/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200513.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, May 13, 2020, Vol. 21, No. 96 Headlines G E R M A N Y DEUTSCHE LUFTHANSA: Egan-Jones Cuts Sr. Unsec. Debt Rating to B DOUGLAS GMBH: Bank Debt Trades at 35% Discount E. ON SE: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ HEIDELBERGCEMENT AG: Egan-Jones Cuts Sr. Unsec. Debt Ratings to BB+ RWE AG: Egan-Jones Lowers Sr. Unsec. Debt Ratings to BB I T A L Y ASSICURAZIONI GENERALI: Egan-Jones Cuts Sr. Unsec. Ratings to BB ENEL SPA: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ TELECOM ITALIA: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B L U X E M B O U R G ARCELORMITTAL: Moody's Cuts Senior Unsecured Ratings to Ba1 EVERGREEN SKILLS: Bank Debt Trades at 41% Discount EVERGREEN SKILLS: Bank Debt Trades at 87% Discount N E T H E R L A N D S COLUMBUS FINANCE: Bank Debt Trades at 26% Discount S P A I N CODERE SA: Moody's Cuts CFR to Caa3 on Deferred Coupon Payment S W E D E N ETRAVELI GROUP: Bank Debt Trades at 29% Discount S W I T Z E R L A N D TRANSOCEAN LIMITED: Egan-Jones Lowers Sr. Unsec. Debt Ratings to C U K R A I N E MOBILE TELESYSEMS: Fitch Affirms LT IDR at BB+, Outlook Stable U N I T E D K I N G D O M A-GAS BIDCO: Bank Debt Trades at 15% Discount A-GAS BIDCO: Bank Debt Trades at 16% Discount GARVE HOTEL: Owner May Wind Up Business Over Next Few Months GEORGE S. FORMAN: Goes Into Administration J D WETHERSPOON: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B+ MARS SHEEP: Enters Administration After Failing to Pay Debts NEIL MCGOUGAN: Cash Flow Problems Prompt Administration NEXT PLC: Egan-Jones Lowers Sr. Unsec. Debt Ratings to BB NUFFIELD SOUTHAMPTON: Coronavirus Impact Prompts Administration SIGNATURE LIVING: Enters Administration Amid Coronavirus Lockdown TESCO PLC: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ WM MORRISON: Egan-Jones Cuts LC Sr. Unsec. Debt Rating to BB+ - - - - - ============= G E R M A N Y ============= DEUTSCHE LUFTHANSA: Egan-Jones Cuts Sr. Unsec. Debt Rating to B --------------------------------------------------------------- Egan-Jones Ratings Company, on April 29, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Deutsche Lufthansa AG to B from B+. EJR also downgraded the rating on commercial paper issued by the Company to B from A3. Deutsche Lufthansa AG, commonly known as Lufthansa, is the flag carrier and largest German airline which, when combined with its subsidiaries, is the second-largest airline in Europe in terms of passengers carried. DOUGLAS GMBH: Bank Debt Trades at 35% Discount ---------------------------------------------- Participations in a syndicated loan under which Douglas GmbH is a borrower were trading in the secondary market around 65 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The bank debt traded around 80 cents-on-the-dollar during the week ended Fri., May 1, 2020. The EUR51.18 million facility is a Term loan. The loan is scheduled to mature on August 13, 2022. The amount is fully drawn and outstanding. The Company's country of domicile is Germany. E. ON SE: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ ------------------------------------------------------------- Egan-Jones Ratings Company, on April 27, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by E.ON SE to BB+ from BBB. Headquartered in Essen, Germany, E.ON SE operates as an international and privately-owned energy supplier. HEIDELBERGCEMENT AG: Egan-Jones Cuts Sr. Unsec. Debt Ratings to BB+ ------------------------------------------------------------------- Egan-Jones Ratings Company, on April 29, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by HeidelbergCement AG to BB+ from BBB-. HeidelbergCement AG is a German multinational building materials company headquartered in Heidelberg, Germany. RWE AG: Egan-Jones Lowers Sr. Unsec. Debt Ratings to BB ------------------------------------------------------- Egan-Jones Ratings Company, on April 29, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by RWE AG to BB from BBB-. Headquartered in Essen, Germany, RWE AG generates, distributes, and trades electricity to municipal, industrial, commercial, and residential customers. ========= I T A L Y ========= ASSICURAZIONI GENERALI: Egan-Jones Cuts Sr. Unsec. Ratings to BB ---------------------------------------------------------------- Egan-Jones Ratings Company, on April 28, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Assicurazioni Generali SpA to BB from BB+. Headquartered in Trieste, Italy, Assicurazioni Generali S.p.A. offers life and non-life insurance and reinsurance throughout the world. ENEL SPA: Egan-Jones Lowers Senior Unsecured Debt Ratings to BB+ ---------------------------------------------------------------- Egan-Jones Ratings Company, on April 28, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Enel SpA to BB+ from BBB-. Headquartered in Rome, Italy, Enel SpA operates as an integrated electricity and gas distributions company. TELECOM ITALIA: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B -------------------------------------------------------------- Egan-Jones Ratings Company, on April 27, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Telecom Italia SpA/Milano to B from B+. Telecom Italia S.p.A., through subsidiaries, offers fixed-line and mobile telephone and data transmission services in Italy and abroad. =================== L U X E M B O U R G =================== ARCELORMITTAL: Moody's Cuts Senior Unsecured Ratings to Ba1 ----------------------------------------------------------- Moody's Investors Service downgraded ArcelorMittal's senior unsecured ratings to Ba1 from Baa3. Concurrently, Moody's has assigned a Ba1 corporate family rating and a Ba1-PD probability of default rating to ArcelorMittal. Moody's has further downgraded the senior unsecured rating on the company's medium-term notes programme and senior unsecured shelf to (P)Ba1 from (P)Baa3, the short-term rating on its Commercial Paper to NP from P-3, and its other short-term rating to (P)NP from (P)P-3. The outlook on all ratings has been changed to stable from negative. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The steel sector has been one of the sectors strongly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in ArcelorMittal's credit profile, including its exposure to cyclical end-markets such as the automotive, machinery and construction industries have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and ArcelorMittal remains vulnerable to the outbreak continuing to spread. The steel industry is a highly cyclical industry with strong exposure to general economic conditions, which Moody's expects to materially worsen this year amid the spreading coronavirus globally, which will dampen activity in many of ArcelorMittal's end-markets. This has been particularly evidenced by recent significant production cuts in the automotive sector in Europe and North America, while Moody's currently forecasts global light vehicle sales to contract by around 14% this year. But also demand in other steel-using sectors such as machinery and construction will stifle due to local work restrictions, government-imposed site closures or disrupted supply chains. The rating agency therefore expects ArcelorMittal's steel shipments to fall by more than 20% in 2020, compressing margins and cash flows in the coming months, albeit mitigated by cost saving initiatives. Such measures include economic unemployment schemes, temporary staff reductions and lower maintenance and SG&A costs, besides the idling of capacity at several plants to align supply with the expected demand slowdown. ArcelorMittal's rating had been very weakly positioned already before the coronavirus outbreak against subdued demand and deteriorating profitability during 2019, caused by narrowing steel spreads on falling steel prices, structural overcapacity of the steel industry and surging raw material costs. As a result, Moody's outlook change to negative in November 2019 reflected its expectation that ArcelorMittal's leverage, as defined in gross debt/EBITDA, will not reduce towards the 3x upper limit for a Baa3 rating by the end of 2021 While the group's increased leverage also reflects significant guarantees provided on behalf of at-equity accounted entities, including the AMNS India joint-venture since its acquisition in December 2019, ArcelorMittal remains highly levered for the Ba1 rating category. The Ba1 rating with a stable outlook reflects Moody's expectation that the company should be able to restore metrics back to the requirements for the current rating over the next years. Moody's now forecasts leverage to decline towards 4x debt/EBITDA by the end of 2021 at the earliest, provided demand will strongly recover next year, which is difficult to predict as the coronavirus continues to spread with still uncertain consequences for ArcelorMittal at this stage. More positively, however, Moody's recognizes the group's $2.1 billion free cash flow generation during 2019 and only modest working capital consumption in the first quarter of 2020, which helped it reduce reported net debt to $9.5 billion at the end of March 2020 from $11.1 billion in the prior year. The rating agency also expects the group to protect positive FCF this year, primarily thanks to a material cut in capital expenditures to $2.4 billion for 2020 versus its previous guidance of $3.2 billion. Together with lower income taxes and sizeable working capital reductions of up to $1 billion, this should enable positive FCF in the low to mid three-digit million US dollar range in 2020, supporting the stable outlook. LIQUIDITY Moody's expects ArcelorMittal to retain a strong liquidity profile. At the end of March 2020, the group had $4.3 billion of cash on the balance sheet and access to its fully undrawn $5.5 billion revolving facility, maturing in 2024. In addition, in April 2020, the group secured from its main relationship banks a new $3 billion credit facility, maturing in April 2021, which helps further bolster its liquidity in case of need. These funds comfortably cover short term debt maturities, including lease liabilities, of $3.1 billion as of March 31, 2020, forecast capital expenditures of around $2.4 billion in 2020 and only minor dividends. Moody's also expects ArcelorMittal to ensure compliance with its leverage maintenance covenant (maximum 4.25x net debt/EBITDA ratio) at all times. ESG CONSIDERATIONS Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on ArcelorMittal of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. OUTLOOK The stable outlook balances ArcelorMittal's currently weak and further deteriorating credit metrics during 2020, with the expectation of a distinct recovery from 2021, allowing for an improvement of currently stretched credit metrics, consistent positive free cash flow generation and its strong liquidity profile. It further reflects the group's prudent financial policy with a clear focus on debt reduction and no material dividend payments. However, the failure to further reduce debt driven by significantly growing earnings after 2020 and the continuation of positive free cash flow generation, supporting de-leveraging towards 4x Moody's-adjusted debt/EBITDA, or a weakening liquidity profile over the next two years would exert negative rating pressure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the ratings would build, if ArcelorMittal's (1) profitability improved sustainably, exemplified by Moody's-adjusted EBIT margins of well above 6%, (2) leverage could be reduced to 3x Moody's-adjusted debt/EBITDA and below on a sustained basis, (3) Moody's-adjusted (CFO -- dividends) / debt ratios of 20% or higher could be maintained. Moody's could downgrade ArcelorMittal's ratings, if (1) the group's operating performance were to deteriorate more strongly than currently foreseen against more negative implications of the spreading coronavirus, (2) its leverage remained well above 4x Moody's-adjusted debt/EBITDA throughout 2022, (3) Moody's-adjusted (CFO -- dividends) / debt ratios fell towards 15%, (4) liquidity were to contract. LIST OF AFFECTED RATINGS: Issuer: ArcelorMittal Assignments: LT Corporate Family Rating, Assigned Ba1 Probability of Default Rating, Reinstated to Ba1-PD Downgrades: Commercial Paper, Downgraded to NP from P-3 Other Short Term, Downgraded to (P)NP from (P)P-3 Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba1 from (P)Baa3 Senior Unsecured Shelf, Downgraded to (P)Ba1 from (P)Baa3 Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from Baa3 Withdrawals: LT Issuer Rating, previously rated Baa3 ST Issuer Rating, previously rated P-3 Outlook Actions: Outlook, Changed to Stable from Negative PRINCIPLE METHODOLOGY The principal methodology used in these ratings was Steel Industry published in September 2017. COMPANY PROFILE ArcelorMittal is the world's largest steel company, with an annual production of around 90 million tons (mt) of crude steel, steel shipments of 84.5 mt, $71 billion revenue and company-adjusted EBITDA of $5.2 billion (7.4% margin) in 2019. The group operates in more than 60 countries worldwide, with steelmaking operations in 19 countries on four continents. The group also operates iron ore and coking coal mines in several geographies for its own consumption and external sales. ArcelorMittal's largest market is Europe, which accounted for 50% of its sales in 2019 (22% of EBITDA). NAFTA accounted for 24% of sales (15% of EBITDA), Brazil for 11% (21%), Africa and Commonwealth of Independent States (ACIS, Eastern Europe and South Africa) for 9% (10%) and mining for 6% (32%). EVERGREEN SKILLS: Bank Debt Trades at 41% Discount -------------------------------------------------- Participations in a syndicated loan under which Evergreen Skills Lux Sarl is a borrower were trading in the secondary market around 59 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The bank debt traded around 68 cents-on-the-dollar during the week ended Fri., May 1, 2020. The $1.37 billion facility is a Term loan. The loan is scheduled to mature on April 28, 2021. The amount is fully drawn and outstanding. The Company's country of domicile is Luxembourg. EVERGREEN SKILLS: Bank Debt Trades at 87% Discount -------------------------------------------------- Participations in a syndicated loan under which Evergreen Skills Lux Sarl is a borrower were trading in the secondary market around 13 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The bank debt traded around 61 cents-on-the-dollar during the week ended Fri., May 1, 2020. The $670 million facility is a Term loan. The loan is scheduled to mature on April 28, 2022. The amount is fully drawn and outstanding. The Company's country of domicile is Luxembourg. ===================== N E T H E R L A N D S ===================== COLUMBUS FINANCE: Bank Debt Trades at 26% Discount -------------------------------------------------- Participations in a syndicated loan under which Columbus Finance BV is a borrower were trading in the secondary market around 74 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The EUR237.68 million facility is a Term loan. The loan is scheduled to mature on July 5, 2024. The amount is fully drawn and outstanding. The Company's country of domicile is Netherlands. ========= S P A I N ========= CODERE SA: Moody's Cuts CFR to Caa3 on Deferred Coupon Payment -------------------------------------------------------------- Moody's Investors Service has downgraded the corporate family rating of Codere S.A. to Caa3 from Caa1 and its probability of default rating to Caa3-PD from Caa1-PD. Concurrently, Moody's has downgraded the rating on the EUR500 million senior secured notes due 2021 and USD300 million senior secured notes due 2021, issued by Codere Finance 2 (Luxembourg) S.A., to Caa3 from Caa1. The outlook remains negative. RATINGS RATIONALE Moody's has downgraded Codere to Caa3 following the company's decision to defer the EUR27 million semi-annual coupon payment on its notes that was due on April 30, 2020 [1], which Moody's believes reflects the increased risk of a default in the next 12 months. This heightened risk of default also considers the substantial debt maturities due in 2021 and the limited options available to the company to repay this debt at par. Moody's also assumes a slower and more phased recovery in the company's activity given recent government announcements and continuing social distancing measures, which will weigh on the company's liquidity. Moody's understands that Codere's willingness, rather than ability, to delay its April interest payment and use the one-month grace period per its bond documentation was driven by the company's lack of short-term earnings visibility due to the coronavirus pandemic. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, given the substantial implications for public health and safety. If the company does not to 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. Under its base case, the company will restart its operations in the May-June period, but only generating 30% of normal revenues in the first month due to the reluctance of customers to come back in gaming venues in the context of coronavirus. Moody's estimates that revenues will not fully recover in the next 12 months due to a strong earnings deterioration in Argentina, which represented 30% of total EBITDA in 2019, and unfavorable foreign exchange movement in Mexico, Uruguay and Colombia. LIQUIDITY PROFILE Moody's considers Codere's liquidity to be weak. As of April 27, 2020, the company had a total of EUR130 million cash on balance sheet, of which EUR15-20 million is trapped in operations. The cash on balance sheet reflects the full drawing on the company's EUR95 million revolving credit facility. Moody's estimates that the company will burn around EUR110-140 million of cash in 2020. In the absence of additional liquidity, the company could therefore run out of cash by the end of the year. Moody's understands from the company that it is exploring additional financing alternatives, including a EUR100 million super senior facility allowed under the EUR200 million credit facility carve-out (including the RCF) in the bond documentation. The RCF documentation contains a springing financial covenant based on a total net leverage set at 4.1x and tested on a quarterly basis when the RCF is drawn by more than 40%. Under its base case, Moody's expects Codere to breach this covenant in June 2020, triggering an event of default if not cured. OUTLOOK RATIONALE The negative outlook reflects the uncertainty of Codere's operations and heightened risk of a default as well as uncertainties related to the final recoveries for bondholders in the event of default. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's would consider a downgrade of the current ratings if recoveries are expected to be lower than those assumed in the Caa3 CFR and Caa3 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, it could occur if the company is able to refinance its debt at par. STRUCTURAL CONSIDERATIONS The PDR of Caa3-PD reflects that the default is very likely in the next 12 months. Even if the coupon is paid within the grace period. Moody's believes that the risk of a debt restructuring is very high, given the need to refinance the notes before November 2021, at a time of rapid deterioration in the company's operations and the economic outlook. The senior secured notes are rated Caa3 because of the small size of the RCF, which has priority over the proceeds in an enforcement under the Intercreditor Agreement. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Gaming Industry published in December 2017. COMPANY PROFILE Founded in 1980 and headquartered in Madrid (Spain), Codere is an international gaming operator. The company is present in nine countries where it has market leading positions: Spain and Italy in Europe and Mexico, Argentina, Uruguay, Panama and Colombia in Latin America. In 2019, the company reported operating revenue of EUR1,389 million and adjusted EBITDA of EUR249 million. =========== S W E D E N =========== ETRAVELI GROUP: Bank Debt Trades at 29% Discount ------------------------------------------------ Participations in a syndicated loan under which Etraveli Group Holding AB is a borrower were trading in the secondary market around 72 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The bank debt traded around 80 cents-on-the-dollar during the week ended Fri., May 1, 2020. The EUR270 million facility is a Term loan. The loan is scheduled to mature on August 1, 2024. The amount is fully drawn and outstanding. The Company's country of domicile is Sweden. ===================== S W I T Z E R L A N D ===================== TRANSOCEAN LIMITED: Egan-Jones Lowers Sr. Unsec. Debt Ratings to C ------------------------------------------------------------------ Egan-Jones Ratings Company, on April 27, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Transocean Limited to C from CCC+. EJR also downgraded the rating on commercial paper issued by the Company to D from C. Headquartered in Zug, Switzerland, Transocean Limited is an offshore drilling contractor. ============= U K R A I N E ============= MOBILE TELESYSEMS: Fitch Affirms LT IDR at BB+, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed PJSC Mobile Telesystems' Long-Term Issuer Default Rating at 'BB+' with a Stable Outlook. MTS is the largest mobile operator in Russia by revenue and subscribers. It also provides fixed-line communication services in numerous Russian regions. The ratings benefit from MTS's leading position in the large Russian mobile market, a rational competitive environment and solid profitability. The ratings also take into account the potential negative influence of its controlling shareholder in line with Fitch's 'Parent and Subsidiary Rating Linkage' criteria. KEY RATING DRIVERS VF Ukraine Sale Neutral to Operations: Fitch views the operating profile of MTS as unchanged following the disposal of its Ukrainian subsidiary (VF Ukraine) in December 2019. Operations in Ukraine provided some diversification to MTS but contributed only about 8% to the company's consolidated revenues in 2019, with MTS Bank deconsolidated. Moreover, MTS did not have access to VF Ukraine's cash flows due to dividend repatriation restrictions in Ukraine from 2014 to mid-2019. Leverage Growth: Fitch projects the company's FFO net leverage to increase further to 2.6x by end-2020 from 2.0x in 2019 and 1.5x in 2018. Fitch expects this increase in 2020 to be driven by continued share buy-backs, higher capex intensity and absence of operating cash flow from Ukraine. In 2019, leverage increased due to the payment of a RUB55.6 billion equivalent settlement to the US Department of Justice and the US Securities and Exchange Commission, share buybacks for RUB15.9 billion, acquisition of a 43.94% stake in MTSB for RUB12.8 billion and equity injections of RUB8.5 billion to MTSB. The sale of VF Ukraine has not benefited MTS's net debt reduction as a significant amount of cash proceeds from the disposal were spent on special dividends in early 2020. Fitch estimates that deconsolidation of the Ukrainian operations, which had no debt on a stand-alone level at end-2019, has led to an increase in MTS's leverage by around 0.2x. Market Leadership: MTS has successfully maintained its mobile market leadership position in Russia for many years. At end-2019 it held about 30% market share by subscribers (who number 79.1 million) and about 32% by revenue. The company has also continually increased its presence in broadband services. It offers fixed-line communication services in 56 Russian regions, holding about 10% market share in broadband residential subscribers, including 37% in the lucrative Moscow market. Modest Operating Results, COVID-19: MTS's revenue increased by 2.1% in 2019 with VF Ukraine and MTSB deconsolidated. Its top-line performance was supported by mobile service revenue growth, which was in line with the market. Fitch expects the company's revenue to decline by mid-single digits in 2020 due to the coronavirus fallout and gradually return to pre-crisis levels in 2022 as the lockdowns are lifted and the economy recovers. Fitch believes revenue will be adversely affected in two main ways: a drop in roaming revenues and a decrease in handset sales. Costly Subsidiary Bank: MTS spent RUB12.8 billion on the acquisition of the remaining stake in MTSB and RUB8.5 billion more on equity injections and perpetual loans for the bank in 2019. Fitch expects cash injections to continue either to support MTSB in case of stress or to finance its growth as was demonstrated in 2019 and at the beginning of 2020. It conservatively assumes MTS will spend RUB5 billion annually to support MTSB in 2020-2023. Negative FCF, Deleveraging Unlikely: Fitch envisages that the company's FCF after dividends will be negative in 2020-2023, with a FCF margin of -9% in 2020 and about -1% afterwards. This will be mainly driven by dividend payments and higher net interest paid following the net debt increase. As a result, deleveraging is unlikely in the next three years. Moreover, continued share buybacks coupled with support for MTSB may lead to further leverage growth to 2.8x by end-2023, leaving no headroom to the downgrade threshold of 2.8x for its 'bbb-' standalone credit profile. Fitch assumes that share buy-backs will continue in 2021-2023, although the company has not stated whether it will renew its share repurchase programme. The assumption is driven by its expectation that Sistema will need this cash to maintain its financial profile at the current level in the absence of any significant asset disposals. Sistema Affects Rating: On a standalone basis, MTS's credit profile is still commensurate with a 'bbb-' rating level. However, its IDR is capped at 'BB+', two notches above Sistema's rating, reflecting the influence of Sistema on the company's operating and strategic decisions. This is shown by a number of related-party transactions in the last two years (acquisition of MTSB, Dekart and Kinopolis, and sale of stake in Ozon). Under Fitch's methodology there are weak parent-subsidiary linkages between MTS (the stronger subsidiary) and Sistema (the weaker parent) taking into account strategic, legal and operational ties. According to its criteria, a stronger subsidiary can only be rated a maximum of two notches above its weaker parent's consolidated group profile. DERIVATION SUMMARY MTS holds the leading position in mobile in Russia both by revenue and subscribers. The segment accounts for more than 70% of MTS's revenue. The company's ratings are underpinned by its stable market position, moderate leverage, sound operating performance and ample pre-dividend FCF generation. MTS's credit profile is consistent with the profile of its western European peers operating in single markets, such as Telefonica Deutschland Holding AG (BBB/Stable) and Sunrise Communications (BBB-/Stable). MTS's standalone credit profile of 'bbb-' is constrained to an IDR of 'BB+' by the ratings of its parent, Sistema, in line with its parent and subsidiary linkage criteria. MTS is rated at the same level as its Russian peer with comparable market position, PJSC MegaFon (BB+/Stable), and one notch below VEON Ltd (BBB-/Stable), even though MegaFon has higher leverage and VEON has higher emerging-market exposure. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer - Revenue declining by mid-single-digits in 2020, with growth resuming in 2021-2022 at low-to-mid single digits; low-single-digit growth in 2023 - EBITDA margin (adjusted for the effect of IFRS 16) at about 38% in 2020-2023 - Capital intensity at about 20% of revenues in 2020, declining to 18% in 2021-2023 - About RUB15 billion annually of share buybacks in 2020-2023 - Dividends of about RUB72 billion in 2020 (including RUB23billion of dividends outstanding at end-2019); dividend payment of about RUB47 billion in 2021 gradually declining to RUB44 billion by 2023 on the back of share repurchases - Net cash proceeds from M&A of about RUB2 billion in 2020 and RUB2.6 billion in 2021 RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - MTS's rating could benefit from an upgrade of Sistema provided MTS continues to adhere to high corporate governance standards and maintains FFO net leverage below 2.8x. - (CFO - capex) / total debt equal or better than 11% on a sustained basis (2019: 15%; 2020f: 8%; 2021f: 10%) Factors that could, individually or collectively, lead to negative rating action/downgrade: - A sustained rise in FFO net leverage to above 2.8x, which would be likely to lead to a revision of MTS's 'bbb-' standalone credit profile to 'bb+' - Competitive weaknesses and market-share erosion, leading to significant deterioration in pre-dividend FCF generation - A downgrade of Sistema, which would also be negative for MTS if Sistema remains the controlling shareholder 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 Ample Liquidity: MTS had ample liquidity at end-2019 supported by a cash balance of about RUB17 billion and unused committed credit facilities totalling RUB275 billion from major Russian banks available until at least end-2023. This should be sufficient to cover the company's expected negative FCF in the forecast period and debt maturing until 2022. MTS has also issued about RUB37 billion bonds in the first four months of 2020. 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 PJSC Mobile TeleSystems (MTS): 4; Governance Structure: 4 Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity. MTS has an ESG Relevance score of 4 for Governance Structure reflecting the dominant majority shareholder's influence over the company and a significant number of related-party transactions. =========================== U N I T E D K I N G D O M =========================== A-GAS BIDCO: Bank Debt Trades at 15% Discount --------------------------------------------- Participations in a syndicated loan under which A-Gas Bidco Ltd is a borrower were trading in the secondary market around 85 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The $137.45 million facility is a Term loan. The loan is scheduled to mature on August 11, 2024. The amount is fully drawn and outstanding. The Company's country of domicile is Britain. A-GAS BIDCO: Bank Debt Trades at 16% Discount --------------------------------------------- Participations in a syndicated loan under which A-Gas Bidco Ltd is a borrower were trading in the secondary market around 84 cents-on-the-dollar during the week ended Fri., May 8, 2020, according to Bloomberg's Evaluated Pricing service data. The GBP50 million facility is a Term loan. The loan is scheduled to mature on August 11, 2024. The amount is fully drawn and outstanding. The Company's country of domicile is Britain. GARVE HOTEL: Owner May Wind Up Business Over Next Few Months ------------------------------------------------------------ Gregor Aiken at The Press and Journal reports that Hart Hotels Limited has announced it will wind up the Garve Hotel and Mackay's Hotel -- both popular stop-offs on the NC500 -- "over the next few months" unless a buyer can be found. The Glenmorag Hotel in Dunoon is also expected to close, The Press and Journal notes. According to The Press and Journal, in a statement, the operators said: "The ongoing coronavirus crisis has had a dramatic impact on all business sectors but especially within travel and tourism. "At present it is impossible to establish when hotel operations will return to normal operating capacity. "The directors of Hart Hotels Ltd have been carefully considering these matters and have made the decision, in the absence of acquisition from interested parties, to wind up the hotel businesses in an orderly manner over the next few months." An application to the Court of Session to enter into a creditors voluntary arrangement (CVA) has since been lodged by Johnston Carmichael, The Press and Journal relates. Hart Hotels Limited has started to contact suppliers and customers with information regarding the CVA Proposal and the process to register payments due or refunds being claimed, The Press and Journal discloses. GEORGE S. FORMAN: Goes Into Administration ------------------------------------------ Neil Ramsden at Undercurrent News reports that Scottish fish merchant George S. Forman -- and Prime Seafoods, a second Aberdeenshire firm owned by the Forman family -- have both appointed administrators. J D WETHERSPOON: Egan-Jones Lowers Sr. Unsec. Debt Ratings to B+ ---------------------------------------------------------------- Egan-Jones Ratings Company, on April 27, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by J D Wetherspoon PLC to B+ from BB+. Headquartered in Watford, United Kingdom, J D Wetherspoon PLC owns and operates a group of pubs throughout the United Kingdom. MARS SHEEP: Enters Administration After Failing to Pay Debts ------------------------------------------------------------ Boutique Hotelier reports that Mars Sheep Hotels Limited, a company that comprises three hotels in the Scottish Highlands, has called in administrators after failing to pay over GBP3 million of construction costs. The company, which is under the ownership of Mumbai-based Mars Enterprise and Hospitality, operates two hotels, The Cluanie Inn and Whispering Pine Lodge as part of the Black Sheep Hotels group. According to Boutique Hotelier, documents filed on Companies House show the business entered administration on March 18, with Donald McNaught -- donald.mcnaught@jcca.co.uk -- and Matt Henderson -- matt.henderson@jcca.co.uk -- of Johnston Carmichael LLP appointed joint administrators. The documents also showed that over GBP3 million was owed to construction company Douglas & Stewart UK who spearheaded the renovation works at the three hotels over 2018 and 2019, Boutique Hotelier discloses. The two hotels are both operated under management which will continue under the administration, although both sites are currently closed due to Covid-19 restrictions, Boutique Hotelier notes. NEIL MCGOUGAN: Cash Flow Problems Prompt Administration ------------------------------------------------------- Business Sale reports that Scottish construction business Neil McGougan Limited has gone into administration after suffering severe cashflow disruption due to the coronavirus lockdown. It had recently been appointed to West Highland Housing Association's GBP3.5 million major repairs and investment program, Business Sale discloses. However, in line with coronavirus restrictions on construction activity at non-essential sites, the company's projects have been shut for over five weeks, Business Sale notes. This closure impacted the company's cash flow and it ceased trading last week, Business Sale recounts. A total of 20 staff have been made redundant, with Derek Forsyth -- derek.forsyth@campbelldallas.co.uk -- and Blair Milne -- blair.milne@campbelldallas.co.uk -- from Campbell Dallas appointed as joint-administrators, Business Sale relates. The administrators will seek buyers for the company assets, including plant, vehicles and equipment, with interested parties asked to make contact as soon as possible, Business Sale states. In its most recent accounts, made up to the year ending December 31 2018, the company registered net current assets of GBP287,800, according to Business Sale. The family-owned contractor, founded in 1986, is the largest construction business in the town of Oban. With a wide client base throughout the surrounding Argyll and Bute and West Highlands areas, the company provides a range of construction services. NEXT PLC: Egan-Jones Lowers Sr. Unsec. Debt Ratings to BB --------------------------------------------------------- Egan-Jones Ratings Company, on April 29, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Next PLC to BB from BB+. Headquartered in Leicester, United Kingdom, Next Plc conducts retailing, home shopping, and customer service management operations. NUFFIELD SOUTHAMPTON: Coronavirus Impact Prompts Administration --------------------------------------------------------------- Chris Wiegand at The Guardian reports that Nuffield Southampton Theatres has gone into administration as a result of the increasingly severe financial impact caused by coronavirus. NST, which has run for more than 50 years, comprises venues at the University of Southampton's Highfield campus and at a new GBP32 million hub in Guildhall Square in the city centre, The Guardian discloses. According to The Guardian, the severe drop in ticket sales from its closure and uncertainty about its reopening date have proved devastating. On April 3, NST announced the cancellation of all performances until May 31, The Guardian relates. The majority of its 80 staff have been furloughed, The Guardian notes. Buyers are being sought by joint administrators Greg Palfrey -- greg.palfrey@smithandwilliamson -- and Steve Adshead, from the south coast office of Smith & Williamson, The Guardian states. SIGNATURE LIVING: Enters Administration Amid Coronavirus Lockdown ----------------------------------------------------------------- Laura Clements at WalesOnline reports that Signature Living Coal Exchange Limited, the company that owns the historic Coal Exchange building in Cardiff, has gone into administration. The company went into administration on May 6, WalesOnline relays, citing papers filed with insolvencies records holder The Gazette. It comes just four months after Cardiff Council offered a GBP2 million loan to the Signature Living Group to help them finish the controversial development, WalesOnline notes. The company that operates the Exchange Hotel in the building is still operating, WalesOnline states. Signature Living Coal Exchange's most recently published accounts, for the year ended March 31, 2018, show it had assets worth GBP10.4 million and debts of GBP19 million, WalesOnline discloses. In addition, Signature Living Hotel Limited, which used to be the parent company to the Coal Exchange, is also in administration, WalesOnline relays. According to WalesOnline, like many in the hospitality sector, the coronavirus pandemic lockdown has hit Signature hard and administrators have now been called in at a number of the group's companies. Cardiff council offered a loan to Signature Living in January this year, but confirmed on May 12 that this money had not been paid yet, WalesOnline recounts. TESCO PLC: Egan-Jones Lowers Senior Unsec. Debt Ratings to BB+ -------------------------------------------------------------- Egan-Jones Ratings Company, on April 27, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Tesco PLC to BB+ from BBB-. Headquartered in Welwyn Garden City, United Kingdom, Tesco PLC, through its subsidiaries, operates as a food retailer. WM MORRISON: Egan-Jones Cuts LC Sr. Unsec. Debt Rating to BB+ ------------------------------------------------------------- Egan-Jones Ratings Company, on April 29, 2020, downgraded the local currency senior unsecured ratings on debt issued by Wm Morrison Supermarkets PLC to BB+ from BBB. Headquartered in Bradford, United Kingdom, Wm Morrison Supermarkets PLC retails groceries through a chain of supermarkets and an online home delivery service in England. ********* 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 * * *