these measures could also lead to one off costs which will affect the cash flow. Albeit it is difficult to assess the impact of coronavirus at this stage, as it depends on the length and severity of the outbreak, Moody's believes that Ardagh will likely experience some decline in revenue and EBITDA in 2020 with the potential for leverage to increase further. Additionally, Moody's does not expect free cash flow to improve this year unless the company's plans to spend additional EUR250 million of capex are delayed or postponed. This incremental investment will be used within the existing plant footprint for new lines or to build larger furnaces and is backed by customer contracts. While contributing to future growth, the additional capex will lead to negative free cash flow generation in 2020, against previous expectations. More positively, the B3 CFR continues to be supported by the company's scale, its leading market positions in both the glass and metal packaging industries, and some diversity across regions and segments. Ardagh also benefits from long term customer relationships and pass-through clauses in the majority of contracts, which partly mitigate a fairly concentrated customer base and exposure to input cost inflation. LIQUIDITY Ardagh's liquidity remains satisfactory due to its large cash balance of approximately $1.2 billion pro forma for the refinancing transaction, $183 million availability under its $700 million asset-based loan facility (ABL) due December 2022 as well as certain supplier financing and non-recourse factoring arrangements (both committed and uncommitted). These sources are considered sufficient to cover seasonal fluctuations in working capital, maintenance and growth capital expenditures, while there is no mandatory debt amortization until 2022. While free cash flow will turn negative in 2020 due to potentially lower earnings and incremental investments, Moody's expects this to improve in 2021. STRUCTURAL CONSIDERATIONS The B3-PD PDR assigned to ARD Finance S.A. is in line with the CFR. This is based on a 50% recovery rate, as is typical for transactions with bank debt and bonds. The B1 rating assigned to the new senior secured notes is in line with the existing senior secured notes as they rank pari passu. It is two notches above the B3 CFR, reflecting the significant amount of debt ranking behind them. Accordingly, the senior unsecured notes are rated Caa1, one notch below the B3 CFR. The notes, both secured and unsecured, are guaranteed by material subsidiaries representing at least 80% of total assets and adjusted EBITDA. The senior secured notes are secured by a first-priority lien on all non-ABL collateral, consisting of stocks and assets. The Caa3 rating of the PIK toggle notes issued by ARD Finance S.A. reflects the significant amount of debt ranking ahead and its reliance on the dividend distribution from the listed entity Ardagh Group S.A. for interest payment. The PIK toggle notes at ARD Finance S.A. benefit from a pledge over the shares of Ardagh Group S.A. and ARD Group Finance Holdings S.A. and are not guaranteed. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that the company will be able to withstand the weakening trading conditions owing to the coronavirus outbreak thanks to its satisfactory liquidity. The outlook also incorporates Moody's assumption that the company will not lose any material customers and will not engage in material debt-funded acquisitions, or shareholder remuneration, for which the company has a track record. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given Ardagh's currently high leverage, meaningful steps of deleveraging would be needed for upward pressure on the rating to develop. More specifically, the ratings could come under positive pressure should Ardagh be able to reduce Moody's-adjusted debt/EBITDA towards 7.0x and generate Moody's-adjusted positive free cash flow, both on a sustainably basis. Conversely, the ratings could come under negative pressure if the company fails to deliver towards 8.0x by the end of 2021, if free cash flow remains negative for an extended period of time and its liquidity weakens. LIST OF AFFECTED RATINGS Issuer: ARD Finance S.A. Downgrades: Probability of Default Rating, Downgraded to B3-PD from B2-PD Corporate Family Rating, Downgraded to B3 from B2 Senior Secured Regular Bond/Debenture, Downgraded to Caa3 from Caa2 Outlook Action: Outlook, Changed To Stable From Negative Issuer: Ardagh Packaging Finance plc Downgrades: Backed Senior Secured Regular Bond/Debenture, Downgraded to B1 from Ba3 Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 from B3 Assignment: Backed Senior Secured Regular Bond/Debenture, Assigned B1 Outlook Action: Outlook, Changed To Stable From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Packaging Manufacturers: Metal, Glass, and Plastic Containers published in May 2018. COMPANY PROFILE ARD Finance S.A. (Ardagh) is a parent company of Ardagh Group SA, a New York Stock Exchange listed company and one of the largest suppliers globally of metal and glass containers primarily to the food and beverage end markets. Pro forma for the disposal of its Food & Specialty (F&S) disposition, the company operates 56 production facilities (23 metal beverages can production facilities and 33 glass container manufacturing facilities) in 12 countries with significant presence in Europe and North America, employing c. 16,400 people. In 2019, the company generated $6.7 billion of revenue and $1.2 billion of EBITDA pro forma for the disposal of F&S. ========= S P A I N ========= ABENGOA SA: Creditors Extend Interest Payment Deadline ------------------------------------------------------ Abengoa, S.A. (the "Company"), in accordance with article 227 of the of the Restated Securities Market Act, informed the Spanish Securities Market Commission (Comision Nacional del Mercado de Valores) of the following: The Company informed that, having requested its creditors their consent to, among other things, extend the interest payment date of the interest due on March 31, 2020, such consent has been granted and consequently, payment of interest is delayed until June 30, 2020. About Abengoa S.A. Spanish energy giant Abengoa S.A. is an engineering and clean technology company with operations in more than 50 countries worldwide that provides innovative solutions for a diverse range of customers in the energy and environmental sectors. Abengoa is one of the world's top builders of power lines transporting energy across Latin America and a top engineering and construction business, making massive renewable-energy power plants worldwide. As of the end of 2015, Abengoa, S.A. was the parent company of 687 other companies around the world, including 577 subsidiaries, 78 associates, 31 joint ventures, and 211 Spanish partnerships. Additionally, the Abengoa Group held a number of other interests of less than 20% in other entities. On Nov. 25, 2015 in Spain, Abengoa S.A. announced its intention to seek protection under Article 5bis of Spanish insolvency law, a pre-insolvency statute that permits a company to enter into negotiations with certain creditors for restricting of its financial affairs. The Spanish company faced a March 28, 2016, deadline to agree on a viability plan or restructuring plan with its banks and bondholders, without which it could be forced to declare bankruptcy. On March 16, 2016, Abengoa presented its Business Plan and Financial Restructuring Plan in Madrid to all of its stakeholders. EDREAMS ODIGEO: Moody's Cuts CFR to B3, On Review for Downgrade --------------------------------------------------------------- Moody's Investors Service has downgraded to B3 from B1 the corporate family rating of eDreams ODIGEO S.A. The rating agency has also downgraded eDreams' probability of default rating to B3-PD, from B1-PD, and has downgraded to Caa1 the EUR425 million senior secured notes due 2023, from B2. Concurrently, Moody's has placed the company's CFR, PDR and rating on the EUR425 million senior secured notes due 2023 on review for downgrade. The outlook on all entities was stable prior to its rating action. "The decision to downgrade eDreams and to place the ratings under review for downgrade reflects the impact that the rapid and widening spread of the coronavirus outbreak is expected to have on eDreams' financial performance and the risk that a prolonged downturn will lead to a further weakening of the company's liquidity position" said Fabrizio Marchesi, Vice President and Moody's lead analyst for the company. 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 travel sector is one of the most significantly impacted by the shock, also due to the quarantine measures introduced by numerous governments. 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 of the breadth and severity of the shock, as well as the deterioration in credit quality it has triggered, on the company. Although eDreams performed well in recent quarters, achieving, for instance, a Moody's-adjusted (gross) debt/EBITDA ratio of 3.5x as at December 31, 2019, its credit quality is expected to deteriorate significantly over the coming quarters because of the coronavirus outbreak, with operational and financial metrics falling outside the parameters commensurate with its previous CFR. Although the company's financial performance should improve once quarantine measures are removed, the timing of any recovery is uncertain and there is a risk that the coronavirus outbreak may have longer-lasting negative effects on consumer sentiment and purchasing power. Moody's expects eDreams will experience significant deterioration in its future liquidity position, on the back of a severe contraction in travel volumes, a large increase in cancellations and a material unwind of its large, negative working capital position. Although the company's liquidity consisted of EUR71 million of cash on balance and EUR175 million of undrawn revolving credit facility (RCF) as at December 31, 2019, Moody's anticipates that a significant portion of this liquidity will be used to fund working capital outflows, leaving the company with tight liquidity going forward. Moody's also notes the risk that stems from an eventual non-compliance with the RCF's springing gross leverage covenant, which is set at 6x gross leverage and tested when the RCF is drawn by more than 30%. A breach of this covenant would constitute an event of default, although Moody's understands that the company is in negotiation with its lender banks regarding a potential covenant waiver. The review process will focus on (1) the duration of the coronavirus epidemic, the quarantine and social distancing measures that governments will keep in place and the actions taken to support their economies; (2) the effects of the outbreak and the aforementioned measures on customer demand for travel; (3) the trajectory of the company's revenue, profitability, working capital, leverage and free cash flow; and (4) its ability to maintain adequate liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure is not expected in the short to medium term. However, the rating could be stabilized if it becomes clear that the impact of the coronavirus epidemic on travel volumes and economic activity will be less pronounced than anticipated, Moody's-adjusted leverage is forecast to remain around 5.0x on a sustained basis, cash flow generation turns positive on a sustained basis, and liquidity is maintained at an adequate level. Conversely, further negative rating pressure could occur in the event that the economic fallout from the coronavirus outbreak is stronger than currently anticipated, leading to a more significant and prolonged decline in profitability, an increase in Moody's-adjusted leverage to above 6.0x on a sustained basis, heightened concerns regarding the ability of the company to meet its obligations as they fall due, or if it becomes clear that the company is not in a position to resolve a potential event of default related to the maintenance covenant of its RCF. STRUCTURAL CONSIDERATIONS The company's capital structure consists of (1) a EUR175 million super-senior revolving credit facility maturing in 2023; and (2) EUR425 million of senior secured notes also maturing in 2023. The senior secured notes rank behind the super-senior facility and their security is limited largely to share pledges. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. COMPANY PROFILE eDreams is the largest OTA in the European flight segment. It was formed in 2011 when Axa (now Ardian) and Permira acquired Opodo and merged it with their existing portfolio travel companies to create a European rival to Expedia Group, Inc. eDreams was listed in Spain in 2014. In fiscal 2019, the company reported revenue and company-adjusted EBITDA of EUR551 million and EUR120 million, respectively. EL CORTE: Moody's Places Ba1 CFR on Review for Downgrade -------------------------------------------------------- Moody's Investors Service has placed on review for downgrade Spanish retailer El Corte Ingles, S.A. Ba1 corporate family rating and its Ba1-PD probability of default rating. Concurrently, the issuer's EUR690 million senior unsecured bond Ba1 rating has also been placed on review for downgrade. The outlook prior to this rating action was stable. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, considered as a social risk under Moody's Environmental, Social and Governance framework given the substantial implications for public health and safety, 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 retail sector is one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, ECI's exposure to store retailing and discretionary spending, have left it vulnerable to mandatory shop closures and to shifts in market sentiment in these unprecedented operating conditions. Its rating action reflects Moody's belief that ECI will face very challenging operating conditions in Spain amidst supply chain disruptions, declining demand, mandated curfews, store closures and dislocation in the financial markets related to the coronavirus pandemic. The rating agency believes that the nationwide lockdown imposed recently by many authorities in Europe a will hurt demand of discretionary products and will result in logistic and supply chain issues. Whilst Moody's acknowledges that around 35% of ECI's product offering is non-discretionary, ECI's online shop is open and ECI's shops are currently partially opened, the rating agency believes that ECI will face material operational disruptions in the next few weeks as the outbreak continues. Over time, this could impact the company's earnings and margins, and ultimately weigh on its free cash flows and debt protections ratios. Whilst ECI needs a liquidity buffer because of its working capital seasonality, Moody's considers the company's liquidity as adequate currently. As of the end of February 2020, the company had a total liquidity of around EUR1.3 billion, comprising cash on the balance sheet of around EUR200 million, and EUR1.1 billion available under its revolving credit facility (RCF) maturing in 2024. The maintenance covenant on the RCF will start being calculated only from July 2021 and only if the company doesn't have at least two investment grade ratings. The company may need to partially draw on its RCF during 2020 to cover its costs during the coronavirus outbreak. The company has also secured on April 1, 2020 an additional EUR1.3 billion worth RCF maturing in April 2021. The new EUR1.3 billion RCF is not subject to financial covenants and Moody's expects this facility to remain undrawn. STRUCTURAL CONSIDERATIONS The Ba1 instrument rating on the senior unsecured notes is in line with the CFR. The company's probability of default rating of Ba1-PD is also in line with the CFR. The probability of default rating reflects the use of a 50% family recovery rate resulting from a capital structure comprising senior unsecured bonds and unsecured bank debt. RATIONALE FOR THE REVIEW FOR DOWNGRADE The review will focus on (1) ECI's operational performance and liquidity strength during this period of significant earnings decline, (2) the impact on demand from the spread of COVID-19 in Spain, as well as (3) Moody's views regarding the longer-term sales and earnings trajectory and credit metrics of the company. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure is not expected in the short term. However, it could arise if the company materially improves its liquidity buffer supported by improving profitability and a solid free cash flow generation and if its Moody´s adjusted (gross) debt/EBITDA ratio decreases sustainably below 3.5x. Downward pressure on the ratings could arise as a result of a deterioration of the company's liquidity. Downward pressure could also arise if there is a prolonged period of negative like-for-like sales, weaker profitability and depressed free cash flow generation. On a quantitative basis, the ratings could be downgraded if Moody´s adjusted (gross) debt/EBITDA ratio increases and is maintained above 4.0x. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail Industry published in May 2018. COMPANY PROFILE ECI, headquartered in Madrid, Spain, is the largest department store in Europe, with groupwide net sales of almost EUR16 billion and adjusted EBITDA of EUR1.2 billion in fiscal 2018. The company operates under two divisions, retail and non-retail, which represented around 82% and 18% for both sales and EBITDA, respectively, in fiscal 2018. Founded in 1935 by Ramon Areces, ECI remains privately owned and controlled by the founder's descendants. Its current main shareholders are the Ramon Areces Foundation, Cartera de Valores IASA and PrimeFin, S.A. ===================== S W I T Z E R L A N D ===================== SELECTA GROUP: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. ---------------------------------------------------------------- Moody's Investors Service has downgraded to Caa1 from B3 the Corporate Family Rating of Selecta Group B.V. The rating agency has also downgraded Selecta's probability of default rating to Caa1-PD, from B3-3PD, and has downgraded to Caa1 the company's EUR865 million senior secured notes, EUR375 million senior secured floating rate notes and CHF250 million senior secured notes, all due 2024, and to B2 the company's EUR150 million super senior secured revolving credit facility (SSRCF) due 2023. Outlook has been 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. Selecta's business model is particularly affected by the social isolation measures implemented in the vast majority of its countries of operation, that will severely impact both its public and workplace offerings. Although Selecta performed well in recent quarters, achieving, for instance, a Moody's-adjusted (gross) debt/EBITDA ratio of 4.8x as at September 30, 2019, its credit quality is expected to deteriorate significantly over the coming quarters because of the coronavirus outbreak, with operational and financial metrics falling outside the parameters commensurate with its previous CFR. Although the company's financial performance should improve once quarantine measures are removed, the timing of any recovery is uncertain and there is a risk that the coronavirus outbreak may have longer-lasting negative effects on consumer sentiment and purchasing power. Moody's expects Selecta to experience significant deterioration in its liquidity position, on the back of a severe contraction in sale volumes. Although the company's liquidity consisted of EUR129.1 million of cash on balance as at September 30, 2019 and availability under the EUR150 million revolving credit facility, headroom will become increasingly tight as the impact of the coronavirus outbreak materializes, and a large portion of this liquidity will be used to fund operations. There is a springing covenant attached to the SSRCF when it is drawn by over 40%, Moody's expects that there will be some headroom under the covenant. The ratings reflect the company's: (1) leading market position as a pan-European vending operator; (2) high renewal rates and contracted installed base; (3) sustained revenue and EBITDA growth and new contract wins over the last few quarters prior to the outset of the coronavirus; and (4) potential upside in EBITDA and capital expenditure from synergy savings and operational improvements. The ratings also take into account the: (1) high leverage given expected slow growth in the next 12 months; (2) negative free cash flow generation, with limited sources of additional available liquidity; (3) the timing of any recovery is uncertain and there is a risk that the coronavirus outbreak may have longer-lasting negative effects on consumer sentiment and purchasing power. 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. Its action reflects the impact of the breadth and severity of the shock, as well as the deterioration in credit quality it has triggered, on the company. Moody's also notes recent changes to Selecta's management and Board, with the latter no longer including any independent members. Moody's positively notes the EUR50 million liquidity line recently provided by the sponsor, albeit on a super senior basis STRUCTURAL CONSIDERATIONS Selecta's debt structure comprises a EUR150 million SSRCF and approximately EUR1.45 billion (euro equivalent) senior secured notes (SSN), all issued by Selecta Group B.V. The SSRCF is rated at B2, two notches higher than the SSN, at Caa1, reflecting its priority ranking. Both the SSRCF and SSN are guaranteed by group companies representing at least 80% of consolidated EBITDA and are secured principally by share pledges over the guarantors, in each case subject to legal limitations. The probability of default rating (PDR) is in line with the CFR, based on a 50% recovery rate, as is typical for transactions with senior secured debt. RATING OUTLOOK The negative outlook reflects Moody's expectation that free cash flow generation could remain negative over the next 12-18 months, with liquidity tightening as time progresses. Factors that could lead to an upgrade or downgrade of the ratings: An upgrade of the rating is unlikely over the near term, given the negative outlook. Nevertheless, the outlook could return to stable if Selecta (1) improves available liquidity, (2) improves cash flow generation such as that RCF/Net debt is sustainably above 7% (3) EBITA/Interest moves sustainably towards 1x and (3) Moody's adjusted debt/EBITDA decreases sustainably below 6.5x The ratings could be downgraded if there is a period of sustained decline in revenues or EBITDA, extending through the second half of 2020, if the company's free cash flows remain substantially negative or if further liquidity concerns arise. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. COMPANY PROFILE Selecta is the leading route based unattended self-service coffee and convenience food provider in Europe by revenue, with operations in 16 countries across Europe. It operates a network of more than 460,000 snack and beverage vending machines on behalf of a broad and diverse client base, including private and public organizations. Selecta is ultimately owned by KKR. =========================== U N I T E D K I N G D O M =========================== CLARKS: To Permanently Close Some Stores; Calls in Bankers ---------------------------------------------------------- Business Matters reports that the family-owned footwear retailer Clarks has drawn up plans for the permanent closure of some of its stores and drafted in bankers to review its finances as the coronavirus crisis takes its toll. According to Business Matters, it is understood that the company, which has been struggling to deliver a turnaround in its fortunes, has decided not to reopen "a small number" of its 347 UK stores once the enforced closure of non-food shops comes to an end. Sources said that Clarks had in recent days appointed Rothschild, the investment bank, to help explore financing options for the business, including accessing new borrowing facilities, Business Matters relates. The company has furloughed thousands of its store staff under the government's Coronavirus Job Retention Scheme, and is assessing options for the remainder of its workforce, Business Matters discloses. The loss-making business is now focused on weathering the COVID-19 pandemic, Business Matters states. Retail sources expect the company to pursue a more formal restructuring deal such as a Company Voluntary Arrangement in the medium term, although the spokeswoman said there were no talks about widespread shop closures, Business Matters notes. GVC HOLDINGS: Moody's Affirms Ba2 CFR, Outlook Negative ------------------------------------------------------- Moody's Investors Service has affirmed GVC Holdings PLC's Ba2 corporate family rating and Ba2-PD probability of default rating. Concurrently, Moody's has affirmed the Ba2 ratings on the undrawn GBP550 million senior secured revolving credit facility due 2023 issued by GVC Holdings PLC and the EUR1,125 million senior secured term loan B due 2024, the $786 million term loan B due 2024, issued by GVC Holdings (Gibraltar) Limited. The outlook has been changed to negative (NEG) from stable (STA) for GVC Holdings PLC and to negative (NEG) from no outlook (NOO) for GVC Holdings (Gibraltar) Limited. 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 gaming sector has been one of the sectors most significantly affected by the shock given its sensitivity to retail gaming shop closures and the cancellation of sports events. More specifically, GVC's is losing revenue in these unprecedented operating conditions and the company remains vulnerable to the outbreak for as long as the current lockdowns and cancellations continue. 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 GVC of the breadth and severity of the shock, and the deterioration in credit quality it has triggered. Moody's adjusted leverage is expected to spike above the 4.5x downgrade trigger temporarily, however it is expected to normalize within the appropriate range for the company's Ba2 rating within the next 12-18 months. Despite the uncertainty regarding the duration of lockdowns and cancellation of sports events, the level of expected cash burn is relatively low and GVC has an adequate liquidity buffer. GVC's Ba2 rating is also constrained by (1) the maturity of the LBO retail segment with its fixed costs structure, although under normal operating conditions this segment provides stable cash flow; (2) the highly competitive nature of the online betting and gaming industry, particularly in the established UK market, which represents approximately 55% of revenue and EBITDA; (3) the presence in the volatile sports betting segment, and; (4) the ongoing threat of greater regulation and increases in gaming taxes, particularly in the UK, however this threat is expected to be lower in the next 12-18 months. The rating is supported by (1) the size of the group; with revenue of $4.5 billion in 2019, GVC is one of the world largest gaming operators with leading positions in the UK, Germany and Italy; (2) its geographic diversity with presence in 35 countries, although the UK remains the largest market accounting for over 50% of revenues, with low exposure to unregulated jurisdictions of around 6%; (3) its online focus and success in increasing market share organically, with positive industry trends underpinning the online betting and gaming sector both in Europe and globally, and; (4) the competitive advantage from GVC's proprietary technology platform and customer relationship management system (CRM) providing the group with the ability to adjust odds and adapt to customers' preferences and games in a timely manner. GVC is publicly listed on the London Stock Exchange and has a good corporate governance track record. The company has also demonstrated adherence to a prudent financial policy over the last few years, which Moody's regard as commensurate with the company's rating level. LIQUIDITY Moody's considers GVC's liquidity position to be adequate for its near-term needs which include a relatively low level of cash burn during the coronavirus shutdown, supported by (1) cash on balance sheet of at least around GBP260 million; (2) the undrawn GBP550 million RCF, and; (3) no debt amortization until 2022. The RCF has one springing covenant if drawn at 35% or more, set at 4.0x maximum net leverage. Under Moody's base case scenario, the covenant would not be expected to breach. The covenant is tested on a quarterly basis and the term loans benefits from cross-acceleration with respect to the RCF. STRUCTURAL CONSIDERATIONS Using Moody's Loss Given Default for Speculative-Grade Companies methodology, the Ba2-PD Probability of Default Rating (PDR) is in line with the CFR. This is based on a 50% recovery rate, as is typical for transactions including bonds and bank debt. The loans rank pari passu because they share the same security, consisting mainly of share pledges, and upstream guarantees. The loans also benefit from the guarantees of material subsidiaries representing at least 75% of the consolidated EBITDA. The senior secured Ladbroke bonds rank pari passu with the loans. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook assumes that GVC will experience continued underperformance from the coronavirus outbreak, but that the company will be able to partially offset these adversities and minimize cash burn due to cost reduction, partially with UK government assistance for the payment of wages, as well as relief from deferrals on taxes and business rates. The outlook could be stabilized if there is enough clarity regarding the coronavirus situation to reliably establish that the company's credit metrics are expected to stay well within the established key indicators commensurate for the Ba2 rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the ratings could arise over time if the company's debt/EBITDA (as adjusted by Moody's) falls below 4.0x and the company's retained cash flow (RCF)/debt (as adjusted by Moody's) trends above 10%, both on a sustainable basis, while maintaining positive free cash flow. For an upgrade, Moody's also expects the group to maintain a conservative financial policy and good liquidity. Downward pressure on the ratings could occur if the company's debt/EBITDA (as adjusted by Moody's) is maintained sustainably above 4.5x, or if free cash flow remains negative for the next 18 months, or if there any material weakening of the company's liquidity profile beyond what has already been taken into account due to the coronavirus. A downgrade could also occur as a result of materially adverse regulatory actions. KCA DEUTAG: Moody's Cuts CFR to Caa2 & Alters Outlook to Negative ----------------------------------------------------------------- Moody's Investors Service downgraded the Corporate Family Rating of Scotland based oilfield services KCA Deutag Alpha Ltd to Caa2 from Caa1 and the Probability of Default Rating to Ca-PD from Caa1-PD. Concurrently, Moody's has downgraded to Caa2 from Caa1 the rating on KCA's senior secured credit facility and on all rated senior secured debt instruments issued by KCA Deutag UK Finance plc. Furthermore, the agency changed the outlook on all ratings to negative from stable. This rating action follows KCA's announcement in its year-end earnings release on March 26, 2020 [1] that it planned to utilize the applicable grace periods for the interest payments due on April 1, 2020 with respect to the 2022 Notes and 2023 Notes issued by KCA Deutag UK Finance plc. If the company does not pay the coupon before the end of the 30-day grace period, Moody's will consider this as a default. In this event, Moody's expects to assign an "/LD" to the PDR at that time. RATINGS RATIONALE The downgrade of KCA's ratings to Caa2 reflects the company's failure to make the quarterly interest payment of approximately $46 million, payable on April 1, 2020, on its $935 million senior unsecured notes. The company has initiated discussions with its creditors via their advisors, and has agreed nondisclosure agreements with advisors representing the ad-hoc group of lenders and the RCF banks. KCA's decision is intended to allow the company time to fully evaluate and assess the impact of the unprecedented market events related to the coronavirus outbreak and OPEC's recent measures that led to a dramatic drop in the oil price. In addition to focussing on staff health and safety measures and continuing dialogue with its customers, KCA is also looking to closely monitor and preserve its liquidity position. KCA's Caa2 rating reflects the company's weak liquidity and high risk of default in the near term. The rating also reflects (1) its diversified operations between onshore and offshore; (2) the strong presence in key oil-producing regions such as the North Sea, the Middle East and Russia; and (3) the solid contract backlog of about $5.7 billion as of March 1, 2020. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS 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 oilfield services sector, where KCA operates, is significantly affected by the shock coupled with the recent OPEC actions that resulted in a precipitous drop in the oil price. More specifically, the existing weaknesses in KCA's credit profile and liquidity, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and KCA remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under the ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on KCA of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. LIQUIDITY Moody's regards KCA's liquidity as weak despite reported available liquidity of $171 million at the end of 2019. The headroom under the company's loan covenants is very tight. KCA reported net leverage of 5.25x of as December 2019 versus the 5.25x covenant level. In March 2019, KCA received a $25 million Holding company equity contribution, which improved the company's EBITDA for covenant calculation purposes. STRUCTURAL CONSIDERATIONS At the end of 2019 KCA's debt comprises of $193 million drawn under a senior secured revolving credit facility, senior secured notes of $375 million due in 2021, senior secured notes of $535 million due 2022, an outstanding senior secured term loan B of $410 million due in 2023 and senior secured notes of $400 million due in 2023. The company's Oman entity Oman KCA Deutag Drilling Company LLC has an additional $16 million of funding as of year-end 2019, which is not rated and amortises on a straight-line basis to 2020. All the senior secured notes issued by KCA Deutag UK Finance plc and secured revolving and term facilities borrowed by KCA Deutag Alpha Ltd rank pari passu and benefit from similar security and guarantee packages from material subsidiaries. In addition, guarantors have provided first-ranking security over certain of their respective assets in support of such guarantees, including a first-ranking security interest in the shares of KCA. Using Moody's Loss Given Default (LGD) methodology, the probability of default rating (PDR) is in line with the CFR based on a 50% recovery rate, as is typical for transactions with senior secured notes and first-lien senior secured bank debt with any financial maintenance covenants. All the rated debt instruments are rated Caa2, at the same level as the CFR. RATIONALE FOR NEGATIVE OUTLOOK The negative outlook on the ratings reflects KCA's uncertain operating and financial prospects in light of its likely debt default, and the uncertainties surrounding the final recoveries for bondholders in the event of default, owing to the asset price declines caused by the unprecedented economic conditions. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's would consider assigning an "/LD" to the PDR if KCA does not pay the bond coupon at the end of the 30-day grace period, on May 1, 2020. Moody's would consider a downgrade of the current ratings if recoveries are lower than those assumed in the Caa2 CFR and bond ratings. In view of its action and the negative rating outlook, Moody's does not currently anticipate upward rating pressure in the near term. However, positive pressure could develop if the company successfully addressed its liquidity pressures and moved towards a more sustainable capital structure. The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. Headquartered in the UK, KCA is a provider of onshore and offshore drilling services as well as engineering services to both International Oil Companies (IOCs) and National Oil Companies (NOCs) in international markets. Its two largest shareholders are Pamplona Capital Management with 33% of shares and former Dalma shareholders (Al-Qahtani Group, Al Nasser Holdings and Gulfcap Energy LLC) with 22%. In 2019, KCA reported revenues of $1.4 billion and EBITDA of $299 million. NMC HEALTH: Fights Lender's Administration Bid ---------------------------------------------- Nicolas Parasie, Archana Narayanan and Filipe Pacheco at Bloomberg News report that the crisis surrounding NMC Health Plc widened, as the struggling hospital operator rejected a call to be put into administration and United Arab Emirates' banks disclosed more than US$2 billion of exposure. Shares in Dubai Islamic Bank PJSC extended declines after the lender revealed its US$541 million of exposure to NMC, risking almost half of its annual profit, Bloomberg relates. Abu Dhabi Islamic Bank PJSC also tumbled after revealing it extended US$291.4 million to NMC, the U.A.E.'s largest private health-care provider, Bloomberg notes. Abu Dhabi Commercial Bank PJSC slumped after it asked a court to put NMC into administration, Bloomberg relays. According to Bloomberg, NMC said on April 6 the company aims to fight any such move. The collateral damage from the implosion of NMC and its sister companies is piling up, dragging in the U.A.E.'s top lenders, central bank and health-care system, Bloomberg states. The fallout comes as banks battle to contain the impact of low oil prices and the coronavirus pandemic, Bloomberg notes. London-listed NMC, founded by Indian entrepreneur Bavaguthu Raghuram Shetty, had seen its stock plunge before it was suspended from trading amid allegations of fraud, Bloomberg recounts. With a market value of US$2.4 billion and total debt of US$6.6 billion, NMC now faces an investigation by the U.K.'s Financial Conduct Authority, Bloomberg discloses. Abu Dhabi Commercial Bank on April 4 said it applied to the U.K.'s High Court for administrators to take control of the company, prompting NMC's new chairman to counter that such an action would endanger lives as the coronavirus spreads across the U.A.E., Bloomberg relates. The lender, which hired investment bank Lazard Ltd. to manage the situation, said its combined exposure to NMC and Finablr Plc totaled US$1.16 billion, according to Bloomberg. STAVELEY HEAD: One Sure Buys Business Out of Administration ----------------------------------------------------------- Business Sale reports that Flintshire-based insurance broker Staveley Head has been acquired as a going concern in a deal secured by administrators Duff & Phelps. Staveley Head appointed Steven Muncaster -- steven.muncaster@duffandphelps.com -- and Sarah Bell -- sarah.bell@duffandphelps.com -- of Duff & Phelps as joint administrators in February 2020, after losing a contract with its main insurer, Business Sale relates. Since then, the administrators have continued trading the company on a reduced basis while exploring a sale of the business, Business Sale notes. They have now been successful, selling the business and certain of its assets as a going concern to One Sure Insurance Ltd., Business Sale discloses. According to Business Sale, the deal secures the jobs of the company's 22 remaining employees and has enabled over 12,000 policies to continue to be administered. The company encountered controversy after entering administration, with the news that it had paid a GBP2 million dividend to holding company Gelert Group shortly beforehand and had reportedly paid GBP600,000 to its directors, Business Sale recounts. In its last set of accounts, to the year ending Marh 31 2019, Staveley Head had fixed assets of GBP161,320, current assets of GBP4.9 million and net assets of close to GBP2.5 million, Business Sale states. TORO PRIVATE II: Moody's Cuts CFR to Caa1, Outlook Negative ----------------------------------------------------------- Moody's Investors Service has downgraded Toro Private Holdings II, Limited's corporate family rating to Caa1 from B3 and its probability of default rating to Caa1-PD from B3 PD. Concurrently, Moody's has downgraded Travelport Finance (Luxembourg) S.a.r.l. first lien senior secured bank facilities to B3 from B2 and second lien senior secured bank facilities to Caa3 from Caa2. The outlook on all ratings is negative. "The decision to downgrade Travelport's ratings reflects the expected deterioration in the operating performance and cash flow generation of the company as a consequence of the coronavirus outbreak. Uncertainty around the depth and duration of the disruption across the travel sector and the GDS market raises concerns around the recovery path of the business" says Luigi Bucci, Moody's lead analyst for Travelport. "As a result, Moody's expects free cash flow (FCF) to remain negative over the next 12/18 months and Moody's-adjusted leverage to be well above levels commensurate for a B3 rating. The sale of eNett may support liquidity in the short term but will not have a material impact on Travelport's credit metrics" adds Mr. Bucci. 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 travel and passenger airlines sectors have been two of the most significantly affected by the shock given their sensitivity to consumer and business demand and sentiment. More specifically, the weaknesses in Travelport's credit profile, including its high leverage and weak interest cover, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Travelport remains vulnerable to an extended outbreak. 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 Travelport from the breadth and severity of the shock and the broad deterioration in credit quality it has triggered. In light of ongoing global travel restrictions and flight cancellations on the back of the coronavirus outbreak Travelport will report materially negative operating performance until the first half of 2020, at best. Recovery in the second part of the year will be contingent on the depth and duration of the current disruption to the travel industry worldwide, that is at present uncertain. Moody's base case assumes there will be a gradual recovery in passenger volumes and global travel 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 are highly uncertain. Moody's analysis assumes a ~70% reduction in Travelport's revenue in the second quarter and an approximate decline of 30%-40% for the full year, whilst also modelling significantly deeper downside cases including continued stress in operating performance through Q3 and Q4. Moody's notes that recovery in 2021 will be also subject to: (1) a rebound in corporate travel after a period in which companies have invested heavily in remote working solutions; and, (2) ongoing disintermediation risk for the GDS market deriving from travel providers and/or travel aggregator and meta search sites. The competitive landscape in the GDS market may also be affected by the coronavirus outbreak as competitors, namely Amadeus IT Group S.A. (Baa2 negative) and Sabre Holdings Corporation (Ba3 negative), with a stronger financial profile will likely put pressure on Travelport's market shares and customer base. In the short term, Moody's anticipates Travelport to address revenue pressures through a reduction in its cost and capex base. A large portion of Travelport's cost base is variable including employee compensation and booking fees paid for reservations. Additional cost cutting will come on top of the already announced synergies of up to $100 million as planned in the take-private transaction of Travelport. In terms of capex, company may also reduce or delay investments in its travel commerce platform (2019: 85% of total capex) or IT spending (2019: 15%). Travelport countermeasures will not, however, be sufficient to contain the negative effect on its credit metrics which will remain outside of the B3 thresholds for the next two years, at best. The rating agency expects under its base case Moody's-adjusted leverage to be at around 8x-11x over the next 12-18 months with Moody's-adjusted EBITA/Interest of below 1x over the same time-frame. This compares with an already high leverage (Pro Forma 2018: 7.6x) at the close of Travelport's public-to-private transaction last year. ENVORONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Moody's perceives the coronavirus outbreak as a social risk given the substantial implications for public health and safety. In terms of governance, after the take private transaction in May 2019, Siris Capital Group, LLC and Evergreen Coast Capital Corp. are the main shareholders in the company. Post completion of the deal, financial sponsors have actively attempted to create value through cost efficiencies or the sale of assets (ie. eNett). These actions are subject to a high degree of execution risk given the challenges the GDS market is facing and the critical importance to maintain the stability and effectiveness of the GDS platform. Moody's also notes a number of key management changes after closing. LIQUIDITY Moody's views Travelport's liquidity as weak, based on the company's expected negative FCF generation over the next 12/18 months, available cash resources and drawn revolving credit facility (RCF) of $171mn ($85 million unrestricted) and $150 million, respectively, as of December 2019. The RCF, due May 2024, is subject to a springing net leverage covenant when more than 35% of the facility is drawn. Moody's anticipates Travelport to draw on its RCF to support liquidity with covenants likely to come under pressure when tested. Moody's expects Travelport to take further actions to strengthen its liquidity, particularly as an extended period of disruption into Q3 would pressure the company's current resources. Liquidity headroom could be helped by the successful completion of the sale of its majority owned subsidiary eNett. Cash proceeds from the sale will be subject to a mandatory debt prepayment clause under current credit agreement. Moody's notes that depending on the timing of the closing the company will either use for debt repayment 75% or 100% of those proceeds. However, Moody's current base case indicates that transaction will be finalized by mid-2020 with part of the proceeds used to support the regular course of business and weather short term liquidity pressures. STRUCTURAL CONSIDERATIONS The senior secured first lien term loan and RCF are rated B3, one notch above the CFR, reflecting their contractual seniority ahead of the senior secured second lien term loan, which is rated Caa3. RATIONALE FOR NEGATIVE OUTLOOK The negative outlook is driven by the uncertain time and trajectory of recovery and the impact of the outbreak on Travelport's credit metrics and liquidity. Significant uncertainty remains regarding the depth and duration of the current decline in global consumer and business demand for travel related services. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: A rating upgrade would depend on evidence of successful recovery of the company's performance post coronavirus outbreak. Positive pressure on Travelport's ratings would arise if: (1) Moody's-adjusted leverage were to move towards 7.5x; and, (2) Moody's-adjusted FCF/Debt were to turn positive. Moody's could downgrade Travelport's ratings if pressures on the travel market were to extend through Q3-Q4 leading to an additional deterioration in the company's credit metrics and liquidity. Over the longer-term negative rating pressure would arise from any operational difficulties that would result in declining company's EBITDA and sustainably negative free cash flow generation or weakening liquidity. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. LIST OF AFFECTED RATINGS Downgrades: Issuer: Toro Private Holdings II, Limited LT Corporate Family Rating, Downgraded to Caa1 from B3 Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Issuer: Travelport Finance (Luxembourg) S.a.r.l. Backed Senior Secured 1st Lien Bank Credit Facilities, Downgraded to B3 from B2 Backed Senior Secured Bank 2nd Lien Credit Facility, Downgraded to Caa3 from Caa2 Outlook Actions: Issuer: Toro Private Holdings II, Limited Outlook, Changed To Negative From Stable Issuer: Travelport Finance (Luxembourg) S.a.r.l. Outlook, Changed To Negative From No Outlook COMPANY PROFILE Headquartered in Langley, United Kingdom, Travelport is a leading travel commerce platform providing distribution, technology, payment and other solutions for the global travel and tourism industry. In January 2020, Travelport entered into a definitive agreement to dispose its majority owned travel payments subsidiary to WEX Inc. (Ba2 stable). The transaction is subject to regulatory approval and is expected to be completed by mid-year 2020. In 2019, the group reported revenue and company adjusted EBITDA of $2,495 million and $568 million, respectively. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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