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       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

          Tuesday, May 26, 2020, Vol. 21, No. 105

                           Headlines



E S T O N I A

ODYSSEY EUROPE: S&P Lowers ICR to 'CCC+' on COVID-19 Impact


G E R M A N Y

DB PRIVAT: Moody's Withdraws Ratings on Merger with DB PFK
LUFTHANSA: WSF Approves EUR9-Bil. Stabilization Package


I R E L A N D

BILBAO CLO III: Fitch Assigns BB-sf Rating on Class D Debt
BILBAO CLO III: S&P Assigns BB- Rating on Class D Notes
CITYJET: Plans to Make More Than 700 Staff Redundant
FAIR OAKS II: S&P Assigns Prelim. BB Rating on Class E Notes


I T A L Y

DEPOBANK: S&P Puts 'BB-' LongTerm ICR on Watch Positive
NAPLES CITY: Fitch Cuts LT IDRs to BB, Outlook Stable


R U S S I A

KRASNOYARSK KRAI: S&P Alters Outlook to Neg. & Affirms 'BB' ICR
NOVOSIBIRSK CITY: Fitch Affirms LT IDR at BB, Outlook Stable
PAO KOKS: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
SOVCOMFLOT: Fitch Affirms LT IDR at BB+, Outlook Stable


S P A I N

GRUPO ALDESA: Fitch Raises LT IDR to BB-, Off Ratings Watch Pos.
VALENCIA: S&P Affirms 'BB/B' Issuer Credit Ratings


U K R A I N E

ZAPORIZHZHIA CITY: Fitch Gives 'B' LT IDR, Outlook Stable


U N I T E D   K I N G D O M

CARLUCCIO'S: Boparan Acquires Business Out of Administration
CLARKS: In Talks with Several Private Equity Firms
PIZZA EXPRESS: May Close Some Restaurants Permanently
VERY GROUP: Fitch Lowers LT IDR to 'B-', Outlook Stable
[*] UK: Plan to Rescue Large Cos. Affected by Coronavirus Crisis


                           - - - - -


=============
E S T O N I A
=============

ODYSSEY EUROPE: S&P Lowers ICR to 'CCC+' on COVID-19 Impact
-----------------------------------------------------------
S&P Global Ratings lowered Estonia-based gaming company Odyssey
Europe Holdco S.a.r.l's (Olympic Entertainment Group AS) long-term
issuer and issue credit ratings from 'B' to 'CCC+'.

S&P expects earnings and cash flow to decline significantly in
2020, primarily due to the temporary closure of all Olympic's
physical operations.

Olympic's land-based retail locations across its different
countries of operation have all been closed in recent months, with
Lithuania reopening the casinos on May 18, 2020 and Estonia allowed
to reopen from June 1, 2020. While there is still high uncertainty
about the rate of spread and timing of the peak of the COVID-19
outbreak, S&P's current base case is for the virus to peak between
June and August 2020; however, there are risks to the downside,
including a potential 'second wave' of infection. We assume that
most of the gaming sites will be closed for three months, until the
beginning of July, and that the ramp up will be progressive
throughout the rest of 2020. S&P said, "While there is potential
upside for some jurisdictions opening earlier than this assumption,
our base case leads to about 30% decline in Olympic's 2020 revenue,
compared with that of 2019. We also assume that some
social-distancing measures will likely persist into 2021, but we
acknowledge the experience may vary greatly by country and
operation."

Uncertainty regarding the timing of Latvian online and land-based
operations' reopening weighs on Olympic's performance metrics, cash
flows, and liquidity.   The government of Latvia has not only
enforced the closure of the gaming halls, but has also suspended
all the gaming licenses for both land-based and online gaming
operations. The commencement of land-based and online operations
will therefore require new legislation to lift the suspension,
which could lead to a delay even after the restrictions on stores
are lifted. The situation surrounding Latvian gaming regulation was
already tightened in March 2019; Riga City Council introduced a law
banning gambling venues in Riga by 2024, with the exception of
gambling venues located in four-star or five-star hotels. Latvia
represented 32% of total revenue and nearly 60% of EBITDA for
Olympic in 2019.

S&P said, "Due to high fixed costs, we expect Olympic to have
limited flexibility to offset the top-line revenue loss in 2020.
About two-thirds of all Olympic's operating costs are fixed, which
in our view leaves the group with limited flexibility to offset the
potential revenue decline. However, we understand that the group
has successfully managed to reduce about 65% of those fixed costs
in the near term, thanks to mitigating actions." These include
renegotiation of rents with more than 100 landlords across
different geographies, and the pausing of nonessential operating
expenses (for example, marketing and travel) as well as
nonessential capital expenditure (capex). The group is also
benefiting from aid packages provided by the governments of its
operating countries, including partial or full subsidies for
employee wage expenses and the suspension of gaming and corporate
taxes, and social security contributions.

Despite cost-mitigation measures, the lockdowns and gradual
recovery result in a lower S&P Global Ratings forecast for free
cash flow and higher leverage.  S&P said, "We anticipate that
Olympic will report about EUR2 million-EUR3 million of negative
EBITDA per month of full shutdown. This results in our revised base
case of about EUR20 million-EUR23 million pre-International
Financial Reporting Standards (IFRS) 16 EBITDA, and about EUR30
million-EUR33 million post-IFRS 16 EBITDA, for 2020. Consequently,
we anticipate that S&P Global Ratings-adjusted leverage will exceed
9.0x, and that the group will report modestly positive free
operating cash flow (FOCF) in 2020. For 2021, we expect leverage to
decrease to about 5.0x and for Olympic to generate EUR15
million-EUR20 million FOCF, based on a substantial recovery and
return to "normalized" trading conditions. We previously expected
Olympic to decrease its adjusted leverage to about 4.1x-4.3x in
2020 from 4.6x in 2019, and FOCF to debt to increase to about 17%
in 2020, from 8.3% in 2019."

Olympic has aborted its planned acquisition of International Evona.
Prior to the COVID-19 pandemic, Olympic was planning to acquire
Croatia-based gaming company International Evona with cash on
balance sheet. In S&P's view, this would have moderately
strengthened Olympic's business, as it would have provided
increased scale and geographical diversification--albeit to a small
extent. Due to the business disruptions brought about by the
pandemic, Olympic has decided to not pursue this acquisition.

S&P said, "Our ratings on Olympic factor in expectations that the
group's liquidity could come under pressure in the next three to
six months.  In our view, Olympic has sufficient near-term
liquidity for the next three to six months. However, beyond this
time and--crucially--subject to macroeconomic conditions, the
group's position could come under pressure. Olympic has about EUR35
million-EUR40 million available cash on balance sheet, having drawn
its EUR25 million revolving credit facility (RCF). We estimate that
the company will have a monthly cash burn, after mitigating
actions, of about EUR5 million, including all the operating
expenses, accrued interest (on a pro rata monthly basis), and
capex. Olympic has EUR8 million of cash interest expenses due at
the end of May, and an additional EUR8 million in November (of
which EUR1.3 million is included in the EUR5 million estimated
monthly cash burn calculation, on a pro rata basis). In order to
restart its operations, we estimate that Olympic will need at least
about EUR10 million in order to be fully operational."

The group has the ability to raise EUR25 million in additional
super senior secured funding under its existing documentary
permitted indebtedness basket, without required consents from
existing lenders, subject to covenant. The super senior RCF is
subject to a 0.79:1.00 senior secured springing net leverage
covenant (see Covenants section, below). S&P understands the group
may consider assessing additional liquidity sources should existing
resources come under increasing pressure--for example, because of a
prolonged lockdown or a slower-than-anticipated recovery. In the
absence of this additional funding, we estimate that Olympic could
exhaust its current liquidity within the next six months, but this
could vary depending on many factors, including the success of
mitigating actions.

The company has a springing covenant on the super senior RCF when
utilization is greater than 35%, set at a maximum consolidated
super senior secured net leverage ratio of 0.79:1 at each
measurement period.

S&P said, "We may regard any future debt buybacks undertaken by the
group as distressed.   We understand Olympic may consider
purchasing a portion of its notes through cash repurchases, in open
market purchases, privately negotiated transactions, or otherwise
from time to time. The notes are currently trading at well below
par. Given the company's leverage, macroeconomic, and regulatory
uncertainty in conjunction with the current rating level and the
group's notes trading at significantly below par, there is an
increasing likelihood that any repurchases undertaken may be
consistent with a distressed offer. Moreover, in our view, the
company is vulnerable and dependent on positive developments to
meet its long-term financial commitments."

Environmental, social and governance (ESG) factors relative to the
rating action:

-- Health and safety factors

The negative outlook reflects the heightened uncertainty about the
sustainability of the company's liquidity and capital structure in
the medium term. This could occur if the magnitude and length of
disruption caused by COVID-19 exceed our current base case or if
the suspension of the Latvian gaming licenses significantly delays
the restart of the operations. The negative outlook also reflects
that Olympic could repurchase some of its notes at well below par,
which we may treat as a distressed exchange.

S&P could lower the ratings if it believes there is an increased
risk of default in the next 12 months. For example, this could
occur if:

-- The magnitude and length of disruption caused by COVID-19 would
exceed our current base-case expectation (which is that the
outbreak will be contained by June 2020), resulting in a heightened
risk of liquidity stress, covenant breach or material deterioration
in company financial positon and performance; or

-- S&P were to view specific default events as an increasing
possibility, such as the likelihood of interest forbearance or bond
debt restructuring. S&P may also consider a buying back of debt
below par as distressed debt exchange and therefore an event of
default.

S&P could consider ratings upside if, in its view:

-- The company's capital structure was sustainable in the long
term;

-- There was no liquidity pressure or risk of covenant breach
within the next 12 months;

-- A stable macroeconomic and regulatory environment underpinned
greater certainty of business performance and achievement of
base-case financial metrics; and

-- There was no risk of default events occurring, including
purchase of the group's debt below par.

The above could occur, for example, in an environment where there
were favorable developments relating to the COVID-19 restrictions
and positive recovery expectations once operations restart in
Latvia. Additionally, if the company successfully executed on its
plans to preserve liquidity and restart operations.




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G E R M A N Y
=============

DB PRIVAT: Moody's Withdraws Ratings on Merger with DB PFK
----------------------------------------------------------
Moody's Investors Service has withdrawn all ratings and rating
inputs previously assigned to DB Privat- und Firmenkundenbank AG.

RATINGS RATIONALE

The rating actions follow Deutsche Bank AG's merger with DB PFK,
which took effect on May 15, 2020[1]. With this transaction,
Deutsche Bank AG effectively assumed the assets and liabilities of
DB PFK, and DB PFK ceased to exist as a separate legal entity.

LIST OF AFFECTED RATINGS

Issuer: DB Privat- und Firmenkundenbank AG

Withdrawals:

Adjusted Baseline Credit Assessment, previously rated ba1

Baseline Credit Assessment, previously rated ba1

Long-term Bank Deposits, previously rated A3, outlook changed to
Rating Withdrawn from Negative

Short-term Bank Deposits, previously rated P-2

Long-term Counterparty Risk Assessment, previously rated A3(cr)

Short-term Counterparty Risk Assessment, previously rated P-2(cr)

Subordinate Regular Bond/Debenture (XS0244360391), previously rated
Ba2

Long-term Counterparty Risk Ratings, previously rated A3

Short-term Counterparty Risk Ratings, previously rated P-2

Outlook Action:

Outlook changed to Rating Withdrawn from Negative


LUFTHANSA: WSF Approves EUR9-Bil. Stabilization Package
-------------------------------------------------------
Arno Schuetze at Reuters reports that Germany's new Economic
Stabilization Fund (WSF) has approved a EUR9 billion (US$9.80
billion) stabilization package for Lufthansa, Germany's flagship
carrier said on May 25.

"The Executive Board also supports the package", Lufthansa, as
cited by Reuters, said, adding that the bailout still need consent
from shareholders as well as the European Commission.

According to Reuters, the bailout comprises an equity injection by
the government, which will take a 20% stake by buying new shares at
the nominal value of EUR2.56 apiece or for a total of about EUR300
million.  The WSF plans to sell its shareholding by end-2023,
Reuters discloses.

Separately, the WSF will make a capital contribution of EUR5.7
billion in the form of a so-called silent stake, which is unlimited
in duration and can be terminated by company on a quarterly basis
in whole or in part, Reuters relays.

A part of that silent stake can be swapped into an additional 5%
equity stake if Lufthansa does not pay the coupon or Germany moves
to protect Lufthansa against a takeover, Reuters notes.

The stabilization measures are supplemented by a syndicated credit
facility of up to EUR3 billion with the participation of German
state bank KfW and private banks with a term of three years,
Reuters states.




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I R E L A N D
=============

BILBAO CLO III: Fitch Assigns BB-sf Rating on Class D Debt
----------------------------------------------------------
Fitch Ratings has assigned Bilbao CLO III Designated Activity
Company final ratings.

RATING ACTIONS

Bilbao CLO III DAC

Class A-1;  LT AAAsf New Rating;  previously AAA(EXP)sf

Class A-2A; LT AAsf New Rating;   previously AA(EXP)sf

Class A-2B; LT AAsf New Rating;   previously AA(EXP)sf

Class B;    LT Asf New Rating;    previously A(EXP)sf

Class C;    LT BBB-sf New Rating; previously BBB-(EXP)sf

Class D;    LT BB-sf New Rating;  previously BB-(EXP)sf

Sub. Notes; LT NRsf New Rating;   previously NR(EXP)sf

TRANSACTION SUMMARY

Bilbao CLO III Designated Activity Company is a securitisation of
mainly senior secured obligations (at least 90%) with a component
of senior unsecured, mezzanine, second-lien loans and high-yield
bonds. Note proceeds are used to fund a portfolio with a target par
of EUR275 million. The portfolio is actively managed by Guggenheim
Partners Europe Limited. The collateralised loan obligation (CLO)
has a one year reinvestment period and six year weighted average
life (WAL).

KEY RATING DRIVERS

'B'/'B-' Portfolio Credit Quality: Fitch places the average credit
quality of obligors in the 'B'/'B-' category. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 33.2,
below the maximum WARF covenant for assigning expected ratings of
37.

High Recovery Expectations: At least 90% of the portfolio will
comprise senior secured obligations. Fitch views the recovery
prospects for these assets as more favourable than for second-lien,
unsecured and mezzanine assets.

The Fitch weighted average recovery rate (WARR) of the identified
portfolio is 67.5%, above the minimum WARR covenant for assigning
expected ratings of 65%.

Diversified Asset Portfolio: The transaction includes several Fitch
test matrices corresponding to the two top 10 obligors'
concentration limits of 17% and 26.5% and fixed rate obligations
limits of 0% and 10%. The transaction also includes various
concentration limits, including the maximum exposure to the three
largest (Fitch-defined) industries in the portfolio at 40%. These
covenants ensure the asset portfolio will not be exposed to
excessive concentration.

Portfolio Management: The transaction has a one year reinvestment
period and includes reinvestment criteria similar to those of other
European transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.

Cash Flow Analysis: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par value and interest coverage
tests.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade: A 25% default multiplier applied to the
portfolio's mean default rate, and with this subtracted from all
rating default levels, and a 25% increase of the recovery rate at
all rating recovery levels, would lead to an upgrade of up to three
notches for the rated notes, except for class A where the notes'
ratings are at the highest level on Fitch's scale and cannot be
upgraded.

The transaction features a reinvestment period and the portfolio is
actively managed. At closing, Fitch uses a standardised stress
portfolio (Fitch's Stressed Portfolio) that is customised to the
specific portfolio limits for the transaction as specified in the
transaction documents. Even if the actual portfolio shows lower
defaults and losses (at all rating levels) than Fitch's Stressed
Portfolio assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely, given the portfolio credit quality
may still deteriorate, not only by natural credit migration, but
also by reinvestments. After the end of the reinvestment period,
upgrades may occur in case of a better than initially expected
portfolio credit quality and deal performance, leading to higher
credit enhancement for the notes and excess spread available to
cover for losses on the remaining portfolio.

Rating Downgrade Sensitivities - COVID 19

COVID-19 Sensitivity Analysis: Fitch has notched down all assets
whose Fitch-derived rating is on Negative Outlook. The resulting
default rate is still below the breakeven default rate for the
stress portfolio analysis, meaning that rating migration of this
magnitude would not affect the rating of the CLO.

Factors that could, individually or collectively, lead to negative
rating action/downgrade: A 125% default multiplier applied to the
portfolio's mean default rate, and with the increase added to all
rating default levels, and a 25% decrease of the recovery rate at
all rating recovery levels, would lead to a downgrade of up to six
notches for the rated notes

Downgrades may occur if the built-up of credit enhancement for the
notes following amortization does not compensate for a higher loss
expectation than initially assumed due to an unexpectedly high
level of default and portfolio deterioration. As the disruptions to
supply and demand due to COVID-19 for other vulnerable sectors
become apparent, loan ratings in such sectors would also come under
pressure. Fitch will update the sensitivity scenarios in line with
the view of Fitch's Leveraged Finance team.

In addition to the base scenario, Fitch has defined a downside
scenario for the current crisis, whereby all ratings in the 'B'
category would be downgraded by one notch and recoveries would be
lower by a haircut factor of 15%. This scenario leads to a
downgrade of up to five notches for the rated notes.


BILBAO CLO III: S&P Assigns BB- Rating on Class D Notes
-------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Bilbao CLO III
DAC's class A-1, A-2A, A-2B, B, C, and D notes. At closing, the
issuer also issued unrated subordinated notes.

Under the transaction documents, the rated notes pay quarterly
interest unless there is a frequency switch event. Following this,
the notes will switch to semiannual payment.

The portfolio's reinvestment period will end approximately 1 year
after closing, and the portfolio's maximum average maturity date
will be approximately 6.2 years after closing

The ratings assigned to the notes reflect S&P's assessment of:

-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.

-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.

-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.

  Portfolio Benchmarks
                                                       Current
  S&P Global Ratings weighted-average rating factor   2,785.28
  Default rate dispersion                               613.41
  Weighted-average life (years)                           5.59
  Obligor diversity measure                              70.60
  Industry diversity measure                             16.80
  Regional diversity measure                              1.30

  Transaction Key Metrics
                                                       Current
  Total par amount (mil. EUR)                              275
  Defaulted assets (mil. EUR)                                0
  Number of performing obligors                             77
  Portfolio weighted-average rating derived
    from S&P's CDO evaluator                               'B'
  'CCC' category rated assets (%)                         6.20
  Covenanted 'AAA' weighted-average recovery (%)         37.00
  Covenanted weighted-average spread (%)                  3.60
  Covenanted weighted-average coupon (%)                  5.00

S&P said, "Our ratings reflect our assessment of the collateral
portfolio's credit quality, which has a weighted-average rating of
'B'. The portfolio primarily comprises broadly syndicated
speculative-grade senior secured term loans and senior secured
bonds. Therefore, we conducted our credit and cash flow analysis by
applying our criteria for corporate cash flow collateralized debt
obligations.

"In our cash flow analysis, we used the EUR275 million par amount,
the covenanted weighted-average spread of 3.60%, the covenanted
weighted-average coupon of 5.00%, and the covenanted
weighted-average recovery rates for all rating levels. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios for each liability rating category.

"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.

"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk to
be limited at the assigned ratings, as the exposure to individual
sovereigns does not exceed the diversification thresholds outlined
in our criteria.

"The transaction's legal structure is bankruptcy remote, in line
with our legal criteria.

"Our credit and cash flow analysis indicates that the available
credit enhancement for the class A-2A to D notes could withstand
stresses commensurate with higher rating levels than those we have
assigned. However, as the CLO is still in its reinvestment phase,
during which the transaction's credit risk profile could
deteriorate, we have capped our assigned ratings on the notes. In
our view, the portfolio is relatively more concentrated in nature,
and generally less diversified across obligors, industries, and
asset characteristics when compared to other CLO transactions we
have rated recently. However, we consider that the concentration
risk is captured in our credit risk analysis in assigning ratings
and will continue to be captured by S&P CDO monitor. As such, we
have not applied any additional scenario and sensitivity analysis
when assigning ratings on any classes of notes in this
transaction.

"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our ratings are
commensurate with the available credit enhancement for the class
A-1, A-2A, A-2B, B, C and D notes.

"In light of the rapidly shifting credit dynamics within CLO
portfolios due to continuing rating actions (downgrades,
CreditWatch placements, and outlook changes) on speculative-grade
corporate loan issuers, we are making qualitative adjustments to
our analysis when rating CLO tranches to reflect the likelihood
that changes to the credit profile of the underlying assets may
affect a portfolio's credit quality in the near term. This is
consistent with paragraph 15 of our criteria for analyzing CLOs."
To do this, S&P reviews the likelihood of near-term changes to the
portfolio's credit profile by evaluating the transaction's specific
risk factors, including, but not limited to, the percentage of the
underlying portfolio that comes from obligors that:

-- Are rated in the 'CCC' range;
-- Are currently on CreditWatch with negative implications;
-- Are rated with negative a negative outlook; or
-- Sit within a static portfolio CLO transaction.

Based on S&P's review of these factors, and considering the
portfolio concentration, it believes that the minimum cushion
between this CLO tranches' break-even default rates (BDRs) and
scenario default rates (SDRs) should be 1.5% (from a possible range
of 1.0%-5.0%).

As noted above, the purpose of this analysis is to take a
forward-looking approach for potential near-term changes to the
underlying portfolio's credit profile.

Taking the above into account and following our analysis of the
credit, cash flow, counterparty, operational, and legal risks, S&P
believe that its ratings are commensurate with the available credit
enhancement for all of the rated classes of notes.

S&P said, "In addition to our standard analysis, to provide an
indication of how rising pressures among speculative-grade
corporates could affect our ratings on European CLO transactions,
we have also included the sensitivity of the ratings on the class
A-1 to D notes to five of the 10 hypothetical scenarios we looked
at in our recent publication.

"S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly."

Bilbao CLO III is a European cash flow CLO securitization of a
revolving pool, comprising euro-denominated senior secured loans
and bonds issued mainly by sub-investment grade borrowers.
Guggenheim Partners Europe manages the transaction.

  Ratings List

  Class   Rating    Amount    Sub (%)   Interest rate*
                   (mil. EUR)

  A-1     AAA (sf)   154.25   43.91     Three/six-month EURIBOR
                                         plus 1.444%

  A-2A    AA (sf)     22.25   30.36     Three/six-month EURIBOR   
                                         plus 2.650%

  A-2B    AA (sf)     15.00   30.36     3.250%

  B       A (sf)      18.75   23.55     Three/six-month EURIBOR
                                         plus 3.230%

  C       BBB- (sf)   16.25   17.64     Three/six-month EURIBOR
                                         plus 5.010%

  D       BB- (sf)    12.00   13.27     Three/six-month EURIBOR
                                         plus 7.450%

  Sub. Notes   NR     43.15   N/A       N/A

* The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.

EURIBOR -- Euro Interbank Offered Rate.
NR -- Not rated.
N/A -- Not applicable.


CITYJET: Plans to Make More Than 700 Staff Redundant
----------------------------------------------------
Peter Hamilton at The Irish Times reports that CityJet plans to
make more than 700 staff redundant -- 60% of its employees -- as
the company restructures as part of an examinership process.

According to The Irish Times, the company said it would start a
consultation process across its Ireland and Britain operations,
anticipating that as many as 276 staff would be let go from its
Dublin and London bases.

The airline, which flies routes on behalf of other airlines
including SAS and Aer Lingus, employs 1,175 people across the
group, more than 410 of whom are based in Dublin.

The plan to make staff redundant in Dublin and London forms part of
a wider restructuring, The Irish Times notes.  It is understood
that, in addition to the proposed redundancy of 276 staff, the bulk
of which will be in Dublin, the company is in talks with unions in
other countries to make 450 staff redundant across its bases in
Estonia, Lithuania, Sweden, Finland, France and Brussels, The Irish
Times discloses.  In total, the company will shed about 726 staff,
The Irish Times understands.  It is expected that the company's
headquarters will remain in Dublin, The Irish Times states.

CityJet, best-known for flying routes out of London City Airport,
sought the protection of the courts from its creditors last month
due to financial difficulties that were exacerbated after its fleet
was grounded by the Covid-19 outbreak, The Irish Times recounts.

The examinership process in which it is participating involves a
full review of the company to ensure it can successfully be
restructured to be sustainable in the long term, The Irish Times
relays.

A spokesman, as cited by The Irish Times, said that includes
examining the "current shape and size of the company, the current
and potential business opportunities and the cost base and
structures required to deliver a successful future".


FAIR OAKS II: S&P Assigns Prelim. BB Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to Fair
Oaks Loan Funding II DAC's class X, A, B-1, B-2, C, D, and E notes.
At closing, the issuer will also issue unrated subordinated notes.

Under the transaction documents, the rated notes will pay quarterly
interest unless there is a frequency switch event. Following this,
the notes will switch to semiannual payment.

The class E notes is a delayed draw tranche. It will be unfunded at
closing and have a maximum notional amount of EUR9.70 million and
maximum spread of three/six-month EURIBOR plus 7.50%. The class E
notes can only be issued once and only during the reinvestment
period for the full amount of EUR9.70 million. The issuer will use
the full proceeds received from the issuance of the class E notes
to redeem the subordinated notes. In the transaction documents the
class E par value test will be assumed to be always outstanding. At
issuance, the class E notes' spread can be lowered subject to
rating agency confirmation.

The portfolio's reinvestment period will end approximately one year
after closing, and the portfolio's maximum average maturity date
will be approximately 6.5 years after closing.

The preliminary ratings assigned to the notes reflect S&P's
assessment of:

-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.

-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.

-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.

  Portfolio Benchmarks
                                                       Current
  S&P Global Ratings weighted-average rating factor   2,801.29
  Default rate dispersion                               537.90
  Weighted-average life (years)                           5.58
  Obligor diversity measure                              82.04
  Industry diversity measure                             17.87
  Regional diversity measure                              1.44

  Transaction Key Metrics
                                                       Current
  Total par amount (mil. EUR)                              250
  Defaulted assets (mil. EUR)                                0
  Number of performing obligors                            105
  Portfolio weighted-average rating derived
    from S&P's CDO evaluator                               'B'
  'CCC' category rated assets (%)                         4.11
  Covenanted 'AAA' weighted-average recovery (%)         36.25
  Covenanted weighted-average spread (%)                  3.50
  Reference weighted-average coupon (%)                   3.75

S&P said, "Our preliminary ratings reflect our assessment of the
preliminary collateral portfolio's credit quality, which has a
weighted-average rating of 'B'. We consider that the portfolio will
primarily comprise broadly syndicated speculative-grade senior
secured term loans and senior secured bonds. Therefore, we
conducted our credit and cash flow analysis by applying our
criteria for corporate cash flow collateralized debt obligations.

"In our cash flow analysis, we used the EUR250 million par amount,
the covenanted weighted-average spread of 3.50%, the reference
weighted-average coupon of 3.75%, and the covenanted
weighted-average recovery rates for all rating levels. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios for each liability rating category. Our credit and cash
flow analysis indicates that the available credit enhancement for
the class B-1 to E notes could withstand stresses commensurate with
higher rating levels than those we have assigned. However, as the
CLO will be in its reinvestment phase starting from closing, during
which the transaction's credit risk profile could deteriorate, we
have capped our ratings assigned to the notes.

"We expect that the transaction's documented counterparty
replacement and remedy mechanisms will adequately mitigate its
exposure to counterparty risk under our current counterparty
criteria.

"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk to
be limited at the assigned preliminary ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria.

"At closing, we consider that the transaction's legal structure
will be bankruptcy remote, in line with our legal criteria.

"In light of the rapidly shifting credit dynamics within CLO
portfolios due to continuing rating actions (downgrades,
CreditWatch placements, and outlook changes) on speculative-grade
corporate loan issuers, we are making qualitative adjustments to
our analysis when rating CLO tranches to reflect the likelihood
that changes to the credit profile of the underlying assets may
affect a portfolio's credit quality in the near term. This is
consistent with paragraph 15 of our criteria for analyzing CLOs."
To do this, S&P reviews the likelihood of near-term changes to the
portfolio's credit profile by evaluating the transaction's specific
risk factors, including, but not limited to, the percentage of the
underlying portfolio that comes from obligors that:

-- Are rated in the 'CCC' range;
-- Are currently on CreditWatch with negative implications;
-- Are rated with negative a negative outlook; or
-- Sit within a static portfolio CLO transaction.

Based on S&P's review of these factors, and considering the
portfolio concentration, it believes that the minimum cushion
between this CLO tranches' break-even default rates (BDRs) and
scenario default rates (SDRs) should be 1.0% (from a possible range
of 1.0%-5.0%).

As noted above, the purpose of this analysis is to take a
forward-looking approach for potential near-term changes to the
underlying portfolio's credit profile.

S&P said, "Taking the above into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that our preliminary ratings are commensurate
with the available credit enhancement for all of the rated classes
of notes.

"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class X to E notes
to five of the 10 hypothetical scenarios we looked at in our recent
publication. The results shown in the chart below are based on
actual weighted-average spread, coupon, and recoveries.

"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have floored the class E notes at 'B-' in scenario 3."

S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak about
midyear, and S&P is using this assumption in assessing the economic
and credit implications. S&P believes the measures adopted to
contain COVID-19 have pushed the global economy into recession. As
the situation evolves, S&P will update its assumptions and
estimates accordingly.

Fair Oaks Loan Funding II is a European cash flow CLO
securitization of a revolving pool, comprising euro-denominated
senior secured loans and bonds issued mainly by sub-investment
grade borrowers. Fair Oaks Capital Ltd. will manage the
transaction.

  Ratings List

  Class    Prelim     Prelim      Sub (%)     Interest rate*
           Rating     amount
                      (mil. EUR)
  X        AAA (sf) 1.00      N/A     Three/six-month EURIBOR
                                           plus 0.70%
  A        AAA (sf)   142.80      42.88   Three/six-month EURIBOR
                                           plus 1.90%
  B-1      AA (sf)     18.40      31.52   Three/six-month EURIBOR
                                           plus 2.79%
  B-2      AA (sf)     10.00      31.52   3.15%
  C        A (sf)      17.40      24.56   Three/six-month EURIBOR
                                           plus 3.35%
  D        BBB (sf)    14.60      18.72   Three/six-month EURIBOR
                                           plus 5.45%
  E§       BB (sf)     9.70      14.84    Three/six-month EURIBOR

                                          plus 7.50%
  Z        NR          2.00      N/A N/A
  M        NR          1.00      N/A N/A
  Sub. Notes  NR       47.00     N/A N/A

* The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.

§ The class E notes is a delayed draw tranche. It will be unfunded
at closing and have a maximum notional amount of EUR9.70 million.
EURIBOR --Euro Interbank Offered Rate.
NR --Not rated.
N/A --Not applicable.




=========
I T A L Y
=========

DEPOBANK: S&P Puts 'BB-' LongTerm ICR on Watch Positive
-------------------------------------------------------
S&P Global Ratings placed on CreditWatch positive its 'BB-'
long-term issuer credit rating on Banca Depositaria Italiana SPA
(DEPObank). At the same time, S&P affirmed its 'B' short-term
rating on the bank.

The CreditWatch placement follows the recent announcement that
Italy-based specialty lender BFF (not rated), DEPObank, and
Equinova (currently owning 91% of DEPObank's share capital) signed
a binding agreement for the sale and subsequent merger of DEPObank
into BFF.

S&P said, "We understand that under the agreement, subject to
receiving all required regulatory approvals, BFF will pay, in
exchange for 76% of DEPObank's shares, a cash consideration equal
to DEPObank's excess capital above the 15% CET1 ratio at closing
date, and subsequently merge DEPObank into BFF. Equinova will then
receive, for the remaining 24% stake in DEPObank, BFF's newly
issued shares amounting to 7.6% of BFF's post-merger share
capital.

"We believe that, if the deal is finalized as planned, the
resulting entity's creditworthiness could be at least equal to or
better than that of DEPObank, by forming a more diversified group
with complementary business lines. Although it might remain
relatively small in absolute terms and will continue operating in
niche sectors, the group's revenue stability could benefit from the
established franchise of BFF and DEPObank in the factoring and in
the securities services and payment businesses, respectively.
Compared to DEPObank, the post-merger group could also enjoy a more
geographically diversified business model, owing to BFF having
about 40% of its current lending activities outside Italy.

"At the same time, we believe that DEPObank's structural liquidity
surplus generated from the securities service activities could
provide a relatively cheap and stable funding source for BFF's
factoring business.

"Upon resolution of the CreditWatch, our view of DEPObank's credit
profile may take into account the final conditions of the merger,
as well as the economic and operating prospects of the countries
where the combined entity would operate.

"The CreditWatch placement reflects the possibility that we may
further revise our views of DEPObank's creditworthiness when we
assess the impact of BFF's acquisition of the bank and its
integration into the BFF group.

"We expect to resolve the CreditWatch in the coming months upon
receiving sufficient information about the completion of the
acquisition and the details of the expected merger. We anticipate
that this could likely happen before end-2020.

"We could raise our ratings on DEPObank by one notch if we
concluded, that following the acquisition and the merger with BFF,
DEPObank has become an important part of a larger and more
diversified banking group with stronger creditworthiness compared
to its own prior to the merger, and we assess the bank's importance
to BFF as integral to BFF's future strategy. We will also monitor
economic developments in Italy and Europe over the coming months
and might update the assumptions underlying our analysis
accordingly.

"We could affirm the ratings on DEPObank if we concluded that the
transaction will not go through, or we anticipated the post-merger
group's creditworthiness is not significantly better than that of
DEPObank."


NAPLES CITY: Fitch Cuts LT IDRs to BB, Outlook Stable
-----------------------------------------------------
Fitch Ratings has downgraded the City of Naples' Long-Term Foreign-
and Local-Currency Issuer Default Ratings to 'BB' from 'BB+' and
removed the Rating Watch Negative. The Outlooks are Stable.

The downgrade reflects Fitch's expectation that Naples' operating
performance will not strengthen to cover annual debt service
requirements by its 1x threshold as a post-coronavirus weak economy
will likely hinder improvement on tax- and fee-collection rates.
While debt takeover by the Italian state is put on hold, Fitch
expects that new inter-governmental loans to repay commercial
liabilities will push Naples' adjusted debt to above EUR3 billion
and reduce negative working capital (disavanzo di amministrazione)
to about EUR0.5 billion from the current EUR1.1 billion.

While Italian local and regional governments' most recently
available data may not have indicated performance impairment,
material changes in revenue and cost profiles are occurring across
the sector and likely to worsen in the coming weeks and months as
economic activity suffers and some form of government restrictions
are maintained or broadened. Fitch's ratings are forward-looking in
nature, and Fitch will monitor developments in the sector for their
severity and duration, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on
performance expectations and assessment of key risks.

KEY RATING DRIVERS

HIGH

Debt sustainability: 'b' category

Under Fitch's rating case for 2020-2024, Naples' debt will rise to
EUR3.2 billion by 2024 from EUR2.5 billion in 2019 and debt
sustainability (debt-to-operating balance or debt payback) will
weaken to around 30x in 2024, from nearly 24x in 2019 and remain in
the 'b' category. Fitch expects debt to remain above 200% of
operating revenue and weak debt service coverage at below 1x,
making timely payment of interest and principal reliant on the
Italian preferential payment system, which allows prioritising
payment of staff, debt service and essential services over
commercial liabilities.

Sovereign Support

Naples has received EUR1.3 billion subsidised loans to pay down its
commercial liabilities, which Fitch views as junior to market
financial debt: Fitch assumes the national government will
subordinate the subsidised loan repayment to market debt if Naples
comes under further financial stress as it has done for all other
Italian LRGs this year with its coronavirus-support measures. Fitch
also expects Naples to draw down an additional EUR600 million for
repaying outstanding commercial liabilities as allowed by a May
2020 national decree, which will take inter-governmental lending to
about 50% of the city's adjusted debt.

The city extensively uses the preferential payments system to
ensure timely debt service. Fitch assumes that Naples will
prioritise up to 90% of its operating expenditure, up from a
historical 85%, as tolerance of late payment among commercial
suppliers shrinks (in turn shrinking resources available for debt
service coverage), amid growing economic strain due to the
pandemic. Fitch estimates the city's adjusted operating balance
(enhanced by considering only prioritised expenditure) to contract
to about EUR190 million during 2021-2024, from an average of EUR240
million in 2015-2019. With market financial debt of EUR1.7 billion
to fund capex, the re-calculated debt payback of six years allows
Naples' IDR to be notched up six times (to BBB-) from the city'
Standalone Credit Profile of 'b-'.

Asymmetric Risk

Naples' long-standing budget deficit highlights weak governance on
forecasts and resource planning. Continued reliance on the
preferential payments carries a risk of default if the mechanism is
reversed by law, or if its incorrect application (all
non-prioritised spending need to be paid according to the date of
the invoice received) leads to a court ruling invalidating the
segregation of liquidity for the benefit of bond and loan holders.

Naples' debt payback weakens to above 11 years ('a' debt
sustainability), when EUR0.5 billion net outstanding payables, post
the upcoming inter-governmental loan, are added to market financial
debt raising the debt-to-revenue ratio back up to 210%. This,
combined with a 'Low-Midrange' risk profile, shaves off the uplift
from SCP by two notches and leads to an IDR of 'BB'.

LOW

Risk Profile: 'Low Midrange'

Fitch assesses Naples' risk profile, or debt tolerance, as 'Low
Midrange' reflecting a fairly high risk of adjusted cash flow
shrinking below its forecast EUR190 million or annual interest and
principal expense rising above the Fitch-expected EUR200 million
per annum over the medium-term. This is reflected in its assessment
of three key risk factors as 'Weaker', two 'Midrange' and one
'Stronger'.

Revenue Robustness: 'Midrange'

Fitch's scenarios envisage a one-off drop in Naples' operating
revenue in 2020 from EUR1.1 billion in 2019, caused by the lockdown
and post-lockdown measures, such as a reduction of the waste tax
(for Naples, about 1/6th of EUR170 million cashed-in), the tourist
tax and soil-occupation charge. Despite expectations of a 5% rise
in transfers from the central government in 2020, to partly
compensate lower tax and service revenue, Fitch's base case
estimates a fall in operating margin to 7% in 2020, and a near
10%-decline in its rating case of prolonged economic weakness.

As cities' tax base is mostly non-cyclical, Fitch expects a rebound
in revenue from 2021 and medium-term growth of 0.6% in its baseline
scenario, unless prolonged economic weakness leaves revenue
stagnating at EUR1.1 billion. A further revenue stabiliser is the
national equalisation fund, which accounts for 33% of Naples'
operating revenue and mitigates its weak tax- and fee-collection
rate of about 75%.

Revenue Adjustability: 'Weaker'

Naples is under a recovery plan since 2014, which requires raising
tax and fee charges up to the legal limit. Fitch believes that the
pandemic may hold back Naples' efforts to fight tax evasion and
hinder improvement in tax collection rates and expanding the tax
base, i.e. the revenue-raising flexibility of the city. With a 23%
unemployment rate - possibly increasing post-pandemic - and GDP per
capita of EUR19,400, below the EU average of EUR30,000, the city is
unlikely to tackle its shadow economy in order to avoid social
discontent.

Expenditure Sustainability: 'Midrange'

Naples' operating expenditure decreased 25% to EUR1 billion over
2010-2019 amid a 35% reduction in staff costs as headcount fell to
7,500 from over 10,000 and as net negative working capital remained
stable at EUR1.1 billion in 2016-2019. Fitch expects the trend to
continue and forecast a medium-term operating balance of about
EUR85 million in its rating case, rising to EUR190 million once
netted of subordinated commercial liabilities. Fitch considers that
some mandatory responsibilities for civil registry, urban
maintenance, waste collection, transportation and childcare as
fairly predictable and that the city will continue to delay
payments on less urgent liabilities.

Expenditure Adjustability: 'Weaker'

Fitch does not expect further curtailments of public spending,
given the city's low level of existing services following spending
cuts to cope with decades of financial distress. Fitch deems Naples
to have virtually no flexibility on operating expenditure, which
results in debt service coverage of just 1x by an EUR180
million-EUR190 million adjusted operating balance.

Liabilities and Liquidity Robustness: 'Stronger'

Under national prudential regulation Naples can only borrow for
capex as long as interest expenses do not exceed 10% of operating
revenue, with amortising-debt structures, and no foreign- currency
debt exposure. Cassa Depositi e Prestiti (BBB-/Stable), a lender of
last resort for Italian LRGs, and the national government together
account for over 75% of Naples' long-term debt, while bonds account
for a modest 11%. Almost the entire stock of Naples' loans carries
fixed interest rates, reflecting a low risk appetite and a low risk
of direct debt servicing increasing sharply.

Liabilities and Liquidity Flexibility: 'Weaker'

Fitch estimates that Naples' cash is wholly earmarked for payables
settlement, while past unpaid liabilities for EUR1.1 billion,
nearly 1x the budget size, continue to put pressure on the city's
liquidity, driving the 'Weaker' assessment on this factor. Partly
mitigating these features is a liquidity line that the city's
treasurer, Intesa Sanpaolo (BBB-/Stable), can extend for up to
EUR280 million cash advances per year by Fitch's calculation,
covering debt service by more than 1x.

DERIVATION SUMMARY

Naples' 'Low Midrange' risk profile and 'b' debt sustainability
lead to a SCP in the 'b' category. Debt service coverage at about
0.5x and a fiscal debt burden above 200% lead to a SCP at 'b-'.
Naples' IDR is notched up from the 'b' SCP to 'BB' for support from
the national government (+ six notches) and notched down for
asymmetric risk (- two notches). Its Short-Term 'B' IDR is mapped
against its Long-Term IDR.

KEY ASSUMPTIONS

Qualitative assumptions and assessments and their respective change
since the last review on November 29, 2019 and weight in the rating
decision:

Risk Profile: Low Midrange, unchanged low weight

Revenue Robustness: Midrange, unchanged with low weight

Revenue Adjustability: Weaker, unchanged with low weight

Expenditure Sustainability: Midrange, unchanged with low weight

Expenditure Adjustability: Weaker, unchanged with low weight

Liabilities and Liquidity Robustness: Stronger, unchanged with low
weight

Liabilities and Liquidity Flexibility: Weaker, unchanged with low
weight

Debt sustainability: 'b' category, unchanged with high weight

Support: +6 notches, deteriorating with high weight

Asymmetric Risk: -2 notches, unchanged with high weight

Sovereign Cap or Floor: n/a

Quantitative assumptions - issuer-specific

Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2015-2018 figures, 2019 estimates and
2020-2024 projected ratios. The key assumptions for the scenario
include:

  - 0.1% decrease in operating revenue on average in 2020-2024 in
rating case versus 0.6% growth in baseline scenario across the same
period;

  - Flat operating spending on average in 2020-2024 in rating case,
versus 0.4% increase in baseline scenario across the same period;

  - Adjusted debt at EUR3.2 billion in rating case versus EUR2.7
billion in baseline scenario;

  - EUR1.5 billion inter-governmental lending in rating case,
including new borrowings for EUR600 million to partially cover
EUR1.1 billion Fitch-calculated net negative working capital.
Baseline scenario envisages EUR1.2 billion inter-governmental
lending (new borrowings at EUR300 million) and outstanding payables
at EUR0.5 billion; and

  - Preferential payments will continue to support timely debt
service.

Quantitative assumptions - sovereign-related (note that no weights
are included as none of these assumptions were material to the
rating action)

Figures as per Fitch's sovereign estimates for 2019 and forecast
for 2021, respectively:

  - GDP per capita (US dollar, market exchange rate): 32,979;
31,362

  - Real GDP growth (%): 0.3%; 3.7%

  - Consumer prices (annual average % change): 0.6%; 0.5%

  - General government balance (% of GDP): -1.6%; -6.6%

  - General government debt (% of GDP): 134.8%; 157.4%

  - Current account balance plus net FDI (% of GDP): 2.1%; 1.1%

  - Net external debt (% of GDP): 48.9%; 51.6%

  - IMF Development Classification: DM

  - CDS Market Implied Rating: BB+

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - The IDR will be downgraded to 'BB-' if Fitch expects the debt
payback ratio, after accounting for state support and asymmetric
risks, reaches 13 years.

  - The ratings could also be downgraded if the preferential
payment mechanism protecting financial lenders is removed or
undermined by regulatory changes.

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - The IDR could be upgraded if a material reduction of the fiscal
debt burden drives the debt payback ratio, after accounting for
state support and asymmetric risk, to around nine years on a
sustained basis.

COMMITTEE MINUTE SUMMARY

Committee date: May 20, 2020

There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Public Finance issuers have a
best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating
downgrade scenario (defined as the 99th percentile of rating
transitions, measured in a negative direction) of three notches
over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA'
to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance.

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

Naples has an ESG Relevance Score of '4' for 'Creditor Rights' due
to the presence of large, long-standing payables that expose the
city to outstanding or pending litigation. Net outstanding payables
are considered as asymmetric risk (weak management and governance)
impacting the city's IDR.

Naples, City of

  - LT IDR BB; Downgrade

  - ST IDR B; Affirmed

  - LC LT IDR BB; Downgrade

  - Senior unsecured; LT BB; Downgrade




===========
R U S S I A
===========

KRASNOYARSK KRAI: S&P Alters Outlook to Neg. & Affirms 'BB' ICR
---------------------------------------------------------------
S&P Global Ratings revised its outlook on the Russian Region of
Krasnoyarsk Krai to negative from stable and affirmed its 'BB'
long-term issuer credit rating.

Outlook

S&P said, "The negative outlook indicates that we could downgrade
Krasnoyarsk Krai in the next 12-18 months should financial
indicators worsen more than currently projected. The region's
financials in 2020-2021 could weaken should a potentially prolonged
recession erode cash reserves or lead to higher debt. In our view,
Krasnoyarsk Krai will aim to maintain a prudent approach to
expenditure and continue to post an operating surplus, despite the
macroeconomic environment. We also assume that Krasnoyarsk Krai
will maintain a sufficient liquidity buffer, tapping capital
markets, or arranging bank loans or committed facilities when
needed."

Downside scenario

S&P could lower the rating if Krasnoyarsk Krai reports materially
higher deficits after capital accounts than in its base case, with
liquidity weakening more than currently projected. A protracted
revenue shortfall could also lead to a downgrade.

Upside scenario

S&P could revise the outlook to stable if it sees risks for the
region reducing, in particular, if it believes the adverse effects
of commodity price declines and the pandemic have subsided, and
Krasnoyarsk Krai has restored its budgetary performance to solid
pre-pandemic levels, while maintaining liquidity buffers and
containing debt accumulation.

Rationale

S&P said, "We expect that economic performance in Russian regions,
including Krasnoyarsk Krai, will follow the country's recession
trend in 2020, but pick up in 2021. We believe the current
environment is reducing the regions' headroom to withstand future
potential pressures. Nonetheless, despite some deterioration of
budgetary performance, we believe that Krasnoyarsk Krai will
continue to achieve operating surpluses. However, these are
projected to drop to 2% of operating revenue, with the deficit
after capital accounts expanding below 8% of total revenue in 2020.
This is in line with the average 6%-9% deficit we expect for
Russia's local and regional government (LRG) sector."

Nevertheless, ample accumulated reserves will support the region in
financing its rising deficits. The region's tax-supported debt is
expected to increase slightly beyond 42% of consolidated operating
revenue by 2022, but remain low by international standards, which
will continue to support the rating. Liquidity coverage is expected
to remain sufficient, thanks to accumulated cash funds, regular
bond bond issuance even in tough market conditions, and access to
short-term liquidity from the federal treasury.

The centralized institutional framework and the region's reliance
on commodities constrain the rating

Like other Russian regions, Krasnoyarsk Krai's financial position
depends heavily on the federal government's decisions under
Russia's institutional setup, which remains unpredictable, with
frequent changes to the tax mechanisms affecting regions. Decisions
regarding regional revenue and expenditure are centralized at the
federal level, constraining the predictability of Krasnoyarsk
Krai's financial policy.

S&P said, "We have revised downward our base-case GDP growth
forecast for Russia for 2020, and now expect the economy to
contract by 4.8%, reflecting weakness in external demand as well as
shrinking investment. This follows our downward revision of our
price assumptions for Brent oil in 2020 to $30 per barrel from $60
previously, and our projection of global GDP falling by 2.3%. We
now believe that Krasnoyarsk Krai's gross regional product will
mirror national recessionary trends in 2020 and bounce back in
2021-2022.

"The region's economy benefits from large reserves of metals,
including Russia's largest volumes of nickel, cobalt, and copper,
and more than 20% of its gold, as well as substantial coal
reserves. However, we expect that the local economy's reliance on
oil and metal extraction will bring volatility in 2020-2022.
Production will mainly stem from two companies, Norilsk Nickel and
Rosneft. Both operate in cyclical industries and together account
for over 20% of Krasnoyarsk Krai's revenues. We expect the oil
price and extraction declines to hit Krasnoyarsk Krai's operating
revenues. So far, revenue from the metal industry is recurrent, but
risks remain.

"Despite an expected reduction in operating revenue, we believe
Krasnoyarsk Krai has sufficient flexibility to balance its budget
in case of a revenue shortfall. Financial management has a strong
track record of cost control, as shown in previous turbulent years.
Additionally, we believe the region's management can postpone some
investment projects in response to declining revenue. At the same
time, we note that Krasnoyarsk Krai, in line with other Russian
regions, lacks reliable long-term strategic planning and does not
have sufficient mechanisms to counterbalance volatility stemming
from the concentrated nature of its economy and tax base."

Despite widening deficits in 2020-2021, sufficient liquidity and
low debt support the rating

S&P said, "We believes that Krasnoyarsk Krai's operating balances
will weaken and the region will return to posting modest deficits
after capital accounts in 2020-2022 after a strong surplus last
year. The deterioration will primarily reflect the decline in
average commodity prices and weaker economic conditions expected
for 2020, influencing the performance of some of the region's
largest taxpayers and reducing expected corporate profit tax
receipts. The COVID-19 pandemic is also likely to further weaken
tax payments. Tax collections in the region are still benefiting
from so far favorable market prices for metals and maintained
production volumes. Furthermore, pandemic-related spending,
although moderately mild, is expected to add up to the already high
and inflexible social expenditure.

"We believe that pressure on expenditure from the implementation of
national development projects, announced by the Russian president
in 2018, will continue to push up the region's spending. We do not
expect Krasnoyarsk Krai to stop any of the federal projects.
However, the region has some flexibility to cut or postpone its own
investment programs if needed.

"In view of the mounting deficit and projected increase in debt
service in 2021-2022, we believe the region will resort to market
financing this year. We project tax-supported debt will rise to
around 42% of consolidated operating revenue through 2022, after a
contraction in 2019. At the same time, compared with international
peers, total debt remains low. As an active participant in Russia's
bond market, Krasnoyarsk Krai enjoys good access to external
liquidity, in our view. It has a proven track record of obtaining
financing in periods of tight market conditions, and continuous
federal treasury liquidity support in the form of short-term loans.
Nevertheless, in the near term, debt service will likely remain at
about 10% of operating revenues on average, owing to large debt
maturities in 2021-2022.

"We believe that Krasnoyarsk Krai's contingent liabilities are low.
They include the debt and payables of the region's
government-related entities, as well as the municipal sector's
debt. The unitary enterprises and regional joint stock companies,
of which Krasnoyarsk Krai owns 25% or more, are mostly financially
healthy. The municipal sector's debt mainly consists of commercial
loans and does not represent a significant liability for the
region."

In accordance with S&P relevant policies and procedures, the Rating
Committee was composed of analysts that are qualified to vote in
the committee, with sufficient experience to convey the appropriate
level of knowledge and understanding of the methodology applicable.
At the onset of the committee, the chair confirmed that the
information provided to the Rating Committee by the primary analyst
had been distributed in a timely manner and was sufficient for
Committee members to make an informed decision.

After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.

The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.

The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.

  Ratings List

  Ratings Affirmed; Outlook Action  
                               To              From
  Krasnoyarsk Krai
   Issuer Credit Rating   BB/Negative/--    BB/Stable/--


NOVOSIBIRSK CITY: Fitch Affirms LT IDR at BB, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed the Russian City of Novosibirsk's
Long-Term Foreign- and Local-Currency Issuer Default Ratings at
'BB' with a Stable Outlook and Short-Term Foreign-Currency IDR at
'B'. The region's senior debt long-term rating has been affirmed at
'BB'.

The affirmation reflects Fitch's expectations that the city will be
resilient to downside shocks and will sustain debt sustainability
ratios in line with its ratings.

KEY RATING DRIVERS

Risk Profile: 'Low Midrange'

Fitch has reassessed Novosibirsk's risk profile at 'Low Midrange'
from 'Weaker', following the revision of the region's revenue
robustness attribute to 'Midrange' from 'Weaker'.

Revenue Robustness: 'Midrange'

The attribute has been reassessed at 'Midrange' from 'Weaker' based
on the midrange economic profile of the city (GRP per capita at
110% of the Russian LRGs' median), which is diversified across
sectors and companies. The city's economy is relatively
well-diversified across sectors and companies. Novosibirsk's GRP
CAGR for 2013-2018 was on par with the Russian average, which
together with the low historical volatility of the city's revenue
proceeds, underpinned the re-assessment for revenue robustness.

Revenue Adjustability: 'Weaker'

Fitch assesses Novosibirsk's ability to generate additional revenue
in response to possible economic downturns as limited. The federal
government holds significant tax-setting authority, which limits
Russian local and regional governments' fiscal autonomy and revenue
adjustability. Land tax and personal property tax are the only two
local taxes and Novosibirsk has the authority to set the rate and
base for both. However, the city's ability to determine taxes is
constrained by the limits set in the National Tax Code. Also, the
revenue generated from the local taxes is modest; in aggregate they
contributed 13% of the city's total revenue in 2019.

Expenditure Sustainability: 'Midrange'

Historically, Novosibirsk demonstrated prudent control of
expenditure, as evidenced by the track record of the spending
dynamic closely following that of revenue in 2015-2019. Like other
Russian municipalities, Novosibirsk's expenditure structure is
dominated by education, which is of a counter-cyclical nature and
accounted for 58% of total expenditure in 2018. The city is not
required to adopt anti-cyclical measures, inflating expenditure
related to social benefits in the times of downturn. At the same
time, the city's budgetary policy is dependent on the decisions of
the federal and regional authorities, which could negatively affect
its expenditure.

Expenditure Adjustability: 'Weaker'

Fitch assesses Novosibirsk's expenditure adjustability as low,
primarily due to the rigid structure of the city's budget. The vast
majority of spending responsibilities is mandatory, with inflexible
items dominating municipal expenditures' structure, making spending
cuts very difficult in response to potential revenue shrinking.
Expenditure rigidity is particularly high for Russian
municipalities with a material portion (Novosibirsk: above 40%)
being funded by earmarked transfers from the upper-tier government
(regional budgets). Additionally, the city's ability to cut
expenditure is constrained by the relatively low level of per
capita expenditure compared with international peers and low
self-sustained capex funding capacity and overall low capex level.

Liabilities and Liquidity Robustness: 'Midrange'

The assessment is supported by a national budgetary framework with
strict rules on municipal debt management. Particularly,
Novosibirsk is subject to debt stock limits and new borrowing
restrictions as well as limits on annual interest payments.
Additionally, use of derivatives is prohibited for Russian LRGs,
while very strict regulation on external borrowing limits FX-risk
exposure. Novosibirsk follows a prudent debt policy, evidenced by
the maintenance of a moderate debt level with a fiscal debt burden
(net adjusted debt/operating revenue) averaging 50% in 2015-2019.

Liabilities and Liquidity Flexibility: 'Midrange'

The city's debt stock comprises domestic bonds (63% of 2019 debt),
followed by bank loans (27%), and budget loans from Novosibirsk
region (10%). The city's exposure to off-balance sheet risks is
immaterial, stemming from GRE's debt. The city's liquidity as of
end-2019 amounted to RUB7.9 billion (2018: RUB8.9 billion)
comprising unused credit lines with local banks. Novosibirsk's
liquidity position is additionally supported by the federal
treasury lines, aimed to cover intra-year cash gaps. This treasury
facility amounted to 1/12th of annual budgeted revenue (excluding
intergovernmental transfers) and can be rolled over during the
financial year. The counterparty risk associated with the liquidity
providers is 'BBB', which limits the assessment of this risk factor
to Midrange.

Debt sustainability: 'a' category

Debt Sustainability Assessment: 'a', derived from a combination of
a payback ratio (net adjusted debt/operating balance), remaining in
line with a 'a' assessment and fiscal debt burden (net adjusted
debt to operating revenue), corresponding to a 'aa' assessment and
weaker-assessed actual debt service coverage ratio (ADSCR:
operating balance to the debt service, including short-term debt
maturities) at the 'b' level.

In line with other Russian LRGs, Fitch classifies Novosibirsk as a
Type B LRG, which are required to cover debt service from cash flow
on an annual basis.

According to updated Fitch's rating case, the payback ratio, which
is the primary metric of the Debt Sustainability assessment for
Type B LRGs, will remain below between 9x-13x over the five-year
projected period. For the secondary metrics, Fitch's rating case
projects that the fiscal debt burden will remain below 100% during
the forecast period while the ADSCR will remain below 1x in
2020-2024.

Novosibirsk the city is the largest metropolitan area of Siberian
Federal District and is the third-largest city in Russia. The city
is the capital of Novosibirsk region (BBB-/Stable). According to
budgetary regulation, Russian LRGs can borrow on the domestic
market. The budget accounts are presented on cash basis while
budget law is approved for three years.

DERIVATION SUMMARY

Novosibirsk's SCP is assessed at 'bb', reflecting a combination of
a 'Low Midrange' risk profile and debt sustainability metrics
assessed in the 'a' category under Fitch's rating case scenario.
The SCP, positioned at 'bb', also reflects the peer comparison. As
the city is not subject to extraordinary support and has no
asymmetric risk, the IDRs are in line with the SCP at 'BB'.

KEY ASSUMPTIONS

Qualitative Assumptions and assessments:

Risk Profile: Low Midrange

Revenue Robustness: Midrange

Revenue Adjustability: Weaker

Expenditure Sustainability: Midrange

Expenditure Adjustability: Weaker

Liabilities and Liquidity Robustness: Midrange

Liabilities and Liquidity Flexibility: Midrange

Debt sustainability: 'a' category

Support: N/A

Asymmetric Risk: N/A

Rating Cap: N/A

Quantitative assumptions - issuer specific

Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2015-2019 figures and 2020-2024 projected
ratios.

The key assumptions for the scenario include:

  - Tax revenue growth at 5.9% CAGR in 2020-2024

  - Operating expenditure growth at 5.0 % CAGR in 2020-2024

Fitch's rating case envisages the following stress compared with
the base case:

  - Additional cumulative stress on PIT by 3.7% leading to
operating revenue stress by 1.2% in 2020-2024

  - Additional cumulative stress on operating expenditure by 2.8%
in 2020-2024

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - An improved ADSCR above 1x on a sustained basis along with
maintenance of a debt payback between 9x-13x according to Fitch's
rating case.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - For Novosibirsk City, a prolonged COVID-19 impact and much
slower economic recovery lasting until 2025 would pressure net
revenues. Should the issuer be unable to proactively reduce
expenditure or supplement weaker receipts from increased central
government transfers, this may lead to a downgrade.

  - A deterioration of the city's debt payback above 13x on a
sustained basis coupled with weak ADSCR below 1.0x according to
Fitch's rating case.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Public Finance issuers have a
best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating
downgrade scenario (defined as the 99th percentile of rating
transitions, measured in a negative direction) of three notches
over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA'
to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance.

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

The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).

Novosibirsk City

  - LT IDR BB; Affirmed

  - ST IDR B; Affirmed

  - LC LT IDR BB; Affirmed

  - Senior unsecured; LT BB; Affirmed


PAO KOKS: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed Russian pig iron company PAO Koks'
Long-Term Foreign- and Local-Currency Issuer Default Ratings at
'B'. The Outlook for the Long-Term IDR is Stable. It has also
affirmed Koks Finance DAC's senior unsecured notes rating at
'B'/RR4.

The affirmation and Stable Outlook reflect its expectation of
improvement in EBITDA from 2020 due to recovery in coal production
after underperformance at two mines in 2019, and better margins
from pig iron sales to Tula-Steel, another entity under common
shareholder control. Fitch forecasts leverage metrics to remain
high in 2020 and to decrease to about 4.5x, which is its negative
guideline, from 2021 and onward, but leading to a tight leverage
headroom. In its view, the company's strong market position in the
pig iron segment, continued efforts toward increased vertical
integration, adequate liquidity and completion of Tula Steel's
construction provide the group with additional financial
flexibility to withstand its current debt load.

In its rating, Fitch has incorporated risks posed by the company's
exposure to the construction market in the Moscow region and the
expected drop in steel demand in the US and Europe, its key pig
iron export markets. A more severe downturn is a downside risk to
its forecast. In addition, Fitch views the potential financial
support that Koks could provide to Tula-Steel in case of a
prolonged unfavourable market conditions affecting Tula-Steel as an
additional credit risk (not in Fitch's base case assumptions), even
though Fitch expects Tula-Steel to service its debt independently
and do not adjust Koks' debt for Tula-Steel's external
indebtedness.

KEY RATING DRIVERS

Limited Leverage Headroom: Koks underperformed compared with its
forecasts in 2018-2019. FFO gross leverage spiked to 5.7x in 2019
due to operational disruptions at Koks' coal mines (now resolved)
leading to lower output, and a final loan issued to Tula-Steel.
Fitch expects leverage to decrease towards 5x in 2020 and to remain
about 4.5x over 2021-2023.

The forecast improvement in credit metrics is driven by recovery in
coal output from 2020 as operations of Butovskaya and Tikhova mines
are back to normal operation and higher margins from sales to
Tula-Steel which support a rebound in EBITDA margin to over 20%
from 2020.

Limited Operational Impact from COVID-19: Operations at all of
Koks' production facilities have continued normally and the company
does not plan to suspend any activity. In April 2020, construction
activity in the Moscow area has stopped until mid-May due to the
lockdown but some activities, such as hospitals and the
construction of the metro, have continued.

The COVID-19 crisis has already caused a reduction in the
availability of scrap around the world, notably in the US and
China, driving prices up. Idling of blast furnaces, in Europe and
US in particular, restricts local supply of pig iron and will
favour import volumes. According to data from the CRU, pig iron
exports from Russia increased in 1Q20 compared with 4Q19. Fitch
forecasts stable pig iron sales volumes for Koks for 2020 compared
with 2019.

Tula-Steel to Improve Margins: Koks lent RUB21 billion to date for
the construction of another entity Tula-Steel plant, which is under
common shareholder control by Mr Zubitskiy. This led to the
increase in Koks' debt load for the past years. The plant is now
completed and started to operate in July 2019. Fitch expects Koks'
sales to Tula-Steel to generate RUB3.5 billion-4.5 billion of
EBITDA per year in 2020-2023.

Koks enjoys higher margins from the sales to Tula-Steel versus
other domestic or export sales because of logistics and casting
cost savings, as both plants are located in the same area, the Tula
region. Tula-Steel buys liquid pig iron from Koks, which does not
require any cooling and casting of the material prior to the sale.
Tula-Steel is currently focused on the construction market in the
Moscow region, with further plan to produce specialty steel for the
machinery and automotive sectors.

Tula-Steel Consolidation Considered after 2021: Tula-Steel is not
consolidated in Koks' perimeter. Gazprombank provided RUB30 billion
project financing, which was the only additional source of funding
to Koks' contribution to the project. Koks may consider
consolidating Tula-Steel in the medium term, when the plant
generates enough cash flow to start deleveraging to a level
comparable with that of Koks. Koks does not guarantee Tula-Steel's
external debt (except for RUB88 million that could be used in the
case of capex overrun) and Fitch expects Tula-Steel to service its
debt independently. In addition, Fitch has not assumed any
repayment of a loan Koks provided to Tula-Steel over 2020-2023.

Vertical Integration to be Achieved by 2025: In 2019, the company's
self-sufficiency was 56% in coal and 67% in iron ore, due to
operational problems at Butovskaya and Tikhova mines, but Fitch
expects these to increase again in 2020. The coal production volume
increase is driven by the expansion of the Tikhova and Butovskaya
mines launched in 2017. Outputs from these mines are expected to
ramp up in stages, with the second stage at the Tikhova mine in
2024. The company expects 100% self-sufficiency in coal by 2021.
Ramp up in iron ore production is dependent on the development of a
second mining level at the Gubkina mine. This development is
expected to be launched in 2021, increasing self-sufficiency to
100% by 2025.

Capex Flexibility: Significant investment projects in 2020 - 2024
include completion of the blast furnace #1 reconstruction in 2021,
construction of new level of the iron ore mine at KMAruda and
construction of the second stage of the Tikhova mine. The
maintenance capex is RUB1.6 billion. Management publicly confirmed
that capex program is flexible and can be postponed, prioritising
the deleveraging. However, in its forecasts, Fitch predicts the
capital intensity ratio to average 11% in the next four years and
capex to remain between RUB7 billion and RUB8.5 billion reflecting
investments in planned volume increase and productivity
improvements.

Strong Pig Iron Position: Koks is Russia's largest merchant coke
producer and the world's largest exporter of merchant pig iron with
a 13% market share in 2019, with North America and Europe being the
key destinations. The group specialises in commercial pig iron and
focuses on increasing its presence in premium pig iron used in
automotive, machinery and tools industries, requiring high-purity
pig iron with low sulphur and phosphorus content.

Material Related-Party Transactions: Koks' significant
related-party transactions include the loan funding of the
Tula-Steel project and high margin sales of liquid pig iron made to
the plant. The company confirmed the sales are made on an
arms-length basis.

In addition, Koks' pig iron exports totalling RUB37 billion, or 43%
of the group's RUB87 billion revenue in 2019, were routed through a
trader that the company's auditors qualify as a related party under
common control. Fitch does not currently view this as a significant
risk to the company's profile, given the arms-length basis of their
trading operations, with limited difference between realised and
market-based pig iron price dynamics, and taking into account the
relatively small pig iron merchant market with a limited number of
traders.

DERIVATION SUMMARY

Koks ranks behind CIS metals and mining closest peers EVRAZ plc
(BB+/Stable), AO Holding Company METALLOINVEST (BB+/Stable) and
Metinvest B.V. (BB-/Stable) in terms of scale of operations,
operational diversification and share of value-added products.
Koks' scale is more comparable to Ukrainian pellet producer
Ferrexpo plc (BB-/Stable) while Koks' EBITDA margins are lower.

Koks' financial profile, including its financial leverage and
operational margins, ranks behind that of Evraz, METALLOINVEST and
Metinvest, but ahead of First Quantum Minerals Ltd. (B-/Stable).

KEY ASSUMPTIONS

  - USD/RUB rate of 74 in 2020-2021, 70 in 2022 and 67 in 2023

  - Realised prices to follow coking coal (140USD/t) and iron ore
(75-60USD/t) prices from Fitch price deck over 2020-2023, adjusted
for historical discounts

  - Tikhova and Butovskaya mines to operate normally from 2020

  - EBITDA margin to improve to 21%-22% over 2021-2023 on ramp up
of coal mines and higher share of pig iron sold to Tula-Steel

  - Average capex/sales about 11% and no dividends

  - No financial support to Tula-Steel to cover Gazprombank's debt
service

  - Tula-Steel is not consolidated

  - Fitch does not assume repayment of a loan provided to
Tula-Steel over 2020-2023

Fitch's Key Recovery Rating Assumptions

The recovery analysis assumes that Koks would be considered a going
concern in bankruptcy and that the company would be reorganised
rather than liquidated.

Koks' recovery analysis assumes a post-reorganisation EBITDA at
RUB11 billion, or 20% below its last 12 months EBITDA of RUB14
billion, to incorporate the potential price moderation and
volatility across Koks' product portfolio.

A distressed EV/EBITDA multiple of 4.5x has been used to calculate
post-reorganisation valuation and reflects a mid-cycle multiple.
This is in line with other similarly rated natural resources
issuers and reflects a smaller scale but a strong market position
in global merchant pig iron market and adequate growth prospects.

Senior unsecured loan participation notes rank pari passu with
other senior unsecured debt across the group.

Revolving credit facilities are assumed to be fully drawn upon
default.

After the deduction of 10% for administrative claims, its waterfall
analysis generated a ranked recovery in the RR4 band, indicating a
'B' instrument rating. The waterfall analysis output percentage on
current metrics and assumptions was 36%.

RATING SENSITIVITIES

Factors that could, Individually or collectively, lead to positive
rating action/upgrade:

  - FFO gross leverage sustainably below 3x

  - Enhanced business profile through larger scale and/or product
diversification

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - FFO gross leverage sustainably above 4.5x driven by market
deterioration or underperformance of new capacities or by
additional support to Tula-Steel

  - Increasing reliance on short-term debt financing or tightening
of liquidity with liquidity ratio falling below 1x

  - FFO interest coverage falling below 2.0x

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

Satisfactory Liquidity: As of end-March 2020, the company had
comfortable liquidity with RUB10 billion cash position and RUB35
billion available committed lines to cover RUB6.8 billion of
short-term debt. Liquidity score drops to below 1x in 2022 as the
Eurobond matures. However, the company may consider plans to
refinance in the next 12 months. The company estimates minimum cash
balance necessary to sustain operations at RUB2 billion.

In accordance with Fitch's policies, the issuer appealed and
provided additional information to Fitch that resulted in a rating
action that is different than the original rating committee
outcome.

SUMMARY OF FINANCIAL ADJUSTMENTS

  - RUB30 million interest related to lease debt reclassified as
lease expenses

  - RUB86 million D&A related to right of use assets reclassified
as lease expense and deducted from EBITDA

  - RUB80 million long-term lease liabilities and RUB99 million
short-term lease liabilities reclassified as other non-current and
current liabilities

  - RUB200 million deducted from cash flow from financing as
non-recourse factoring was fully repaid in 2019

  - Total debt of the company according to IFRS is adjusted by
RUB88 million of guarantees for loans issued to Tula-Steel

  - RUB167 million of non-operating income reclassified as
operating

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

The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).


SOVCOMFLOT: Fitch Affirms LT IDR at BB+, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed Russia-based PAO Sovcomflot's Long-Term
Issuer Default Rating at 'BB+' with a Stable Outlook. Fitch has
also affirmed SCF Capital Designated Activity Company's senior
unsecured notes, which are guaranteed by SCF, at 'BB+'.

The affirmation reflects SCF's healthy business profile supported
by cash-flow visibility with about half of total time charter
equivalent revenue coming from industrial business (LNG/LPG carrier
and offshore services) with long-term contracts, large scale of
operations, fairly young and specialised fleet and diversified
customer base as well as its expectation that credit metrics will
remain comfortable for the rating, with funds from operations
adjusted net leverage averaging 4.6x in 2020-2023. The rating also
incorporates SCF's exposure to the highly volatile spot market
typically through conventional business (crude oil and oil product
transportation).

The 'BB+' rating continues to incorporate a one-notch uplift to its
Standalone Credit Profile of 'bb', reflecting the links to the
parent, the Russian Federation (BBB/Stable).

KEY RATING DRIVERS

Healthy Business Profile: The industrial segment, which accounted
for 52% of total TCE revenue in 2019, is generally more profitable
and benefits from long-term, fixed-rate contracts improving
cash-flow visibility. At end-2019, the future contracted revenue
was USD13 billion, including joint ventures, up from about USD8
billion two years ago. USD3 billion of contracted revenue is
scheduled for 2020-2023. The remaining revenue is generated from
conventional segment, which is typically contracted for less than a
year or runs on spot trading. Fitch expects the share of industrial
business to remain stable.

Tanker Rate Hikes to Reverse: Fitch expects the currently strong
tanker rates to reverse for the balance of the year. Tanker rates,
which were under pressure for most of 2017-2018, recovered from
4Q19 and remained strong in 1Q20 mainly on the back of geopolitical
situation and implementation of IMO-2020 regulation, which
temporarily reduced capacity supply. Also, as a result of the
pandemic, soaring demand for floating storage has kept the rates
buoyant. The company has not yet been negatively affected by the
coronavirus other than small operational difficulties, which the
management believes manageable and negligible.

However, Fitch assumes that earnings will drop for 2H20 after a
healthy first quarter, resulting in about 19% lower annual EBITDA
in 2020 compared with 2019.

Assuming 10-Year Average Rates: Fitch considers current tanker
rates level to be unsustainable and expect them to adjust. In its
rating case, Fitch used historical 10-year average freight rates
from 2020, which are below current levels. SCF is exposed to market
risks as about 45% of total TCE revenue comes from the
transportation of conventional crude oil and oil products, about
44% of which operates on spot trading, with the remaining on
fixed-term contracts of no more than two years.

Robust 1Q20 Results: In 1Q20, SCF reported revenue of USD493
million and EBITDA of USD283 million, a 20% and 40% increase,
respectively. This was mainly on the back of the strong tanker
market and growing industrial business portfolio. Given the
volatility of tanker rate, Fitch takes a through-the-cycle rating
approach, assuming a 10-year tanker freight rate average in its
rating case. As a result, Fitch anticipates the company's EBITDA to
average about USD700 million in 2020-2023.

Healthy Credit Metrics: In 2019, SCF's Fitch-calculated FFO
adjusted net leverage improved to 3.8x from a capex- and low rates-
driven peak of 7.4x at end-2017. Fitch anticipates the company's
FFO adjusted net leverage to be comfortably within its guidelines
for the current rating, averaging 4.6x in 2020-2023 on stable cash
flow from the industrial segment, normalisation of tanker freight
rates and slightly lower than historical level of capex. Fitch
expects SCF to generate healthy cash flow from operations in
2020-2023, but its FCF to be neutral or slightly negative.

Strong Operations: SCF is one of the global leaders in maritime
transportation of hydrocarbons and in servicing of offshore
exploration and oil & gas majors. The company owns and operates 140
vessels, which are fairly young with an average age of 11 years.
SCF has a diversified customer base consisting of large
international and Russian oil and gas companies, whose
unconstrained credit profiles are generally stronger than that of
SCF. Top 10 customers accounted for 76% of TCE revenue in 2019,
with no single counterparty contributing more than a fifth of TCE
revenue.

One-Notch Uplift: SCF's rating continues to incorporate a one-notch
uplift to its SCP of 'bb'. Fitch views the status, ownership and
control linkage of SCF with the sovereign as strong, due to the
government's full ownership of the company, while there is a
moderate record of support. Fitch assesses socio-political
implications of its theoretical default as moderate, considering
that the company operates in a highly competitive market and could
be substituted, but also that SCF plays an important role in the
Russian oil and gas sector and is included in the list of
strategically important enterprises.

Partial Privatisation Rating-Neutral: Fitch views the potential
privatisation of 25% minus one share as rating-neutral, as Fitch
believes it will not affect the relations between SCF and the
state, given that the company is an integral part of the
government's energy strategy in transporting Russia's oil and gas
and its close working relationship with state-owned oil and gas
companies. Further significant privatisation leading to the loss of
effective control over SCF by the state may result in the removal
of the one-notch uplift above the SCP.

Senior Unsecured Aligned with IDR: Fitch continues to align the
senior unsecured rating with the company's Long-Term IDR. It would
consider decoupling the ratings if the amount of unencumbered
assets fell well below 1.8x of unsecured debt on a sustained basis,
which Fitch believes would indicate a structural subordination that
is detrimental to the unsecured debt.

DERIVATION SUMMARY

SCF's SCP of 'bb' is higher than PT Soechi Lines Tbk's (B/Stable),
despite higher leverage, and is underpinned by its significantly
stronger business profile supported by the large scale of its
business, healthy share of long-term contracts, fairly young and
specialised fleet and diversified customer base. SCF's EBITDA is
about 10x larger than Soechi's, while Soechi's historical average
FFO adjusted net leverage is about 4.5x. SCF benefits from the
one-notch uplift due to strong support from the Russian
government.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within its Rating Case for the Issuer

  - 10-year average tanker rates in 2020-2023, capacity as per
scheduled deliveries

  - 85% of utilisation rate for vessels on spot trading in 2020-
contractual rates for time charters

  - annual capex of up to USD500 million

  - dividend pay-out ratio of 50% of net income in 2020-2023

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - Stronger links with the government

  - FFO adjusted net leverage well below 4.0x and FFO fixed-charge
cover above 3.5x on a sustained basis

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - Structural decline of tanker rates or more sizeable capex
resulting in the deterioration of the company's credit metrics (eg
FFO adjusted net leverage above 5.0x and FFO fixed-charge coverage
below 2.5x on a sustained basis)

  - Weaker links with the government.

  - Unencumbered assets falling well below 1.8x of unsecured debt
on a sustained basis would lead to a downgrade of the senior
unsecured rating

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

Strong Liquidity: As of end-March 2020, SCF's unrestricted cash
position was USD534 million along with its undrawn portion of
committed credit lines of USD434 million, USD85 million of which
are secured revolving credit facilities for general corporate
purposes and the rest related to capex funding. This compares
comfortably with short-term debt maturities of USD525 million and
negative post-dividend free cash flow of USD92 million that Fitch
estimates for the subsequent 12 months.

SUMMARY OF FINANCIAL ADJUSTMENTS

Cash: Fitch has reclassified as restricted cash at end-2019 cash
related to the retention accounts of USD26.3 million designated by
the group's lenders for the purposes of the secured bank loan
agreement to cover future loan principal and interest repayments
and bank deposits accessible on the maturity of USD0.6 million

EBITDA: Gain on sale of assets, allowance for credit losses, share
of profits in equity accounted investments and other impairment
provision were excluded from EBITDA calculations

Cross-Currency Interest-Rate Swap: Net asset/liability for
cross-currency interest-rate swaps are treated as debt

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

The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).




=========
S P A I N
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GRUPO ALDESA: Fitch Raises LT IDR to BB-, Off Ratings Watch Pos.
----------------------------------------------------------------
Fitch Ratings has upgraded Spanish engineering and construction
company Grupo Aldesa S.A.'s Long-Term Issuer Default Rating (IDR)
to 'BB-' from 'B-' and has removed the ratings from Rating Watch
Positive. The Outlook on the IDR is Stable.

Concurrently, Fitch has withdrawn the 'B-' senior secured rating of
the wholly owned subsidiary Aldesa Financial Services S.A as the
company redeemed the bond on 19 May.

The upgrade is driven by the completion of Aldesa's investment
agreement with its immediate parent, CRCC International Investment
Group (CRCCII), a wholly owned subsidiary of China Railway
Construction Corporation Limited (CRCC). On May 8, 2020, CRCCII
completed the acquisition of a 75% stake in Aldesa while existing
shareholders retained the remaining 25% of the share capital. The
transaction included an around EUR256 million capital increase,
which was used to redeem Aldesa's EUR245 million Luxembourg bond on
May 19.

The upgrade reflects the positive impact of the transaction on
Aldesa's financial structure and liquidity position, which
outweighs deteriorating profitability due to coronavirus-related
sector disruptions and low order intake in recent quarters. The
rating incorporates a one-notch uplift to reflect Aldesa's links
with its stronger ultimate parent, CRCC. Fitch assesses overall
ties between the two companies as moderate under Fitch's "Parent
and Subsidiary Rating Linkage" criteria.

CRCC is one of the largest integrated construction groups in the
world, with revenues of over USD115 billion in 2019.

The ratings were withdrawn for the following reason: Bonds Were
Prefunded/Called/Redeemed/Exchanged/Cancelled/Repaid Early

KEY RATING DRIVERS

Stronger Financial Structure: The transaction has strengthened
Aldesa's financial structure as the capital increase from CRCCII
was used to redeem the EUR245 million bond maturity including
related put-option costs. Fitch assumes that financial structure
improvements achieved from the bond repayment will be partly offset
by potential new debt drawdown. Nevertheless, Fitch expects a
stronger leverage profile that is in line with a higher rating.

Improving Liquidity Profile: Aldesa's liquidity profile is
supported by the intercompany financing agreement with CRCCII and
it is no longer constrained by refinancing pressures related to the
bond maturity. Fitch expects adequate liquidity and no significant
debt maturities following the assumed refinancing of the company
apart from working capital management facilities (factoring and
confirming lines). Fitch believes Aldesa's liquidity profile will
provide sufficient headroom to offset expected negative free cash
flows in 2020 due to the impact of the pandemic.

Moderate Parental Support: Fitch views the overall links between
Aldesa and its stronger parent CRCC as moderate under Fitch's
Parent and Subsidiary Rating Linkage criteria, and apply a
single-notch uplift to its standalone credit profile. Moderate
strategic ties are mainly reflected in Aldesa's role as a platform
for CRCC to enter American markets. The link is limited by the lack
of strong legal ties such as guarantees and cross-default clauses,
and the relatively small size of Aldesa, which accounts only for
around 1% of CRCC's total revenues.

Pandemic to Weigh on Profitability: Fitch expects a sharp decline
in margins and high cash consumption in 2020 driven by the
significant impact of coronavirus-related disruptions. Fitch
expects supply chain challenges with materials, equipment and
subcontractors will lead to some project delays and cost overruns.
Overall Fitch assumes an over 2pp drop in EBITDA margin and
negative free cash flow (FCF) of about EUR45 million.

Fitch expects severe adverse impact from the pandemic in Spain and
relatively moderate disruptions in Mexico and Poland.

Declining Revenues in 2020: Fitch expects a further decrease of
revenues and total backlog in 2020 driven by the impact of the
pandemic coupled with relatively low new order intake in recent
quarters. In the first nine months of 2019, Aldesa's order backlog
fell 18% to about EUR1,168 million. The slowdown in new orders was
driven by delayed tenders for civil works in Mexico and lower
levels of contracting in residential building projects in Spain.

Fitch expects stronger new order intake from 2021 driven by the
recovery across the construction market coupled with potential
synergies from the integration with CRCC. Fitch believes the
transaction may provide support for improvements to Aldesa's scale
of operations and operational capabilities, leading to larger and
more stable order backlog over the medium term.

Synergies from Integration with CRCC: Fitch believes Aldesa's
credit profile will also benefit from potential synergies related
to integration into CRCC. It is one of the largest international
engineering and construction contractors in the world with a
presence in about 100 countries and solid operational capabilities
across different segments including railways, highways, bridges,
tunnels and urban rail traffic. Fitch expects Aldesa to leverage
CRCC's scale and capabilities as Fitch believes it will act as a
platform for the Chinese group's expansion in selected countries in
Europe and the Americas.

Adequate Standalone Business Profile: Aldesa's standalone business
profile is commensurate with a 'B' rating category. The company has
effectively deployed its recognised technical capabilities in
sub-segments of the infrastructure construction industry, such as
tunnelling, to enter new geographic market, and build solid
positions outside Spain, notably in Mexico. Geographic and customer
concentrations are satisfactory for a 'B' rated issuer.

Fitch expects a stronger business profile following the integration
driven by potential increase in the scale of operations and
improved operational capabilities.

Constrained by Size: Aldesa's smaller size compared with peers',
with sales of less than EUR1 billion, remains a negative factor at
the current rating. However, this is mitigated by a solid record in
risk management and long-lasting relationships with the company's
major customers.

DERIVATION SUMMARY

Aldesa's business profile is somewhat stronger than Obrascon Huarte
Lain SA's (OHL; CCC+/Stable). OHL's larger scale, broader
geographic diversification and stronger market position in roads
and railways is more than offset by large working capital
requirements and persistent issues with contract risk management in
many legacy projects across different markets and business
segments. Aldesa's financial profile is also stronger than OHL's
given Aldesa's lower leverage and sound financial flexibility. The
recent transaction has strengthened Aldesa's liquidity profile and
reduced short-term refinancing risk, compared with OHL's ongoing
large cash consumption and weakening financial flexibility.

KEY ASSUMPTIONS

  - Decline in revenues by low teens in 2019 and mid-single digits
in 2020 followed by low to mid-single-digit growth in 2021-2022

  - Recourse EBITDA margin of 5.2% in 2019, sharp decline to around
3.0% in 2020 followed by increase to 5.3% in 2021 and 6.3% in 2022

  - Working capital consumption of around 5% of revenues in 2020
and 2% annually in other years

  - Capex of EUR9 million in 2019 and EUR10 million annually in
2020-2022

  - No dividends from non-recourse subsidiaries

  - No dividends paid to common shareholder

  - No material asset disposals

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - Evidence of stronger links between Aldesa and CRCC

  - Positive free cash flow (FCF) generation on a sustained basis

  - Significant improvement in the operating risk profile driven by
increased scale (sales sustainably above EUR2 billion) and
internationalisation, reduced concentration risk and funding
diversification

  - A material increase in steady income being upstreamed from the
concession business without re-leveraging assets

Factors that could, individually or collectively, lead to negative
rating action/downgrade:
  
  - Weakening links between Aldesa and CRCC

  - FFO net leverage failing to decline below 3.5x

  - FFO interest coverage below 2x

  - Evidence of support for weakening non-recourse activities or a
material increase in new concessions leading to equity
contributions from the recourse business

ESG CONSIDERATIONS

The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).


VALENCIA: S&P Affirms 'BB/B' Issuer Credit Ratings
--------------------------------------------------
S&P Global Ratings affirmed its 'BB/B' long- and short-term issuer
credit ratings on the Autonomous Community of Valencia. The outlook
remains stable.

Outlook

The stable outlook reflects S&P's view that, despite Valencia's
very weak budgetary performance and new increases in tax-supported
debt, the Spanish central government will continue to provide
sufficient financial support to the region, mitigating the risk
that its very high tax-supported debt ratios would otherwise
imply.

Downside scenario

S&P said, "We could lower the ratings on Valencia if we thought the
central government's willingness or ability to provide financial
support to Valencia was in question, if such support proved
insufficient, or if we had doubts about its timeliness and
efficacy. We could also lower the ratings on Valencia if its
regional government showed a weakening commitment to improving
regional budgetary metrics, leading to weaker performance than we
currently forecast."

Upside scenario

S&P said, "We could raise the ratings on Valencia if we expected a
structural improvement in the region's budgetary metrics, for
example through a meaningful reform of the regional financing
system or through the explicit absorption of regional debt by the
central government. In this scenario, we would also expect the
regional government to clearly demonstrate a commitment to maintain
a sound budgetary trajectory going forward."

Rationale

The ratings on Valencia are underpinned by the supportive nature of
Spain's institutional framework for normal status regions, as
demonstrated by the strength of central government support, which
we expect to continue. In S&P's view, this support mitigates the
risk arising from Valencia's consistently high deficits and very
high levels of debt. The central government provides full coverage
of Valencia's financing needs, supporting the region's liquidity.
The Spanish government is by far the region's largest creditor.

The regional financing system and central government support
mitigate the impact of the COVID-19 pandemic on Valencia.   The
COVID-19 pandemic has fundamentally changed the economic growth
outlook for Spain. S&P said, "We now expect a recession in 2020,
followed by a recovery in economic activity in 2021. We see
Valencia's economy as somewhat weaker than other Spanish peers',
with a GDP per capita below the national average." Valencia's
unemployment rate, at 14.4% as of Q1 2020, is very high in an
international context, and we expect it will rise in the current
environment.

Although the impact on economic activity and tax collection will be
immediate, the pandemic will only partly affect revenue for
Valencia and Spain's other normal status regions.

The central government has chosen to take a very supportive stance
by providing additional funds through the regional financing
system, as well as via a dedicated fund, to absorb the impact of
the crisis. About 85% of regional operating revenue comes from the
regional financing system. Regions receive advances each year based
on the expected revenue from shared taxes in each region--mainly
personal income tax, value-added tax, and excises.

The Spanish government has already committed the volume of
resources from the financing system for 2020, and is transferring
them regularly to the regions. It has also announced the
settlements due to the 2018 financing system. With these two
sources combined, Spanish regions' resources from the financing
system will increase by 7.3% in 2020 on average--Valencia's will
increase by 9.4%. Given that tax revenue will be lower than
expected, the system will likely generate a large negative
settlement for 2022. S&P said, "We think the central government
will likely allow regions to return this settlement over several
years, as it did for the negative settlements in 2008 and 2009.
Overall, we expect the regional financing system will soften the
effect of the COVID-19 pandemic on Spanish regions' overall
revenue."

Additionally, on May 3, 2020, the central government announced
three new funds totaling up to EUR16 billion to help regions cope
with the impact of the COVID-19 pandemic on their finances. The
pandemic will lead to higher health care costs, increased need for
social services, and lost tax revenue--such as those linked to real
estate transactions, for example. In S&P's opinion, such government
support is consistent with its view of the institutional framework
for Spain's normal-status regions, which has been supportive in the
past.

Furthermore, since 2012, the central government has sponsored
liquidity facilities to help regions fund their financial needs and
clear or reduce their arrears, as well as fund their deficits.
Valencia has been funding its needs through these facilities since
2012, and S&P expects this will remain the case.

The current regional financing system systematically provides
revenue per capita below the national average for Valencia. Despite
this system, Valencia's revenue increased strongly during the
recent cycle of economic expansion. The region has long maintained
a strong political position demanding a reform of this system, but
economic and political circumstances have delayed this reform
multiple times.

In the absence of such a reform, Valencia's financial management
has decided to converge toward average levels of per capita
spending, making budgetary consolidation a secondary objective.
S&P's view this as a sign of weak financial management, and in its
opinion this position can only be sustained due to the strength of
the central government's support.

S&P said, "Central government support should mitigate the impact of
the COVID-19 pandemic on regional finances, but we expect Valencia
to continue posting large deficits and accumulating debt.   After
Valencia deviated materially from budgetary targets in 2019, we
expect support from the central government will prevent a further
material deterioration in 2020." In 2021 and 2022, performance
should again moderately improve. This assumes a strong recovery of
the Spanish economy, as well as a rollback of temporary expenditure
measures required to deal with the pandemic.

Valencia's performance in 2019 was weak due to the combination of
weaker-than-expected revenue and a material increase in
expenditure. Part of the deviation was due to one-off factors such
as the lack of payment of one month's worth of value-added tax from
2017, which the region expected. This is a problem shared by all
other normal-status regions. Nevertheless, S&P also thinks Valencia
did not budget some revenue items--such as real estate taxes or
receipts from hospital concessions--in a sufficiently conservative
way.

At the same time, the region continued to expand its operating
expenditure as it sought to catch up with other Spanish regions.
The central government also decided to increase salaries, which
raised personnel expenditure.

In 2020, S&P expects Valencia will benefit from a strong increase
in revenue from the regional financing system, coupled with the
additional funds that the region stands to receive from the central
government to fund COVID-19 pandemic-related expenses.

The amounts that each region will receive are still currently under
discussion. Nevertheless, the government will divide the largest of
the funds, worth EUR10 billion, between regions depending on the
cost of measures required to combat the pandemic. So far, Valencia
has been one of the least affected regions in Spain, and therefore
may receive a lower proportion of this fund. However, based on our
conservative estimates, S&P still thinks Valencia's revenue will
expand considerably in 2020, absorbing the impact of the COVID-19
pandemic.

S&P said, "We also think the regional government will expand
operating expenditure to cope with the health care crisis. Main
drivers of expenditure growth would include the hiring of new
medical personnel, the acquisition of medical equipment and
supplies, and the establishment of support measures aimed at
softening the impact of the crisis on the most vulnerable sectors.

"Overall, we therefore expect Valencia to continue posting
operating deficits above 10% of operating revenue. We also expect a
reduction in capital expenditure, stemming from either a
governmental decision or from technical and administrative
difficulties in executing works. Therefore, balances after capital
accounts should remain high, but substantially in line with those
of 2019, at about 17% of total revenue.

"In 2022, performance could deteriorate slightly due to the
negative settlement from the financing system that we expect in
that year, arising from the overbudgeting of revenue in 2020.
However, in our base case, we assume the central government will
allow regions to return this settlement over several years, as it
did with those generated in 2008 and 2009.

"Given this budgetary trajectory, we expect Valencia's debt will
continue to increase, in contrast with our previous expectation of
a very slight downward trajectory. Valencia's debt burden metrics
are the highest of all Spanish regions, and stand out in an
international context."

Currently, about 97% of Valencia's debt is direct debt, since the
region has taken direct responsibility for government-related
entity (GRE) debt over the past few years, aided by the central
government's liquidity facility (Fondo de Liquidez Autonomico),
which allows the refinancing of the maturities of GREs within the
official perimeter of the region.

S&P said, "At year-end 2019, Valencia owed about 84% of its total
debt to the central government, which provides funding at very low
interest rates. This mitigates the risk that such a high debt stock
would otherwise imply, in our view. We note that Valencia has used
loans from commercial banks to successfully refinance loans from
early editions of the central government's liquidity facilities --
at higher interest rates, based on then-prevailing market
conditions -- achieving substantial cost savings over the life of
the loans.

"Although Valencia's liquidity metrics are very weak, we note the
availability of central government liquidity facilities, which
fully cover the region's debt service requirements."




=============
U K R A I N E
=============

ZAPORIZHZHIA CITY: Fitch Gives 'B' LT IDR, Outlook Stable
---------------------------------------------------------
Fitch Ratings has assigned Ukrainian City of Zaporizhzhia Long-Term
Foreign- and Local-Currency Issuer Default Ratings of 'B' with
Stable Outlook.

The ratings reflect Zaporizhzhia's standalone credit profile of 'b'
resulting from a combination of 'Vulnerable' risk profile and an
'a' debt sustainability assessment.

KEY RATING DRIVERS

Risk Profile: 'Vulnerable'

Zaporizhzhia's 'Vulnerable' risk profile reflects its 'Weaker'
assessment on all the city's six key risk factors in a combination
with a low Ukrainian sovereign rating of 'B'.

Revenue Robustness: 'Weaker'

The 'Weaker' assessment of Zaporizhzhia's revenue robustness
reflects the evolving nature of the national fiscal framework, its
dependence on a weak counterparty (Ukrainian state) for a material
portion of its revenue and weak revenue growth prospects. Its
wealth metrics are moderately above the national average, which
materially lags behind international peers.

Operating revenue is mostly made up of taxes, notably personal
income tax (2019: 44% of operating revenue) and property taxes
(2019: 11%), whose growth prospects are however limited by a weak
economic environment and disruptions caused by the coronavirus
pandemic. Inter-governmental transfers have been declining over the
last two years but still account for a material share of 30%. The
transfers are sourced from the Ukraine's central government but
almost half of them are channeled through Zaporizhzhia region's
budget, which, in Fitch's view, impairs revenue sustainability
especially during periods of downturn.

Revenue Adjustability: 'Weaker'

Zaporizhzhia's ability to generate additional revenue in response
to possible economic downturns is limited. The city has formal
tax-setting authority over several local taxes and fees that
accounted for about 20% of total revenue in 2019. While the city
estimates that an increase in the local taxes and charges (mostly
land rent and land tax) to the legal maximum would increase revenue
by about 25%, its affordability to raise revenue is constrained by
the low income of residents and high social-political sensitivity
to tax increases.

Expenditure Sustainability: 'Weaker'

The city's expenditure framework is fragile, leading to its
'Weaker' assessment of its sustainability. Spending during the last
five years has been influenced by high, albeit slowing, inflation
and reallocation of spending responsibilities. Currently, the city
is largely responsible for education and healthcare (42% of total
spending in 2019), which are of counter-cyclical nature. Owing to
an evolving budgetary system in Ukraine further reallocation of
responsibilities between government tiers is likely, in Fitch's
view, while the risk of unfunded mandates transfer is growing in
the current economic downturn.

Expenditure Adjustability: 'Weaker'

Fitch assesses the city's ability to curb spending in response to
shrinking revenue as weak due to the high rigidity of operating
expenditure and overall low per capita spending compared with
international peers. Operating expenditure is dominated by staff
costs (33% of operating spending in 2019) and social subsidies
transfers (15%). In total, Fitch estimates the share of inflexible
expenditure at about 70% of total spending.

The city's capex programme (16% of total spending in 2019) offers
some leeway in the short-term as worsened economic conditions may
see the city re-channeling part of the funds aimed at development
to socially-oriented spending. Over the longer-term, pressure on
capex will persist as the city's infrastructure needs remain high
due to significant infrastructure under-financing over the past
decades.

Liabilities and Liquidity Robustness: 'Weaker'

Zaporizhzhia operates under a weak national debt and liquidity
management framework due to an under-developed Ukraine debt capital
market and an unfavorable credit history of the sovereign that has
impaired Ukrainian local and regional governments' access to
financial markets. Consequently, as with the majority of national
peers, Zaporizhzhia does not borrow from the market and was
debt-free in 2015-2017. Currently, the city is not exposed to
material debt but its cost of debt is high. The latter is, however,
contained by gradual cuts to the policy rate to 8% in April 2020
from 13.5% at end-2019. Off-balance-sheet liabilities (guarantees
and other contingent liabilities) are not significant but carry
foreign-exchange risk and are likely to increase due to expected
depreciation of the hryvnia by 25% yoy in 2020. Contingent
liabilities include a loan from the central government, which is
subject to write-off (end-2019: UAH278 million).

Liabilities and Liquidity Flexibility: 'Weaker'

Zaporizhzhia's available liquidity is limited to own cash reserves,
which are low (end-2019: UAH70 million). The city has no undrawn
committed credit lines in place but has reasonable access to loans
from local banks ('b' rated counterparties) that justifies its
'Weaker' assessment of the liquidity profile. There are no
emergency bail-out mechanisms from the national government due to
the sovereign's fragile fiscal capacity and weak public finances,
which are dependent on IMF funding for the smooth repayment of its
external debt.

Debt sustainability: 'a' category

Fitch classifies Zaporizhzhia as a type B LRG, as it covers debt
service from cash flow on an annual basis. Fitch's rating case
incorporates a negative shock from the coronavirus pandemic to the
city's economy and fiscal accounts. Under Fitch's rating case the
debt payback ratio (net adjusted debt-to-operating balance) - the
primary metric of debt sustainability for type B LRGs - will
deteriorate towards 9x by 2024, which corresponds to 'aa'
assessment. However, actual debt service coverage ratio (operating
balance-to-debt service, ADSCR) will be weak at below 1x in its
rating case, which leads us to a final 'a' debt sustainability.

Zaporizhzhia is a capital city in Zaporizhzhia region located in
the south of Ukraine. The population of the city is about 730,000
or 43% of the regions. The city's economy is industrialised and
dominated by metallurgy and machine building. Financial planning,
debt projections and investment planning are based on a three-year
cycle while its budgets are subject to regular amendments due to
political and geopolitical instability and ongoing changes in
Ukraine's budgetary system.

DERIVATION SUMMARY

Zaporizhzhia's 'b' SCP reflects a combination of a 'Vulnerable'
risk profile and an 'a' debt sustainability assessment. The SCP
also factors in national peer comparison. No other factors affect
the ratings and the city's IDRs are equal to the SCP.

KEY ASSUMPTIONS

Qualitative assumptions and assessments:

Risk Profile: 'Vulnerable'

Revenue Robustness: 'Weaker'

Revenue Adjustability: 'Weaker'

Expenditure Sustainability: 'Weaker'

Expenditure Adjustability: 'Weaker'

Liabilities and Liquidity Robustness: 'Weaker'

Liabilities and Liquidity Flexibility: 'Weaker'

Debt sustainability: 'a' category

Support: N/A

Asymmetric Risk: N/A

Sovereign Cap or Floor: N/A

Quantitative assumptions - issuer-specific

Fitch's rating case is a 'through-the-cycle' scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2015-2019 figures and 2020-2024 projected
ratios. The key assumptions for the scenario include:

  - 1.2% yoy increase in operating revenue on average in 2020-2024,
including 4.8% in tax revenue, a one-off 52% reduction in current
transfers in 2020 and average 5.3% yoy growth in transfers in
2021-2024;

  - 1.8% yoy increase in operating spending on average in
2020-2024, including a one-off 33% reduction in current transfers
in 2020 and average 6.3% yoy growth in transfers in 2021-2024;

  - Net capital balance at a negative UAH708 million on average in
2020-2024; and

  - Average 15% cost of debt for domestic borrowings and 7.5% for
external debt.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - Positive rating action could result from the debt payback ratio
falling below 5x or ADSCR improving to above 2x on a sustained
basis in its rating case due to higher revenues fueled by better
economic prospects, along with an upgrade of the sovereign.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - Long-Term IDRs could be downgraded if the debt payback ratio
exceeds 9x on a sustained basis in its rating case.

  - A downgrade of the sovereign rating would also lead to a
downgrade of the city's ratings.

  - Prolonged COVID-19 impact and much slower economic recovery
lasting until 2025 would put pressure on the city's tax receipts.
Should Zaporizhzhia be unable to proactively reduce expenditure or
supplement weaker receipts from increased central government
transfers, this may lead to a downgrade.

ESG CONSIDERATIONS

The city has an ESG Relevance Score of '4' for 'Political Stability
and Rights' due to its exposure to impact of political pressure or
to instability of operations and tendency toward unpredictable
policy shifts which, in combination with other factors, impacts the
rating.

Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Public Finance issuers have a
best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating
downgrade scenario (defined as the 99th percentile of rating
transitions, measured in a negative direction) of three notches
over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA'
to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance.

LIQUIDITY AND DEBT STRUCTURE

Zaporizhzhia's net adjusted debt amounted to UAH1 billion at
end-2019, comprising five-year loans from local state-owned banks.
The loans bear 17.6% - 19.5% annual interest rates and have an
amortising structure with one-year grace period. In its rating
case, net adjusted debt is expected to increase towards UAH4.5
billion, which increases the city's fiscal debt burden (net
adjusted debt-to-operating revenue) towards 50% by end-2024 from
12% in 2019.

Debt growth is driven by a weakening operating balance due to
prudent assumptions in tax revenue growth and operating spending
increases, while the city's investment programme is expected to be
maintained. In the rating case Fitch included the guaranteed debt
of municipal companies (end-2019: UAH152 million) in the city's
adjusted debt as Fitch assumes it could crystallise as
Zaporizhzhia's direct obligations under unfavorable economic
conditions.

Other obligations are UAH278 million of interest-free treasury
loans contracted prior to 2015. As these loans were granted to the
city to finance mandates delegated by the central government and
will be written off by the state in the future. Fitch does not
include these treasury loans in its calculation of the city's
adjusted debt.

SUMMARY OF FINANCIAL ADJUSTMENTS

Fitch-adjusted debt includes the guaranteed debt of municipal
companies (end-2019: UAH152 million) as, in Fitch's view, it could
crystallise as Zaporizhzhia's direct obligations under unfavorable
economic conditions.

Fitch-adjusted debt excludes the loan from the central government
(end-2019: UAH278 million) as it is subject to write-off by the
state. The loan is included in the city's contingent liabilities.

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.




===========================
U N I T E D   K I N G D O M
===========================

CARLUCCIO'S: Boparan Acquires Business Out of Administration
------------------------------------------------------------
BBC News reports that Italian restaurant chain Carluccio's has been
bought out of administration by the owner of Giraffe restaurants.

According to BBC, the deal saves 800 jobs and 30 sites, but 40
restaurants and more than 1,000 jobs will be lost, more than half
the total workforce.

Administrators ARP said the coronavirus lockdown meant difficult
decisions had to be taken, BBC relates.

New owners Boparan Restaurant Group also own Fishworks and Ed's
Easy Diner restaurants, BBC notes.

Until the sale, most of the company's 2,000 employees were being
paid through the government's job retention scheme, BBC states.

"The COVID-19 lockdown has put incredible pressure on businesses
across the leisure sector, so it has been important to work as
quickly and as decisively as possible in an extremely challenging
business environment to secure a sale," BBC quotes Phil Reynolds,
Joint Administrator at FRP, as saying.

Before the outbreak, Carluccio's was hit by the crunch in the
casual dining sector and recently urged the state to step in, BBC
recounts.

Restrictions aimed at curbing the coronavirus pandemic forced most
cafes and restaurants to close in March, but some have reopened as
takeaways only, BBC relays.

Carluccio's has faced some difficult times in recent years, closing
a third of its restaurants in 2018as part of a Company Voluntary
Arrangement (CVA) rescue plan, BBC discloses.

Like many mid-market restaurants, it has felt the brunt of a fall
in consumer spending, combined with higher business rates, and
increases in the minimum wage, according to BBC.  It is also a
market with much competition, BBC states.

The chain was founded more than 20 years ago by celebrity chef and
restaurateur Antonio Carluccio, who died aged 80 in 2017.


CLARKS: In Talks with Several Private Equity Firms
--------------------------------------------------
Sky News reports that Clarks has approached several private equity
firms about a deal, which would involve raising between GBP100
million and GBP200 million from external investors.

According to Sky News, sources said the discussions were at a
preliminary stage, with the exact sum to be raised and the
combination of debt and equity some time from being finalized.

If successfully concluded, however, the talks are likely to lead to
the Clark family's 85% shareholding being reduced, Sky News notes.

News of the discussions comes the day after the company unveiled a
strategy -- dubbed "Made to Last" -- that will aim to steer it into
its third century of operation, Sky News states.

The plans will involve 900 job losses, with 200 new roles being
created, Sky News says.

More than 100 redundancies at its Somerset head office were
announced on May 21, Sky News recounts.

The reorganization of Clarks' business is being led by Giorgio
Presca, a former Levi Strauss & Co and Golden Goose executive who
took over as chief executive earlier this year, Sky News
discloses.

According to Sky News, a source close to Clarks confirmed that the
company was holding "very early-stage discussions about potential
minority equity investors into the business".

The source cautioned that this was only "one of a number of
different options under consideration, and it is too early to say
if this is an option that will be pursued", Sky News notes.

Last month, Sky News reported that three of the big four
accountancy firms had been drafted in to work on a restructuring of
Clarks as it tries to weather the coronavirus outbreak's impact on
the high street.

The chain's family shareholders have drafted in KPMG to advise
them, while Deloitte has been hired by the company's management
team, according to Sky News.

PricewaterhouseCoopers had been engaged by a syndicate of the
footwear chain's lenders as they assess the COVID-19 crisis's
impact on its prospects, Sky News relates.

The involvement of Deloitte, KPMG and PwC signals that a more
far-reaching restructuring is likely, including much larger numbers
of store closures in some of the countries in which Clarks
operates, Sky News states.

Clarks trades from 450 stores in the UK and Ireland, employing
thousands of people, but has denied that it will be exploring a
Company Voluntary Arrangement -- a widely used insolvency mechanism
that would -- if approved by creditors -- pave the way for a
radical restructuring, Sky News relays.


PIZZA EXPRESS: May Close Some Restaurants Permanently
-----------------------------------------------------
Rebecca Goodman at The Scottish Sun reports that Pizza Express
could be forced to close some restaurants permanently when the UK's
coronavirus lockdown is fully lifted.

The struggling restaurant chain has currently closed all of its 470
branches, with some open for delivery only, The Scottish Sun
discloses.

But it's understood the company could now close some or all of its
loss-making restaurants, The Scottish Sun relays, citing the
Financial Mail on Sunday.

This will be possible if the business is restructured via a Company
Voluntary Arrangement (CVA), The Scottish Sun notes.

It's unclear exacty how many restuarants would be permantly closed,
The Scottish Sun states.

The paper reports that before March, less than 10 branches were
loss-making, The Scottish Sun relays.  But the virus outbreak is
likely to have made the firm's financial situation worse, The
Scottish Sun states.

The newspaper has reported it is now looking at different options
to solve its debt problems, The Scottish Sun discloses.

The Chinese-owned chain, which employs 14,000 people globally, has
a debt of GBP1.1 billion and it has asked debtors if it can delay
its 2019 results, The Scottish Sun recounts.


VERY GROUP: Fitch Lowers LT IDR to 'B-', Outlook Stable
-------------------------------------------------------
Fitch has downgraded The Very Group Limited's Long-Term Issuer
Default Rating to 'B-' from 'B'. It has also downgraded The Very
Group Funding plc's senior secured notes to 'B-' from 'B'. Both
ratings have been removed from Rating Watch Negative. The Outlook
on the IDR is Stable.

The downgrade of The Very Group reflects its view that refinancing
risks have increased in view of maturities in 2022. Its highly
leveraged balance sheet prior to the outbreak of the coronavirus
pandemic reduces its ability to meaningfully deleverage prior to
refinancing while navigating an uncertain trading environment
ahead. While the group's liquidity position has improved since
June-2019 due primarily to shareholder support, Fitch still views
liquidity as limited due to the remote prospects for a more
permanent repayment of the fully drawn revolving credit facilities
prior to refinancing.

The Stable Outlook reflects its expectation that The Very brand
will remain resilient to the challenges presented by UK's lockdown
and expected recessionary environment thereafter, evidenced in 4Q
FY20 (financial year end June) trading so far. While Fitch does not
factor in any asset impairments from the consumer book at this
point, Fitch sees some uncertainty from macroeconomic challenges in
2H20 and in 2021. Its finance subsidiary's, Shop Direct Finance
Company Limited, bolstered capital position solid profitability are
mitigating factors.

KEY RATING DRIVERS

PPI Claims Finalised: Shareholders injected a further GBP25 million
of equity in February 2020 (total GBP100 million in FY20) and GBP50
million of subordinated notes were issued to fund any liquidity
shortfall from the remaining PPI payments that stood at GBP88
million at March 31, 2020. This also improves SDFCL's capital
position, providing capacity to accommodate modest asset quality
deterioration during a UK recession. The 'B-' IDR would, however,
be vulnerable to a pronounced increase in loan impairments if the
corresponding pressure on the capital and liquidity of SDFCL are
not quickly remedied, disrupting its ability to continue enabling
the group's retail operations.

Market Share Gains in Lockdown: The Very Group has strengthened its
presence in UK retail despite competition from traditional
retailers with an increasing online presence and pure-play internet
retailers. This has driven the success of Very, which accounted for
72% of the group's retail sales in FY19, counteracting a managed
decline at Littlewoods. Fitch expects trading during the UK
lockdown to be overall positive for the group as it has been able
to fulfil consumer demand while traditional retailers have been
closed, attracting new customers at a lower cost.

Subdued Revenue Growth Expected: The recessionary environment and
slow recovery post-lockdown present challenges for The Very Group,
given the broadly discretionary nature of its offering and the
accelerated (yet managed) decline in the Littlewoods brand.
Therefore, Fitch's base case sees muted revenue growth through to
FY22.

Improved Liquidity; RCFs Fully Drawn: During FY20 the incremental
capital support has improved the group's liquidity position
sufficiently to meet the final PPI payments. As with many peers,
The Very Group drew on the total remaining amount of its RCFs,
GBP55 million so far in FY20. Therefore, Fitch expects current
liquidity to be sufficient for the retail operations, but with
little room to accommodate a sustained fall in revenues, large
working capital outflows or a spike in delinquencies in the
consumer loan book. Correspondingly, its base case does not
envisage any capacity to sustainably repay the fully drawn RCFs
(GBP150 million) prior to its refinancing in May 2022.

High Leverage Increases Refinancing Risk: Leverage is set to remain
high with the more challenging trading environment impairing the
group's ability to reduce funds from operations adjusted leverage
for the retail operations (FY19: 7.7x) prior to refinancing of both
the senior secured notes and RCF in 2022. Along with muted revenue
growth, Fitch conservatively forecasts a slight contraction in
retail EBITDA margins to 9.5% in FY20, from 10.2% in FY19,
reflecting a changing business mix despite a strong 4QFY20 trading
(April-June). The quarter will see a large increase in electronic
and smaller category sales at the expense of the previously
dominant, and profitable, fashion segment.

Synergies with SDFCL: The group's wholly-owned finance subsidiary
SDFCL provides consumer financing as a complementary core offering
to its online general merchandise retail operations. EBITDA margin
(excluding exceptional PPI payments) at SDFCL of 26.9% in FY19 is
very healthy. The profitability stemming from revolving credit
provided to retail customers allows the financing unit to help pay
the expenses for operations, IT and marketing costs, supporting
retail sales volume growth in a symbiotic way. Fitch continues to
view this feature as supportive of The Very Group's sustainable
business model during a downturn.

ESG Change: The Very Group's Relevance Score for Customer
Welfare/Fair Messaging, Privacy and Data Security has been revised
to '4' from '5' previously as the final amounts for PPI claims to
be settled have been quantified with the passing of the FCA
deadline to submit new claims (August 29, 2019).

DERIVATION SUMMARY

With over 50% of the group's consolidated total assets related to
trade receivables - relative to around a 1.5% equivalent figure for
Marks and Spencer Group Plc (BB+/Stable) or 3% for New Look Bonds
Limited (CC) - The Very Group's asset base is inherently different
from other traditional retailers. Financial services income is
driven by the retail unit's customer base with over 95% of
transactions including payments on credit.

With key focus on online retail operations and client base, the
cost base is also different from traditional retailers without
meaningful fixed assets or operating leases. This is reflected in
stronger EBITDAR-based profit margin conversion into FCF
post-dividends. The group's dedicated online retail activities are
enabled by consumer finance operations via intra-group loans. This
is an unusual business arrangement from the Corporates perspective
but it helps to support its commercial proposition. Fitch
acknowledges the group's product and service offering to clients is
very compelling relative to key competitor Amazon, Inc.
(A+/Positive) or pure online competitors such as Bohoo or ASOS.

The Very Group also benefits from efficient distribution
infrastructure with the lowest picking costs and an established
online platform without duplication of costs or capex compared with
M&S, New Look or other brick-and-mortar retailers with an expanding
online presence.

KEY ASSUMPTIONS

  - Low single-digit revenue growth in FY20 and FY21, as resilient
trading during the lockdown is set to outweigh the decline in the
Littlewoods brand and weaker consumer confidence in a recessionary
environment;

  - Retail-only EBTIDA margin to remain around 9.5% for the next 2
years with recent cost-initiatives offsetting margin pressures from
the tougher trading conditions envisaged in FY21;

  - Working capital outflow not to exceed GBP15 million in both
FY20 and FY21;

  - Management fee of GBP5 million a year, which is recorded within
other items before FFO;

  - GBP20 million of cash is restricted and not considered
available for debt-servicing; and

  - No repayment of the RCFs prior to refinancing in May 2022.

KEY RECOVERY RATING ASSUMPTIONS

Its recovery analysis continues to assume that The Very Group would
be considered a going concern in bankruptcy and that the group
would be reorganised as Fitch expects a better valuation in
distress than liquidating its assets (and extinguishing the
securitisation debt) after satisfying trade payables. Fitch has
assumed a 10% administrative claim.

Fitch uses its proxy retail-only EBITDA of GBP87 million, which
excludes GBP70 million "run-rate" contribution for operating cost
from SDFCL - an amount deemed sustainable to allow for continuing
operations as a combined "retail + consumer lending" platform
post-restructuring. Fitch applies a 19% discount to this EBITDA
figure, which results in stabilised "retail-only"
post-restructuring EBITDA of GBP71 million. It also removes the
GBP1.3 billion non-recourse securitisation financing outside the
group under SDFCL, as Fitch assumes that consumer finance can be
structured by a third-party bank or in a joint venture after
restructuring.

Fitch uses a 5.0x distressed enterprise (EV)/EBITDA multiple,
reflecting a growing online retail and technology platform and
competitive position enabled by consumer finance.

For the debt waterfall Fitch assumes a fully drawn super senior RCF
of GBP100 million and GBP7.6 million of debt located in
non-guarantor entities. This debt ranks ahead of The Very Group's
bonds. After satisfaction of these claims in full, any value
remaining would be available for noteholders (GBP550 million) and
creditors of the GBP50 million pari passu RCF issued by The Very
Group. Its waterfall analysis generates a ranked recovery for
noteholders in the 'RR4' band, indicating a 'B' instrument rating.
The waterfall analysis output percentage on current metrics and
assumptions is 35%.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

  - Ability and commitment to deleverage to retail-only FFO
adjusted (gross) leverage below 7.0x, for example, driven by steady
profitability and more creditor-friendly financial policies;

  - Steady business growth (at least mildly positive sales growth)
and profitability reflected in FFO margin trending above 6%;

  - FFO fixed charge cover above 2.5x; and

  - Maintenance of adequate asset quality not affecting financial
services' profitability and capital position, and ultimately
continuing to enable the group's retail activities.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

  - Retail-only FFO adjusted (gross) leverage remaining above 8.5x
due to deteriorating retail operations or to weakening asset
quality of receivables leading to higher Fitch-adjusted debt;

  - Further liquidity tightening due to trading challenges not
alleviated by shareholder support;

  - Negative business growth and decreasing profitability under
more challenging market conditions in the UK as reflected in an FFO
margin below 5%;

  - FFO fixed charge cover sustainably below 1.5x; and

  - Deterioration in asset quality negatively affecting financial
services' profitability and cash flows, and ultimately the
division's ability to support the group's retail activities.

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

Improved Cash Liquidity: The Very Group's liquidity was very tight
at end-FY19, only supported by an undrawn GBP55 million RCF. The
GBP100 million equity injection in FY20 supports the remainder of
the PPI claim payments, but for normal operations the GBP55 million
RCF has been drawn. Expected positive free cash flow (FCF)
generation in FY20 is modest and does not offset the envisaged cash
flow challenges in FY21, including the final settlement of PPI
claims. Thus, Fitch expects liquidity to remain limited, preventing
a meaningful repayment of the RCF, on a permanent basis, prior to
its refinancing in 2022.

SUMMARY OF FINANCIAL ADJUSTMENTS

In its analysis, Fitch strips out the results of SDFCL for a proxy
of cash flows available to service debt at The Very Group. It also
deconsolidates the GBP1.3 billion non-recourse securitisation
financing outside of the group under SDFCL. This securitisation
debt is core to the group's consumer financing offer and is repaid
by the collection of receivables predominantly originated from
retail.

Due to the below-average asset quality and inherent funding and
liquidity constraints for SDFCL (due to the encumbered nature of
SDFCL receivables), Fitch adds back around GBP399 million of debt
to The Very Group's retail operations, as Fitch views this amount
as a form of equity injection from The Very Group to SDFCL to
attain a capital structure for the subsidiary that would require no
cash calls to support the latter's operations over the rating
horizon. Fitch makes this adjustment despite the business being
financed on a non-recourse basis via a receivables securitisation.

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

The Very Group has a Relevance Score 4 for Customer Welfare/Fair
Messaging, Privacy and Data Security (previously 5).

It also assigns a Relevance Score of 4 under Group Structure and
Governance Structure given sub-optimal board independence and
effectiveness relative to rated peers, as well as ownership
concentration, group complexity and certain related-party
transactions, which may lead to some misalignment between
shareholders and creditors' interests.

These factors have a negative impact on the credit profile and they
are relevant to the ratings in conjunction with other factors.

Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).


[*] UK: Plan to Rescue Large Cos. Affected by Coronavirus Crisis
----------------------------------------------------------------
BBC News reports that the UK government has indicated it is
prepared to rescue large British companies severely affected by the
coronavirus crisis.

According to BBC, the Treasury said "last resort" support could be
made available if a firm's failure would "disproportionately harm
the UK economy".

The move follows indications that a number of big firms are seeking
government help to survive the crisis, BBC notes.

These include Jaguar Land Rover, which is in talks to secure a GBP1
billion loan, BBC states.

The government has already put in place various initiatives to help
companies weather the pandemic, including loan programs, deferring
of tax payments and the furlough scheme, which allows workers to
receive 80% of their salary paid by the government, BBC discloses.

According to latest figures, eight million workers are covered by
the furlough scheme which has been extended until the end of
October, BBC states.  But from August, businesses will be expected
to meet part of the cost of the scheme, BBC notes.

Concern is growing that some big firms are still in difficulties
even after making use of these options, according to BBC.

The bailout plan, named "Project Birch", was mentioned by Transport
Secretary Grant Shapps in Parliament last week when discussing the
future of the aviation industry, BBC relates.

It could involve the state taking stakes in companies, although
extending existing loans would be preferable, BBC notes.

The BBC understands the Treasury would have to notify Parliament of
any spend incurred, and although companies might seek financial
assistance, this does not mean such support will be given.



                           *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.

Copyright 2020.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
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