/raid1/www/Hosts/bankrupt/TCREUR_Public/200814.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, August 14, 2020, Vol. 21, No. 163
Headlines
G E R M A N Y
LUFTHANSA: Posts Largest Ever Quarterly Loss Despite Bailout
TELE COLUMBUS: Moody's Confirms CFR at B3, Outlook Stable
I R E L A N D
DILOSK RMBS 2: Moody's Downgrades Class D Notes to Ba1
I T A L Y
ATLANTIA SPA: S&P Affirms BB-/B ICR & Alters Outlook to Dev.
SOCIETA DI PROGETTO: Fitch Affirms Sr. Sec. Notes Rating at BB+
L U X E M B O U R G
COLOUROZ MIDCO: Moody's Affirms CFR at Caa1, Outlook Negative
PACIFIC DRILLING: Moody's Cuts CFR to Ca, Outlook Altered to Neg.
N E T H E R L A N D S
AURORUS 2020: Moody's Gives (P)B2 Rating to Class F Notes
R U S S I A
XALQ BANK: S&P Assigns BB-/B ICRs, Outlook Negative
U N I T E D K I N G D O M
ITSU: To Begin Reopening Select Number of Travel Hub Sites
NEW LOOK: Mulls Company Voluntary Arrangement
RESIDENTIAL MORTGAGE 32: Fitch Gives BB+sf Rating to Class E Debt
RESIDENTIAL MORTGAGE 32: S&P Puts BB- (sf) Rating to X1-Dfrd Notes
SELECT: Seeks New Company Voluntary Arrangement to Cut Costs
WARRENS BAKERY: Cuts Minimum CVA Payments to Protect Business
WHSMITH PLC: Demands Rent Cuts with Landlords, May Opt for CVA
X X X X X X X X
[*] BOOK REVIEW: Hospitals, Health and People
- - - - -
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G E R M A N Y
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LUFTHANSA: Posts Largest Ever Quarterly Loss Despite Bailout
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Tanya Powley, Naomi Rovnick and Alexander Vladkov at The Financial
Times report that German airline Lufthansa has reported its largest
ever quarterly operating loss and said it can no longer rule out
job cuts in its home country, despite having taken a EUR9 billion
government bailout.
The flag carrier, which has already said it would shed 22,000 staff
and retire 100 aircraft, on Aug. 6 announced a EUR1.7 billion
operating loss for the three months to the end of June, as
passenger traffic and its revenues collapsed, the FT relates. For
the first six months of 2020, the total loss was EUR2.9 billion,
the FT discloses.
Lufthansa has already reduced its workforce by 8,300 compared with
a year ago, the FT notes. But on Aug. 6 it warned that compulsory
redundancies in Germany were now likely amid faltering talks with
unions, the FT relays.
Lufthansa is the latest major carrier to axe staff despite having
received emergency state funding, the FT states. Its bailout saw
the German government take a stake in the carrier almost a quarter
of a century after it was first privatized, according to the FT.
TELE COLUMBUS: Moody's Confirms CFR at B3, Outlook Stable
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Moody's Investors Service has confirmed Tele Columbus AG's B3
corporate family rating, B3-PD probability of default rating, and
the B3 instrument rating on the senior secured bank credit
facilities and senior secured notes. The outlook has been changed
to stable from ratings under review.
This rating action concludes the review for downgrade initiated by
Moody's on April 21, 2020.
"We have confirmed Tele Columbus' B3 ratings with a stable outlook
because the company has strengthened its liquidity through the
refinancing of its EUR50 million revolving credit facility maturing
in January 2021 with a new term loan and a new RCF amounting to
EUR50 million in total and both maturing in August 2022," says
Agustin Alberti, a Moody's Vice President -- Senior Analyst and
lead analyst for Tele Columbus.
Upon completion of the transaction, the current EUR50 million RCF
will be cancelled and its rating will be withdrawn.
"The stable outlook takes into account the good progress of the
company's turnaround plan, resulting in the improvement of its
operational performance and the stabilization of its main financial
metrics and its expectation that the company will continue its path
of recovery while maintaining adequate liquidity," adds Mr.
Alberti.
RATINGS RATIONALE
On August 7, 2020, Tele Columbus announced [1] that it had reached
an agreement to replace its current EUR50 million RCF, with a new
term loan and a new RCF amounting to EUR50 million in total, both
maturing in August 2022.
Following this announcement, the company has strengthened its
liquidity, which was the key driver that led Moody's to place the
ratings on review for downgrade on April 21, 2020. The new funding
will allow the company to have adequate liquidity for its near-term
operational needs. Upon completion of the transaction, the company
will have available liquidity in excess of EUR62 million, including
cash and availability under the RCF.
The new facilities include two maintenance financial covenants
(6.5x net financial leverage and minimum available liquidity of
EUR50 million on at least two quarters in any rolling twelve-month
period). Moody's notes that headroom under these covenants will be
limited, leaving little headroom for deviation from the rating
agency's expectations, with Moody's adjusted EBITDA estimated at
around EUR240 million in 2020 and 2021.
Moody's expects the company's revenues (excluding low margin
construction revenues) to be broadly stable in 2020, as positive
broadband customer additions and new B2B wins will compensate for
the decline in basic TV customer base and related revenues.
The rating agency expects Tele Columbus' free cash flow generation
to be marginally positive in 2020, in the EUR5 million to EUR10
million range, on the back of lower restructuring costs, further
savings from efficiency measures, and lower capital spending.
Moody's expects Tele Columbus' leverage will remain high, with
Moody's gross debt/EBITDA projected at around 6.5x 2020 and 2021,
but well within the thresholds for the current B3 rating of between
6x and 7x.
Moody's notes that the company is currently undergoing a strategic
review with the aim of seizing growth opportunities in the German
telecom market. The outcome of the strategic review is expected to
be announced at the time of the publication of the Q2 results.
STRUCTURAL CONSIDERATIONS
Tele Columbus' probability of default rating is B3-PD, in line with
the CFR. The company's capital structure comprises a EUR707 million
term loan (maturing in 2024), a EUR75 million term loan (maturing
in 2023), a EUR650 million senior secured bond (maturing in 2025),
and the new term loan and RCF amounting to a total of EUR50 million
(maturing in 2022).
The B3-rated bond benefits from the same security and guarantee
structure as the B3-rated bank debt. All of Tele Columbus' debt is
secured against share pledges of key operating subsidiaries and
benefits from guarantees from operating entities accounting for 80%
of group EBITDA/90% of group assets.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectation that the company
(1) will continue to improve its operations, translating into
modest revenue and EBITDA growth, (2) will be able to slowly
delever on the back of EBITDA growth together with positive FCF
generation, and (3) will manage its liquidity in a prudent manner.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure could arise if: (1) the company continues to
show improvement in its operating metrics, including growth in the
overall number of customers; (2) returns to sustained revenue and
EBITDA growth; and (3) maintains Moody's-adjusted gross debt/EBITDA
below 6.0x on a sustained basis and generates positive FCF (after
capital spending and dividends).
The ratings could be downgraded if (1) Tele Columbus'
Moody's-adjusted gross debt/EBITDA leverage deteriorates and
remains above 7.0x on a sustained basis; (2) its FCF remains
meaningfully negative; (3) a timely execution of the turnaround
plan is unsuccessful, such that the business fails to return to
growth; or (4) the liquidity position deteriorates.
LIST OF AFFECTED RATINGS
Issuer: Tele Columbus AG
Confirmations, previously placed on review for downgrade:
Probability of Default Rating, Confirmed at B3-PD
Corporate Family Rating, Confirmed at B3
Senior Secured Bank Credit Facility, Confirmed at B3
Senior Secured Regular Bond/Debenture, Confirmed at B3
Outlook Action:
Outlook, Changed To Stable From Ratings Under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Pay TV
published in December 2018.
COMPANY PROFILE
Tele Columbus AG is a holding company, which through its
subsidiaries offers basic cable television services, premium TV
services and, where the network is migrated and upgraded, Internet
and telephony services in Germany. It is the second largest cable
operator in terms of homes connected in Germany with 3.3 million.
The company is headquartered in Berlin (Germany) and reported
revenue of EUR499 million and normalised EBITDA of EUR239 million
in 2019.
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I R E L A N D
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DILOSK RMBS 2: Moody's Downgrades Class D Notes to Ba1
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Moody's Investors Service has downgraded the ratings of 3 notes,
confirmed the ratings of 7 notes, and affirmed the ratings of 11
notes in 4 Irish RMBS transactions.
Moody's downgraded the ratings of 1 note in Dilosk RMBS No.2
Designated Activity Company and 2 notes in European Residential
Loan Securitisation 2019-PL1 DAC. The rating downgrade in Dilosk 2
reflects the change in the modeling of the reserve fund
amortisation. The ratings downgrades in ERLS 2019-PL1 reflect the
increased likelihood of deteriorating mortgage collateral
performance, due to the economic disruption following the
coronavirus outbreak.
Moody's affirmed the ratings of 11 notes and confirmed the ratings
of 7 notes that had sufficient credit enhancement to maintain their
current ratings.
Its rating action concludes the review of 9 notes placed on review
for downgrade on June 8, 2020 due to the increased likelihood of
deteriorating performance of the mortgage loans backing the notes
due to the economic disruption following the coronavirus outbreak.
Issuer: Dilosk RMBS No.2 Designated Activity Company
EUR180.457M Class A Notes, Affirmed Aaa (sf); previously on Nov 19,
2018 Definitive Rating Assigned Aaa (sf)
EUR18.618M Class B Notes, Affirmed Aa1 (sf); previously on Nov 19,
2018 Definitive Rating Assigned Aa1 (sf)
EUR14.322M Class C Notes, Confirmed at A1 (sf); previously on Jun
8, 2020 A1 (sf) Placed Under Review for Possible Downgrade
EUR17.186M Class D Notes, Downgraded to Ba1 (sf); previously on Jun
8, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade
EUR25.779M Class E Notes, Affirmed B3 (sf); previously on Nov 19,
2018 Definitive Rating Assigned B3 (sf)
Issuer: Dublin Bay Securities 2018-1 DAC
EUR208.91M Class A Notes, Affirmed Aaa (sf); previously on Sep 28,
2018 Definitive Rating Assigned Aaa (sf)
EUR13.0M Class B Notes, Affirmed Aa1 (sf); previously on Sep 28,
2018 Definitive Rating Assigned Aa1 (sf)
EUR7.15M Class C Notes, Affirmed A1 (sf); previously on Sep 28,
2018 Definitive Rating Assigned A1 (sf)
EUR6.5M Class D Notes, Confirmed at Baa2 (sf); previously on Jun 8,
2020 Baa2 (sf) Placed Under Review for Possible Downgrade
EUR9.49M Class E Notes, Affirmed B3 (sf); previously on Sep 28,
2018 Definitive Rating Assigned B3 (sf)
Issuer: European Residential Loan Securitisation 2019-PL1 DAC
EUR356.449M Class A Notes, Affirmed Aaa (sf); previously on Oct 16,
2019 Definitive Rating Assigned Aaa (sf)
EUR64.195M Class B Notes, Affirmed Aa2 (sf); previously on Oct 16,
2019 Definitive Rating Assigned Aa2 (sf)
EUR37.165M Class C Notes, Confirmed at A1 (sf); previously on Jun
8, 2020 A1 (sf) Placed Under Review for Possible Downgrade
EUR32.097M Class D Notes, Confirmed at Baa2 (sf); previously on Jun
8, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade
EUR32.773M Class E Notes, Downgraded to Ba2 (sf); previously on Jun
8, 2020 Ba1 (sf) Placed Under Review for Possible Downgrade
EUR41.558M Class F Notes, Downgraded to Caa1 (sf); previously on
Oct 16, 2019 Definitive Rating Assigned B3 (sf)
Issuer: Roundstone Securities No. 1 DAC
EUR2241.428M Class A Notes, Affirmed Aaa (sf); previously on Sep
28, 2018 Assigned Aaa (sf)
EUR158.558M Class B Notes, Affirmed Aa2 (sf); previously on Sep 28,
2018 Assigned Aa2 (sf)
EUR108.108M Class C Notes, Confirmed at A3 (sf); previously on Jun
8, 2020 A3 (sf) Placed Under Review for Possible Downgrade
EUR64.864M Class D Notes, Confirmed at Baa3 (sf); previously on Jun
8, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade
EUR108.107M Class E Notes, Confirmed at B2 (sf); previously on Jun
8, 2020 B2 (sf) Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The rating downgrade in Dilosk 2 is caused by the change in the
modeling of the reserve fund amortisation. The ratings downgrades
in ERLS 2019-PL1 are prompted by the increased likelihood of
deteriorating performance of the mortgage loans due to the economic
disruption following the coronavirus outbreak.
The rating confirmations and affirmations announced in this press
release reflect sufficient credit enhancement and liquidity to
maintain the ratings of the affected notes.
Change of the reserve fund modeling in Dilosk 2
In its initial assessment of the transaction, Moody's understood
the transaction documentation [1] of Dilosk 2 to state that the
combined balance of the general reserve fund (i.e. General Reserve
Fund First Target Level and General Reserve Fund Second Target
Level) would not amortise as long as the rated notes remain
outstanding. However, as reflected in the investor report [2] and
now confirmed by the master servicer, the General Reserve Fund
Second Target Level amortises, resulting in the combined balance of
the general reserve fund amortising in line with the amortisation
of the notes.
As a result, there is less cash available for temporary interest
shortfall or to cover losses, compared to the situation in which
the general reserve fund is non-amortising. Correcting the modeling
of the general reserve fund in line with the revised interpretation
has a negative impact on the rating of class D.
Revision of Key Collateral Assumptions
Moody's reassessed its key collateral assumptions, namely the
portfolio Expected Loss and MILAN CE assumptions for all four
transactions affected by its rating action.
Collateral performance of all four pools has been showing signs of
weakening, with delinquency levels having increased since closing.
This increase has been most pronounced for Dilosk 2, where the
portion of loans that have been in arrears for 90 days or more has
increased to 7% as of the latest payment date in June 2020, from
2.4% in September 2019.
In ERLS 2019-PL1 the 90+ arrears increased to 3.4% as of the latest
payment date from 1% as of December 2019. The arrears increase in
Dublin Bay Securities 2018-1 DAC and Roundstone Securities No. 1
DAC experienced after closing were partially driven by IO loans
that had reached maturity but did not repay. A portion of these
loans has been restructured, which led to a subsequent decrease in
the overall arrears' levels but also to an increase in the portion
of restructured loans.
Moody's increased the expected loss assumptions in ERLS 2019-PL1,
Dublin Bay 2018-1, and Roundstone 1 as a result of recently
observed deterioration in collateral performance. In ERLS 2019-PL1,
Moody's increased the expected loss assumption to 12.5% as a
percentage of original pool balance from 11.5%. In Dublin Bay
2018-1, Moody's has increased the expected loss assumption to 4.85%
as a percentage of original pool balance from 4.5%. In Roundstone 1
Moody's has increased the expected loss assumption to 6.2% as a
percentage of original pool balance from 6%.
In Dilosk 2, Moody's maintained the expected loss assumption at 12%
as a percentage of original pool balance, as the performance
deterioration remained within expectations.
Moody's has also assessed loan-by-loan information as a part of its
detailed transaction review to determine the credit support
consistent with target rating levels and the volatility of future
losses. As a result, Moody's has maintained the MILAN CE assumption
for all four transactions.
The rapid spread of the coronavirus outbreak, the government
measures put in place to contain it and the deteriorating global
economic outlook, have created a severe and extensive credit shock
across sectors, regions and markets. Its analysis has considered
the effect on the performance of consumer assets from the collapse
in the Irish economic activity in the second quarter and a gradual
recovery in the second half of the year.
However, that outcome depends on whether governments can reopen
their economies while also safeguarding public health and avoiding
a further surge in infections. As a result, the degree of
uncertainty around its forecasts is unusually high. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
The principal methodology used in rating all deals except European
Residential Loan Securitisation 2019-PL1 DAC was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in May 2020.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement and (3) improvements in the credit quality of
the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
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I T A L Y
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ATLANTIA SPA: S&P Affirms BB-/B ICR & Alters Outlook to Dev.
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S&P Global Ratings affirmed its 'BB-/B' long- and short-term issuer
credit ratings on Atlantia SpA and its core subsidiary ASPI and its
'BB+/B' ratings on Atlantia's subsidiary Aeroporti di Roma (AdR)
and revising the outlooks on the three companies to developing.
S&P said, "We expect a potential settlement between ASPI and the
grantor could lead to positive rating actions on Atlantia and ASPI,
but the extent may differ for each company.
"We believe the Italian government's preliminary agreement with
ASPI, announced on July 15, 2020, and alternative proposals set out
by Atlantia SpA on Aug. 4, 2020, could lead to a settlement of the
dispute on serious breaches of the ASPI concession, which started
with the Genoa bridge collapse on Aug. 14, 2018. The content,
timing, and procedures of the settlement remain unclear at this
stage. Nevertheless, we understand that a settlement would remove
the risk that the ASPI concession is terminated and consequently
the liquidity and legal risks that triggered our multi-notch
downgrade on ASPI and its parent Atlantia on Jan. 13, 2020. Pending
a final agreement, the risk the ASPI concession is terminated
cannot be ruled out and, although we see it as less likely, it
continues to underpin potential downside risk to the ratings. Under
the proposals, a change of control would occur at ASPI (currently
88% owned by Atlantia), which would ultimately cease to be part of
Atlantia group. Given the complexity of the divestiture and the
large number of stakeholders involved, the outcome remains
difficult to predict at this stage. Nevertheless, we anticipate
that such a settlement would mean ASPI no longer qualifies as a
core subsidiary of Atlantia group and our ratings on the two
companies would reflect their respective credit qualities.
"In case of a settlement, our rating on ASPI would primarily depend
on its credit metrics, the supportiveness of the regulatory
framework, and its ability to maintain at least adequate
liquidity.
"We understand that a new Economic and Financial Plan (PEF) has
been submitted by ASPI to the grantor, the Italian Ministry of
Infrastructure and Transportation, in line with the guidelines set
out by the Transport Regulator Authority (ART), which involves a
new tariff regime and the transition to a regulated-asset base
scheme. At the same time, the preliminary agreement between ASPI
and the grantor includes a EUR3.4 billion settlement, through a
combination of reduced tolls (EUR1.5 billion on a cumulated basis
over the life of the concession); additional maintenance work
(EUR1.2 billion split between 2020-2024); and expenses related to
the re-construction of the Genoa bridge (EUR700 million). Pending
visibility on the new PEF, which has yet to be approved, ASPI's
credit metrics remain difficult to predict compared with 2019, when
S&P Global Ratings-adjusted funds from operations (FFO) to debt and
adjusted debt to EBITDA were approximately 19% and 3.8x,
respectively. These metrics, which could be commensurate with an
investment-grade rating, reflect that we add back to reported
EBITDA the provisions related to the settlement (EUR1.5 billion as
of Dec. 31, 2019) and include them in our adjusted debt. This is
because we see these amounts as similar to litigation-related
liabilities which will have a multi-year effect over ASPI's cash
flows. ASPI's financial metrics post settlement could also be
influenced by a potential capital injection from any new
shareholders, on which we have no visibility at this stage. In our
view on ASPI's credit quality we will also consider the
transparency and supportiveness of the new regulatory framework,
given certain concession amendments are expected to align the terms
to the content of the Milleproroghe decree, particularly related to
termination event clauses. Legacy risks that ASPI may continue to
bear, if any, in relation to the collapse of the Genoa bridge could
also be reflected in our rating. Pending visibility on the new
shareholders and governance of ASPI, it is premature to comment if
potential control by government-owned lending institution Cassa
Depositi e Prestiti (CDP) could affect our rating on ASPI. This is
because it is uncertain at this stage if we could consider ASPI a
government-related entity and, if so, what the likelihood of
extraordinary support ultimately provided by the government would
be. Furthermore, an investment-grade rating on ASPI would require
it to maintain at least adequate liquidity. Given large upcoming
debt maturities of EUR1.2 billion in 2021--including approximately
EUR700 million of bonds guaranteed by Atlantia that we assume will
be due to be reimbursed by ASPI--we would expect ASPI to secure
sufficient sources to cover its expected liquidity needs.
"If a settlement is reached, our rating on Atlantia would primarily
depend on its credit metrics, the strengths of its operating
assets, and its strategy.
"In our view, a settlement could trigger a positive rating action
on Atlantia since it would remove liquidity contamination risk
driven by a potential termination of the ASPI concession.
Nevertheless, the extent of the positive rating action would depend
on a number of factors, including the pricing, process and use of
the proceeds of the ASPI disposal. ASPI contributes about 30% of
Atlantia's consolidated EBITDA and its financial leverage is
smaller than the largest contributor Abertis (S&P Global
Ratings-adjusted debt to EBITDA was 3.8x for ASPI and 5.7x for
Abertis on Dec. 31, 2019). Hence, all else being equal, the
disposal could weaken Atlantia's credit metrics from approximately
13% S&P Global Ratings-adjusted FFO to debt on Dec. 31, 2019,
depending on the amount and use of the transaction proceeds.
Atlantia's potential weaker credit metrics could be partially
compensated by the proceeds from the disposal of other
subsidiaries' minority stakes, such as the digital payment platform
of Atlantia Telepass, which could be completed over the next few
months. Pending visibility on Atlantia's future strategy, we
anticipate the quality and geography of its operating assets will
be an important credit consideration for the rating. Spanish-based
global toll road operator Abertis (50% plus one share) as well as
Italy-based airport operator AdR (almost fully owned by Atlantia)
both manage strong operating assets, despite being hit by
COVID-19-related traffic disruption and most of the assets are
located in low risk countries. Nevertheless, ASPI has been an
important dividend contributor to Atlantia and it remains unclear
how or if the loss of the cash flow would be replaced in the
future. The quality of Atlantia's future portfolio, together with
the supportiveness of the regulatory framework, and level of
exposure to soft currency risk, will be key credit considerations
for our assessment of Atlantia's business strengths--combined with
any potential legacy risk from the ASPI concession. We expect
Atlantia's guarantee over ASPI's EUR4.8 billion of debt will be
waived as part of the transaction to remove any financial
obligations between the two companies. The process remains unclear
at this stage but could take some time and result in transaction
costs for Atlantia, which we currently cannot quantify."
S&P's outlook revision and rating affirmation on AdR mirrors the
rating action on Atlantia.
The rating on AdR continues to incorporate two notches of
insulation from that on parent Atlantia. This caps its long-term
rating on AdR at 'BB+', which is four notches below the 'a-'
stand-alone credit profile (SACP). The insulation reflects that,
despite being almost fully owned by Atlantia, AdR must meet certain
conditions under its concession agreement with the Italian Civil
Aviation Authority, including a debt-service coverage ratio of
above 1.2x over the time of the concession. It is also subject to
regulatory oversight by the grantor, which, in its view, protects
the company from potential negative intervention by Atlantia. The
two notches of insulation also reflect that AdR's euro medium-term
note program and facilities do not include any cross-default
provisions or guarantees with Atlantia.
The ratings on Abertis remain unchanged at 'BBB-/A-3' with a
negative outlook, since they are not directly linked to S&P's
ratings on Atlantia.
This is because S&P expects Abertis' minority shareholders ACS
(30%) and Hochtief (20%) to exercise their rights under the
shareholder agreement, including veto power on reserved matters,
such as distributions and acquisitions, to limit potential negative
intervention from Atlantia. In S&P's view, Abertis also continues
to demonstrate access to capital markets at conditions largely
unaffected by credit stress at the parent and there are no
cross-default or debt acceleration clauses in Abertis' financial
documentation that could be triggered by an Atlantia's insolvency
or rating actions on Atlantia.
The developing outlook indicates that S&P could take a positive
rating action on Atlantia, ASPI, and consequently AdR, if an ASPI
concession settlement is signed with the government, which would
reduce the risk of a liquidity event at ASPI and Atlantia.
At the same time, it indicates that, pending certainty over the
settlement, downside risk to the ratings remains, notably related
to the termination risk of the ASPI concession.
S&P could take a positive rating action on ASPI and Atlantia if the
risk of a liquidity event driven by a potential termination of the
concession is removed, which it expects will materialize if a
settlement is signed with the government.
S&P said, "The extent of the positive rating action on ASPI would
depend on its credit metrics, as well as our view on the
supportiveness and predictability of its regulatory framework. A
potential upgrade to investment grade would need to be supported by
solid credit metrics, adequate liquidity, visibility over the
company's governance and financial policy, as well as nonmaterial
legacy risk from the Genoa bridge collapse.
"In the case of Atlantia, a positive rating action will also depend
on its own future credit metrics, combined with our view on the
quality of its portfolio and stability of its operating cash flows.
Although we see a potential settlement as positive in terms of
liquidity risk, we would need to assess the future strategy of the
holding company, considering the disposal of its core subsidiary.
"We could raise the rating on AdR, depending on the extent of the
positive rating action on Atlantia, considering our assessment of
AdR's SACP at 'a-'.
"We could lower the ratings on ASPI, Atlantia, and consequently
AdR, by more than one notch if a settlement is not signed and a
liquidity risk materializes at ASPI and, in turn, Atlantia." This
would most likely follow a termination or revocation of the
concession, or come through some creditors' willingness and ability
to ask for acceleration of debt reimbursement. A financial covenant
breach, which we do not anticipate at the moment, could also
trigger a negative rating action if liquidity risk materializes and
a waiver is not received in good time from lenders.
SOCIETA DI PROGETTO: Fitch Affirms Sr. Sec. Notes Rating at BB+
---------------------------------------------------------------
Fitch Ratings has affirmed Societa di Progetto Brebemi S.p.A.'s
senior secured class notes at 'BB+' and removed them from Rating
Watch Negative. A Stable Outlook has been assigned.
The removal of the RWN follows completed solicitation with
Brebemi's senior creditors to grant a covenant holiday until June
2021. This agreement will cure the otherwise likely default
covenant breach by year-end and, crucially, will prevent junior
noteholders from taking enforcement actions.
RATING RATIONALE
The operational toll road of Brebemi benefits from its route
location linking fairly wealthy and densely populated Milan and
Brescia in the economically diversified Region of Lombardy. Brebemi
has a balanced user profile of commuters and heavy vehicles who are
willing to pay Brebemi's slightly elevated toll rates in exchange
for shorter travel time and high-quality service compared with
competing A4 motorway.
Class A1 and A2 Ratings
The class A1 and A2 notes' 'BB+' ratings reflect favourable demand
from the northern Italy catchment area and a regulatory asset base
(RAB)-based pricing system sustaining revenue growth. The ratings
also consider the impact of a severe demand shock in 2020 related
to the coronavirus pandemic, which will likely delay Brebemi's
ongoing efforts to ramp-up traffic, and as such Fitch expects
normalised and mature traffic volumes only in 2026.
Brebemi has a fairly rigid operating and financial structure and,
as a result, Fitch expects the project to return to a stabilised
1.4x debt service coverage ratio only from 2026 in the Fitch Rating
Case.
Liquidity is adequate throughout the next 12 months to offset the
expected short-term revenue shortfall.
Class A3 Rating
The class A3 zero coupon notes' 'BB+' rating reflects the risk
associated with the timely payment of the terminal value (TV) at
concession maturity by the grantor, Concessioni Autostradali
Lombarde. Its assessment of CAL's obligation to pay the TV is
notched down from Fitch's internal assessment of the Region of
Lombardy. CAL is contractually bound to pay the TV by 2042. A cash
sweep mechanism caps outstanding class A3 accretion of notes
principal at EUR760 million, but the TV payment from CAL remains
the sole pledged funding source for the full repayment of the class
A3 notes at maturity.
Fitch views the TV mechanism as legally strong. The TV payment is
contractually equal to the non-amortised value of the asset and
allows Brebemi to recover its investment. The TV will be paid by
the new concessionaire at concession maturity (2040) or in case of
delays by the grantor two years later (2042). Given uncertainty of
re-tendering the asset, Fitch assesses the grantor's contractual
obligation to pay the TV, whose proceeds will be used to repay the
class A3 notes.
As the class A3 notes are contractually pari passu with the senior
fully amortising tranches, the credit profile of the class A3 notes
is similar to that of the senior fully amortising debt but
ultimately linked to the creditworthiness of CAL's obligation to
pay the TV in a timely manner.
The outbreak of coronavirus and related government containment
measures worldwide create an uncertain global environment for the
toll road sector. While Brebemi's most recently available
performance data may not have indicated impairment, material
changes in revenue and cost profile are occurring across the toll
road sector and will continue to evolve as economic activity and
government restrictions respond to ongoing developments. Fitch's
ratings are forward-looking in nature, and it will monitor the
virus outbreak for its severity and duration, and incorporate
revised base- and rating-case qualitative and quantitative inputs
based on expectations for future performance and assessment of key
risks.
KEY RATING DRIVERS
Senior Creditors Approve Covenant Holiday
On July 23, 2020, Brebemi's qualifying secured creditors approved a
covenant holiday of the testing of certain financial ratios for 12
months, from and including the test date falling on June 30, 2020
to and including the test date falling on June 30, 2021. This
effectively removes the risk of junior noteholders taking
independent enforcement actions which, according to the existing
bond documentation would have been possible, if the senior
creditors did not act for 12 months and the event of default is not
cured.
Coronavirus Affecting Demand
The spread of coronavirus in Italy is leading to an unprecedented
impact on travel and to a lesser extent, freight mobility, with a
knock-on impact on Brebemi's revenues and cash flow generation.
At the peak lockdown months of March, April and May, traffic
declined around 65% on average with a marked difference between
light vehicles (-76%) and heavy vehicles (-32%) on average. From
January to July, light vehicles suffered an average drop of around
41%, while heavy vehicles remained more resilient with a decline of
14% vs 2019. Total traffic decline during January-to-July was 34%.
In the FRC, Fitch expects Brebemi's traffic to gradually recover
for the rest of the year but to decline around 25% yoy on a full
year basis.
From 2021 Fitch expects traffic to progressively normalise while
ramp-up should resume, albeit from a lower base than in 2019,
ultimately leading to mature and stabilised traffic only from
2026.
Brebemi has limited flexibility in operating expenditure reduction
given its fixed contract with a third-party operator, while
negligible capex limits scope for cutbacks to cushion the impact on
cash flow available for debt service.
Reducing Coverage in FRC
Following the covenant holiday period, Fitch expects the DSCR under
its FRC to average 1.2x until 2025 and remain below 1.4x until at
least 2026 when Fitch expects the ramp-up to end.
Sensitivity Analysis
The Fitch sensitivity case assumes a steeper decline in traffic
volumes in 2020 (-35%), and a slower recovery. Fitch expects
traffic to normalise progressively, leading to mature traffic
volume only in 2028. This sensitivity case results in an average
DSCR of 0.95x until 2025, which should remain below 1.4x until
2032.
Change of Control Neutral
On June 26, Brebemi announced that Aleatica, a fully owned vehicle
of IFM Global Infrastructure Fund, agreed with Intesa Sanpaolo for
the purchase of all the bank's investments held in Brebemi and in
Autostrade Lombarde S.p.A., ultimately taking control of Brebemi.
Brebemi is majority-owned by Autostrade Lombarde (82%), which
itself is owned by a variety of stakeholders, with Aleatica now the
controlling shareholder at 56%.
Fitch views the transaction as neutral to the rating of Brebemi's
notes as it rates the project on a standalone basis. Also, the
change of control does not trigger any relevant clauses under its
bond documentation.
Comfortable Liquidity in FRC
As of July 31, 2020 Brebemi, had EUR46.3 million under its
nine-month debt service reserve account in addition to EUR38.9
million of available cash, versus December 2020 and 2021 debt
service of, respectively, EUR30 million and EUR62 million.
Key Rating Drivers - Summary Assessments
- Revenue Risk Volume - 'Midrange': Limited traffic history,
asset in ramp-up.
- Revenue Risk Price - 'Midrange': Price-cap increases tracking
inflation.
- Infrastructure Development & Renewal- 'Stronger': Highly
developed plan.
- Debt Structure - 'Stronger': Covenanted structure, debt fully
amortising.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A sustained increase in traffic leading to stabilised average
senior DSCR of 1.4x in FRC well before 2026.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- An escalation of or protracted period of restricting measures
leading to a worsening traffic profile than its expectations.
- Fitch views the grantor's obligation to pay the TV as ranking
below the Region of Lombardy's direct debt and the class A3 rating
could move in tandem with Fitch's internal assessment of the Region
of Lombardy. A change in the assessment of CAL's credit linkage
with the Region of Lombardy could also widen the notching.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
TRANSACTION SUMMARY
Brebemi operates a 62 km stretch of toll road directly linking
Milan and Brescia, in one of the wealthiest and industrialised
European regions. Traffic is still in the ramp-up phase amid delays
in the opening of interface connections as well as expected network
enhancements both east (Brescia) and west (Milan), which are not
expected before 2021. Brebemi is exposed to competition from
another toll road managed by Autostrade per l'Italia (A4
Milan-Brescia).
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).
===================
L U X E M B O U R G
===================
COLOUROZ MIDCO: Moody's Affirms CFR at Caa1, Outlook Negative
-------------------------------------------------------------
Moody's Investors Service has affirmed the Caa1 corporate family
rating and upgraded to Caa1-PD/LD from Caa3-PD the probability of
default rating of ColourOz MidCo's. At the same time, Moody's
appended the PDR with the "/LD" designation.
Concurrently, Moody's has assigned Caa1 ratings to COLOUROZ
INVESTMENT 1 GMBH & FDS Holdings BV senior secured first lien term
loan credit facilities and to the COLOUROZ INVESTMENT 1 GMBH
revolving credit facility, and assigned Caa3 ratings to COLOUROZ
INVESTMENT 1 GMBH senior secured second lien term loan credit
facilities. The outlook on all ratings remains negative.
RATING RATIONALE
The affirmation of the Caa1 CFR and the upgrade of the PDR by two
notches to Caa1-PD/LD reflect the successful conclusion of Flint's
amend and extend proposal initially put forward to lenders in April
2020. This resolves the near-term refinancing risk associated with
debt instruments in the capital structure that would otherwise have
matured in 2021 and 2022 respectively. The original maturities of
the RCF and first lien facilities in 2021 and second lien
facilities in 2022, have been extended to 2023 and 2024
respectively.
This extends the next meaningful debt maturity by two years to
2023. The amend and extend transaction has come into effective 7
August 2020 and is in Moody's view moderately credit positive, as
the transaction alleviates concerns about the company's liquidity
profile. It provides the company with additional financial
flexibility at a time when the company is in the middle of
restructuring its packaging business and managing through the
structural decline of its CPS business.
Under Moody's definition this constitutes a distressed debt
exchange and a default event. Moody's will remove the "/LD"
designation from the PDR after three days. This transaction does
not constitute an event of default under any of the company's debt
agreements.
The affirmation of the Caa1 CFR takes into account the highly
levered capital structure. Flint's Moody's adjusted gross leverage
of 11.1x (9.8x adjusted for the packaging restructuring) in the LTM
period ending March 2020 remains high and, in its view, continues
to create a major challenge for the refinancing of the capital
structure after the extended maturity dates. To retain the Caa1
rating a material improvement in performance transformed into
positive free cash flow generation would be necessary in the next
12-18 months, in absence of additional measures to improve the
company's capitalization.
Flint's Moody's-adjusted gross leverage peaked at 11.6x in 2019 due
to weak performance of its packaging segment, the continued
structural decline in CPS, high restructuring cost in its packaging
segment in addition to its regular restructuring related to its CPS
segment. In total restructuring charges in both segments resulted
in P&L charges of EUR62 million during 2019. Moody's expects a
gradual deleveraging supported by lower restructuring charges and
the benefits from restructuring measures. Performance in Q1 2020
was well above that of prior year due to cost savings initiatives
implemented in late 2019.
Q1 2020 results have also benefitted from increasing demand for
food & pharma packaging and the company indicated that it expects
strong demand to continue through Q2 2020, which also should
support a moderate deleveraging in 2020 and 2021 towards 10.0x on a
Moody's-adjusted basis. The company reports its Q2 results in
mid-August. This is somewhat offset by generating free cash flows
in 2021 onwards which supports the build-up of cash.
LIQUIDITY
Flint's liquidity profile will be adequate after the exchange. As
at March 31, 2020 the company had around EUR124 million of cash on
balance sheet and around EUR94 million of availability under its
EUR103 million RCF and a $55 million ABL facility provided by its
shareholders. These liquidity source in combination with projected
FFO generation should be sufficient to cover forecasted capital
expenditure, scheduled debt amortizations and swings in working
capital over the next 12-18 months. The company's RCF is subject to
financial covenants, which Moody's expects to be met all times
during the next 12-18 months.
STRUCTURAL CONSIDERATIONS
The rating on the first lien debt (including the RCF, which ranks
pari passu) is Caa1, in line with the CFR, while the second lien
debt is rated Caa3, two notches below the CFR reflecting the
ranking in the waterfall analysis.
RATING OUTLOOK
The negative outlook on Flint's rating reflects Moody's expectation
of adjusted leverage remaining above 10x in 2020, with limited free
cash-flow to deleverage by the time the debt will be due.
Furthermore, the negative outlook reflects the risk that absent a
performance improvement in the next 12-18 months refinancing risks
will exacerbate again.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the rating could materialize, if there are
visible near-term improvements in performance resulting in Moody's
adjusted leverage decreasing towards 7.0x, resulting in a high
likelihood that Flint will be able to refinance its capital
structure without any further losses for creditors. Furthermore, an
upgrade of Flint's ratings would require Flint maintaining an
adequate liquidity profile, including comfortable head room under
its covenants, at all times.
Moody's could downgrade Flint's rating, if liquidity weakens due to
negative FCF or decreasing covenant headroom under its RCF. Flint's
rating also could be downgraded if there are no operating
performance improvements that result in a more sustainable capital
structure.
The principal methodology used in these ratings was Chemical
Industry published in March 2019.
PROFILE
Headquartered in Luxembourg, ColourOz MidCo (Flint) is one of the
largest global producers and integrated suppliers of inks and other
print consumables, with a wide range of support services for the
printing industry, along with well-established positions in most of
its key markets.
In 2019, the company reported revenue of around EUR2.0 billion,
split 51% between EMEA, 39% the Americas and 10% in the AsiaPacific
region. Flint serves the printing industry through two segments:
packaging and CPS. Since September 2014, Flint has been owned 50%
each by Goldman Sachs Merchant Banking Division and Koch Equity
Development LLC, after a secondary leveraged buyout from CVC
Capital Partners. The company traces its origins to the acquisition
and merger of Akzo Nobel Inks and BASF Printing Systems in 2004 by
CVC, forming Xsys Print Solutions. Flint was created when Xsys
merged with US-based Flint Ink Corporation. Since 2014, the company
has grown its packaging business through various add-on
acquisitions.
PACIFIC DRILLING: Moody's Cuts CFR to Ca, Outlook Altered to Neg.
-----------------------------------------------------------------
Moody's Investors Service downgraded Pacific Drilling S.A.'s
Corporate Family Rating to Ca from Caa2, Probability of Default
Rating to Ca-PD from Caa2-PD, first lien senior secured notes
rating to Caa3 from Caa1 and second lien senior secured notes
rating to C from Caa3. Moody's also downgraded the company's
Speculative Grade Liquidity rating to SGL-4 from SGL-3. The rating
outlook was changed to negative from stable. Under Moody's ESG
framework, social and governance risks were a factor in this rating
outcome.
"The commodity price collapse in the first quarter of 2020 poses a
substantial challenge for PacDrilling to improve its cash flow and
its weak credit profile, as near-term improvement of offshore
fundamentals is unlikely. Moreover, PacDrilling's default risk has
increased significantly following its engagement of financial and
legal advisors to evaluate alternatives, including chapter 11
bankruptcy protection, to address its capital structure," commented
Sreedhar Kona, Moody's Senior Analyst. "PacDrilling's consumption
of cash weakens is liquidity position and contributes to the
negative outlook."
Debt List:
Downgrades:
Issuer: Pacific Drilling, S.A.
Corporate Family Rating, Downgraded to Ca from Caa2
Probability of Default Rating, Downgraded to Ca-PD from Caa2-PD
1st lien senior secured notes rating, Downgraded to Caa3 (LGD3)
from Caa1 (LGD3)
2nd lien senior secured notes rating, Downgraded to C(LGD5) from
Caa3 (LGD5)
Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3
Outlook Actions:
Issuer: Pacific Drilling, S.A.
Outlook, changed to negative from stable
RATINGS RATIONALE
PacDrilling's downgrade to Ca CFR reflects Moody's expectation that
challenging offshore drilling fundamentals will not allow the
company to improve its cash flow generation. The CFR reflects high
likelihood of default and Moody's views on the potential overall
recovery. The downgrade also considers PacDrilling's governance
risk, including historical financial policies that led to
accumulation of high debt loads and long periods of weak leverage
and coverage, incompatible with the highly volatile industry.
The company engaged in balance sheet restructuring in 2018 to
reduce debt burden. Its recent engagement of financial and legal
advisors to evaluate restructuring alternatives in order to address
its unsustainable capital structure, including a potential chapter
11 bankruptcy filing, indicates further deterioration in the
financial policy.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The OFS sector has
been one of the sectors most significantly affected by the shock
given its sensitivity to demand and oil prices. More specifically,
the weaknesses in PacDrilling's credit profile have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions and PacDrilling remains vulnerable to the
outbreak continuing to spread and oil prices remaining weak.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Its action reflects the impact on PacDrilling of the
breadth and severity of the oil demand and supply shocks, and the
broad deterioration in credit quality it has triggered.
The rating outlook is negative, reflecting the continued oversupply
of deepwater and ultra-deepwater rigs reducing the likelihood of
sufficient utilization or dayrate improvement for PacDrilling. The
company will continue to erode its liquidity.
The $750 million first lien senior secured notes due in October
2023 are rated Caa3, one notch above the CFR, reflecting the
secured facility's first lien claim on substantially all assets of
PacDrilling and its priority claim over the $326 million second
lien secured notes (as of June 30, 2020) with a maturity in April
2024. The company also put in place a $50 million first lien super
priority revolving credit facility that matures in April 2023. The
second lien secured notes are rated C, one notch below the CFR
reflecting the size of the first lien secured notes in comparison
to the second lien notes and also the subordination of the second
lien notes to the first lien notes and the revolving credit
facility.
PacDrilling will have weak liquidity as reflected in its SGL-4
rating. As of the end of second quarter 2020, the company had a
cash balance of $246 million and had no availability under its
revolver. The company will not be able to generate sufficient cash
flow from its operations to meet its debt service and capital
expenditures needs. Through 2020 and 2021, the company will consume
a significant portion of its cash balance to meet its liquidity
needs. PacDrilling's revolving credit facility, secured first lien
and second lien notes facilities do not have any financial
maintenance covenants. The company's assets are fully encumbered by
the secured facilities limiting the ability to raise cash through
asset sales.
PacDrilling's Ca CFR is constrained by the company's relatively
small scale with seven drillships, poor market demand and industry
overcapacity, and high financial leverage. Unless there is
substantial improvement in offshore sector's fundamentals,
PacDrilling will be challenged to command high dayrates and
generate significant cash margins even with the improvement in the
utilization of its drillships. The company must also demonstrate
its renewed financial discipline and execution track record through
recontracting of its drillships and positive free cash flow
generation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
PacDrilling's ratings could be downgraded if the company performs
debt restructuring or files for chapter 11 bankruptcy protection.
A ratings upgrade is unlikely in the near-term. PacDrilling's
ratings could be considered for an upgrade if the company is able
to contract its rigs at dayrates that result in sufficient EBITDA
to improve cash interest coverage ratio to exceed 1.0x. The company
must also maintain adequate liquidity
Headquartered in Luxembourg, Pacific Drilling S.A. (PacDrilling),
is a provider of high-specification deepwater drilling services to
the oil and gas industry.
The principal methodology used in these ratings was Global Oilfield
Services Industry Rating Methodology published in May 2017.
=====================
N E T H E R L A N D S
=====================
AURORUS 2020: Moody's Gives (P)B2 Rating to Class F Notes
---------------------------------------------------------
Moody's Investors Service has upgraded the following provisional
ratings to Notes to be issued by Aurorus 2020 B.V.:
EUR[ ]M Class B Floating Rate Notes due August 2046, Upgraded to
(P)Aa1 (sf) previously on July 3, 2020 rated (P)Aa2 (sf)
EUR[ ]M Class C Floating Rate Notes due August 2046, Upgraded to
(P)Aa3 (sf) previously on July 3, 2020 rated (P)A2 (sf)
EUR[ ]M Class D Floating Rate Notes due August 2046, Upgraded to
(P)Baa1 (sf) previously on July 3, 2020 rated (P)Baa3 (sf)
EUR[ ]M Class E Floating Rate Notes due August 2046, Upgraded to
(P)Ba2 (sf) previously on July 3, 2020 rated (P)Ba3 (sf)
EUR[ ]M Class F Floating Rate Notes due August 2046, Upgraded to
(P)B1 (sf) previously on July 3, 2020 rated (P)B2 (sf)
The rating action reflects the correction of an input error by
Moody's in the application of the early amortization triggers in
its cash flow analysis. Its initial modeling did not correctly
consider certain triggers such as the PDL-trigger that would lead
to higher payments to rated Classes of Notes in the event of an
early amortization. The correction of the input error has a
positive impact on the ratings.
The rating action also takes into account the final Notes' spreads
and swap rate related to the transaction's fixed-floating interest
rate swap, both being meaningfully lower than assumed at the
initial provisional rating date. This also has a positive impact on
the ratings of the Notes.
Moody's has not changed the provisional rating of the Class A Notes
as a result of the input error correction and the updated
information on Notes' spreads and the swap rate.
RATINGS RATIONALE
The transaction is a revolving cash securitisation of unsecured
consumer loans extended by Qander Consumer Finance B.V. (not rated)
to obligors in the Netherlands. The originator will also act as the
servicer of the portfolio during the life of the transaction.
As of July 31, 2020, the portfolio shows 97.1% non-delinquent
contracts with a weighted average seasoning of around 4.7 years.
The portfolio consists for the majority of amortising loans
(53.2%), which have equal instalments during the life of the loan.
The remainder of the portfolio consists of revolving loans
(46.8%).
The rapid spread of the coronavirus outbreak, the government
measures put in place to contain it and the deteriorating global
economic outlook, have created a severe and extensive credit shock
across sectors, regions and markets. Its analysis has considered
the effect on the performance of consumer assets from the collapse
in Dutch economic activity in the second quarter and a gradual
recovery in the second half of the year.
However, that outcome depends on whether governments can reopen
their economies while also safeguarding public health and avoiding
a further surge in infections. As a result, the degree of
uncertainty around its forecasts is unusually high. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
According to Moody's, the transaction benefits from credit
strengths such as: (i) a granular portfolio; (ii) an experienced
originator/servicer and a back-up servicer; and (iii) appropriate
credit enhancement levels. Furthermore, the Notes benefit from a
non-amortising cash reserve funded at closing at 0.9% of the
initial Notes balance of Class A to D Notes. The cash reserve will
build up to 1.5% of Class A to D Notes after the end of the
revolving period in October 2023 using excess spread before payment
of interest on Class E and F.
This mechanism will result in approximately two months of deferred
interest on Class E and F. The reserve will provide liquidity
during the life of the transaction to pay senior expenses, hedging
costs and the coupon on the Class A to D Notes (Class B to D only
when no PDL is recorded). When Class A to D Notes are fully
redeemed, the cash reserve covers interest of the most senior Class
of Notes outstanding.
However, Moody's notes that the transaction features some credit
weaknesses such as: (i) a revolving period of 3 years; (ii) loans
with a revolving nature and the ability to redraw amounts up to a
defined credit limit for up to 3 years; (iii) a slow amortization
of the portfolio leading to loan maturities of up to 15 years; and
(iv) limited liquidity available to pay interest on Classes E and F
Notes for approximately two months at the beginning of the
amortization period.
Moody's analysis focused, among other factors, on: (i) an
evaluation of the underlying portfolio of financing agreements;
(ii) the macroeconomic environment; (iii) historical performance
information; (iv) the credit enhancement provided by subordination
and cash reserve; (v) the liquidity support available in the
transaction through the reserve fund; and (vi) the legal and
structural integrity of the transaction.
MAIN MODEL ASSUMPTIONS
Moody's determined the portfolio lifetime expected defaults of
7.0%, a recovery rate of 15.0% and Aaa portfolio credit enhancement
of 25.0% related to the underlying loans. The expected defaults and
recoveries capture its expectations of performance considering the
current economic outlook, while the PCE captures the loss Moody's
expects the portfolio to suffer in the event of a severe recession
scenario. Expected defaults, recoveries and PCE are parameters used
by Moody's to calibrate its lognormal portfolio loss distribution
curve and to associate a probability with each potential future
loss scenario in the ABSROM cash flow model to rate Consumer ABS.
Portfolio expected defaults of 7.0% are higher than the EMEA
Consumer ABS average and are based on Moody's assessment of the
lifetime expectation for the pool taking into account: (i) historic
performance of the loan book of the originator; (ii) benchmark
transactions; and (iii) other qualitative considerations, such as
the revolving nature of nearly half of the loans in the pool.
Portfolio expected recoveries of 15.0% are in line with the EMEA
Consumer ABS average and are based on Moody's assessment of the
lifetime expectation for the pool taking into account: (i) historic
performance of the loan book of the originator; (ii) benchmark
transactions; and (iii) other qualitative considerations.
PCE of 25.0% is slightly higher than the EMEA Consumer ABS average
and is based on: (i) Moody's assessment of the borrower credit
quality; (ii) the replenishment period of the transaction; and
(iii) the revolving feature combined with a long maturity of some
loan products. The PCE level of 25.0% results in an implied
coefficient of variation of 39%.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in July
2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that may cause an upgrade of the ratings include
significantly better than expected performance of the pool together
with an increase in credit enhancement of Notes.
Factors that may cause a downgrade of the ratings include a decline
in the overall performance of the portfolio and a meaningful
deterioration of the credit profile of the originator and servicer
Qander Consumer Finance B.V.
===========
R U S S I A
===========
XALQ BANK: S&P Assigns BB-/B ICRs, Outlook Negative
---------------------------------------------------
S&P Global Ratings assigned its 'BB-/B' long- and short-term issuer
credit ratings to Uzbekistan-based Xalq Bank. The outlook is
negative.
S&P said, "We think that the substantial capital support provided
by the government to date and additional capital to be injected in
2020 will enable the bank to preserve its solid capital buffer,
which is Xalq Bank's key rating strength. In 2019, the bank
received Uzbekistani sum (UZS) 2,559 billion of capital from the
government, which enabled it to increase its capital base by almost
3.0x. Meanwhile, in 2019 our risk-adjusted capital (RAC) ratio
jumped to 15.2% versus 10.2% at year-end 2018. We expect that the
government will provide additional capital of about UZS800 billion
($80 million) this year to support the bank's implementation of the
social lending programs and its transformation efforts. We forecast
that the bank's RAC ratio will remain above 10% at mid-year 2021,
which would allow it to offset the expected deterioration of its
asset quality caused by COVID-19. That said downside risks to this
forecast remain acute considering negative trends related to
economic risk in Uzbekistan combined with new wave of lockdown
measures related to COVID-19.
"In our view, Xalq Bank's relatively high market share, holding of
the country's largest branch network, and solid franchise in retail
and small and midsize enterprise (SME) lending will support the
stability and diversity of its business. However, this is balanced
by uncertainty with regards to planned transformation of the
business model, frequent changes in the management team, and
historically poor profitability. With total assets of UZS21.8
trillion as of July 1, 2020, Xalq Bank is the sixth-largest bank in
Uzbekistan, with a market share of 6.9% of systemwide assets and
9.6% of total customer deposits. Xalq Bank serves 18.5 million
retail customers or about 56% of Uzbekistan's population through
197 branches. The bank also owns the largest payment system in the
country, Uzpaynet, which allows it to access clients' transaction
activity and might improve the product offering and risk
management.
"We think that the bank's profitability and business sustainability
will likely improve in the next three years. In particular, the
recently announced government plans to take over the Xalq Bank's
responsibilities of accumulating and managing pension assets might
give the bank more flexibility in managing its asset mix and
operating costs and therefore improve its profitability. We also
note that the bank's growth in commercial lending with better
risk-adjusted return and transformation initiatives may further
improve its earning capacity.
"We expect that the bank's asset quality will remain worse than
peers', reflecting the predominance of unsecured retail and SME
loans, which might suffer more from COVID-19 than large corporate
customers. As of year-end 2019, the bank's Stage 3 loans
represented 6.1% of its gross loans versus the 2.5%-3.0% systemwide
average. The bank has restructured UZS2.4 trillion, or 15.5% of its
loan portfolio, as of mid-year 2020, including UZS1.4 trillion to
corporate customers and UZS1.0 trillion to individuals. The share
of total restructured loans is materially higher than that of the
largest state-owned banks and is closer to private banks. We assume
that roughly half of the restructured loans will become problem by
year-end 2020, which translates into expected nonperforming assets
(NPAs) to total loans of about 11.6%, versus 4.0%-5.0% expected for
the system average.
"In our view, aggressive lending growth, which reached 174% in
2019, a significant share of newly acquired unseasoned loans (more
than 40% of its loan portfolio), and low provisioning coverage
ratios might lead to elevated credit losses in the future. We
expect the bank's lending growth will remain high in 2020 and could
reach 50%--supported by corporate lending and implementation of
state-driven social programs. At the same time, we assume that the
bank's cost of risk will increase to 3.5%-4.0% this year,
reflecting deteriorating asset quality and the need to create
additional provisions.
"We expect the bank's funding profile will gradually change since
it will transfer some pension assets to the Ministry of Finance.
After the transfer, the bank's funding mix will be more similar to
other state-owned banks in the country, although funding from
government-related entities (GREs) and the government itself will
remain the most important funding source. Credit lines from
international financial institutions will gradually become another
important source of future business growth and will likely
represent 30%-35% of the bank's funding mix in the next
two-to-three years. We expect the transfer of pension savings will
be gradual, over two-to-three years, and therefore will not
pressure liquidity.
"In our view, the bank's systemic importance will gradually
diminish along with the transfer of pension functions to the
Ministry of Finance. Although the bank will likely lose its
exclusive right to distribute pensions to current retirees, we
think that it will remain the key player along with other banks due
to its wide geographical footprint and good brand recognition.
"We consider the bank to be a GRE with a moderately high likelihood
of receiving extraordinary government support, if needed. This, in
turn, reflects the bank's important public policy role for the
financial system and close link with the government, since the
government directly owns 100% of the bank's capital. We note that
the government recently announced its plans to privatize the bank
in 2021. We expect the privatization process will take at least
three years and the government will retain control of the bank in
the next 12-18 months. Although Xalq Bank will be less involved in
managing state pensions, it will remain important for the
government to finance a number of social support programs, mainly
in the entrepreneurship and SME sectors.
"The negative outlook reflects our view that the bank's capital
buffer might come under higher pressure, with our RAC ratio falling
below 10%. This might be the result of more aggressive lending
growth than we currently expect or higher risks affecting borrowers
in Uzbekistan because of an extended lockdown. It also reflects the
risk of much more significant deterioration of the bank's asset
quality due to recently aggressive credit growth and a high share
of unseasoned loans.
"We could take a negative rating action in the next 12 months if
the bank's RAC ratio falls below 10%, due to higher economic risks
in Uzbekistan or more aggressive lending growth. A negative rating
action may also follow if the recent improvement of the bank's
profitability proves to be unsustainable and it continued being
heavily dependent on government capital support. This could happen,
for example, due to significantly higher credit losses than we
currently expect or if management fails to improve the bank's
operating efficiency and risk governance. A material deterioration
of the bank's asset quality due to COVID-19 and weaker performance
of recently provided loans, with problem assets exceeding those of
peers with a similar lending mix, would likely lead to a negative
rating action as well. In addition, a negative rating action on
Uzbekistan would result in similar action on the bank.
"A positive rating action is unlikely in the next 12 months. We
could consider revising the outlook to stable if macroeconomic and
sovereign risks decline, the bank maintains a solid capital buffer
and demonstrates sustainable improvement of its core profitability,
and there is no sign of asset-quality deterioration beyond our
current expectations."
===========================
U N I T E D K I N G D O M
===========================
ITSU: To Begin Reopening Select Number of Travel Hub Sites
----------------------------------------------------------
James McAllister at Big Hospitality reports that Itsu is to begin
reopening a select number of its travel hub sites in London.
According to Big Hospitality, the grab-and-go sushi chain is to
reopen six sites in total today, Aug. 14, icluding train station
locations at London's Eston, and Victoria. Restaurants in
Islington, Reading and Victoria 163 will also be reopening, Big
Hospitality discloses.
Earlier this month it was reported that Itsu was intending to close
two sites and cut rents on a further 53 of its UK locations by
means of a company voluntary arrangement (CVA), Big Hospitality
recounts.
These restructuring plans are being implemented to help shore up
the group's finances following months of closure, and comes after
it hired restructuring experts AlixPartners to explore options for
the business, Big Hospitality notes.
NEW LOOK: Mulls Company Voluntary Arrangement
---------------------------------------------
Andrea Byrne at FashionUnited reports that New Look is reportedly
considering a company voluntary arrangement (CVA) as it looks to
switch to turnover-based rents.
The British fashion retailer is expected to appoint advisors from
Deloitte as soon as this week, FashionUnited relays, citing This is
Money.
According to FashionUnited, the company, which has over 10,000
employees, will be asking landlords at more than 450 stores to
accept new lease contracts as the average spend of its stores
remain at around half of the levels they were at last year.
This is not the first CVA for New Look, FashionUnited notes. In
2018, the company voted in favour of the proposal to improve the
operational performance of the company, FashionUnited recounts.
RESIDENTIAL MORTGAGE 32: Fitch Gives BB+sf Rating to Class E Debt
-----------------------------------------------------------------
Fitch Ratings has assigned Residential Mortgage Securities 32 plc
final ratings.
Residential Mortgage Securities 32 PLC
- Class A XS2207321931; LT AAAsf New Rating
- Class B XS2207322152; LT AAsf New Rating
- Class C XS2207322822; LT Asf New Rating
- Class D XS2207323390; LT BBBsf New Rating
- Class E XS2207325254; LT BB+sf New Rating
- Class F1 XS2207325502; LT BBsf New Rating
- Class F2 XS2207325841; LT NRsf New Rating
- Class X1 XS2207378964; LT Bsf New Rating
- Class X2 XS2207379186; LT NRsf New Rating
- Class Z XS2207379426; LT NRsf New Rating
TRANSACTION SUMMARY
RMS32 is a securitisation of non-prime owner-occupied and
buy-to-let mortgages backed by properties in the UK. The mortgages
were originated primarily by Kensington Mortgage Company (47.3%),
London Mortgage Company (22.3%) and Money Partners Limited
(15.9%).
The assets have been securitised in five previous rated
transactions: Residential Mortgage Securities 26 Plc; Residential
Mortgage Securities 28 Plc; Kensington Mortgage Securities plc -
Series 2007-1; Marble Arch Residential Securitisation Ltd No 4; and
Southern Pacific Securities 05-3Plc.
KEY RATING DRIVERS
Coronavirus-related Additional Assumptions
Fitch expects a generalised weakening in borrowers' ability to keep
up with mortgage payments due to the economic impact of the
coronavirus pandemic and related containment measures. As a result,
Fitch applied updated criteria assumptions to RMS32's mortgage
portfolio.
The combined application of revised 'Bsf' representative pool's
weighted average foreclosure frequency, revised rating multiples
and arrears adjustment resulted in a multiple of 1.20x to the
current FF assumptions at 'Bsf' and of 1.02x at 'AAAsf'. The
updated assumptions are more modest for higher ratings as the
corresponding rating assumptions are already meant to withstand
more severe shocks.
Seasoned Non-Prime Loans
The portfolio consists of 14-year seasoned loans originated
primarily between 1996 and 2008. The OO loans (87.8% of the pool)
contain a high proportion of self-certified, interest-only and
restructured loan arrangements, and 20.5% are in arrears by more
than one payment. Fitch therefore applied its non-conforming
assumptions to this sub-pool.
When setting the originator adjustment for the portfolio Fitch took
into account factors including the historical performance and
average annualised constant default rate since the closing of the
RM26, RMS 28, KMS2007-1, MARS4 and SPS05-3. This resulted in an
originator adjustment of 1.0x for the OO sub-pool and 1.5x for the
BTL sub-pool.
Impact of Payment Holidays
As of July 13, 2020, 21.2% of the portfolio's loans were on payment
holidays. In line with Financial Conduct Authority guidance,
Kensington grants payment holidays based on a borrower's
self-certification. Fitch expects providing borrowers with a
payment holiday of up to six months to have a temporary positive
impact on loan performance. However, the transaction may face some
liquidity constraints if a large number of borrowers opt for a
payment holiday.
Fitch also applied a payment holiday stress for the first six
months of its projections, assuming up to 30% of interest
collections will be lost and related principal receipts will be
delayed.
Unhedged Basis Risk
The pool contains 26.5% of loans linked to the Bank of England base
rate and 60.5% linked to the Kensington variable rate or the Money
Partners variable rate, with the remainder linked to Libor. As the
notes pay daily compounded SONIA, the transaction is exposed to
basis risk between the BBR and SONIA. Fitch stressed the
transaction's cash flows for basis risk, in line with its
criteria.
RATING SENSITIVITIES
Downgrade Rating Sensitivity to Coronavirus-Related Stresses
Due to the coronavirus pandemic, the broader global economy remains
under stress, with surging unemployment and pressure on businesses
stemming from social-distancing guidelines. Recent government
measures related to the coronavirus pandemic allow for mortgage
payment holidays of up to six months. Fitch acknowledges the
uncertainty of the path of coronavirus-related containment measures
and has therefore considered more severe economic scenarios.
As outlined in "Fitch Ratings Coronavirus Scenarios: Baseline and
Downside Cases", it considers a more severe downside coronavirus
scenario for sensitivity purposes whereby a more severe and
prolonged period of stress is assumed with a halting recovery from
2Q21. Under this scenario, Fitch assumed a 15% WAFF increase and a
15% decrease in WA recovery rate. The results indicate up to a
three-notch downgrade of the class A and D notes and a four-notch
downgrade of the class B and C notes.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The transaction's performance may be affected by adverse changes in
market conditions and economic environment. Weakening asset
performance is strongly correlated to increasing levels of
delinquencies and defaults that could reduce credit enhancement
available to the notes.
In addition, unanticipated declines in recoveries could result in
lower net proceeds, which may make certain notes susceptible to
negative rating action depending on the extent of the decline in
recoveries. Fitch conducts sensitivity analyses by stressing
base-case FF and RR assumptions by 30% each. As a result, the class
A notes' rating would deviate from the final rating by up to six
notches.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and
potentially upgrades. Fitch tested an additional rating sensitivity
scenario by applying a decrease in the FF of 15% and an increase in
the RR of 15%, implying upgrades of the class B and C notes by one
notch, the class D notes by three notches and the class E notes by
four notches.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven 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 seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E as prepared by
Deloitte LLP. The third-party due diligence described in Form 15E
focused on the validation of information contained in the loan
level data compared against that held in the loan files and systems
of the originator and servicer.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
DATA ADEQUACY
Fitch reviewed the results of a third-party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
Overall and together with the assumptions referred to above,
Fitch's assessment of the asset pool information relied upon for
the agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
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
Residential Mortgage Securities 32 PLC: Customer Welfare - Fair
Messaging, Privacy & Data Security: 4, Human Rights, Community
Relations, Access & Affordability: 4
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
RESIDENTIAL MORTGAGE 32: S&P Puts BB- (sf) Rating to X1-Dfrd Notes
------------------------------------------------------------------
S&P Global Ratings has assigned its credit ratings to Residential
Mortgage Securities 32 PLC's (RMS 32) class A, B-Dfrd, C-Dfrd,
D-Dfrd, E-Dfrd, F1-Dfrd, and class X1-Dfrd notes. At closing, the
issuer also issued unrated class F2-Dfrd, X2-Dfrd, and Z-Dfrd
notes.
RMS 32 is a static RMBS transaction that securitizes a portfolio of
£651 million owner-occupied and BTL mortgage loans secured on
properties in the U.K. There is no prefunding mechanism in this
transaction.
The loans in the pool were originated between 1996 and 2014 by
several originators, including Kensington Mortgage Company Ltd.
(50.72%), Matlock Bank Ltd. (20.61%), and Money Partners Ltd.
(15.91%).
The underlying collateral consists of mortgage loans that were
previously securitized in several transactions.
S&P considers the collateral to be nonconforming based on the
prevalence of loans to borrowers with previous adverse credit
history (23.51%) and borrowers who at origination self-certified
their income (64.54%).
Of the pool, 24.96% of the mortgage loans have been granted payment
holidays due to COVID-19.
The transaction benefits from liquidity provided by a general
reserve fund, and principal can be used to pay senior fees and
interest on the notes subject to various conditions. A further
liquidity reserve will be funded if the general reserve fund drops
below 1.5%.
Credit enhancement for the rated notes consists of subordination
and the general reserve fund.
At closing, the issuer used the issuance proceeds to purchase the
full beneficial interest in the mortgage loans from the seller. The
issuer grants security over all of its assets in favor of the
trustee.
S&P's ratings on the notes are not constrained under its
counterparty, operational risk, or structured finance sovereign
risk criteria. S&P considers that the issuer should be bankruptcy
remote.
Ratings Assigned
Class Rating Class size (%)
A AAA (sf) 80.00
B-Dfrd AA+ (sf) 7.50
C-Dfrd AA- (sf) 4.00
D-Dfrd A (sf) 2.50
E-Dfrd BBB (sf) 2.50
F1-Dfrd BB (sf) 1.50
F2-Dfrd NR 2.00
X1-Dfrd BB- (sf) 2.00
X2-Dfrd NR 1.54
Z-Dfrd NR 3.00
Certificates NR N/A
NR--Not rated.
N/A--Not applicable.
Dfrd--Deferrable.
SELECT: Seeks New Company Voluntary Arrangement to Cut Costs
------------------------------------------------------------
Laura Onita at The Telegraph reports that embattled fashion chain
Select has been forced to beg landlords for a third round of rent
cuts, after being laid low by the coronavirus pandemic.
According to The Telegraph, the business--which struck a deal last
year to keep its 169 branches open following a plunge into
administration--is pushing ahead with a new company voluntary
arrangement (CVA) to slash its costs again.
It is working with advisors Howard Kennedy on a plan likely to
spark fears that store closures and job cuts could be on the cards
this time, The Telegraph discloses.
Select first went through an insolvency process to slash its rent
bill in 2018, then went bust last year and agreed a second CVA with
creditors in June, The Telegraph recounts. Brokered by
administrator Quantuma, the deal saved 1,800 jobs and Select's
owner Genus was hopeful it could turn the business around, The
Telegraph notes.
However, the firm has failed to pay rent since coronavirus hit, The
Telegraph relates. Its previous CVA with creditors was
automatically terminated on May 8 after an aggrieved landlord
demanded payment, and Select is expected to put forward new
proposals for a vote this month, The Telegraph states.
WARRENS BAKERY: Cuts Minimum CVA Payments to Protect Business
-------------------------------------------------------------
Vince Bamford at British Baker reports that Warrens Bakery has cut
its minimum Company Voluntary Arrangement (CVA) payments after
warning it needed to do so to continue trading.
The CVA was agreed with its suppliers and landlords last December
following a major restructure by the business, which shut around 20
shops and closed its factory in St Just, British Baker recounts.
In March 2020, the company extended five-year loan facilities with
its bank on improved terms to support cash-flow going forward,
British Baker notes.
However, Covid-19 and lockdown had "significantly impacted"
Warrens, with the business closing all shops other than hospital
sites, British Baker relates. The shops have since reopened on
reduced hours, British Baker states.
Warrens told British Baker that landlords have been supportive
during the outbreak, assisting with rental holidays and other
reliefs.
As a result of the impact on the business and restriction to trade,
Warrens proposed reducing the terms of the CVA to limit payments to
GBP5,000 a month until June 2021, down from the previously agreed
GBP24,000, British Baker discloses. This was consequently agreed
with landlords, who Warrens described as "fully supportive",
according to British Baker.
The company's accounts revealed turnover rose in the year, up from
GBP17.3 million in 2018 to GBP18.6 million, while operating loss
was reduced from GBP692,000 to GBP387,000, British Baker relays.
WHSMITH PLC: Demands Rent Cuts with Landlords, May Opt for CVA
--------------------------------------------------------------
Nigel Frith at Asktraders reports that WHSmith PLC has continued to
implement its cost-cutting measures.
According to Asktraders, just a few days after the firm announced
plans to slash 1,500 jobs, or 11% of the total workforce, WHSmith
has reportedly contacted its landlords to demand rent cuts.
The High Street retailer contracted property agency Gerald Eve to
negotiate deals with property owners, Asktraders relays, citing the
Sunday Times. Accordingly, WHSmith threatened landlords with
delayed payments through the Company Voluntary Arrangement (CVA) if
new terms are not agreed, Asktraders notes.
===============
X X X X X X X X
===============
[*] BOOK REVIEW: Hospitals, Health and People
---------------------------------------------
Author: Albert W. Snoke, M.D.
Publisher: Beard Books
Softcover: 232 pages
List Price: $34.95
Order your personal copy today at
http://www.beardbooks.com/beardbooks/hospitals_health_and_people.html
Hospitals, Health and People is an interesting and very readable
account of the career of a hospital administrator and physician
from the 1930's through the 1980's, the formative years of today's
health care system. Although much has changed in hospital
administration and health care since the book was first published
in 1987, Dr. Snoke's discussion of the evolution of the modern
hospital provides a unique and very valuable perspective for
readers who wish to better understand the forces at work in our
current health care system.
The first half of Hospitals, Health and People is devoted to the
functional parts of the hospital system, as observed by Dr. Snoke
between the late 1930's through 1969, when he served first as
assistant director of the Strong Memorial Hospital in Rochester,
New York, and then as the director of the Grace-New Haven Hospital
in Connecticut. In these first chapters, Dr. Snoke examines the
evolution and institutionalization of a number of aspects of the
hospital system, including the financial and community
responsibilities of the hospital administrator, education and
training in hospital administration, the role of the governing
board of a hospital, the dynamics between the hospital
administrator and the medical staff, and the unique role of the
teaching hospital.
The importance of Hospitals, Health and People for today's readers
is due in large part to the author's pivotal role in creating the
modern-day hospital. Dr. Snoke and others in similar positions
played a large part in advocating or forcing change in our hospital
system, particularly in recognizing the importance of the nursing
profession and the contributions of non-physician professionals,
such as psychologists, hearing and speech specialists, and social
workers, to the overall care of the patient. Throughout the first
chapters, there are also many observations on the factors that are
contributing to today's cost of care. Malpractice is just one
example. According to Dr. Snoke, "malpractice premiums were
negligible in the 1950's and 1960's. In 1970, Yale-New Haven's
annual malpractice premiums had mounted to about $150,000." By the
time of the first publication of the book, the hospital's premiums
were costing about $10 million a year.
In the second half of Hospitals, Health and People, Dr. Snoke
addresses the national health care system as we've come to know it,
including insurance and cost containment; the role of the
government in health care; health care for the elderly; home health
care; and the changing role of ethics in health care. It is
particularly interesting to note the role that Senator Wilbur Mills
from Arkansas played in the allocation of costs of hospital-based
specialty components under Part B rather than Part A of the
Medicare bill. Dr. Snoke comments: "This was considered a great
victory by the hospital-based specialists. I was disappointed
because I knew it would cause confusion in working relationships
between hospitals and specialists and among patients covered by
Medicare. I was also concerned about potential cost increases. My
fears were realized. Not only have health costs increased in
certain areas more than anticipated, but confusion is rampant among
the elderly patients and their families, as well as in hospital
business offices and among physicians' secretaries." This aspect of
Medicare caused such confusion that Congress amended Medicare in
1967 to provide that the professional components of radiological
and pathological in-hospital services be reimbursed as if they were
hospital services under Part A rather than part of the co-payment
provisions of Part B.
At the start of his book, Dr. Snoke refers to a small statue,
Discharged Cured, which was given to him in the late 1940's by a
fellow physician, Dr. Jack Masur. Dr. Snoke explains the
significance the statue held for him throughout his professional
career by quoting from an article by Dr. Masur: "The whole question
of the responsibility of the physician, of the hospital, of the
health agency, brings vividly to mind a small statue which I saw a
great many years ago.it is a pathetic little figure of a man, coat
collar turned up and shoulders hunched against the chill winds,
clutching his belongings in a paper bag-shaking, tremulous,
discouraged. He's clearly unfit for work-no employer would dare to
take a chance on hiring him. You know that he will need much more
help before he can face the world with shoulders back and
confidence in himself. The statuette epitomizes the task of medical
rehabilitation: to bridge the gap between the sick and a job."
It is clear that Dr. Snoke devoted his life to exactly that
purpose. Although there is much to criticize in our current
healthcare system, the wellness concept that we expect and accept
today as part of our medical care was almost nonexistent when Dr.
Snoke began his career in the 1930's. Throughout his 50 years in
hospital administration, Dr. Snoke frequently had to focus on the
big picture and the bottom line. He never forgot the importance of
Discharged Cured, however, and his book provides us with a great
appreciation of how compassionate administrators such as Dr. Snoke
have contributed to the state of patient care today. Albert Waldo
Snoke was director of the Grace-New Haven Hospital in New Haven,
Connecticut from 1946 until 1969. In New Haven, Dr. Snoke also
taught hospital administration at Yale University and oversaw the
development of the Yale-New Haven Hospital, serving as its
executive director from 1965-1968. From 1969-1973, Dr. Snoke worked
in Illinois as coordinator of health services in the Office of the
Governor and later as acting executive director of the Illinois
Comprehensive State Health Planning Agency. Dr. Snoke died in April
1988.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
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The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
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