/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200821.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 21, 2020, Vol. 21, No. 168 Headlines G E R M A N Y TAKKO FASHION: S&P Upgrades ICR to CCC-, Outlook Negative WIRECARD AG: To Be Deleted from Dax Index Following Collapse I R E L A N D MONTMARTRE EURO 2020-2: S&P Assigns B- (sf) Rating on Cl. F Notes R U S S I A AGRIBUSINESS HOLDING: Fitch Affirms B LT IDR, Outlook Stable U N I T E D K I N G D O M INTU: Joint Administrators Propose Distributions to Creditors NEW LOOK: Fitch Cuts LT IDR to C on Proposed Restructuring NMC HEALTH: Abu Dhabi Unit Plans to File for Administration NMC HEALTH: Receives Expressions of Interest for Fertility Biz RESTAURANT GROUP: Firejacks Restaurant Won't Be Reopening SEQUENCE FINANCIAL: Goes Into Administration, Halts Trading VALARIS PLC: Moody's Cuts PDR to D-PD on Bankruptcy Filing WOODFORD EQUITY: Investors to Share in GBP183MM Capital Return X X X X X X X X [*] BOOK REVIEW: Mentor X - - - - - ============= G E R M A N Y ============= TAKKO FASHION: S&P Upgrades ICR to CCC-, Outlook Negative --------------------------------------------------------- S&P Global Ratings raised its long-term issuer credit rating on Takko Fashion S.a.r.l. (Takko) to 'CCC-' from 'SD' and its issue rating on the secured notes to 'CCC-' from 'D'. Takko resumed interest payments on its senior secured notes following pent-up demand after lockdown measures were lifted. Following the end of the COVID-19-related lockdown in Germany and other markets, Takko has reaped the benefits of pent-up demand in recent months, increasing our visibility of its earnings. SP said "Consequently, we have revised our expectations, with a sales decline of 13%-18% now expected this year from up to 25% previously. In light of stabilized cash flow generation, Takko has also resumed interest payments on its senior secured notes following the payment of the coupons due on Aug. 14. The group had previously decided to suspend the coupon payment due for May unilaterally, which we considered a default under our criteria." Alongside the payment in August, Takko also paid the accrued interest from May, after payment deferral to August was essentially confirmed by bondholders in June. The group remains vulnerable to economic and market conditions to meet its financial obligations over the coming 12 months. S&P said, "In our base-case scenario, we do not expect another shortfall of liquidity. We note, however, that the gross available liquidity buffer of about EUR100 million (gross of cash needs for operational purposes such as cash in tills) as of early August is limited. This is given our expectation of high market volatility; subdued economic recovery that could hamper customer spending on discretionary items; and several payment deferrals during lockdown--including on interest, taxes, or rents--that need to be made up over the coming months. We also note that the apparel business is highly weather dependent and there is a risk that an unusually warm autumn season could affect cash generation, as seen in 2018. Moreover, following the pandemic, we believe that customer demand for online shopping is accelerating but we see this as an underdeveloped sales channel for Takko. Overall, we still note material downside risk to the group's liquidity cushion over the coming quarters and it is dependent on favorable market conditions to meet its financial commitments." S&P said, "We assume Takko will likely receive the required covenant reset from the revolving credit facility (RCF) lenders, but still see associated risks. Although we understand that no negotiations about a balance sheet restructuring are currently underway, we note that the group will likely not comply with the minimum EBITDA financial maintenance covenant included in its RCF documentation. We understand that this could accelerate the repayment of debt outstanding if the lending banks do not waive the expected breaches or agree to a covenant reset. We assume that the banks will likely agree to a waiver or reset given Takko's improved earnings and cash generation and the temporary suspension on the last testing date, but risks remain until this is agreed." Uncertainties regarding the effects of the pandemic and recession still cloud our earnings visibility. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until second-half 2021. S&P said "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety The negative outlook indicates that the group's operational cash generation could weaken again, which could happen if it faces another major business disruption due to COVID-19, unusual adverse weather conditions, or decreasing customer demand in light of the current economic recession. It also reflects uncertainties around the covenant waiver from bank lenders, which if not obtained could accelerate repayment. S&P said "We could lower the rating in case of a new liquidity shortfall over the coming quarters potentially triggering a restructuring of the capital structure that we may view as being distressed. We could also lower the rating if banks do not waive the expected covenant breach or agree to a covenant reset. "We could revise our outlook to stable in case of a long period of stable operating conditions and further cash accumulation, in combination with more certainty on the effect of the recession and pandemic on consumer demand. A stable outlook would also hinge on the group eventually securing a durable covenant waiver or reset and being able to manage its liquidity." WIRECARD AG: To Be Deleted from Dax Index Following Collapse ------------------------------------------------------------ Joe Miller at The Financial Times reports that Wirecard is to be deleted from Germany's blue-chip Dax index, weeks after the payments provider's spectacular collapse into insolvency following the revelation of a long-running fraud. Once the country's most celebrated financial tech group, Wirecard was first promoted to the Dax--which contains Germany's 30 leading companies--in 2018, when it replaced the ailing Commerzbank, the FT recounts. But following persistent reports of accounting irregularities, the Aschheim-based company admitted in June that EUR1.9 billion of cash was missing, causing its shares to lose almost all of their value in a rapid fall from grace, the FT relates. At its height, Wirecard stock traded at almost EUR200, but it will leave Germany's prestigious index with its shares worth little more than EUR1 each, the FT notes. Although Wirecard filed for insolvency soon after its admission, Deutsche Boerse, which runs the Dax, was not scheduled to review the index's constituents until September, the FT discloses. Facing pressure from investors, the group pushed through a rule-change to allow it to remove Wirecard earlier than planned, the FT states. Wirecard will also be removed from the TecDAX index, according to the FT. ============= I R E L A N D ============= MONTMARTRE EURO 2020-2: S&P Assigns B- (sf) Rating on Cl. F Notes ----------------------------------------------------------------- S&P Global Ratings assigned its credit ratings to Montmartre Euro CLO 2020-2 DAC's class A, B-1, B-2, C, D, E, and F notes. At closing, the issuer also issued 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 portfolio's reinvestment period will end approximately 2.9 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 2,538.13 Default rate dispersion 681.17 Weighted-average life (years) 5.21 Obligor diversity measure 86.64 Industry diversity measure 14.52 Regional diversity measure 1.45 Transaction Key Metrics Current Total par amount (mil. EUR) 300.00 Defaulted assets (mil. EUR) 0.00 Number of performing obligors 97 Portfolio weighted-average rating derived from our CDO evaluator 'B' 'CCC' category rated assets (%) 1.17 Covenanted 'AAA' weighted-average recovery (%) 37.07 Covenanted weighted-average spread (%) 3.40 Covenanted weighted-average coupon (%) 4.00 S&P said, "Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We consider that the portfolio will be well-diversified on the effective date, primarily comprising 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 EUR300 million par amount, the covenanted weighted-average spread of 3.40%, the covenanted weighted-average coupon of 4.00%, and the covenanted weighted-average recovery rates for all rating levels designated by the collateral manager. 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. S&P said, "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. "We consider that 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 B 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 granular in nature, and well-diversified across obligors, industries, and asset characteristics when compared to other CLO transactions we have rated recently. As such, we have not applied any additional scenario and sensitivity analysis when assigning ratings on any classes of notes in this transaction. "Until the end of the reinvestment period on July 15, 2023, the collateral manager is allowed to substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may, through trading, deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "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, B-1, B-2, C, D, E, and F notes. "Taking the above into account and 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 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 A to E 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 evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P said, "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly." Montmartre Euro CLO 2020-2 DAC is a European cash flow CLO securitization of a revolving pool, comprising euro-denominated senior secured loans and bonds issued mainly by speculative-grade borrowers. CBAM CLO Management Europe LLC will manage the transaction. Ratings List Class Rating Amount Subordination (%) Interest rate* (mil. EUR) A AAA (sf) 180.00 40.00 Three/six-month EURIBOR plus 1.59% B-1 AA (sf) 20.00 30.00 Three/six-month EURIBOR plus 2.25% B-2 AA (sf) 10.00 30.00 2.65% C A- (sf) 34.50 18.50 Three/six-month EURIBOR plus 2.90% D BBB- (sf) 15.00 13.50 Three/six-month EURIBOR plus 4.00% E BB- (sf) 11.25 9.75 Three/six-month EURIBOR plus 6.43% F B- (sf) 5.25 8.00 Three/six-month EURIBOR plus 6.92% Sub. notes NR 24.74 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. =========== R U S S I A =========== AGRIBUSINESS HOLDING: Fitch Affirms B LT IDR, Outlook Stable ------------------------------------------------------------ Fitch Ratings has affirmed Russia-based Agribusiness Holding Miratorg LLC's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'B'. The Outlook is Stable. Fitch has simultaneously withdrawn all ratings for commercial reasons. The ratings reflect Miratorg's currently heightened leverage levels due to ongoing, largely debt-funded, capex expansion projects and high number of guarantees provided for related parties' liabilities. This is balanced by the group's large scale, its strong market positions in Russia and a high degree of vertical integration across the value chain, which results in strong EBITDA margins. The Stable Outlook reflects Fitch's expectation that following high leverage in 2019-2021, the company should gradually deleverage from 2022 as new production facilities will come on stream, as well as its assumption that Miratorg will be able to maintain ready access to bank financing and obtain funding for new investments on a timely basis. The ratings were withdrawn with the following reason: for commercial purposes KEY RATING DRIVERS Vertically Integrated Business Model: Miratorg's ratings are supported by the group's robust business model. Miratorg is the largest pork producer and ranks among the top 10 chicken producers in Russia. It benefits from vertical integration across the value chain, from crop growing and fodder production to livestock and poultry breeding, slaughtering and product delivery. High vertical integration enables the group to maintain EBITDA margins higher than its peers and to smooth out the business's inherent volatility. Expansion in Progress: Miratorg is in the middle of its massive project to double pork production by 2024 toward 1 million tonnes (2019: 428,000 tonnes) driving industry consolidation trends, increasing its market share at the expense of small players and household producers, while participating in growing export opportunities. In 2018-19, Miratorg invested RUB44 billion out of a total project cost of RUB156 billion. However peak investments are planned for 2020-2021 at around RUB112 billion. Miratorg is also investing RUB5 billion in growing its poultry capacities by nearly 32% or 35,000 tonnes, which should become operational in 2021. Fitch estimates execution risks related to the projects are limited, based on Miratorg's strong track record in green field farms and processing capacities launches over the last decade. Fitch expects that once completed, Miratorg's credit profile will benefit from the group's greater scale, strengthened market positions and economies of scale. Leverage at Peak: As a result of large investments anticipated in 2020-21, Fitch expects Miratorg's funds from operations (FFO) gross leverage to be high at 7.5x in 2020 (2019: 7.0x), more in line with a lower rating, before gradually declining toward 5.0x in 2022 once capacity starts to ramp up and capex normalises. Current high leverage levels continue to pressure Miratorg's credit profile. The projected deleveraging pace would also be subject to Miratorg's other expansion plans, as well as the extent of support provided to related-party projects where Moody's has less visibility. Support to Related-Party Project: In 2019 Miratorg provided RUB10 billion in loans to related parties, mainly the beef business developed by its shareholders. In addition, Miratorg supports it via working capital, increasing receivables from related parties by RUB3.7 billion and buying rights for their receivables from third parties of RUB2.4 billion in 2019. Moody's conservatively factors in cash support from Miratorg through related-party loans of around RUB5 billion per year over 2020-2023 and assume higher working capital investments, capturing the possibility of further support to related parties. At end-2019 Miratorg also guaranteed RUB41.0 billion (2018: RUB41.6 billion) working capital loans of its beef business but reduced this to RUB25.4 billion by June 2020. Moody's treats these guarantees as off-balance sheet debt and add the amount to Miratorg's own debt obligations, which is expected to contribute 0.8x to FFO gross leverage in 2020. Profitability of Pork Under Pressure: Fitch expects EBITDA margin in the core pork segment (2019: 58% of group EBITDA) to remain pressured at around 37% vs. an average 46% in 2016-18 (based on gross revenue) due to further, albeit slower, decline in pork prices in the country, stemming from growing meat supply from both local producers and importers. Together with subdued consumer sentiment in Russia, Moody's does not expect a fast recovery in pork prices in the near term. Profitability of the pork segment will be dragged down by the lower margins of the new production facilities until they reach planned capacity post-2023. While below historical averages, the projected EBITDA margin will remain at very strong levels compared with international peers. Accelerated Exports: In 1H20 Miratorg doubled its export sales volumes, mainly driven by the opening of the Chinese market for poultry in 2019 and pork in 2020. Increased export sales allowed the group to fully offset reduced demand from the hotel and restaurant sales channel (nearly 18% of revenue in 2019), which domestically resulted from COVID-19-related social distancing measures. Moody's also anticipates that increasing exports by Russian pork and poultry producers to China and Middle East should help support internal meat prices, absorbing part of growing domestic supply. Other Segments Support Profit: Fitch estimates lower profitability in the pork segment in 2020 will be partly offset by continued growth in other profitable segments. The poultry and crop farming divisions, which have EBITDA margins of 30% or above, continue to demonstrate revenue growth on the back of further output increase and a more favourable price environment. However, as new pork facilities will ramp up, the share of other segments in EBITDA is likely to return to below 30% (2019: 42%). Weak Governance Drags on Credit Profile: In Fitch's view, Miratorg's corporate governance is not in line with international standard practices due to key man risk from its two shareholders, related-party transactions, guarantees provided outside the group perimeter and a complex group structure. Miratorg's audited consolidated accounts include entities that it controls the operations of but does not own. Weak governance practices continue to have a moderate negative impact on the group's credit profile. State Support for the Sector: As an agricultural producer, Miratorg enjoys a favourable tax regime and subsidised interest rates. This helps its cash flow generation, leading to improved financial flexibility. As food self-sufficiency remains one of key objectives of the Russian government, Fitch expects state support to agricultural producers to be maintained over the next four years. Its rating case assumes this level of state support is maintained but also recognises that the company's increasingly strong scale benefits and market position would enable it to successfully cope with a less favourable environment. DERIVATION SUMMARY Miratorg has a smaller business size and weaker ranking on a global scale than industry leaders Tyson Foods Inc. (BBB/Negative), Smithfields Foods Inc. (BBB/Stable) and BRF S.A. (BB/Stable). Furthermore, Miratorg's projected leverage is substantially higher than peers and the group's rating also incorporates weak corporate governance practices. Miratorg has a similar vertically integrated business model and comparable size with the largest Ukrainian poultry producer and exporter MHP SE (B+/Stable), whose rating is also pressured by Ukraine's operating environment. Compared with MHP, Miratorg has higher Fitch-projected leverage and weaker corporate governance, which result in a rating difference. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer - Revenue and EBITDA to grow at around 15% CAGR over 2020-2023, driven mostly by increasing pork production volumes - Capex related to construction of new pork production capacity of around RUB112 billion in total over 2020-2023 - Capex-related expansion of existing pork capacity, other projects and maintenance capex together of around RUB14 billion per year over 2020-23 - Maintenance of high requirement for working-capital related to pork doubling project as well as potential support to related parties with net working capital as percentage of revenue at around to 36% in 2020-21 (2019: 30%) before normalisation toward 30% by 2023 - Maintenance of state support to the sector, including interest rate subsidies, favourable tax regime - Additional loans to related parties not exceeding RUB5 billion per year over 2019-2022 - Guarantees to related parties' liabilities, which Moody's treats as Miratorg's own debt, stable at RUB25.4 billion - Annual RUB5 billion dividends from 2022 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 Insufficient Liquidity: At end-December 2019 Fitch-adjusted unrestricted cash balances of RUB15.9 billion, and long-term committed undrawn credit facilities of RUB16.85 billion were insufficient to cover short-term debt of RUB53.4 billion and expected negative free cash flow driven by high capex. Liquidity sources do not take into account funding for new pork production capacity as credit agreements have not yet been signed. However, the credit limit has been approved by one of the largest Russian banks and management is confident it will be able to obtain the necessary funding on a timely basis. Miratorg's liquidity should be supported by the renewal of existing short-term committed facilities (2019: RUB5.5 billion), given the track record of timely rollover, as well as the group's strong relationships with Russian state-owned banks. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch has added guarantees provided for related-party obligations to Miratorg's off-balance sheet debt (2019: RUB40.9 billion). 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 Unless otherwise disclosed in this section, the highest level of ESG credit relevance 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. Miratorg has an ESG Relevance Score of 4 for Governance Structure due to the concentrated ownership, lack of board independence and complex group structure, which has a modest negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. Following the withdrawal of Miratorg's ratings, Fitch will no longer be providing the associated ESG Relevance Scores to the rating in conjunction with other factors. =========================== U N I T E D K I N G D O M =========================== INTU: Joint Administrators Propose Distributions to Creditors ------------------------------------------------------------- Yadarisa Shabong at Reuters reports that the joint administrators of Intu Properties on Aug. 19 proposed distributions to certain creditors of the collapsed mall operator from available funds and listed a number of exit strategies to end the administration. According to Reuters, KPMG, which was appointed as administrator in June after the owner of Manchester's Trafford Center and Lakeside in Essex failed to reach a deal with its lenders, said they have realised cash at bank of GBP151 million in the period covered by its proposals. Exit strategies to end Intu's administration included placing the company into creditors' voluntary liquidation, applying to the court for control to be returned to the company's directors and formulating a proposal for a company voluntary arrangement, among others, Reuters discloses. NEW LOOK: Fitch Cuts LT IDR to C on Proposed Restructuring ---------------------------------------------------------- Fitch Ratings has downgraded New Look Bonds Ltd's Long-Term Issuer Default Rating to 'C' from 'CC'. Fitch has also affirmed the rating of its GBP440 million senior secured notes due in May 2024, issued by New Look Financing Plc, at 'C' but downgraded its Recovery Rating to 'RR6'/3% from 'RR5'/18%. New Look is the entity that indirectly owns the main operating company New Look Retailers Ltd, which operates as a multi-channel value fashion retailer in the UK clothing & footwear market. The downgrade reflects New Look's debt restructuring and company voluntary arrangement procedure announcement. The proposed debt restructuring, including a material senior debt amount reduction to GBP100 million from GBP540 million and the CVA on its lease portfolio and other creditors, represents a distressed debt exchange based on Fitch's criteria. New Look has reopened the majority of its 496 stores but is still experiencing a decline of 38% of its revenue on a like-for-like basis compared with pre-pandemic levels. New Look has managed its liquidity tightly during the pandemic by deferring various payments. The announced restructuring should provide greater financial flexibility by extending its working capital facilities, a GBP40 million new money injection and rebasing lease obligations. If the restructuring plan is approved, upon completion of the DDE, Fitch will downgrade New Look's Long-Term Issuer IDR to 'RD' (Restricted Default) before assigning a new rating based on the group's business prospects and new capital structure. KEY RATING DRIVERS Restructuring will Constitute a DDE: The restructuring will materially reduce senior secured debt by GBP440 million in an exchange for a GBP40 million subordinated shareholder loan maturing in 2029 and a 20% non-voting equity interest. Existing senior secured notes holders will maintain control of New Look, subject to their participation in the GBP40 million new money. Maturity will be extended for its GBP65 million operating facility to June 2023 and for its GBP100 million revolving credit facility (RCF) to June 2024 (from June 2021). A CVA will help resolve rental arrears and other non-critical creditor balances; it will also rebase rents by linking the payable rent amounts to stores' turnover. Liquidity Compromised by COVID-19: During the three months of shop closures with minimal online revenues, New Look did not have sufficient liquidity to pay for its inventories and it suspended payments to its suppliers. It also did not pay rent since the end of March to preserve cash until the re-opening of stores. It made use of government support on 80% staff costs and business rate holiday, and cut variable costs. New Look closed all its stores by March 21, 2020, while maintaining its online operations (around 20% of revenues). While most of its stores are now open it is struggling given a sharp drop in footfall experienced across the sector, due to the pandemic, with like-for-like sales 38% yoy lower. Turnaround not Fully Realised: In February 2020 New Look lowered its pre COVID-19 EBITDA guidance for financial year to March 2020 to GBP60 million-GBP76 million from GBP100 million under its turnaround plan, compared with a Fitch-expected GBP86 million. Revenue and profits have declined alongside footfall and online traffic, despite progress on its original turnaround plan. Turnaround strategy to restore its value-for-money and broad-appeal reputation is plausible, and New Look has managed to cut costs, improved its inventory management and reduced markdowns in 3Q20, along with reducing lead times from sourcing to store. It has also recruited experienced industry professionals to transform the business. New CVA/Cost Savings Ahead: The new CVA, expected to launch on August 26, if approved, should enhance operating and financial flexibility post-pandemic by reducing rental expense (one of the key cost items) and linking it to turnover. Fitch estimates operating leases accounted for almost 70% of EBITDAR in FY20. In addition, New Look has achieved large savings via headcount reduction, HQ rationalisation, exit of non-core and loss-making markets, ongoing efficiency programmes and opening negotiations with its suppliers over payment terms. Competitive UK Clothing Market: New Look operates in a crowded UK mass market clothing sector characterised by reduced consumer confidence and stiff competition. The group is also challenged by a new generation of pure online retailers such as ASOS, Boohoo.com and The Very Group, who benefit from a lower cost base and a lack of legacy IT and logistics systems. New Look also competes with traditional store-based retailers such as Next Plc and Marks & Spencer plc (BB+/Stable), which are developing their online offering and integrating this channel into their existing store portfolio. DERIVATION SUMMARY New Look is a multi-channel fashion retailer operating in the value segment of the UK clothing & footwear market for women, men and teenage girls. Its e-commerce platform is a key differentiating factor relative to other sector peers, such as Novartex SA (C). However, prior issues around product, brand and pricing perception have led to a decline in market share, even in its online channel. Despite enhanced financial flexibility following its latest financial restructuring (between March 2018 and May 2019), the forced store closures in lockdown has led us to forecast excessive funds from operations adjusted gross leverage, with a weak liquidity position given the traditional inventory build-up in the early spring. Its credit and liquidity profiles mirror those of Novartex but contrast with online asset-light retailers, such as Boohoo, ASOS and The Very Group (B-/Stable), some of which have been still able to sell through their online channels during the lockdown, with structurally stronger cash generation than store-based retail peers'. Novartex was downgraded to 'C' from 'CC' in April 2020, following its public announcement of filing for a safeguard process to allow it to suspend payments to landlords and suppliers while it works on a restructuring plan. KEY ASSUMPTIONS Fitch's Key Assumptions within its Rating Case for the Issuer: Once the proposed debt restructuring completes, if a rating is maintained, Fitch would establish new assumptions in support of its long-term forecasts for the business with a new capital structure. This is expected to happen once Fitch has discussed the company's revised business plan with management and assessed it. Key Recovery Assumptions: - Moody's maintains a going-concern approach as Fitch believes creditors are likely to maximise their recoveries via a restructuring or a sale as a going-concern as opposed to liquidation. Importantly, going-concern value is also higher than value in liquidation. Moody's uses a going-concern EBITDA of around GBP50 million, which implies a 0% discount to the forecast FY20 EBITDA. This is below its previous analysis (GBP70 million) as it takes into account a longer- lasting effect of the pandemic on the company's operations. This level of EBITDA in a post-restructuring scenario (outside of coronavirus) is enough to cover maintenance capex of GBP25 million, taxes and working-capital needs. Moody's maintains a distressed EV/EBITDA multiple of 4x, reflecting the scale of the business relative to peers' and its view of its redeemable business model. Moody's assumes that the surviving drawn debt and shareholder loan equate to the group's sustainable enterprise value, pointing to around a 4x multiple based on forward-looking EBITDA. After deducting 10% for administrative claims, based on the existing debt waterfall where the RCF (GBP100 million) and the utilised operating facilities (GBP65 million) rank super senior, Fitch expects the senior secured notes to achieve recoveries within the 'RR6' range with an output percentage based on current metrics and assumptions at 3%, indicating a 'C' instrument rating. The senior secured note notional amount includes accrued PIK interest. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - A direct upgrade of the IDR to 'CC' is unlikely at present. Post-restructuring a new capital structure leading to a sustainable debt service capability, improved liquidity and debt maturity profiles, and enabling New Look to strengthen its operating profile may lead to an upgrade Factors that could, individually or collectively, lead to negative rating action/downgrade: - Implementation of a DDE, which would lead to a downgrade to 'RD' - Failure to receive minimum approvals for a comprehensive debt restructuring, leading to administration, liquidation or other formal winding-up procedures, would lead to a downgrade to 'D' 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 Tight Liquidity Profile: Fitch had expected New Look would run out of cash by September 2020, assuming its stores remained closed for three months. While trading has resumed and liquidity has been tightly managed, the upcoming financial restructuring is needed to shore up the group's liquidity buffer, by way of rebased lease payments, a new capital injection, along with extension of the operating facilities and RCF. This is critical for the group to meet seasonal payments related to the autumn-winter clothes collection and invest in, and deliver, on its strategic business plan. 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). NMC HEALTH: Abu Dhabi Unit Plans to File for Administration ----------------------------------------------------------- Saeed Azhar and Hadeel Al Sayegh at Reuters report that NMC Healthcare LLC plans to file for administration in Abu Dhabi, the UAE-based hospitals operator said on Aug. 19, as it targets a three-year recovery plan involving a debt moratorium, debt restructuring and asset sales. Its London-listed holding company NMC Health Plc is already being run by administrators Alvarez & Marsal after going into administration in April following months of turmoil over its finances, Reuters notes. According to Reuters, NMC Healthcare LLC plans to file for administration with the Abu Dhabi financial centre ADGM, it said in a presentation posted on its website on Aug. 19. It said Alvarez & Marsal will also be appointed as administrators of the UAE business, Reuters relates. "We are looking to move there as soon as we can," Marija Simovic, managing director of Alvarez & Marsal told Reuters, saying the administrators were working with lenders. NMC's implosion this year amid allegations of fraud and the disclosure of more than US$4 billion (GBP3 billion) in hidden debt has left some UAE and overseas lenders with heavy losses and prompted legal battles to try and recover money owed, Reuters discloses. NMC Health is the largest private healthcare provider in the UAE, operating more than 200 facilities including hospitals, clinics and pharmacies. As part of its restructuring plan, NMC and its lenders will have until Jan. 30, 2021, to deliver a binding reorganization plan or the process will move to core asset sales, Reuters relays. NMC, as cited by Reuters, said negotiations will begin soon and a term sheet will be delivered to lenders by Oct. 31. NMC has agreed to terms with existing lenders to raise up to US$300 million to fund the business as it prepares to enter administration, Reuters recounts. NMC said significant cash has been extracted from the company, resulting in constrained liquidity and payment defaults to lenders and suppliers, according to Reuters. NMC HEALTH: Receives Expressions of Interest for Fertility Biz -------------------------------------------------------------- Saeed Azhar at Reuters reports that hospital group NMC Health has received expressions of interest from more than 60 potential bidders for its international fertility business, one of the first non-core assets it plans to sell as part of a recovery plan, its acting CEO said on Aug. 19. NMC's acting CEO Michael Davis and Marija Simovic, managing director of NMC's administrators Alvarez & Marsal, told Reuters the Boston IVF business may be included in the sale process alongside the Spain-based Eugin IVF unit. Reuters reported in June that the administrators of NMC have selected Perella Weinberg Partners to advise on the sale. "We're just going through round one now. Some of those people will drop off on their own and some of them will shortlist based on their ability to raise funds and their knowledge of the portfolio and the business," Reuters quotes Mr. Davis as saying. "This is not a fire sale. We're not relinquishing these businesses at a discount," he said, adding the underlying businesses of NMC are strong. The administrators are also weighing the sale of UK-based hospital operator Aspen, but a formal process is yet to begin, Reuters notes. Mr. Davis, as cited by Reuters, said his preference would be for the core businesses of NMC, which is UAE's biggest private hospital operator, to remain intact. NMC's difficulties amid allegations of fraud and the disclosure of more than US$4 billion in hidden debt has left some UAE and overseas lenders with heavy losses and prompted legal battles to try and recover money owed, Reuters discloses. RESTAURANT GROUP: Firejacks Restaurant Won't Be Reopening --------------------------------------------------------- David Holmes at CheshireLive reports that Firejacks restaurant in Chester city centre won't be reopening following its closure during lockdown. Owners The Restaurant Group are restructuring part of its business through an insolvency procedure known as a company voluntary arrangement (CVA), CheshireLive notes. It's now been confirmed that Firejacks, which was rebranded from a Coast to Coast outlet, will remain permanently closed, CheshireLive discloses. According to CheshireLive, a company spokesman said: "The casual dining sector has faced enormous, well documented pressures which have been exacerbated by Covid-19 and the lockdown. Unfortunately, we have had to take difficult but necessary decisions to ensure a sustainable future for our business. "We have been in close contact with affected colleagues throughout this process and we are doing all we can to support them during this time." The Restaurant Group is one of the largest operators in the country but has been forced to shut sites across its brands such as Garfunkel's and Chiquito as well as Frankie and Benny's including its Greyhound Retail Park outlet, CheshireLive states. SEQUENCE FINANCIAL: Goes Into Administration, Halts Trading ----------------------------------------------------------- Business Sale reports that Sequence Financial Management has ceased trading and entered administration. Andrew Poxon and Mike Dillon of the Manchester office of business recovery firm Leonard Curtis have been appointed as joint administrators for the company, Business Sale relates. According to Business Sale, in a statement, the joint administrators said that they had been appointed on Aug. 12 and that SFM had ceased trading prior to their appointment. The joint administrators added that all enquiries relating to the administration should be forwarded to Leonard Curtis' Riverside House office in Manchester, Business Sale notes. The company's most recent accounts filed at Companies House were made up to the year ending September 30 2019, Business Sale states. According to those accounts, SFM employed around 12 staff. SFM's total assets less liabilities were valued at GBP379,246, down from GBP422,370 in 2018, while its net assets amounted to GBP224,451, down from close to GBP250,000, Business Sale discloses. The Northwich, Cheshire-based wealth management firm specialized in pensions and investment and offered services ranging from financial planning to wealth management, corporate advice and pension reviews to private and corporate clients. VALARIS PLC: Moody's Cuts PDR to D-PD on Bankruptcy Filing ---------------------------------------------------------- Moody's Investors Service downgraded Valaris plc's Corporate Family Rating to Ca from Caa3, Probability of Default Rating to D-PD from Caa3-PD/LD, senior unsecured notes to C from Ca, and Speculative Grade Liquidity Rating to SGL-4 from SGL-3. The rating outlook remains negative. These actions follow the company's bankruptcy filing on August 19, 2020. Downgrades: Issuer: Valaris plc Probability of Default Rating, Downgraded to D-PD from Caa3-PD /LD Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3 Corporate Family Rating, Downgraded to Ca from Caa3 Senior Unsecured Notes, Downgraded to C (LGD4) from Ca (LGD4) Issuer: ENSCO International Incorporated Senior Unsecured Notes, Downgraded to C (LGD4) from Ca (LGD4) Issuer: Pride International, Inc. Senior Unsecured Notes, Downgraded to C (LGD4) from Ca (LGD4) Issuer: Rowan Companies, Inc. Senior Unsecured Notes, Downgraded to C (LGD4) from Ca (LGD4) Affirmations: Issuer: Valaris plc Senior Unsecured Commercial Paper (Foreign Currency), Affirmed NP Unchanged: Issuer: Valaris plc Outlook, Remains Negative Issuer: ENSCO International Incorporated Outlook, Remains Negative Issuer: Pride International, Inc. Outlook, Remains Negative Issuer: Rowan Companies, Inc. Outlook, Remains Negative RATINGS RATIONALE The Ca CFR and C notes rating reflect Moody's view on expected recoveries. Shortly after its rating action, Moody's will withdraw all of Valaris' ratings, and no changes to the ratings are expected prior to the withdrawal. Valaris plc is headquartered in London, UK and is one of the world's largest providers of offshore contract 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. WOODFORD EQUITY: Investors to Share in GBP183MM Capital Return -------------------------------------------------------------- Peter Smith at The Financial Times reports that more than 300,000 investors still stuck in Neil Woodford's equity income fund are to share in a GBP183 million capital distribution in the coming days, according to Link Fund Solutions, the fund's administrator. According to the FT, combined with a GBP143 million distribution made in March, and GBP2.12 billion paid out in January, investors will have had GBP2.45 billion of their money returned since the fund was put into liquidation last year. Mr. Woodford's equity income fund was suspended in June last year, having shrunk to GBP3.7 billion after years of weak investment performance and an exodus of investors, the FT recounts. Following this latest distribution to investors, the size of the defunct fund has now shrunk to less than GBP290 million, the FT states. Laura Suter, personal finance analyst at investment platform AJ Bell, said selling the remaining assets in the fund would be difficult, the FT notes. "There's no mention of a timeline or any progress having been made on the sale of the assets, with Link just saying the sale 'may take some time'," the FT quotes Ms. Suter as saying. "This means the process will drag on for even longer for investors, who just want to get as much of their money back as possible and move on from the sorry saga." Link also announced that publication of the fund's annual accounts would be delayed by about a month, the FT discloses. According to the FT, Link said on Aug. 20 it remained in "regular discussions" with Grant Thornton, the fund's auditor. =============== X X X X X X X X =============== [*] BOOK REVIEW: Mentor X ------------------------- The Life-Changing Power of Extraordinary Mentors Author: Stephanie Wickouski Publisher: Beard Books Hard cover: 156 pages ISBN: 978-1-58798-700-7 List Price: $24.75 Order this Book: https://is.gd/EIPwnq Long-time bankruptcy lawyer Stephanie Wickouski at Bryan Cave impressively tackles a soft problem of modern professionals in an era of hard data and scientific intervention in her third published book entitled Mentor X. In an age where employee productivity is measured by artificial intelligence and resumes are prescreened by computers, Stephanie Wickouski adds spirit and humanity to the professional journey. The title is disarmingly deceptive and book browsers could be excused for assuming this work is just another in a long line of homogeneous efforts on mentorship. Don't be fooled; Mentor X is practical, articulate and lively. Most refreshingly, the book acknowledges the most important element of human development: our intuition. Mrs. Wickouski starts by describing what a mentor is and distinguishes that role from a teacher, coach, role model, buddy or boss. Younger professionals may be skeptical of the need for a mentor, but Mrs. Wickouski deftly disabuses that notion by relating how a mentor may do nothing less than change the course of a protege's life. Newbies to this genre need little convincing afterwards. One of the book's worthiest contributions is a definition of mentor that will surprise most readers. Mentors are not teachers, the latter of which impart practical knowledge. Instead, according to Mrs. Wickouski, her mentors "showed me secrets that I could learn nowhere else. They showed me how doors are opened. They showed me how to be an agent of change and advance innovative and controversial ideas." What ambitious professional doesn't want more of that in their life? The practicality of the book continues as Mrs. Wickouski outlines the qualities to look for in a mentor and classifies the various types of mentors, including bold mentors, charismatic mentors, cold and distant mentors, dissolute mentors, personally bonded mentors, younger mentors, and unexpected mentors. Mentor X includes charts and workbooks which aid the reader in getting the most out of a mentor relationship. In a later chapter, Mrs. Wickouski provides an enormously helpful suggestion about adopting a mentor: keep an open mind. Often, mentors will come in packages that differ from our expectations. They may be outside of our profession, younger, less educated, etc . . . but the world works in mysterious ways and Mrs. Wickouski encourages readers to think about mentors broadly. In this modern era of heightened workplace ethics, Mrs. Wickouski articulates the dark side of mentors. She warns about "dementors" and "tormentors"--false mentors providing dubious and sometimes self-destructive advice, and those who abuse a mentor relationship to further self-interested, malign ends, respectively. She describes other mentor dysfunctions, namely boundary-crossing, rivalry, corruption, and a few others. When a mentor manifests such behaviors, Mrs. Wickouski counsels it's time to end the relationship. Mrs. Wickouski tells readers how to discern when the mentor relationship is changing and when it is effectively over. Those changes can be precipitated by romantic boundaries crossed, emergence of rivalrous sentiment, or encouragement of unethical behavior or corruption. Mrs. Wickouski aptly notes that once insidious energies emerge, the mentorship is effectively over. At this point, certain readers may say to themselves, "Okay, I've got it. Now I can move on." Or, "My workplace has a formal mentorship program. I don't need this book anymore." Or even, "Can't modern technology handle my mentor needs, a Tinder of mentorship, so to speak?" Mrs. Wickouski refutes that notion. She analyzes how many mentoring programs miss the mark. In one of the best passages in the book, Mrs. Wickouski writes, "Assigning or brokering mentors negates the most critical components of a true mentor–protege relationship: the individual process of self-awareness which leads a person to recognize another individual who will give the advice singularly needed. That very process is undermined by having a mentor assigned or by going to a mentoring party." She does not just criticize; she offers a solution with three valuable tips for choosing the right mentor and five qualities to ascertain a true mentor in the unlimited sea of possibilities. Next, Mrs. Wickouski distinguishes between good advice and bad advice. She punctuates that discussion with many relevant and relatable examples that are easy to read and colorfully enjoyable. This section includes interviews with proteges who have had successful mentorships. The punchline: in the best mentorships, the parties harmoniously share personal beliefs and values. Also important, the protege draws inspiration and motivation from the mentor. The book winds down as usefully as it started: Mrs. Wickouski interviews proteges, asking them what they would have done differently with their mentors if they could turn back the clock. A common thread seems to be that the proteges would have gone deeper with their mentors--they would have asked more questions, spent more time, delved into their mentors' thinking in greater depth. The book wraps up lightly by sharing useful and practical suggestions for maintenance of the mentor relationship. She answers questions such as, "Do I invite my mentor to my wedding?" and "Who pays for lunch?" Mentor X is an enjoyable read and a useful book for any professional in any industry at, frankly, any point in time. Advanced individuals will learn much from the other side, i.e., how to be more effective mentors. Mrs. Wickouski does a wonderful job of encouraging use of that all knowing aspect of human existence which never fails us: proper use of our intuition. About The Author Stephanie Wickouski is widely regarded as an innovator and strategic advisor. A nationally recognized lawyer, she has been named as one of the 12 Outstanding Restructuring Lawyers in the US by Turnarounds & Workouts and as one of US News' Best Lawyers in America. She is the author of two other books: Indenture Trustee Bankruptcy Powers & Duties, an essential guide to the legal role of the bond trustee, and Bankruptcy Crimes, an authoritative resource on bankruptcy fraud. She also writes the Corporate Restructuring blog. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *