/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200416.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 16, 2020, Vol. 21, No. 77 Headlines F I N L A N D FINNAIR OYJ : Egan-Jones Lowers Senior Unsecured Debt Ratings to B F R A N C E ACCOR SA: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ CARREFOUR S.A.: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ CASINO GUICHARD: Egan-Jones Cuts Sr. Unsec. Debt Ratings to B- IM GROUP: Moody's Cuts CFR to B3 & Alters Outlook to Negative REMY COINTREAU: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ RENAULT SA: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ TAURUS 2019-1: DBRS Confirms BB Rating on Class E Notes G E R M A N Y CONDOR: Lot Pulls Out of Takeover Deal, Future Uncertain G R E E C E GLOBUS MARITIME: Ernst & Young (Hellas) Raises Going Concern Doubt I R E L A N D APTIV PLC: Egan-Jones Lowers LC Senior Unsec. Debt Ratings to B N O R W A Y NORWEGIAN AIR: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CC P O R T U G A L NOVO BANCO: DBRS Confirms B (high) Long Term Issuer Rating S P A I N SANTANDER CONSUMO 3: DBRS Finalizes BB(high) Rating on E Notes SANTANDER HIPOTECARIO 7: DBRS Confirms C Rating on 3 Series C Notes S W E D E N INTERSPORT AB: Main Franchisee Files Court-Led Restructuring T U R K E Y TURK HAVA: Moody's Cuts CFR to B2 & Reviews Ratings for Downgrade U K R A I N E DTEK: Ready to Submit Debt Restructuring Proposals to Creditors U N I T E D K I N G D O M GOODYEAR EUROPE: Fitch Lowers Issuer Rating to BB- LIBERTY GLOBAL: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CCC MARKS & SPENCER: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B NEXT PLC: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ NOBLE CORPORATION: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CC PB TRANSPORT: Brexit, Coronavirus Prompt Liquidation SMALL BUSINESS 2018-1: DBRS Confirms BB (high) Rating on D Notes [*] UK: Big Firms Urged to Help Businesses on Verge of Collapse - - - - - ============= F I N L A N D ============= FINNAIR OYJ : Egan-Jones Lowers Senior Unsecured Debt Ratings to B ------------------------------------------------------------------ Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Finnair Oyj to B from BB-. EJR also downgraded the rating on commercial paper issued by the Company to B from A3. Finnair is the flag carrier and largest airline of Finland, with its headquarters in Vantaa on the grounds of Helsinki Airport, its hub. Finnair and its subsidiaries dominate both domestic and international air travel in Finland. Its major shareholder is the government of Finland, which owns 55.8% of the shares. =========== F R A N C E =========== ACCOR SA: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ ---------------------------------------------------------------- Egan-Jones Ratings Company, on March 31, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Accor SA to BB+ from BBB-. Accor S.A. is a French multinational hospitality company that owns, manages and franchises hotels, resorts, and vacation properties. It is the single largest hospitality company in Europe and the sixth-largest worldwide. CARREFOUR S.A.: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ ------------------------------------------------------------------- Egan-Jones Ratings Company, on March 30, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Carrefour S.A. to BB+ from BBB-. Carrefour S.A. is a French multinational corporation specialized in retail. CASINO GUICHARD: Egan-Jones Cuts Sr. Unsec. Debt Ratings to B- -------------------------------------------------------------- Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Casino Guichard Perrachon SA to B- from BB. EJR also downgraded the rating on commercial paper issued by the Company to B from A2. Casino Group or Casino Guichard-Perrachon is a French mass-market retail Group. It was founded on 2 August 1898 by Geoffroy Guichard under the corporate name Guichard-Perrachon & Co. IM GROUP: Moody's Cuts CFR to B3 & Alters Outlook to Negative ------------------------------------------------------------- Moody's Investors Service has downgraded the corporate family rating of IM Group SAS, a holding company owner of French luxury apparel company Isabel Marant, to B3 from B2. Concurrently, Moody's has downgraded the company's probability of default rating to B2-PD from B1-PD. At the same time, Moody's has downgraded IMG's guaranteed senior secured notes due 2025 to B3 from B2. The outlook has been changed to negative from stable. "Its downgrade reflects its expectations that the spread of the coronavirus and store closures will negatively impact Isabel Marant's results and key credit metrics in 2020, and that the company is likely to have weaker credit metrics and liquidity post the crisis", said Guillaume Leglise, Assistant Vice President and Moody's lead analyst on Isabel Marant. 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, IMG's exposure to discretionary spending, has 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 IMG of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Its rating action reflects Moody's expectation that the nationwide lockdown and store closures imposed in many countries where IMG is present will materially and negatively affect revenues with a consequent impact on EBITDA and cash flow generation in 2020. Moody's believes that IMG is vulnerable considering its store base exposure thought own stores and wholesale customers, which respectively represent 32 stores and 849 point of sales as at end-September 2019, although relative to peers, the company does have a stronger online presence. Depending on customers' willingness to spend on luxury non-discretionary products during a time of lockdown, this online presence could limit losses incurred by the company. Most governments in Europe, including in France, 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 IMG could emerge with weaker credit metrics and liquidity post the crisis. Moody's recognizes the company's solid profitability, relative to peers and especially in 2019, including its asset-light business model with low inventory risk and limited fixed costs. 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 luxury 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 IMG remains vulnerable to a potential prolonged period of lockdown, unfavorable discretionary consumer spending and the uncertainty regarding the pace at which consumer spending will recover once stores reopen. LIQUIDITY IMG currently has an adequate liquidity, with a pro forma cash balance of at least EUR42.5 million following its bond issuance completed in early February 2020. While the company has no revolving credit facility in place, Moody's believes its internal liquidity sources should be sufficient to withstand a couple of months of store closures. IMG usually benefits from low working capital requirements during the year. The company has low inventory levels, because of the magnitude of its wholesale activities. Also, IMG can count on its factoring facility (up to EUR18 million), which enables the company to reduce its wholesale trade receivables. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS 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 IMG's products. Overtime, upward rating pressure could emerge if IMG shows that its new collections are resonating with core customers while establishing a longer track record of profitable growth. An upgrade would also require IMG to deliver positive free cash flow, display adjusted debt/EBITDA (as adjusted by Moody's) sustainably below 5.5x and adjusted EBITA/interest expense above 1.5x. Conversely, negative pressure could arise on the rating if there is evidence of pressure on IMG's sales and earnings or a decline in operating margins. Quantitatively, an adjusted debt/EBITDA ratio rising towards 6.5x could trigger a downgrade. Also, a deterioration in liquidity owing to negative free cash flow could put pressure on the rating. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Apparel Methodology published in October 2019. COMPANY PROFILE Headquartered in Paris, France, IM Group SAS is a holding company, owner of Isabel Marant, a French luxury apparel company, designing and distributing women ready-to-wear products (dress, T-shirts, bags, shoes) and accessories (belts, jewelry). Founded by Ms Isabelle Marant in 1994, the company products are offered through two main lines, Isabel Marant (60% of revenues) and "Isabel Marant Etoile" (40% of revenues). IMG is part of the Federation Française de la Mode and takes part of shows during the Paris Fashion Week since 1994. The company reported EUR178 million of revenue and EUR54.5 million of EBITDA in the last twelve months ended September 30, 2019. REMY COINTREAU: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ ------------------------------------------------------------------- Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Remy Cointreau SA to BB+ from BBB. Remy Cointreau is a French, family-owned business group whose origins date back to 1724. RENAULT SA: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ --------------------------------------------------------------- Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Renault SA to BB+ from BBB. France-based Renault designs, manufactures, markets, and repairs passenger cars and light commercial vehicles. The Company provides financing and service solutions including credit for new and used vehicles. TAURUS 2019-1: DBRS Confirms BB Rating on Class E Notes ------------------------------------------------------- DBRS Ratings GmbH changed the trend on Class E to Positive from Stable and confirmed its ratings on all classes of the Commercial Mortgage-Backed Floating-Rate Notes issued by Taurus 2019-1 FR DAC (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AA (low) (sf) -- Class C at A (low) (sf) -- Class D at BBB (low) (sf) -- Class E at BB (sf) The trends on Classes A through D remain Stable. The rating confirmations are based on the stable performance of the transaction metrics since issuance. The fast deleveraging of the portfolio following the disposal of 20 assets also further improves the credit quality of the notes, especially for the most junior Class E, hence the trend change. The Issuer is the securitization of 95% interest of a EUR 249.6 million, 65% loan-to-value (LTV) five-year senior commercial real estate acquisition facility advanced by Bank of America Merrill Lynch International DAC (BofAML or the Loan Seller) to Colony Capital (Colony or the sponsor) in the context of a sale-and-lease-back operation between Colony and Electricite de France (EDF). The senior loan was advanced to three French borrowers, and BofAML also provided a co-terminus mezzanine term loan. At inception, there were 206 assets in the portfolio but as of the Q4 2019 interest payment date (IPD), only 186 assets remained. Two of the 20 disposed assets are the Lyon - Thiers and Nice - Diables Bleus assets, which were the largest and third-largest asset ranked by market value (MV) at issuance, representing 11.2% and 2.8% portfolio MV at issuance, respectively. The remaining disposed properties were of smaller size and weaker asset quality, including 11 of the 16 vacant properties at issuance. The total disposed MV amounts to EUR 75.2 million, which resulted in a loan amount reduction of EUR 62.7 million and deleveraged the senior loan's LTV to 63.7% from 65%. In addition, the current outstanding loan amount already meets the lowest target loan amount test set in the facility agreement. As per the Q4 2019 investor report, the largest tenants remained unchanged. However, ENEDIS has vacated eight assets where the tenant's lease has expired. The sponsor is working to lease or sell these recently vacated properties. The projected net operating income has decreased to EUR 25 million as of February 2020 from EUR 29.8 million at inception. The debt yield, however, has slightly increased to 12.8% from 12.6% at issuance, largely because of the paydowns. DBRS Morningstar does not expect ENEDIS, which accounts for 77.3% of the total rental income and whose business is to maintain the electricity network in France, to be significantly impacted by the outbreak of Coronavirus Disease (COVID-19). Nevertheless, if the economic disruptions triggered by the pandemic should develop into a prolonged recession, this would likely reduce the liquidity in the commercial real estate market and increase the refinancing risk of the loan at maturity. The rating currently assigned to the Class E notes is lower than the rating stress the class can withstand as per the output of DBRS Morningstar's direct sizing hurdles. In this transaction, the assigned rating reflects the external uncertainties caused by the coronavirus pandemic. Notes: All figures are in Euros unless otherwise noted. ============= G E R M A N Y ============= CONDOR: Lot Pulls Out of Takeover Deal, Future Uncertain -------------------------------------------------------- James Shotter and Guy Chazan at The Financial Times report that the owner of Poland's state-controlled airline Lot has pulled out of a deal to buy German rival Condor, casting the future of the charter airline into doubt again. Condor has been struggling since its former parent, UK travel group Thomas Cook, went into administration last year but was given a lifeline in January when PGL, Lot's parent group, offered to buy it, the FT discloses. Terms of the deal were not disclosed but as part of the takeover PGL had promised to repay a EUR380 million bridging loan granted by German authorities last September to give Condor a chance to find a buyer, the FT notes. According to the FT, PGL said it had informed Condor on April 13 that it was abandoning the takeover -- which would have created an airline with about 20m customers and 140 aircraft -- but declined to give further details. The collapse of the deal renews questions about Condor's future, the FT states. German media has previously speculated the government could be forced to nationalize the airline, which has almost 5,000 staff, if the deal with Lot collapsed, the FT relays. The EUR380 million loan is due to be repaid on April 17, according to the FT. Condor, as cited by the FT, said the group was in talks with PGL over the terms of its exit, and was also examining how to enforce its rights from the sale contract. The group also said it intended "soon" to exit a German protection scheme it entered after the collapse of Thomas Cook and was also in talks over receiving state aid to help mitigate the impact of the coronavirus pandemic, the FT notes. =========== G R E E C E =========== GLOBUS MARITIME: Ernst & Young (Hellas) Raises Going Concern Doubt ------------------------------------------------------------------ Globus Maritime Limited filed with the U.S. Securities and Exchange Commission its annual report on Form 20-F, disclosing a total comprehensive loss of $36,351,000 on $15,623,000 of total revenues for the year ended Dec. 31, 2019, compared to a total comprehensive loss of $3,568,000 on $17,354,000 of total revenues for the year ended in 2018. The audit report of Ernst & Young (Hellas) states that as at December 31, 2019 and for the year then ended, the Company has incurred a net loss from operations, has a working capital deficiency and has stated that substantial doubt exists about the Company's ability to continue as a going concern. In addition, based on its projections, the Company (i) may not be able to comply with certain covenants of loan agreements at measurement dates falling within the 12 months following the issuance of these financial statement without obtaining waivers and, (ii) cover its working capital needs as they become due in the twelve-month period ending following the issuance of the consolidated financial statements. The Company's balance sheet at Dec. 31, 2019, showed total assets of $55,656,000, total liabilities of $45,777,000, and $9,879,000 in total equity. A copy of the Form 20-F is available at: https://is.gd/sxzCMR Globus Maritime Limited, an integrated dry bulk shipping company, provides marine transportation services worldwide. The company owns, operates, and manages a fleet of dry bulk vessels that transport iron ore, coal, grain, steel products, cement, alumina, and other dry bulk cargoes. As of December 31, 2017, it owned and operated five vessels with a total carrying capacity of 300.571 deadweight tonnage. The company was founded in 2006 and is based in Athens, Greece. Globus Maritime Limited is a subsidiary of Firment Trading Limited. ============= I R E L A N D ============= APTIV PLC: Egan-Jones Lowers LC Senior Unsec. Debt Ratings to B --------------------------------------------------------------- Egan-Jones Ratings Company, on March 30, 2020, downgraded the local currency senior unsecured ratings on debt issued by Aptiv PLC to B from BB-. EJR also downgraded the rating on LC commercial paper issued by the Company to B from A3. Aptiv PLC is a Jersey-domiciled auto parts company headquartered in Dublin, Ireland. =========== N O R W A Y =========== NORWEGIAN AIR: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CC -------------------------------------------------------------- Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Norwegian Air Shuttle ASA to CC from CCC. EJR also downgraded the rating on commercial paper issued by the Company to D from C. Norwegian Air Shuttle ASA, trading as Norwegian, is a Norwegian low-cost airline and Norway's largest airline. =============== P O R T U G A L =============== NOVO BANCO: DBRS Confirms B (high) Long Term Issuer Rating ---------------------------------------------------------- DBRS Ratings GmbH confirmed the ratings of Novo Banco, S.A. (NB or the Bank), including the Long-Term Issuer Rating of B (high) and the Short-Term Issuer rating of R-4. The Bank's Deposit ratings were confirmed at BB (low)/R-4, one notch above the IA, reflecting the legal framework in place in Portugal which provides full depositor preference in bank insolvency and resolution proceedings. At the same time, the Trend on the Bank's long-term ratings was revised to Negative from Positive, while the Trend on the Short-Term Issuer and Deposit ratings remained Stable. The BB (high)/R-3 Critical Obligations Ratings were confirmed while the trend was revised to Stable from Positive. The Bank's Intrinsic Assessment (IA) was maintained at B (high) and the Support Assessment remains unchanged at SA3. A full list of rating actions is included at the end of this press release. KEY RATING CONSIDERATIONS The change of the Trend to Negative on NB's long-term ratings reflects our expectation that, although the bank has made considerable progress in reducing its legacy problem assets, the wide and growing scale of economic and market disruption resulting from the coronavirus (COVID-19) pandemic will add new challenges and higher execution risk for the Bank's restructuring plan. In our view, the deteriorating operating environment in Portugal will likely affect the Bank's revenues, cost of risk and balance sheet. While the impact will likely emerge in the coming quarters, the implications for the Bank will depend on the evolution of the outbreak, the length of the economic shutdown in Portugal and in other countries, as well as the strength of any recovery. The confirmation of the ratings reflects the progress made in reducing its Non-Performing Loans (NPLs) and other non-core assets, the support provided by the Contingent Capital Agreement (CCA) from the Portuguese Resolution Fund, and the Bank's stable franchise and stable liquidity position. Nonetheless, the ratings continue to reflect the Bank's still large stock of problem assets and its weak profitability. Albeit improving, NB's gross NPL ratio, which stood at 11.8% at FY19, remains significantly higher than the European average and the large stock of legacy problem assets continues to be a drag on the Bank's results. For FY 2019, NB posted a net loss of EUR 1.1 billion, following a negative result of EUR 1.4 billion in 2018. NB's BB (high) / R-3 Critical Obligations Ratings were confirmed with a Stable Trend. This reflects DBRS' expectation that, in the event of a resolution of the Bank, certain liabilities (such as payment and collection services, obligations under a covered bond program, payment and collection services, etc.) have a greater probability of avoiding being bailed-in and are likely to be included in a going-concern entity. RATING DRIVERS A rating upgrade is unlikely given the Negative Trend. The trend could revert back to Stable if the impact of the coronavirus on NB's earnings and credit quality metrics is manageable. A downgrade could arise from a material deterioration in the Bank's asset quality and capital, potentially as a result of the current coronavirus global pandemic. RATING RATIONALE The Bank is in the midst of its restructuring plan agreed with European Commission following its sale to Lone Star. In 2019, NB continued to reduce its NPLs and real estate assets and, as part of the strategic re-focus on the core business in Iberia, the Bank downsized its international operations and non-core assets. Further progress was made in terms of simplification of the branch network and investments in digitalization, and DBRS Morningstar notes that total customer lending from the recurrent activities increased by roughly 6% YoY on the back of higher volumes in residential mortgages, consumer finance and corporate loans. NB's gross NPL stock decreased by 49% to EUR 3.4 billion at FY 2019, with the gross NPL ratio improving to 11.8%, down from 22.4% at FY18, mainly as a result of write-offs and disposals covered by the CCA. At FY 2019, the CCA compensations totaled EUR 2.98 billion, including EUR 1 billion for 2019. After this payment, the CCA amount still available for NB is approximately EUR 900 million. Despite the reduction in NPLs and non-core assets, the Group's risk profile is still affected by the large stock of impaired assets, especially in the SME and corporate sectors, and its NPL ratios continue to compare unfavorably with domestic and international peers. In addition, we believe that the ongoing economic disruption resulting from the COVID-19 global pandemic could contribute to the formation of new NPLs and risking cost of risk as well as delay the Bank's NPL plan. Several key SME sectors of the Portuguese economy are currently experiencing a significant disruption, in particular tourism & hospitality, automotive, textile and other manufacturers, and this could impact NB given its significant exposure to SMEs and Corporates which accounted for 53% of total customer loans at YE 2019, excluding legacy assets. DBRS Morningstar does note, however, the recent support measures announced by the Portuguese government which may mitigate some of the impact on the Bank. In our view, the ongoing economic slowdown and uncertainty will also weigh on NB's revenues. The hit will likely result from a combination of low rates and weak business volumes although we expect an increase in credit facilities to support the liquidity of companies. Payment fees are also expected to decrease on the back of lower transaction volumes, while the worsening market conditions will likely weigh on capital market revenues and fees from asset management. A negative impact might also be expected on the Bank's capital reserves given the large exposure to securities classified at fair value. At YE 2019, NB reported a fully loaded common equity tier 1 (CET1) ratio of 12.8% and total capital ratio at 14.4%, including the CCA compensation for 2019 which is expected to be paid in the first-half of 2020. In 2019, the Bank maintained a sizable stock of liquid assets and a stable funding profile. Customer deposits, of which a significant portion is composed by corporate clients, are the main sources of funding. Access to the wholesale markets remains generally more difficult compared to domestic peers, although this is likely to be mitigated to a certain degree by the support from the ECB. Notes: All figures are in EUR unless otherwise noted. ========= S P A I N ========= SANTANDER CONSUMO 3: DBRS Finalizes BB(high) Rating on E Notes -------------------------------------------------------------- DBRS Ratings GmbH finalized its provisional ratings on the following classes of notes (collectively, the Rated Notes) issued by Santander Consumo 3, FT (the Issuer): -- Series A Notes at AA (sf) -- Series B Notes at A (sf) -- Series C Notes at A (low) (sf) -- Series D Notes at BBB (sf) -- Series E Notes at BB (high) (sf) DBRS Morningstar does not rate the Series F issued in this transaction. The rating of the Series A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal maturity date in December 2031 The ratings on the Series B Notes, Series C Notes, Series D Notes, and Series E Notes address the ultimate payment of interest and ultimate repayment of principal by the legal maturity date. DBRS Morningstar based its ratings on a review of the following analytical considerations: -- The transaction's capital structure, including form and sufficiency of available credit enhancement. -- Credit enhancement levels are sufficient to support DBRS Morningstar's projected expected net losses under various stress scenarios. -- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the notes. -- The seller's, originator's, and servicer's financial strength and their capabilities with respect to originations, underwriting, and servicing. -- The other parties' financial strength to their respective roles. -- DBRS Morningstar's operational risk review on Banco Santander, which it deemed to be an acceptable servicer. -- The credit quality, diversification of the collateral and historical and projected performance of the seller's portfolio. -- DBRS Morningstar's current sovereign rating of the Kingdom of Spain at "A" with a Positive trend. -- The consistency of the transaction's legal structure with DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology, the presence of legal opinions that address the true sale of the assets to the Issuer. The transaction represents the issuance of Series A Notes, Series B Notes, Series C Notes, Series D Notes, and Series E Notes backed by a portfolio of approximately EUR 2.0 billion fixed-rate and floating-rate receivables related to consumer loans granted by Banco Santander, S.A (the originator) to private individuals residing in Spain. The originator also services the portfolio. Series F Notes were issued to fund the cash reserve. The transaction includes an 11-month revolving period scheduled to end in March 2021. During the revolving period, the originator may offer additional receivables that the Issuer will purchase provided that eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, insolvency of the originator, or replacement of the servicer. The transaction allocates payments on a combined interest and principal priority and benefits from an amortizing EUR 30.0 million cash reserve funded through the subscription proceeds of the Series F Notes. The cash reserve can be used to cover senior costs, interest on Series A Notes, Series B Notes, Series C Notes, Series D Notes, and Series E Notes but cannot be used to offset losses. The repayment of the notes will start after the end of the revolving period on the first principal payment date in June 2021 on a pro rata basis unless certain events such as breach of performance triggers, insolvency of the originator, or the termination of the servicer occur. Under these circumstances, the principal repayment of the notes will become fully sequential, and the switch is not reversible. The Rated Notes pay interest indexed to three-month Euribor whereas most of the portfolio pays a fixed-interest rate. The interest rate risk arising from the mismatch between the Issuer's liabilities the portfolio is hedged through a swap agreement with an eligible counterparty. Banco Santander acts as the account bank for the transaction. Based on the DBRS Morningstar rating of Banco Santander at A (high) (COR at AA (low)), the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to Banco Santander to be consistent with the rating assigned to the Series A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. Banco Santander acts as the swap counterparty for the transaction. DBRS Morningstar's Long-Term Issuer and Long-Term COR ratings of Banco Santander at A (high) and AA (low), respectively, are consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. DBRS Morningstar analyzed the transaction structure in Intex DealMaker, considering the default rates at which the Rated Notes did not return all specified cash flows. Notes: All figures are in Euros unless otherwise noted. SANTANDER HIPOTECARIO 7: DBRS Confirms C Rating on 3 Series C Notes ------------------------------------------------------------------- DBRS Ratings GmbH confirmed its ratings on the following notes (the Rated Notes) issued by three Santander RMBS transactions: FTA, Santander Hipotecario 7 (SH7): -- Series A notes at AAA (sf) -- Series B notes at BB (high) (sf) -- Series C notes at C (sf) FTA, Santander Hipotecario 8 (SH8): -- Series A notes at AAA (sf) -- Series B notes at B (low) (sf) -- Series C notes at C (sf) FTA, Santander Hipotecario 9 (SH9): -- Series A notes at AA (sf) -- Series B notes at BB (low) (sf) -- Series C notes at C (sf) The ratings on the Series A and Series B notes address the timely payment of interest and the ultimate payment of principal on or before their respective legal final maturity dates. The ratings on the Series C Notes address the ultimate payment of interest and principal on or before their respective legal final maturity dates. The confirmations follow an annual review of the transactions and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies and defaults, as of the latest payment date for each transaction; -- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions for the outstanding collateral pools; and -- The current credit enhancement available to the Rated Notes to cover the expected losses for the Series A and Series B notes at their respective rating levels for each transaction. The Series C notes of each transaction were issued to fund the Reserve Fund and are in a first-loss position supported only by available excess spread. Given the characteristics of the Series C notes, as defined in the transaction documents, the default would most likely be recognized at maturity or following an early termination of the transaction. The three Santander RMBS transactions are securitizations of Spanish prime residential mortgage loans originated and serviced by Banco Santander SA (Santander). PORTFOLIO PERFORMANCE The portfolios are performing within DBRS Morningstar's expectations. For SH7, as of the March 2020 payment date, loans in arrears for more than 90 days represented 0.6% of the collateral portfolio, while the current cumulative default ratio stood at 4.1% of the original portfolio balance. For SH8, as of the February 2020 payment date, the 90+ delinquency ratio was at 0.7% of the collateral portfolio, while the current cumulative default ratio stood at 5.4%. For SH9, as of the February 2020 payment date, the 90+ delinquency ratio was at 0.4% of the collateral portfolio, while the current cumulative default ratio stood at 2.6%. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS DBRS Morningstar conducted a loan-by-loan analysis on the remaining collateral pools of receivables and updated its PD and LGD assumptions. For SH7 the base-case PD and LGD are 5.4% and 41.3%, respectively. For SH8, the base-case PD and LGD are 5.5% and 42.3%, respectively, while for SH9, they are 6.7% and 40.8%, respectively. CREDIT ENHANCEMENT The credit enhancements available to all the rated notes have continued to increase as the transactions continue to deleverage. The Series A notes in all three transactions are supported by the subordination of the Series B notes and the Reserve Fund, which is available to cover senior fees, interest, and principal of the Series A and Series B notes. The Series B notes are solely supported by the reserve fund. For SH7, as of March 2020, the credit enhancement to the Series A notes and Series B notes was 46.3% and 6.9%, respectively, increasing from 42.3% and 5.9%, as of March 2019. For SH8, as of February 2020, the credit enhancement to the Series A notes and Series B notes was 42.8% and 2.7%, respectively, increasing from 39.3% and 2.3% as at February 2019. For SH9, as of February 2020, the credit enhancement to the Series A notes and Series B notes was 50.1% and 6.9%, respectively, increasing from 46.6% and 6.4% as at February 2019. The Series C notes will be repaid according to the Reserve Fund amortization. The Reserve Funds in all three transactions are able to amortize once they have reached 10% of the Outstanding Balance of the Series A and Series B notes, maintaining such percentage until the Reserve Fund reaches the floor of 1.8% of the initial amount of the Series A and Series B notes for SH7 and SH8, and the floor of 2.2% for SH9. The Reserve Funds are currently at EUR 63.6 million, EUR 10.8 million, and EUR 28.6 million, which is at the targets for SH7 and SH9, and below the target of EUR 28.1 million for SH8. Santander acts as the account bank for all three transactions and as the Swap Counterparty for SH7 and SH8. Based on Santander's reference rating of A (high), being one notch below its DBRS Morningstar Long-Term Critical Obligations Rating (COR) of AA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the most senior notes in each transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology; Santander's COR is also consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. The ratings on the Series B notes for SH7 and SH8 transactions materially deviates from the higher ratings implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating difference of three or more notches between the assigned rating and the rating implied by a quantitative model that is a substantial component of a rating methodology; in this case, the current performance trend might not be sustainable amid the potential additional stresses arisen in the current Coronavirus Disease (COVID-19) pandemic. Notes: All figures are in Euros unless otherwise noted. =========== S W E D E N =========== INTERSPORT AB: Main Franchisee Files Court-Led Restructuring ------------------------------------------------------------ Colm Fulton at Reuters reports that Swiss-based sporting goods group Intersport AB's main franchisee in Sweden has filed for a court-led restructuring as it seeks to avert bankruptcy in the face of falling sales because of the COVID-19 pandemic. Intersport, which employs about 2,000 people, said in a statement on April 14 that it needs temporary relief from creditors to weather the downturn after a sharp decline in sales left it without adequate cash to pay all of its bills, Reuters relates. "This is an extraordinary measure . . . but we are doing this to save jobs and to ensure that the business will survive in the long term," Reuters quotes the Swedish retailer's CEO, Marcus Wibergh, as saying. Mr. Wibergh, as cited by Reuters, said he expects the court in Gothenburg to grant the request allowing Intersport, which is majority-owned by private equity firm Adelis, to begin negotiations with its creditors. He declined to say how much debt was up for restructuring during the relief period, Reuters notes. =========== 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 K R A I N E ============= DTEK: Ready to Submit Debt Restructuring Proposals to Creditors --------------------------------------------------------------- Natalia Zinet at Reuters reports that Ukraine's largest private power producer, DTEK, which recently suspended its debt payments, is ready to submit proposals on debt restructuring to creditors, the company's CEO said on April 14. DTEK, owned by the country's richest man, Rinat Akhmetov, missed payments of coupons on Eurobonds and interest on bank debt as it struggled to minimize effects of the economic crisis, Reuters relates. "A committee of creditors has been established; we have prepared proposals for restructuring and they will be sent to the committee of creditors in the near future," Reuters quotes DTEK's chief executive, Maxim Timchenko, as saying in an online briefing. He declined to disclose how much debt the company wants to restructure or for how long, Reuters notes. "We need to ask our investors to restructure our loan portfolio," Mr. Timchenko, as cited by Reuters, said. "Since April, the company has not been able to continue payments on the loan portfolio according to the schedule being agreed with investors." He said due to financial problems in the energy sector, DTEK has not received full payments for its production and had to temporarily suspend from April 1 operations of some coal units, where about 8,000 employees work, Reuters relays. =========================== U N I T E D K I N G D O M =========================== GOODYEAR EUROPE: Fitch Lowers Issuer Rating to BB- -------------------------------------------------- Fitch Ratings has downgraded the ratings of The Goodyear Tire & Rubber Company and its Goodyear Europe B.V. subsidiary to 'BB-' from 'BB'. Fitch has also downgraded GT's senior unsecured notes rating to 'BB-'/'RR4' from 'BB'/'RR4'. Fitch has affirmed the ratings on GT's first-lien revolving credit facility, second-lien term loan and GEBV's revolving credit facility at 'BB+'/'RR1' and the rating on GEBV's senior unsecured notes at 'BB'/'RR2'. The Rating Outlook is Negative. For GT, Fitch's ratings apply to a $2.0 billion first-lien secured revolver, a $400 million second-lien term loan and $3.0 billion in senior unsecured notes. For GEBV, Fitch's ratings apply to an EUR800 million secured revolver and EUR250 million in senior unsecured notes. KEY RATING DRIVERS Ratings Overview: The downgrade of GT's LT IDR to 'BB-' from 'BB' reflects Fitch's concerns that tire shipments in 2020 will be significantly lower than previous expectations due to the global coronavirus crisis and that a recovery of volumes to pre-crisis levels may not occur until at least 2022 as the global economic recovery is likely to be relatively weak. GT's credit metrics had previously weakened as a result of elevated raw material costs, heavy global tire industry competition, challenges related to manufacturing and distribution changes, and unexpectedly weak auto production in China. Fitch had previously anticipated that metrics would improve over the intermediate term on positive developments in each of the aforementioned factors. However, the coronavirus crisis and the resulting decline in current and expected economic activity over the next couple of years are likely to result in GT's metrics remaining weak relative to Fitch's prior negative sensitivities for a sustained period. The Negative Outlook reflects the high level of uncertainty with respect to the duration and depth of the current global economic downturn, which heightens the risk that GT's metrics could weaken further for a longer period. That said, a combination of lower commodity costs, particularly for petroleum-based products, new original equipment fitments for a number of upcoming global vehicle launches and various cost control initiatives could help to stabilize GT's metrics. Under such a scenario, Fitch could revise the rating outlook back to Stable. Weaker Market Conditions Expected: The global coronavirus outbreak is likely to result in a steep decline in GT's global tire volumes in 2020. Fitch expects global new vehicle sales to decline about 15% in 2020 and to rise by only about 8% in 2021. Within these figures, Fitch expects new vehicle sales in the U.S. and Western Europe, two of GT's most important markets, to decline by about 20% in 2020. Although sales to vehicle manufacturers only comprise about a quarter of GT's typical sales volume, and those sales typically carry lower margins than replacement tire sales, the expected decline in global vehicle production will nonetheless have a meaningful impact on GT's near-term sales volume and profitability. Fitch expects replacement tire volumes, which make up about three-quarters of GT's tire volumes, to hold up better in the near term than sales to vehicle manufacturers. However, Fitch's expectation of continued weak economic conditions following the end of the coronavirus crisis is likely to dampen replacement sales over the near term. In addition, the extended "shelter-in-place" directives that have been in place for multiple weeks in many global jurisdictions are likely to have significantly reduced total vehicle miles traveled which will further reduce near-term replacement demand. It is notable that GT has suspended production in the Americas and in Europe, while many of its retail locations remain open, suggesting the company anticipates a steep decline in near-term demand. Fitch expects lower production and demand to result in about a 12% decline in revenue in 2020. Improving conditions in 2021 are expected to drive higher revenue for the year, but Fitch expects ongoing macro weakness through next year to result in revenue remaining about 3% below the actual 2019 level, which was already relatively depressed by weakening tire market conditions in several global markets, notably China and Europe. Long-Term Tire Demand Fundamentals Intact: Over the long term, Fitch continues to expect global replacement tire volumes to grow along with the global vehicle population. In addition, the industry's shift toward larger diameter, higher technology premium tires, especially in developing markets, will benefit those tire manufacturers like GT that have shifted their focus toward these higher margin products over the past decade. This shift will accelerate as the global population of electric vehicles grows, given the higher tire technology requirements for the premium EVs that many manufacturers will be introducing over the intermediate term. GT has recently won a number of original equipment fitments for EVs that will be introduced over the next several years. FCF Pressure: Fitch currently expects GT's post-dividend FCF to be slightly negative in 2020 as working capital benefits from lower sales volumes offset an expected steep decline in FFO resulting from lower business levels. Fitch assumes some level of near-term capex adjustment, given the expectation for weaker tire demand levels. Fitch expects FCF to remain under pressure in 2021 as the company could see a use of working capital as production volumes grow and capex could increase to support stronger business conditions. Actual post-dividend FCF in 2019, according to Fitch's methodology, was $272 million, equivalent to a 1.8% FCF margin. Fitch's FCF calculations are adjusted for changes in off-balance sheet factoring, which Fitch treats as changes in financing cash flows. Increased Leverage: Fitch expects leverage to rise in 2020 as a result of lower EBITDA and FFO in the face of weak market conditions. Fitch expects EBITDA leverage (debt, including off-balance sheet factoring/Fitch-calculated EBITDA) to rise to the mid-4x range in 2020 before falling back toward the low-3x range by YE 2021. Likewise, Fitch expects FFO leverage to rise toward the upper-6x range in 2020 before falling back toward the mid-4x range in 2021. Fitch expects both leverage metrics to be high relative GT's prior rating category through YE 2021. Debt at YE 2019, including off-balance sheet factoring, was $6.0 billion, down from $6.4 billion at YE 2018. Fitch expects debt to remain roughly close to the YE 2019 level over the next several years, with some occasional fluctuations in borrowing to offset seasonal fluctuations in working capital. GEBV Notes Rating: GEBV's EUR250 million 3.75% senior unsecured notes due 2023 have a Recovery Rating of 'RR2', reflecting their structural seniority to GT's senior unsecured notes, which have a recovery rating of 'RR4'. GEBV's notes are guaranteed on a senior unsecured basis by GT and the subsidiaries that also guarantee GT's secured revolver and second-lien term loan. Although GT's senior unsecured notes are also guaranteed by the same subsidiaries, they are not guaranteed by GEBV. The recovery prospects of GEBV's notes are further strengthened relative to those at GT by the lower level of secured debt at GEBV. GEBV's credit facility and its senior unsecured notes are subject to cross-default provisions relating to GT's material indebtedness. DERIVATION SUMMARY GT has a relatively strong competitive position as the third-largest global tire manufacturer, with a highly recognized brand name and a focus on the higher-margin high value-added tire category. However, the shift in focus has led to lower tire unit volumes and revenue, particularly in the mature North American and Western European markets. The company's diversification is increasing as rising incomes in emerging markets lead to higher demand for HVA tires, particularly in the Asia Pacific region. GT's margins are roughly consistent with the other large Fitch-rated rated tire manufacturers, Compagnie Generale des Etablissements Michelin (A-/Stable) and Continental AG (BBB+/Stable), but GT's leverage is considerably higher, as the other two both maintain EBITDA leverage below 1x. GT's leverage is roughly consistent with auto suppliers in the 'BB' category, such as Meritor, Inc. (BB-/Positive), Delphi Technologies PLC (BB/Rating Watch Positive) or Tenneco Inc. (BB-/Stable). GT's margins are relatively strong compared to typical 'BB'-category issuers, but this is tempered somewhat by heavier seasonal working capital swings that lead to more variability in FCF over the course of a year. FCF margins are also sensitive to raw material prices and capex spending. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer -- Global auto production declines by 15% in 2020, including 20% declines in the U.S. and Europe, before rising about 8% in 2021; -- Global replacement tire demand declines in the mid-single digits in 2020 before rising in 2021; -- Beyond 2021, GT's sales grow in the low-single-digits; -- Capex generally runs in the 5% to 5.5% range over the next several years; -- Debt remains roughly flat, near $6 billion, including off- balance sheet factoring, over the next several years; -- Full-year FCF is modestly negative in 2020 and 2021 before rising toward 1.5% in 2022; -- The company maintains a solid liquidity position, including cash and credit facility availability. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Demonstrating continued growth in tire unit volumes, market share and pricing; -- Sustained FCF margins of 1.5%; -- Sustained gross EBITDA leverage below 3.0x; -- Sustained FFO leverage below 3.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A significant step-down in demand for the company's tires without a commensurate decrease in costs; -- An unexpected increase in costs, particularly related to raw materials, that cannot be offset with higher pricing; -- A decline in the company's consolidated cash below $700 million for several quarters; -- Sustained breakeven FCF margin; -- Sustained gross EBITDA leverage above 4.0x; -- Sustained FFO leverage above 4.5x. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate 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 four 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. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Fitch expects GT's liquidity to remain sufficient for the company to withstand the operating pressures of the current coronavirus crisis. The company ended 2019 with $908 million in cash and cash equivalents (excluding Fitch's adjustments for not readily available cash) and $3.6 billion of availability on its various global credit agreements, including $2.6 billion of availability on its primary U.S. and European revolvers. The most significant near-term debt maturity is $282 million in senior unsecured notes that mature in August 2020, and Fitch expects the company will have sufficient liquidity to manage that maturity if it is not refinanced. According to its criteria, Fitch treated $610 million of GT's cash and cash equivalents as not readily available as of Dec. 31, 2019 for purposes of calculating net metrics. Starting in 2020, Fitch has treated $600 million of GT's cash as not readily available, based on Fitch's updated estimate of the amount of cash needed to cover seasonality in the company's business. Debt Structure: GT's consolidated debt structure primarily consists of a mix of secured bank credit facilities and senior unsecured notes. As of Dec. 31, 2019, GT had $400 million in second-lien term loan borrowings and $3.0 billion in senior unsecured notes outstanding. There were no amounts outstanding on GT's first-lien secured revolver. GEBV's debt structure consisted of EUR250 million in senior unsecured notes and $327 million of on-balance sheet account receivable securitization borrowings. There were no amounts outstanding on GEBV's secured revolver. GT also has various borrowings outstanding at certain non-U.S. operations, including credit facilities in Mexico and China. In addition to its on-balance sheet debt, Fitch treated $548 million of off-balance sheet factoring as debt at Dec. 31, 2019. SUMMARY OF FINANCIAL ADJUSTMENTS Per its criteria, Fitch has adjusted GT's debt and FCF calculations for the effect of off-balance sheet factoring. 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). LIBERTY GLOBAL: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CCC ---------------------------------------------------------------- Egan-Jones Ratings Company, on March 30, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Liberty Global PLC to CCC from B. EJR also downgraded the rating on commercial paper issued by the Company to C from B. Liberty Global is a multinational telecommunications company with headquarters in London, Amsterdam and Denver. It was formed in 2005 by the merger of the international arm of Liberty Media and UGC. Liberty Global is the largest broadband internet service provider outside the US. MARKS & SPENCER: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B --------------------------------------------------------------- Egan-Jones Ratings Company, on March 31, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Marks & Spencer Group PLC to B from BB. EJR also downgraded the rating on commercial paper issued by the Company to B from A2. Marks and Spencer Group plc is a major British multinational retailer with headquarters in Westminster, London that specializes in selling clothing, home products, and food products. NEXT PLC: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ ---------------------------------------------------------------- Egan-Jones Ratings Company, on March 30, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Next plc to BB+ from A. Next plc is a British multinational clothing, footwear, and home products retailer headquartered in Enderby, Leicestershire. It has around 700 stores, of which circa 500 are in the United Kingdom, and circa 200 across Europe, Asia, and the Middle East. NOBLE CORPORATION: Egan-Jones Lowers Sr. Unsec. Debt Ratings to CC ------------------------------------------------------------------ Egan-Jones Ratings Company, on April 1, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Noble Corporation plc to CC from B-. EJR also downgraded the rating on commercial paper issued by the Company to C from B. Noble Corporation plc is an offshore drilling contractor organized in London, United Kingdom. Its affiliate, Noble Corporation, is organized in the Cayman Islands. It is the corporate successor of Noble Drilling Corporation. PB TRANSPORT: Brexit, Coronavirus Prompt Liquidation ---------------------------------------------------- Business Sale reports that Bristol-based transport training course provider PB Transport Solutions has gone into liquidation, after succumbing to external factors including Brexit and coronavirus. Accounting and advisory firm Mazars LLP has been appointed to act as liquidator for the company, which supplies transport training courses across the South West, including specialist HGV/LGV driver training, Business Sale relates. Founded in 2011, PB Transport Solutions employed 11 staff and also operated a 35,000 square foot warehousing facility. It had been forecast to reach turnover of GBP1 million in the year to April 2019, before the difficult trading environment caused by Brexit uncertainty lead to a decline in demand for its warehousing facilities, Business Sale notes. The company saw the loss of several key customers and then had to shut down its entire training operation last month, with the onset of the coronavirus lockdown, Business Sale discloses. With no alternative work and significant cash flow difficulties, the directors placed the business into liquidation, with trading ceasing and all employees made redundant, Business Sale relays. Tim Ball -- Tim.Ball@mazars.co.uk -- and Mike Field -- Mike.Field@mazars.co.uk -- of Mazars have been appointed joint liquidators, according to Business Sale. Mr. Ball, as cited by Business Sale, said: "External factors have impacted this business which has, in its most recent year, been profitable. Unfortunately, given a very significant drop off in trade, the company has run out of cash and the directors had to make the difficult decision to enter liquidation to prevent the position for creditors worsening." SMALL BUSINESS 2018-1: DBRS Confirms BB (high) Rating on D Notes ---------------------------------------------------------------- DBRS Ratings Limited confirmed and placed under review with positive implications (UR-Pos.) the following ratings on the bonds issued by Small Business Origination Loan Trust 2018-1 DAC (SBOLT 2018-1): -- Class A Notes at A (high) (sf) -- Class B Notes at A (high) (sf) -- Class C Notes at A (low) (sf) -- Class D Notes at BB (high) (sf) DBRS Morningstar also confirmed and placed under review with developing implications (UR-Dev.) the following ratings on the bonds issued by Small Business Origination Loan Trust 2019-1 DAC (SBOLT 2019-1): -- Class A Notes at A (high) (sf) -- Class B Notes at A (low) (sf) -- Class C Notes at BBB (low) (sf) -- Class D Notes at BB (low) (sf) In both transactions, the rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. In both transactions, the ratings on the Class B Notes, Class C Notes, and Class D Notes address the ultimate payment of interest and principal on or before the legal final maturity date. The documents of both transactions permit the deferral of interest on non-senior bonds and this is not considered an event of default. The legal final maturity date for the Class A, Class B, Class C, and Class D Notes (together, the Rated Notes) falls on the December 2026 and December 2027 payment dates for the SBOLT 2018-1 and SBOLT 2019-1 transactions, respectively. The rating actions follow an annual review of the transactions and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults, and losses. -- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables. -- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels. -- Current economic environment and sustainable performance assessment, as a result of the Coronavirus Disease (COVID-19) outbreak. The transactions are cash flow securitizations collateralized by a portfolio of term loans and originated through the Funding Circle Ltd lending platform (Funding Circle) to small and medium-size enterprises (SMEs) and sole traders based in the United Kingdom. The transactions share the same structural features and similar portfolio composition in terms of geographical, borrower, and industry concentrations. In both portfolios, all the loans are unsecured, fully amortizing, pay on a monthly basis, and bear a fixed interest rate. The notes of the SBOLT 2018-1 transaction entered sequential amortization between the April 2019 and May 2019 payment dates while the notes of the SBOLT 2019-1 transaction are still following a pro rata amortization, which is applicable prior to the occurrence of events triggering a sequential amortization. PORTFOLIO PERFORMANCE Both transactions have seen an increasing trend in delinquencies since closing. In the case of the SBOLT 2018-1 transaction, two- to three-month arrears and 90+ delinquency ratio were 1.7% and 2.6%, respectively, as of the March 2020 payment date, up from 1.2% and 1.8%, respectively, a year ago. In the case of the SBOLT 2019-1 transaction, two- to three-month arrears and 90+ delinquency ratio have increased to 1.7% and 1.2%, respectively, between closing and the March 2020 payment date. As of the March 2020 payment date, the cumulative default ratios were 8.5% and 5.3% for the SBOLT 2018-1 and SBOLT 2019-1 transactions, respectively. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables in both transactions and has decreased its base case PD assumptions to 17.9% from 20.1% a year ago for SBOLT 2018-1 and to 20.3% from 22.0% at closing for SBOLT 2019-1. The decrease reflects the positive effect of the portfolio amortization. DBRS Morningstar maintained its base case LGD assumption at 32.9% for both transactions. The ratings on SBOLT 2018-1 materially deviate from the higher ratings implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by a quantitative model that is a substantial component of a rating methodology; in this case, the deviation reflects the results of DBRS Morningstar stressed analysis corresponding to an adverse economic environment, which assessed the impact of a deterioration in the individual PD assigned to each borrower on the achievable rating levels. Nevertheless, the nonevidence of a performance deterioration of the underlying borrowers to date drives the confirmations of the ratings on both transactions while the difference in the rating impact under an adverse economic scenario drives the placement of ratings under review with positive implications in the case of the SBOLT 2018-1 transaction and with developing implications in the case of the SBOLT 2019-1 transaction. CREDIT ENHANCEMENT As of the March 2020 payment date, the credit enhancement (CE) for the SBOLT 2018-1 transaction substantially increased as follows since a year ago: -- CE to the Class A Notes increased to 71.2%, up from 42.4% -- CE to the Class B Notes increased to 60.6%, up from 36.4% -- CE to the Class C Notes increased to 48.2%, up from 29.4% -- CE to the Class D Notes increased to 35.8%, up from 22.4% As of the March 2020 payment date, the credit enhancement (CE) for the SBOLT 2019-1 transaction increased as follows since the DBRS Morningstar initial rating: -- CE to the Class A Notes increased to 37.2%, up from 35.8% -- CE to the Class B Notes increased to 34.1%, up from 32.8% -- CE to the Class C Notes increased to 27.0%, up from 25.8% -- CE to the Class D Notes increased to 16.3%, up from 15.3% In both transactions, the credit enhancement for the Rated Notes consists of the overcollateralization from the portfolio, subordination of the junior notes, and the Cash Reserve. The Cash Reserve is amortizing, capped at 2.75% of the initial portfolio balance and available to cover senior fees and interest on the Rated Notes and principal losses via the principal deficiency ledgers (PDLs) on each Rated Note, as well as on the Class E and Class Z Notes. As of the March 2020 payment date, the Cash Reserve is at its target amount of GBP 2.8 million and GBP 4.9 million for the SBOLT 2018-1 and SBOLT 2019-1 transactions, respectively. The Class Z PDL stands at GBP 306,877 and at GBP 2.7 million, for the SBOLT 2018-1 and the SBOLT 2019-1 transactions, respectively. All other PDLs are clear for both transactions. A Liquidity Reserve provides additional liquidity support to the transactions to cover senior fees and interest on the most senior of the Rated Notes. As of the March 2020 payment date, the Liquidity Reserve is at its target amount of GBP 516,431 and GBP 450,649 for the SBOLT 2018-1 and SBOLT 2019-1 transactions, respectively. Citibank N.A./London (Citibank London) acts as the account bank for the transaction. Based on the DBRS Morningstar's private rating of Citibank London, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. NatWest Markets plc acts as the interest cap provider for the transaction. DBRS Morningstar's public Long-Term Critical Obligations Rating of NatWest Markets Plc of "A" is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in British pound sterling unless otherwise noted. [*] UK: Big Firms Urged to Help Businesses on Verge of Collapse --------------------------------------------------------------- Lucy Burton and Matthew Field at The Sunday Telegraph report that the biggest names in the City are being urged to club together to help prop up the thousands of businesses hit by coronavirus after a task force was set up to save companies on the brink. Sources told The Sunday Telegraph that banks, law firms, asset managers and auditors had been asked to pitch in with ways to save British firms that are on the verge of collapse. According to The Sunday Telegraph, at least 10 City grandees will be chosen to lead the efforts on behalf of different sectors in the coming days. The move is being spearheaded by Sir Adrian Montague, head of the FTSE 100 insurer Aviva, who is chairing a new so-called Recapitalisation Group out of industry body TheCityUK, The Sunday Telegraph discloses. The audit firm, as cited by The Sunday Telegraph, said Omar Ali, EY's financial services managing partner, who built the Big Four firm's banking practice in the wake of the financial crisis, will lead the new group's technical committee. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *