/raid1/www/Hosts/bankrupt/TCREUR_Public/201111.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, November 11, 2020, Vol. 21, No. 226
Headlines
I R E L A N D
CVC CORDATUS XVIII: S&P Assigns B Rating on Class F Notes
U N I T E D K I N G D O M
CLARKS: Accused of Abusing Insolvency Processes by Landlords
COUNTRYWIDE PLC: Connells Eyes Possible GBP82-Mil. Buyout
COURTNEY AIRSAVERS: Enters Administration Over Covid-19 Impact
DELTIC GROUP: Bids for Assets Due by Nov. 12
NEW LOOK: Completes Debt Refinancing Following Successful CVA
RESIDENCE TOWER AT SALFORD: Administrators Work to Close Sale
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I R E L A N D
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CVC CORDATUS XVIII: S&P Assigns B Rating on Class F Notes
---------------------------------------------------------
S&P Global Ratings assigned credit ratings to the class X to F
European cash flow CLO notes issued by CVC Cordatus Loan Fund XVIII
DAC (CVC Cordatus XVIII). At closing the issuer also issued unrated
subordinated notes.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
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.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which is in line with our
counterparty rating framework.
-- Under the transaction documents, the rated notes pay quarterly
interest unless there is a frequency switch event. Following this,
the notes will permanently switch to semiannual payment.
-- The portfolio's reinvestment period will end approximately 3.2
years after closing, and the portfolio's maximum average maturity
date is eight and a half years after closing.
Portfolio Benchmarks
Current
S&P Global Ratings weighted-average rating factor 2,759.56
Default rate dispersion 524.57
Weighted-average life (years) 5.35
Obligor diversity measure 93.39
Industry diversity measure 16.88
Regional diversity measure 1.29
Transaction Key Metrics
Current
Total par amount (mil. EUR) 375
Defaulted assets (mil. EUR) 0
Number of performing obligors 110
Portfolio weighted-average rating
derived from S&P's CDO evaluator 'B'
'CCC' category rated assets (%) 0.53
'AAA' weighted-average recovery (covenanted) (%) 36.90
Covenanted weighted-average spread (%) 3.90
Reference weighted-average coupon (%) 4.00
Workout loan mechanics
Under the transaction documents, the issuer can purchase workout
loans, which are bonds or loans the issuer acquired in connection
with a restructuring of a related defaulted obligation or credit
impaired obligation, to improve its recovery value.
The purchase of workout loans is not subject to the reinvestment
criteria or the eligibility criteria. It receives no credit in the
principal balance definition, although where the workout meets the
eligibility criteria with certain exclusions, it is accorded
defaulted treatment in the par coverage tests. The cumulative
exposure to loss mitigation loans purchased using interest or
principal proceeds is limited to 10.0% of target par.
The issuer may purchase workout loans using either interest
proceeds, principal proceeds, or amounts in the collateral
enhancement account. The use of interest proceeds to purchase
workout loans are subject to (i) all the interest and par coverage
tests passing following the purchase, and (ii) the manager
determining there are sufficient interest proceeds to pay interest
on all the rated notes on the upcoming payment date. The use of
principal proceeds is subject to passing par coverage tests, and
the manager having built sufficient excess par in the transaction
so that the aggregate collateral amount is equal to or exceeding
the portfolio's reinvestment target par balance after the
acquisition.
To protect the transaction from par erosion, any distributions
received from workout loans will irrevocably form part of the
issuer's principal account proceeds unless the principal collateral
amount is equal to or exceeding the portfolio's reinvestment target
par balance after the reinvestment, par coverage tests are passing,
and the manager has recovered the collateral value of the workout
loan.
The portfolio is well-diversified, primarily comprising broadly
syndicated speculative-grade senior secured term loans and senior
secured bonds. S&P said, "Therefore, we have conducted our credit
and cash flow analysis by applying our criteria for corporate cash
flow collateralized debt obligations. As such, we have not applied
any additional scenario and sensitivity analysis when assigning
ratings to any classes of notes in this transaction."
S&P said, "In our cash flow analysis, we used the EUR375 million
target par amount, the covenanted weighted-average spread (3.90%),
the reference weighted-average coupon (4.00%), and the covenanted
weighted-average recovery rates as indicated 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. Our
credit and cash flow analysis indicates that the available credit
enhancement for the class B-1 to F notes could withstand stresses
commensurate with higher rating levels than those we have assigned.
However, as the CLO will be in its reinvestment phase starting from
closing, during which the transaction's credit risk profile could
deteriorate, we have capped our ratings assigned to the notes."
This transaction also features a principal transfer test. Following
the expiry of the non-call period, and following the payment of
deferred interest on the class F notes, interest proceeds above
101% of the class F interest coverage amount can be paid into the
principal account and/or collateral enhancement account. This
feature may therefore reduce the amount of interest proceeds
available to cure the reinvestment overcollateralization test,
which is junior to this item in the interest waterfall. S&P has
considered this in its cash flow analysis by assuming that such
amounts will be paid to equity.
The transaction includes an amortizing reinvestment target par
amount, which is a predetermined reduction in the value of the
transaction's target par amount, unrelated to the principal
payments on the notes. This may allow for the principal proceeds to
be characterized as interest proceeds when the collateral par
exceeds this amount, subject to a limit, and affect the
reinvestment criteria, among others. This feature allows some
excess par to be released to equity during benign times, which may
lead to a reduction in the amount of losses that the transaction
can sustain during an economic downturn. Hence, in S&P's cash flow
analysis, it has considered scenarios in which the target par
amount declined by the maximum amount of reduction in line with the
documentation.
Under S&P's structured finance sovereign risk criteria, it
considers that the transaction's exposure to country risk is
sufficiently mitigated at the assigned ratings.
Until the end of the reinvestment period on Jan. 29, 2024, the
collateral manager is allowed to substitute assets in the portfolio
for so long as S&P's 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 can, through trading, deteriorate
the transaction's current risk profile, as long as the initial
ratings are maintained.
The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under S&P's current counterparty criteria.
The transaction's legal structure is bankruptcy remote, in line
with S&P's legal criteria.
Following S&P's analysis of the credit, cash flow, counterparty,
operational, and legal risks, it believes its ratings are
commensurate with the available credit enhancement for each class
of notes.
The transaction securitizes a portfolio of primarily senior secured
leveraged loans and bonds, and is managed by CVC Credit Partners
European CLO Management LLP.
S&P said, "In addition to our standard analysis, to provide an
indication of how rising pressures among speculative-grade
corporates could affect our ratings on European CLO transactions,
we have also included the sensitivity of the ratings on the class X
to F notes to five of the 10 hypothetical scenarios we looked at in
our recent publication. The results shown in the chart below are
based on the actual weighted-average spread, coupon, and
recoveries.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met."
S&P Global Ratings acknowledges a high degree of uncertainty about
the evolution of the coronavirus pandemic. The current consensus
among health experts is that COVID-19 will remain a threat until a
vaccine or effective treatment becomes widely available, which
could be around mid-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."
Ratings List
Class Rating Amount Interest rate Credit
(mil. EUR) enhancement (%)
----- ------ -------- ------------------ ---------------
X AAA (sf) 2.10 Three/six-month N/A
EURIBOR plus 0.45%
A AAA (sf) 226.90 Three/six-month 39.50
EURIBOR plus 1.10%
B-1 AA (sf) 21.30 Three/six-month 31.00
EURIBOR plus 1.65%
B-2 AA (sf) 10.60 1.95% 31.00
C A (sf) 30.00 Three/six-month 23.00
EURIBOR plus 2.40%
D BBB (sf) 22.50 Three/six-month 17.00
EURIBOR plus 3.50%
E BB (sf) 22.50 Three/six-month 11.00
EURIBOR plus 5.83%
F B (sf) 7.50 Three/six-month 9.00
EURIBOR plus 7.94%
M-1 NR 38.05 N/A N/A
M-2 NR 1.00 N/A N/A
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
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U N I T E D K I N G D O M
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CLARKS: Accused of Abusing Insolvency Processes by Landlords
------------------------------------------------------------
Huw Hughes at FashionUnited reports that landlords have reportedly
accused Clarks of abusing insolvency processes after it launched a
company voluntary arrangement (CVA) they say they have little
chance of blocking.
The British footwear retailer launched its CVA last week which will
result in the majority of its 320 UK stores moving to
turnover-based rents, while 60 will move to nil rent, FashionUnited
relates.
According to FashionUnited, The Sunday Times said the company's
landlords will only hold 25% of the vote for the CVA, despite being
the only creditors to have their debts -- totaling GBP160 million
-- compromised by the CVA.
British Property Federation CEO Melanie Leech told The Sunday
Times, "This abuse of CVAs forces property owners to absorb
significant losses with little attempt to build a recovery strategy
they can support as economic partners", FashionUnited notes.
Last week, Hong Kong-based private equity firm LionRock Capital
agreed to acquire a GBP100 million majority stake in Clarks
provided the retailer gets the green light for its CVA from
creditors, FashionUnited recounts.
COUNTRYWIDE PLC: Connells Eyes Possible GBP82-Mil. Buyout
---------------------------------------------------------
Aakash B and Pushkala Aripaka at Reuters report that Britain's
Countrywide Plc has been approached by real estate management firm
Connells Ltd about a possible buyout that would value the real
estate agent at around GBP82 million (US$108 million).
Countrywide, which vies for market share with Foxtons, has been
trying to recover from a botched 2015 restructuring that led to
four profit warnings and a deeply discounted share issue, Reuters
relates.
According to Reuters, Connells confirmed it had approached
Countrywide on Oct. 26 and said in a statement the estate agent
needed a new management team and strategy to turnaround its
business, adding that Countrywide's board had indicated it was in
"urgent need of recapitalization" to cut debt and exposure to
lenders.
Countrywide's underlying net debt at June 30 was just shy of GBP92
million, nearly double its market capitalization of about GBP48
million based on the Nov. 9 closing price of 145 pence, Reuters
discloses.
Countrywide in October said that funds advised by Alchemy Partners
had proposed investing about GBP90 million in the company in
exchange for management control following the recapitalization,
Reuters notes.
Making the case for its offer, Connells, as cited by Reuters, said
that the deal with Alchemy would have "resulted in Countrywide
shareholders suffering material dilution", and questioned the
expertise and plan of the proposed management.
Countrywide, which operates 60 high street brands, including
Hamptons International, Bairstow Eves and Bridgfords, said there
was no certainty on the terms of any deal, while Connell said it
was still evaluating the terms of any possible firm offer, Reuters
relays.
COURTNEY AIRSAVERS: Enters Administration Over Covid-19 Impact
--------------------------------------------------------------
Coreena Ford at BusinessLive reports that Courtney Airsavers, a
North East travel operator, has collapsed after struggling to trade
as a result of the Covid-19 pandemic.
Courtney Airsavers, which had bases around the region in Newcastle,
Sunderland and Guisborough, closed its doors after calling in
administrators from FRP Advisory Trading Limited, BusinessLive
relates.
The company, which had 14 employees, was first established in the
Newcastle centre in 1986, BusinessLive notes.
According to BusinessLive, a spokesman for FRP Advisory, where
Stephen Ross and Allan Kelly have been appointed as joint
administrators, said the company had traded very well before
falling victim to the massive changes to have hit the travel
industry in recent months.
He said the firm had set up an email -- airsavers@frpadvisory.com
-- and over the next week, where possible, will be contacting
customers with contact details for airlines and tour operators as
well as their ATOL contracts, BusinessLive discloses.
Director David Ellis said he and colleagues were devastated that
Covid-19 had forced the closure, BusinessLive relays.
Since closing in March, he said the company had received many
requests for refunds, following the tightening of travel
restrictions around the world, to slow the spread of the
coronavirus, according to BusinessLive.
With bills and rent continuing to mount, and no bookings coming in,
debts increased to the point where directors knew the business
could not continue, triggering the call to FRP Advisory,
BusinessLive states.
DELTIC GROUP: Bids for Assets Due by Nov. 12
--------------------------------------------
Mark Kleinman at Sky News reports that prospective bidders for one
of Britain's biggest nightclub operators have been told to table
offers within days as it seeks emergency funding to keep it
afloat.
Sky News understands that advisers to Deltic Group, which owns the
Atik and Pryzm chains, are seeking initial bids by Thursday, Nov.
12, as it suffers from enforced COVID-19 restrictions.
Deltic, which employs 2,000 people and trades from 52 venues across
the UK, hired the accountancy firm BDO last month to find new
investors, Sky News relates.
The company is privately owned by its management team, led by chief
executive Peter Marks, and a number of other individual
shareholders, Sky News notes.
Its sites have been shut for months, and there remains no clarity
on when they will reopen, despite optimism surging through
financial markets on Nov. 9 about the prospects for a vaccine, Sky
News states.
Mr. Marks himself has been candid about the fact that the company's
survival is in doubt, and sources said the request for bids to be
submitted this week was an indication of the cash squeeze facing
Deltic, Sky News discloses.
NEW LOOK: Completes Debt Refinancing Following Successful CVA
-------------------------------------------------------------
Emily Seares at Drapers reports that New Look has completed a
refinancing to significantly reduced its long-term debt.
According to Drapers, the financial recapitalization includes a
debt for equity swap, reducing debt from circa GBP550 million to
GBP100 million and in turn decreasing interest costs, an extension
of primary working capital facilities and a cash injection of GBP40
million to support the business plan.
The refinancing follows the retailer's successful turnover-based
company voluntary arrangement which was finalized in September,
Drapers notes. The proposal included switching 68 stores to zero
rent, with 402 stores converted to turnover-based lease terms,
Drapers states.
RESIDENCE TOWER AT SALFORD: Administrators Work to Close Sale
-------------------------------------------------------------
Sarah Townsend at North West Place reports that a group of more
than 100 investors in the stalled Salford apartment project is the
preferred bidder to acquire the scheme out of administration, but
funding challenges are delaying the deal.
Construction of Elliot Group's GBP70 million The Residence tower at
Salford's Greengate halted earlier this year after the
Liverpool-based developer's founder, Elliot Lawless, was arrested
on Dec. 18 along with Liverpool City Council's regeneration chief
Nick Kavanagh on suspicion of fraud, North West Place recounts.
Lawless was released on bail and no charges were brought, and he
later won a case in the High Court ruling that a police search of
his house at the time of the arrest was unlawful, North West Place
notes.
However, the 34-storey The Residence tower remained stalled during
the months of uncertainty following the arrests and went into
administration in March along with two other Elliot Group schemes,
North West Place states.
According to North West Place, an update on The Residence
administration process, published by David Rubin & Partners at the
end of last week, said the administrators had granted a three-month
extension in June to the sale process for The Residence, following
requests from the 100-plus investors in the scheme.
The investors, most of which are represented by a formal "steering
committee", are in the process of drawing up a bid to take over
ownership of the Greengate site, complete the scheme's delivery and
recoup their investments.
Wrangling between the investor steering committee and several other
investors that had been working on an alternative bid for the site
earlier in the summer has so far contributed to delays in the
process, Place North West understands. By law, the administrators
are obliged to consider bids submitted by all investors in the
scheme, North West Place says.
However, David Rubin & Partners said in its report last week that
mounting costs borne by the scheme mean that a sale "now needs to
be agreed urgently", North West Place relates.
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