/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/201229.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 Tuesday, December 29, 2020, Vol. 21, No. 260 Headlines B E L G I U M CASPR-1: Fitch Assigns 'BB+sf' Rating on Class D Debt B O S N I A A N D H E R Z E G O V I N A SRPSKA REPUBLIC: Moody's Completes Review, Retains B3 Rating ZITOPROMET: Second Asset Auction Fails to Attract Any Bidders C R O A T I A SLADORANA: Zagreb Court to Launch Pre-Bankruptcy Proceedings VIRO: Zagreb Commercial Court Opens Pre-Bankruptcy Proceedings ZAGREB CITY: Moody's Completes Review, Retains Ba1 Rating D E N M A R K WELLTEC A/S: Moody's Completes Review, Retains B3 CFR F R A N C E CGG SA: Moody's Completes Review, Retains B3 CFR EUROPCAR MOBILITY: Moody's Completes Review, Retains Caa2 CFR G E O R G I A JSC SILKNET: Fitch Downgrades Long-Term IDR to 'B', Outlook Stable G E R M A N Y DEBEKA BAUSPARKASSE: Moody's Affirms Baa3 Deposit Ratings FRESHWORLD HOLDING III: Fitch Affirms 'B' LT IDR, Outlook Stable G R E E C E ATHENS CITY: Moody's Completes Review, Retains Ba3 Issuer Rating GRIFONAS FINANCE: Fitch Affirms 'Bsf' Rating on Class C Notes I R E L A N D EIRCOM HOLDINGS: Moody's Completes Review, Retains B1 Rating I T A L Y MONTE DE PASCHI: Moody's B1 Rating Still on Review for Upgrade TELECOM ITALIA: Moody's Completes Review, Retains Ba2 Rating K A Z A K H S T A N FORTEBANK JSC: Moody's Hikes Long-Term Bank Deposit Ratings to Ba3 L U X E M B O U R G ALTICE FRANCE: Moody's Completes Review, Retains B2 Rating ALTICE INTERNATIONAL: Moody's Completes Review, Retains B2 Rating ENDO LUXEMBOURG: Moody's Completes Review, Retains B3 CFR N E T H E R L A N D S DCDML 2016-1: Moody's Affirms B2 (sf) EUR4.4MM Class E Notes Rating IHS NETHERLANDS: Moody's Completes Review, Retains B2 CFR IPD3 BV: Fitch Assigns 'B' Final Long-Term IDR, Outlook Negative SIGMA HOLDCO: Fitch Cuts Long-Term IDR to 'B', Outlook Stable P O L A N D ALIOR BANK: Fitch Affirms 'BB' LT IDR, Outlook Remains Negative CYFROWY POLSAT: Moody's Completes Review, Retains Ba1 CFR R U S S I A PAYMENT STANDARD SNCO: Bank of Russia Revokes Banking License SAMARA OBLAST: Moody's Completes Review, Retains Ba2 Rating TATARSTAN: Moody's Completes Review, Retains Ba1 Rating TATTELECOM PJSC: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable VOLGOGRAD CITY: Moody's Completes Review, Retains B2 Rating S E R B I A BELGRADE CITY: Moody's Completes Review, Retains Ba3 Rating NOVI SAD: Moody's Completes Review, Retains Ba3 Rating PROJMETAL: Bankruptcy Auction Scheduled for January 20 VALJEVO CITY: Moody's Completes Review, Retains B1 Rating S L O V E N I A POLZELA: Assets to Be Put Up for Sale at EUR2.3MM Asking Price S P A I N LORCA HOLDCO: Moody's Completes Review, Retains B1 CFR T U R K E Y ICBC TURKEY: Fitch Withdraws 'B+' LT IDR for Commercial Reasons U K R A I N E KHARKIV CITY: Moody's Completes Review, Retains B3 Issuer Rating KYIV CITY: Moody's Completes Review, Retains B3 Rating U N I T E D K I N G D O M ASHLEY HOUSE: Enters Administration After CVA Fails BRANSTON HALL: Placed Into Administration EUNETWORKS HOLDINGS: Moody's Completes Review, Retains B2 CFR FINSBURY SQUARE 2018-2: Moody's Affirms 2 Note Classes at Caa2 (sf) GOODWIN: Owed GBP2.9MM to Creditors at Time of Administration GREAT HALL 2007-2: Fitch Affirms Bsf Ratings on Class Ea, Eb Debts JASCOTS WINE: Goes Into Administration Amid Covid Lockdowns LK BENNETT: Creditors Approve CVA, Five Stores to Close MONEYTHING: Enters Administration Due to Litigation Costs MYJAR: Goes Into Administration Following Customer Complaints VEDANTA RESOURCES: Moody's Completes Review, Retains B2 CFR - - - - - ============= B E L G I U M ============= CASPR-1: Fitch Assigns 'BB+sf' Rating on Class D Debt ----------------------------------------------------- Fitch Ratings has assigned CASPR-1 S.a.r.l. Compartment CASPR- 1 final ratings with a Stable Outlook. A full list of ratings is detailed below. DEBT RATING PRIOR ---- ------ ----- CASPR S.a.r.l. Compartment CASPR-1 A LT AAsf New Rating AA(EXP)sf B LT Asf New Rating A(EXP)sf C LT BBB+sf New Rating BBB+(EXP)sf D LT BB+sf New Rating BB+(EXP)sf First Loss Tranche LT NRsf New Rating NR(EXP)sf Senior Unprotected LT NRsf New Rating NR(EXP)sf TRANSACTION SUMMARY This transaction is the first synthetic securitisation of a residential loans portfolio originated by AXA Bank Belgium (ABB). The issuer uses the proceeds to fund a credit default swap (CDS) that protects the originator from the losses of the reference portfolio. The reference portfolio consists of mortgage loans secured by residential properties in Belgium. The transaction is designed for risk transfer and capital- relief purposes, and includes loans with high current loan/values (CLTVs; 77.2%) and debt/income (DTI, class 5 DTI represent 29%). The note structure consists of class A, B, C, D and a first-loss tranche, which represent the credit-protection tranches. KEY RATING DRIVERS Excessive Counterparty Exposure The proceeds used to fund the CDS are deposited in the deposit account held by Bank of New York Mellon S.A./N.V. Luxembourg Branch (AA/Stable/F1+). These funds are being used for the payments under the CDS and to amortise the notes. If the funds are totally or partially lost due to a deposit account bank default, the notes cannot be reimbursed. As a result, the ratings of the notes are constrained by the rating of Bank of New York Mellon S.A./N.V. Luxembourg Branch. Exposure to ABB Under the CDS, the issuer bears the risk of losses from the reference portfolio. Following the default of a loan, the issuer will pay the expected loss to ABB. At the end of the recovery process, the final loss will be known giving rise to an adjustment payment. If the expected loss is larger than the final loss, ABB will pay the difference to the issuer. If ABB defaults on the adjustment payment, it may result in a loss for the notes. Fitch has limited the rating of the notes to a stress scenario where the available credit enhancement (CE) offsets the exposure to ABB. Higher-Risk Portfolio The reference portfolio has been selected from the higher-risk loans in the book of ABB and as such have a higher-risk credit profile than what typically seen in Belgian RMBS transactions. The pool consists of loans with a weighted average original LTVs of close to 90% and a DTI distribution skewed toward highest buckets. The pool also includes a material portion of loans with one missed payment by less than 30 days past due. Coronavirus-Related Additional Assumptions The pandemic has resulted in significant deterioration of the global economy. Fitch expects a generalised weakening in borrowers' ability to keep up with mortgage payments and increased pressure on asset performances, due to the economic impact of the coronavirus pandemic and the related containment measures. Given the uncertainty and the lack of reliable data, Fitch tested additional stress scenarios as described in "EMEA RMBS: Criteria Assumptions Updated Due to Impact of the Coronavirus Pandemic". The additional stress scenario resulted in an increase of 1.25x of the 'Bsf' representative pool weighted average foreclosure frequency (WAFF) but a broadly unchanged WAFF at 'AAsf' due to compressed rating multiples. The transaction has an ESG Relevance Score of '5' for Transaction Parties & Operational Risk due to the exposure to Bank of New York Mellon Luxembourg branch as deposit-account provider whose default would result in redemption funds being lost. As a result, Fitch capped the rating of the notes at that of Bank of New York Mellon Luxembourg branch. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The broader global economy remains under stress due to the coronavirus pandemic, with surging unemployment and pressure on businesses stemming from social-distancing guidelines. 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", Fitch 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% increase in WAFF and a 15% decrease in WA recovery rate (WARR). The results indicate a downgrade of three notches for the class A, B and D notes and five notches for the class C notes. -- The class C notes are particularly sensitive to its downside stress as the transaction is sensitive to the recovery level. The combination of a 15% increase in defaults and 15% decrease in recoveries leads to an increase of 1.8x the 'BBB' current loss assumption. -- The transaction's performance may be affected by changes in market conditions and economic environment. Weakening asset performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes. -- Additionally, unanticipated declines in recoveries could also result in lower net proceeds, which may make certain note ratings susceptible to negative rating actions depending on the extent of the decline in recoveries. Fitch conducts sensitivity analyses by stressing both a transaction's base case FF and RR assumptions, and examining the rating implications on all classes of issued notes. For example, a 25% FF increase will lead to a two-notch downgrade for class A notes, a one-notch downgrade for the class B and C notes and no downgrade for the class D notes. A 10% RR decrease will lead to two-notch downgrade for the class A and B notes, a three-notch downgrade for the class C and no downgrade for the class D notes. Factor 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 CE levels and consideration for 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%. Under this sensitivity, the class B and C notes will be upgraded by three notches. The class A and D notes will remain unchanged due to rating limitations. 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 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. 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, 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. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'. ESG CONSIDERATIONS CASPR S.a.r.l. Compartment CASPR-1: Transaction Parties & Operational Risk: 5 The transaction has an ESG Relevance Score of '5' for Transaction Parties & Operational Risk due to the exposure to Bank of New York Mellon Luxembourg branch as deposit-account provider whose default would result in redemption funds being lost. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========================================== B O S N I A A N D H E R Z E G O V I N A =========================================== SRPSKA REPUBLIC: Moody's Completes Review, Retains B3 Rating ------------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of Srpska, Republic of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of Republic of Srpska (B3) reflects Republic of Srpska's unique status as one of the republics composing Bosnia and Herzegovina (B3) underpinning its superior level of fiscal flexibility and an adequate operating performance as well as a low probability that the Government of Bosnia and Herzegovina would provide the Republic the necessary liquidity if it were to face acute financial distress. At the same time, the republic has a high level of debt while ageing population may pressurize the budgetary performance. The principal methodology used for this review was Regional and Local Governments published in January 2018. ZITOPROMET: Second Asset Auction Fails to Attract Any Bidders ------------------------------------------------------------- Iskra Pavlova at SeeNews reports that a second auction for the sale of Bosnian bakery products and grain manufacturer and trader Zitopromet's assets failed to attract any bidders, even though the BAM8.3 million (US$5.1 million/EUR4.2 million) asking price was 10% lower than in the first auction. According to SeeNews, investors are probably put off by the need for considerable investments in order to launch production, news wire Indikator.ba reported on Dec. 10, citing the company's bankruptcy receiver, Aleksandar Vicanovic. Bijeljina-based Zitopromet entered bankruptcy in November 2019, following the launch of pre-bankruptcy proceedings a month earlier upon request of the company's trade unions, SeeNews relates. The Bijeljina court that opened the bankruptcy proceedings said last year that Zitopromet had not been operational since November 2018, SeeNews notes. It had 113 registered employees at the end of 2019, SeeNews discloses. According to SeeNews, the court has also said that the company ended 2018 with a BAM2.7 million loss, while its accumulated loss reached BAM6.2 million at the end of December 2019. Zitopromet's business assets totalled BAM17.3 million at the end of 2018, while its total liabilities stood at BAM4.8 million, including short-term debt to financial institutions, suppliers, workers and the state, SeeNews relays. Zitopromet is based in Bijeljina in the Serb Republic, which together with the Federation forms Bosnia and Herzegovina. ============= C R O A T I A ============= SLADORANA: Zagreb Court to Launch Pre-Bankruptcy Proceedings ------------------------------------------------------------ Iskra Pavlova at SeeNews reports that the commercial court in Zagreb said it decided to launch pre-bankruptcy proceedings against Croatian sugar producer Sladorana due to lack of liquidity. According to SeeNews, the court said in a statement on Nov. 30 the decision was made upon a request filed by the company, which also submitted a restructuring plan to be carried out during the procedure. The court appointed Ivan Kurecic pre-bankruptcy receiver and called on the creditors of Sladorana to submit their claims against the company in the next 21 days, SeeNews relates. Sladorana is a subsidiary of local sugar producer Viro. VIRO: Zagreb Commercial Court Opens Pre-Bankruptcy Proceedings -------------------------------------------------------------- Iskra Pavlova at SeeNews reports that the Zagreb commercial court said it opened pre-bankruptcy proceedings against Croatian sugar producer Viro due to a persistent lack of liquidity. The court said in a statement on Dec. 18 the decision was made upon a request filed by the company, SeeNews relates. The court called on the creditors of Viro to submit their claims in the following 21 days, SeeNews discloses. The hearing of the claims will be held on May 12, 2021, SeeNews states. Viro has said it submitted its request for the launch of bankruptcy proceedings on Oct. 30, SeeNews recounts. In September, the sugar maker said its bank accounts were blocked by a creditor, Belgium-based sugar company SESVanderHave N.V., over an unpaid claim of HRK1.47 million (US$237,000/EUR195,000), SeeNews relays. According to SeeNews, Viro narrowed its consolidated net loss to HRK46 million in the first nine months of 2020, from HRK52 million a year earlier, while its total consolidated revenue plunged 86% to HRK81 million. ZAGREB CITY: Moody's Completes Review, Retains Ba1 Rating --------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Zagreb, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of the City of Zagreb (Ba1) reflects its consistently prudent budgetary management, sound operating margin and low direct debt levels. The rating also takes into account the city's cautious capital spending, thus limiting debt accumulation. Conversely, the rating incorporates the potential pressure stemming from the city's transportation company, Zagrebacki Elektricni Tramvaj, and the public services provider, Zagrebacki Holding D.O.O. (Zagrebacki Holding, Ba1). Besides the fundamental factors reflected in the city's baseline credit assessment of ba1, its credit profile also benefits from Moody's assessment of a moderate likelihood of extraordinary support from the Government of Croatia (Ba1) in the event that the issuer were to face acute liquidity stress. The credit profile of Zagrebacki Holding reflects its strong financial and institutional linkages with its sole founder and owner the City of Zagreb, as reflected in Zagrebacki Holding's clear policy mandate and its key role in the city's utilities sector. Zagrebacki Holding's credit profile benefits from Moody's assessment that the City of Zagreb would provide timely support should the entity face acute liquidity stress. Zagrebacki Holding's rating also reflects the stable institutional and operational framework and strict control over the Holding's operations exercised by the City of Zagreb. The principal methodologies used for this review were Regional and Local Governments published in January 2018. ============= D E N M A R K ============= WELLTEC A/S: Moody's Completes Review, Retains B3 CFR ----------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Welltec A/S and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Welltec A/S's B3 corporate family rating incorporates the company's technological advantage in robotics for well intervention, resulting in a leading market share in that segment, strong geographical diversification, and high adjusted EBIT margin around 20% compared to most of its peers in the oilfield service sector. The company's leverage is very modest for its current rating level, at 4.3x as of LTM September 2020 and broadly breakeven free cash flow despite a negative working capital outflow of $10 million in the nine months ending September 2020, as the company was able to adjust its cost base quickly to adapt to materially declining revenues (about -10% in the nine months 2020 compared with the same period last year) in the current market downturn. The rating is constrained by the small scale of Welltec's operations and short lead times leading to limited visibility. The company is materially burdened by very high interest payments on its outstanding $340 million 9.5% senior secured bond due in 2022. The company managed to reset the test level for its interest cover maintenance covenant to 1.8x from 2.2x on its $40 million revolving credit facility for the first half of 2021 reflecting its close relation with its RFC lender. Hence, with $55.8 million cash on balance $10 million available under its $40 million RCF as of 30 September 2020 we view the groups liquidity as adequate. The principal methodology used for this review was Global Oilfield Services Industry Rating Methodology published in May 2017. =========== F R A N C E =========== CGG SA: Moody's Completes Review, Retains B3 CFR ------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of CGG SA and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS CGG SA's B3 corporate family rating is adequately positioned in its rating category. After posting operationally strong results in 2019, the company has experienced a material decline in profitability and cash generation due to the significant deterioration in the market conditions in the seismic oil & gas industry caused by the sharp drop in oil prices in 2020. As of 30 September 2020, the company had a sizeable cash balance of $464.5 million, which is more than sufficient to offset the moderately negative underlying free cash flow in the next 12--18 months. In the nine months 2020 net FCF amounted to a negative $152 million including a cash outflow from the discontinued operations of $52.5, and about $80 million of non-recurring restructuring cash costs in total. The company does not have any material debt maturities coming due until 2023. Moody's rating also considers CGG's outstanding development and production oriented technological expertise as well as its global leading market position in the seismic industry, which is characterized by very high barriers to entry. Since November 2018, the company has been in transition to an asset-light business model which has already showed its benefits increasing the group's resilience in the current market downturn. The principal methodology used for this review was Global Oilfield Services Industry Rating Methodology published in May 2017. EUROPCAR MOBILITY: Moody's Completes Review, Retains Caa2 CFR ------------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Europcar Mobility Group S.A. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The Caa2 CFR of Europcar Mobility Group reflects the upcoming restructuring of the company's corporate debt which will lead to a substantial debt impairment. As announced by the company on November 26, 2020, under the agreement with its main creditors, the company will reduce its corporate indebtedness by EUR1.1 billion through the equitization in full of the senior notes due 2024 and 2026, and the Credit Suisse facility. In addition, there will be new equity injection of EUR250 million and new fleet financing of up to EUR225 million. The group's objective is to gradually reduce its corporate net leverage towards the post IPO levels. The rating also incorporates the missed interests payments on the 2024 notes following the end of the grace period on November 30, 2020. The company also announced that it will not pay the interest on the 2026 notes at then end of the grace period on December 16, 2020. Moody's considers that the failure to pay the interest at the end of the 30-day grace period constitutes a limited default under Moody's ratings definition, even if creditors waived the missed payments. Moody's expects EMG and its creditors to conclude a consensual restructuring of the corporate debt as part of the lock up agreement by end of February 2021. The principal methodology used for this review was Equipment and Transportation Rental Industry published in April 2017. ============= G E O R G I A ============= JSC SILKNET: Fitch Downgrades Long-Term IDR to 'B', Outlook Stable ------------------------------------------------------------------ Fitch Ratings has downgraded JSC Silknet's (Silknet) Long-Term Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Stable. The downgrade reflects a considerable increase in funds from operations (FFO) net leverage above Fitch’s downgrade sensitivity of 3.0x in 2020 and Fitch’s expectation that the leverage is likely to remain above this threshold for the next two years. It also factors in ongoing corporate governance risk, as evident in significant property transactions with related parties in 2019-2020. Silknet is the incumbent telecoms operator in Georgia with an extensive backbone and last-mile infrastructure across the country. The company holds sustainably strong market shares above 30% in in fixed-voice, fixed-broadband (FBB) and pay-TV segments, but is only the second-largest after Magticom, its key rival. Acquisition of Geocell, the second-largest mobile operator in Georgia, in 2018 has turned Silknet into a diversified telecom services provider and more than doubled its revenue and EBITDA. However, the company's small absolute size remains a strategic weakness. Fitch expects the company's Fitch-defined EBITDA to be about USD56 million in 2020 (using GEL/USD rate of 3.3). KEY RATING DRIVERS Leverage above Rating Threshold: Fitch expects Silknet's FFO net leverage to increase to 3.5x by end-2020 from 2.9x at end-2019 and to gradually reduce to 3.1x by end-2022, assuming no further depreciation of the lari over that period. This leverage increase was driven by the lari's devaluation, negative EBITDA impact from the coronavirus pandemic and a considerable payment for a plot of land in Tbilisi. Fitch estimates that the lari's devaluation in 2020 contributed at least 0.3x to the leverage increase. Fitch’s forecast assumes a GEL/USD rate of 3.3 (a spot rate at end-November 2020) over 2020-2023, compared with an average rate of 2.8 in 2019. Significant Foreign-Exchange (FX) Mismatch: Silknet has a significant FX exposure, as a considerable portion of its debt and above 70% of its capex are denominated in foreign currencies, while most of its revenues are in local currency. The company hedges part of its debt with cross-currency swaps and by keeping most of its cash in US dollar. However, the unhedged portion of its US dollar debt was around 70% of the total at end-3Q20. Silknet's significant FX risk is reflected in Fitch’s tighter leverage thresholds relative to peers'. High Risk Appetite: Fitch assesses the company's financial policy as risky. Despite the lari's depreciation against the US dollar by more than 10% in 2019 and a further 15% in 2020 and the resulting rise in leverage Silknet continued with its significant capex, including the land purchase. Capex (excluding the land purchase and content costs) was around 30% of revenue in 2019, which Fitch expects to rise to around 26% in 2020. Material Related-Party Transactions: Silknet's acquisition of the 20,000 sq. m plot of land in the centre of Tbilisi from a related party has had a negative impact on the company's leverage. It plans to build a new headquarters on this land purchased for USD20 million paid over two equal instalments in 2019 and 2020. Fitch estimates that this purchase increased leverage by around 0.3x at end-2020. The fair value of the plot of land was assessed by an independent appraiser, Colliers International, in compliance with the company's bond documentation. Dominant Shareholder Influence: Silknet's 100% shareholder Silk Road Group can exercise significant influence on the company as demonstrated by the latter bypassing formal restrictions on dividends when it guaranteed GEL35 million of its shareholder's loan in 2016 and the recent related-party transactions. This is reflected in Fitch’s ESG Relevance score of '4' for Governance Structure. This has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. Silknet's governance is commensurate with the 'B' rating category. Its outstanding USD200 million Eurobond documentation has restrictions on both shareholder distributions and shareholder's access to Silknet's cash flows, offering some creditor protection. Silk Road Group does not publicly disclose its financial results. Coronavirus Reverses Revenue Growth: Silknet's healthy revenue growth of 6.5% in 1Q20, following a 3% decline in 2019 and stagnation in 2018, was reversed by the coronavirus pandemic. Revenue was hit by temporary lockdowns, closure of businesses and a sharp decline in tourism (over 10% of Georgia's GDP), which is a source of lucrative roaming revenue. Total revenue contracted 5.3% and 4.6% in 2Q20 and 3Q20, respectively. Gradual Recovery Post-Coronavirus: Fitch expects positive revenue dynamics observed in 1Q20 to resume in 2H21 as the pandemic's effect gradually wanes. Fitch’s base case envisages low single-digit revenue growth in 2021-2023, driven primarily by mobile data, as well as FBB, Pay-TV (including OTT services) and roaming revenue. Growth in mobile revenue will be underpinned by increasing data consumption as a result of 4G network upgrade in previous years, and a steady rise in mobile internet users' penetration (below 65% in 3Q20 for Silknet). FBB revenue increase should be supported by the ongoing project of xDSL replacement with FTTH. Regulatory Pressures on Pricing: Silknet has a limited ability to increase prices on its services. A rapid rise in tariffs risks triggering regulatory scrutiny and intervention, as was evident in 2019 when Georgian Communications Commission (GNCC) forced Silknet's rival, Magticom, to abandon its announced increase of its tariffs. Also, recent liberalisation of the mobile market, which obliges the big-three mobile operators to provide their network access to mobile virtual network operators, might negatively affect Silknet's pricing power in the medium term. Stabilising Market Positions: Silknet's efforts to stop continued market-share erosion have started to pay off in 2020. Mobile market share by revenue increased to 36.5% in 9M20 from 35.8% in 2019 according to GNCC. In 9M20 Silknet accounted for 35% of Georgia's broadband market by revenue, a decline of only 0.3pp, compared with a market share loss of 1.3pp in 2019 and 2.5pp in 2018. However, the telecoms market in Georgia remains competitive. Negative but Improving FCF: Fitch’s rating case envisages Silknet to continue generating negative free cash flow (FCF) in 2020, due to weakened revenue performance, continued high capex intensity and payment of the second instalment for the plot of land. Fitch expects FCF generation to gradually improve by 2022, supported by post-coronavirus recovery and deceleration in capex. DERIVATION SUMMARY Silknet's peers group includes emerging markets telecom operators Kazakhtelecom JSC (BBB-/Stable), PJSC Tattelecom (BB/Stable), PJSC VF Ukraine (B/Stable), PJSC Mobile TeleSystems (BB+/Stable), Turkcell Iletisim Hizmetleri A.S.'s (BB-/Negative) and Turk Telekomunikasyon A.S. (BB-/Negative). Silknet benefits from its established customer franchise and the wide network of a fixed-line telecoms incumbent, combined with a growing mobile business similar to Kazakhtelecom and Tattelecom. However, Silknet is smaller in size, faces high FX risks and is only the second-largest telecoms operator in Georgia. Its corporate governance is shaped by dominant shareholder influence. Silknet's operating profile compares well with that of VF Ukraine by size, market position, competitive environment and profitability. Similar to VF Ukraine, Silknet has significant FX risks and corporate- governance weaknesses. At the same time Silknet is better-diversified with a presence in the fixed-line/broadband segment but faces a stricter regulatory environment. MTS and Turkish peers are significantly larger in scale and benefit from product diversification. Similar to Turkcell, Turk Telecomunikasyon and VF Ukraine, Silknet's FX risk also results in tighter leverage thresholds for any given rating compared with that of other rated companies in the sector. KEY ASSUMPTIONS -- Revenue to decline about 2% in 2020, followed by low single digit growth in 2021-2023; -- Fitch-defined EBITDA margin at 48%-49% in 2020-2023, with content-cost amortisation treated as an operating cash expense, reducing both EBITDA and capex, and lease expense deducted from EBITDA; -- Capex (excluding land purchase) at around 25-26% of revenues in 2020-2021, decreasing to about 18% in 2022-2023; -- A second payment for the land purchase of around GEL31 million in 2020; -- Dividends of around GEL8 million in 2022, GEL15 mullion in 2023; and -- GEL / USD at 3.3 over 2020-2023. KEY RECOVERY RATING ASSUMPTIONS -- The recovery analysis assumes that Silknet would be considered a going-concern in bankruptcy and that it would be reorganized rather than liquidated; -- GEL742 million of unsecured debt outstanding as of end September 2020; -- A 10% fee for administrative claims; -- Going-concern EBITDA estimate of GEL162 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA upon which Fitch bases the valuation of the company; -- An enterprise value (EV)/EBITDA multiple of 4.0x is used to calculate a post-reorganisation valuation, reflecting a conservative post-distressed valuation; and -- USD20 million revolving credit facility (RCF) assumed to be fully drawn and has priority over senior unsecured notes as it is secured. The Recovery Rating for Georgian issuers is capped at 'RR4' and hence the rating of Silknet's senior unsecured instrument is equalised with the Long-Term IDR of 'B' with 'RR4'/50%, although the underlying recovery percentage is higher than 'RR4'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Maintenance of sound market position, positive FCF generation, alongside comfortable liquidity and a record of improved corporate governance; and -- FFO net leverage sustainably below 3.0 x in the presence of significant FX risks. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO net leverage rising above 4.0x on a sustained basis without a clear path for deleveraging in the presence of significant FX risks; -- A significant reduction in pre-dividend FCF generation driven by competitive or regulatory challenges; and -- A rise in corporate-governance risks due to, among other things, related-party transactions or up-streaming excessive distributions to shareholders. 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 Adequate Liquidity: Silknet had adequate short-term liquidity, supported by cash and cash equivalents of GEL95 million at end-September 2020 and an RCF of USD20 million with a Georgian bank. Together with GEL42 million of Fitch-expected positive pre-dividend FCF in 2022, this should be sufficient to cover around GEL33 million (USD10 million) of debt maturing in 2021 and around GEL35 million maturing in 2022. A bullet payment of its EUR200 million Eurobond is due in 2024. ESG CONSIDERATIONS Silknet: Governance Structure: 4 Silknet has an ESG Relevance score of 4 for Governance Structure reflecting the dominant majority shareholder's influence over the company and related-party transactions. This has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ============= G E R M A N Y ============= DEBEKA BAUSPARKASSE: Moody's Affirms Baa3 Deposit Ratings --------------------------------------------------------- Moody's Investors Service has affirmed the ratings of Debeka Bausparkasse AG, which comprise its Baa3/P-3 deposit ratings and Baa1/P-2 Counterparty Risk Ratings. The outlook on the long-term deposit ratings remains negative. Concurrently, the rating agency has affirmed Debeka's ba1 Baseline Credit Assessment and its ba1 Adjusted BCA, as well as its Baa1(cr)/P-2(cr) Counterparty Risk Assessment. RATINGS RATIONALE AFFIRMATION OF DEBEKA's BASELINE CREDIT ASSESSMENT The affirmation of the bank's ba1 BCA considers the challenges Debeka continues to face in the prolonged low interest-rate environment. Debeka's profitability is undermined by a funding structure that contains about 60% [1] of highly remunerated fixed-rate home savings (Bauspar) deposits, aggravated by further pressured asset margins in the more adverse interest rate environment. As a result, Moody's expects Debeka to post continued losses for several years to come. While capitalisation materially improved following a capital injection by Debeka's parent company in 2018, the ongoing losses could undermine the bank's solvency in the long-term, absent further parental support. At the same time, Debeka benefits from very strong asset quality metrics, which reflects its focus on highly collateralized residential mortgage lending and very high portfolio granularity, which is expected to support the bank during the coronavirus crisis. In addition, Debeka's reliance on interbank and capital market funding is limited and the bank maintains adequate liquidity buffers. However, in light of persistent business model challenges, Moody's continues to apply a negative corporate behavior adjustment to Debeka, in addition to the negative adjustment for a lack of business diversification, reflecting the weak strategic position of the bank in a sustained low interest rate environment. AFFIRMATION OF SHORT-TERM AND LONG-TERM RATINGS The affirmation of Debeka's ratings follows the affirmation of the bank's ba1 BCA and Adjusted BCA, and unchanged results from Moody's Advanced Loss Given Failure analysis, which considers the severity of loss in resolution for Debeka's different liability classes. Based on outstanding volumes of debt instruments and deposits, and incorporating forward looking assumptions that point towards stability of the funding structure, the rating agency's Advanced LGF analysis continues to indicate an extremely low loss-given-failure for counterparty risk liabilities and a low loss-given-failure for deposits, resulting in three and one notches of rating uplift from the bank's ba1 Adjusted BCA, respectively. Moody's also continues to assume a low probability of systemic support for Debeka, which does not result in any rating uplift from government support, because of the bank's very small size relative to the German banking system. OUTLOOK REMAINS NEGATIVE The negative outlook reflects that Debeka has yet to prove that it can implement sufficient adjustments to its product pricing, operational set up and internal structures that will be necessary to turn around the negative profit situation and ensure the viability of its business model. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Higher ratings could be prompted by a BCA upgrade or upon a change in Debeka's liability structure that results in additional notches of rating uplift, particularly if (junior) senior unsecured debt components were to account for a materially higher share of Debeka's total liabilities. An upgrade of Debeka's BCA would be subject to successful strategic measures to offset challenges for its business model that stem from the prolonged low interest-rate environment; or further capital measures, if these were to provide sufficient comfort even in a strongly adverse scenario. Debeka's ratings would likely be downgraded in case of a downgrade of its BCA. Debeka's ratings may also be downgraded upon a change in its liability structure, particularly if the amount of (junior) senior debt outstanding declines from current levels. This could result in higher-than-expected loss severity for Debeka's depositors and, therefore, lower rating uplift. A downgrade of Debeka's BCA could result from persistent or even increasing margin pressure from the low interest-rate environment, which could lead to deteriorating profitability dynamics; indications of more aggressive risk-taking or a further worsening of the operating environment in Germany with a negative impact on the bank's asset quality; or a failure to compensate for losses by drawing on the capital resources of the bank's parent company. LIST OF AFFECTED RATINGS Issuer: Debeka Bausparkasse AG Affirmations: Long-term Counterparty Risk Rating, affirmed Baa1 Short-term Counterparty Risk Rating, affirmed P-2 Long-term Bank Deposits, affirmed Baa3, outlook remains Negative Short-term Bank Deposits, affirmed P-3 Long-term Counterparty Risk Assessment, affirmed Baa1(cr) Short-term Counterparty Risk Assessment, affirmed P-2(cr) Baseline Credit Assessment, affirmed ba1 Adjusted Baseline Credit Assessment, affirmed ba1 Outlook Action: Outlook remains Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in November 2019. FRESHWORLD HOLDING III: Fitch Affirms 'B' LT IDR, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Freshworld Holding III GmbH's (ADCO) Long-Term Issuer Default Rating at 'B' with a Stable Outlook following the fungible EUR90 million add-on to the group's existing term loan B to finance the repayment of its EUR122 million shareholder loan. Fitch has also affirmed the instrument rating of the first-lien senior secured Term Loan B, issued by Freshworld Holding IV GmbH, at 'B+'. Under Fitch’s recovery assumptions the add-on reduces the recovery percentage from 65% to 54%, still within the 'RR3' band. The ratings benefit from ADCO's strong market position in mobile sanitary services (cabins and containers), the resilience of its earnings and cash flows to the coronavirus pandemic, and exposure to cyclical end-markets and growth prospects from both further consolidation and macro trends in construction, especially in its key geographies. At the same time, the rating reflects high leverage, which Fitch forecasts will be around 7.5x on a funds from operations (FFO) leverage basis by end-2020, with the additional debt. Fitch expects deleveraging to be possible through growth and continued implementation of transformation initiatives. However, the pace of deleveraging may be affected by further shareholder remuneration. KEY RATING DRIVERS Limited Coronavirus Impact: ADCO's business experienced limited disruption by the coronavirus pandemic as its services are deemed necessary for its customers to carry on operating. The construction industry is a key segment for ADCO and the industry's resilient performance in its key markets together with an increased focus on hygiene (e.g. higher demand for cabins equipped with water sink, shorter service intervals) boosted ADCO's core revenue growth. The emergence of new use cases (e.g. hospitals, logistic centres) also contributed to offsetting the negative impact in countries that had more severe lockdowns (including construction halt), such as Italy, Spain or Luxembourg and events' cancelation/postponement due to social distancing requirements. Overall, revenue (per management's definition) improved by 4.5% during 9M20. Longstanding Brand and Value Proposition: ADCO's TOI TOI and DIXI brands have decades of recognition and solidify the company's leadership position in Germany and Poland, as well as in most other European markets. ADCO's strength across the value chain also makes it the clear top choice for customers, as the waste management aspect is necessary, although not highly contested. Aside from premium toilet cabins, ADCO also offers customisable sanitary containers and ancillary equipment for larger or longer-term projects, which regional players that compete mainly for smaller projects cannot provide. Defensive Route-Based Model: ADCO's business model, concentrated highly on network density, scale and logistics, protects its entrenched position relative to competitors. In Germany, for example, its national market share is 15x higher than its closest competitor. With comparatively more stops per servicing route, ADCO is able to drive down the cost per stop, leading to a margin advantage. In effect, this creates a barrier to entry, as it becomes difficult for a competitor without significant comparable presence to operate alongside ADCO in a given area. Resilient Construction End-Markets: The medium-term prospects for the construction end-market are central to Fitch's rating case. Fitch expects ADCO's key geographies to weather the pandemic and related economic consequences relatively unscathed owing to a robust and balanced construction market, reflecting persistent undersupply and ongoing upgrades required for older building stock. Euroconstruct forecasts the German construction market to have slowed by 2.4% during 2020, followed by a rebound in 2021 (to above 2018 levels). Other European countries are forecast to experience a more accentuated low double digit slowdown in 2020, with a slower recovery, reaching 2018 levels by 2022. Fitch expects hygiene-driven demand to be sustained as current pandemic-related concerns persist. Fitch also believes any revenue/margin loss associated with an easing pandemic (and consequent more lenient hygiene concerns) would be accompanied by the resurgence of the event business, leading to a manageable impact on the company's cash flow generation. Transformation Programme Update: Despite an abnormal year, the group has managed to achieve some to of improvement targets it set out at the time of the LBO. These include several initiatives on pricing and sales, which have been the focus during the 2020. Other initiatives focused on administrative, procurement and fleet costs have been deprioritised but continue to be available. Fitch expects further efficiencies to be achieved in the next 24 months from both rolling value-added selling to all customers and focus on cost initiatives. Uncertain Financial Policy: ADCO's family owners have a 24.9% equity stake, and the management team is unchanged, providing continuity to the business strategy that saw recent years of growth. However, new majority ownership by Apax Partners, an independent private equity firm, introduces the risk of shareholder-friendly actions, which reduces Fitch’s visibility in terms of deleveraging path. Nonetheless, Fitch expects that the group will maintain sufficient headroom for situations such as the present shareholder distribution. DERIVATION SUMMARY ADCO has no direct peers that Fitch rates. However, other service businesses in Fitch’s ratings universe with strong competitive positions and high recurring revenue visibility include Irel Bidco S.a.r.l. (IFCO, B+/Stable), TeamSystem Holding SpA (B/Stable) and Pinnacle Bidco plc (PureGym, B-/Negative). ADCO's downgrade rating sensitivity of 8x FFO gross leverage is slightly looser than TeamSystem's 7.5x, reflecting a slightly stronger competitive position and geographical diversification. IFCO's lower leverage results in a rating one notch higher. PureGym's business has been disrupted by the pandemic, which is reflected in its lower rating. Like ADCO, IFCO operates as leader in several European markets, while PureGym and TeamSystem are more concentrated geographically in one market. ADCO's customer contracts reflect the subscription-like nature of its services, akin to those of TeamSystem's ERP and IFCO, though PureGym's model poses fewer barriers to customer churn. KEY ASSUMPTIONS -- Revenue growth of approximately 2.5% in 2020, reflecting overall good performance in 9M20; thereafter, revenue growth in the low single digits in 2021 and 2022; -- EBITDA margin increasing to 24% by 2022, driven by cost efficiency realisation started in 2020; -- Capex at 8.3% in 2020 and around 10.5%-11.0% from 2021 onwards; -- One-off shareholder loan repayment of EUR122 million in 4Q20 and no dividend payment in 2021-2022; -- Tuck-in acquisitions of EUR2 million per year till 2022 -- Working capital slightly negative/close to breakeven till 2022 KEY RECOVERY RATING ASSUMPTIONS -- The recovery analysis assumes that ADCO would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated. -- Fitch has assumed a 10% administrative claim. -- Post-restructuring going concern EBITDA at a 23% discount of Fitch’s expected 2020 Fitch-defined EBITDA of EUR91 million, reflecting the significant growth in the company's profitability which could be lower if further benefits from the transformation program envisaged by management are not fully achieved. -- An enterprise value multiple of 6.0x is used to calculate a post-reorganisation valuation, reflecting ADCO's dominant and entrenched position in most large European markets, arising from its scale and density. -- Fitch calculates the recovery prospects for the senior secured instruments of a EUR565 million TLB at 54%, and assumes a fully drawn revolving credit facility (RCF) of EUR105 million. The current EUR16 million bilateral facility is considered super senior. Overall, this implies a one-notch uplift for the instrument rating relative to the company's IDR to 'B+' with a Recovery Rating of 'RR3'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- FFO gross leverage sustained below 6.0x; -- Free cash flow (FCF) margin improvement to mid-single digits, reflecting operational improvements from cost-saving initiatives. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO gross leverage sustained over 8.0x; -- FFO interest coverage below 2.5x or a weakening liquidity profile; -- Failure to improve FCF to consistently positive levels; -- Significant slowdown or downturn in construction end-markets or failure to deliver cost savings resulting in EBITDA deterioration. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: At end-September 2020 ADCO had around EUR60 million in cash and equivalents. This will partially (EUR32 million) be used to finance the repayment of the shareholder loan. Fitch expects the business to generate positive FCF from 2021 onwards. The group's liquidity is further enhanced by an undrawn RCF of EUR105 million, maturing in April 2026.There is no significant debt maturity until the term loan matures in October 2026. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========== G R E E C E =========== ATHENS CITY: Moody's Completes Review, Retains Ba3 Issuer Rating ---------------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Athens, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of Athens, city of (issuer rating of Ba3) reflects its good operating performance supported by efficient budgetary practices. While the coronavirus outbreak and the associated deterioration in the economic outlook weight on the city's tax revenues in 2020, its good fundamentals and the ongoing support measures from the central government provide some shock absorption, limiting credit implications. The city's debt burden is moderate and declining while its debt structure is sound with fully amortizing loans and no structured products. The improved liquidity position entirely covers the city's annual debt service expenditure. Credit challenges include the city's rigid budgetary structure and limited financial flexibility stemming from the current framework. The rating incorporates a baseline credit assessment of ba3 as well as Moody's assessment of a low likelihood of extraordinary support from the government of Greece (Ba3) in the event that the issuer faced acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. GRIFONAS FINANCE: Fitch Affirms 'Bsf' Rating on Class C Notes ------------------------------------------------------------- Fitch Ratings has affirmed Grifonas Finance No. 1 Plc's ratings. The Outlooks on the class A and B notes have been revised to Stable from Positive. A full list of rating actions is found below. DEBT RATING PRIOR ---- ------ ----- Grifonas Finance No. 1 Plc Class A XS0262719320 LT BBBsf Affirmed BBBsf Class B XS0262719759 LT BBsf Affirmed BBsf Class C XS0262720252 LT Bsf Affirmed Bsf TRANSACTION SUMMARY The Greek RMBS transaction comprises fully amortising residential mortgages originated and serviced by Consignment Deposit & Loans Fund (CDLF). KEY RATING DRIVERS Resilient to Coronavirus Stresses The affirmation reflects Fitch’s view that the notes are sufficiently protected by credit enhancement (CE) and excess spread to absorb projected losses, driven by the coronavirus and related containment measures, which are producing an economic recession and increased unemployment in Greece. Fitch expects structural CE to continue increasing as the transaction amortises fully sequentially. Fitch also considers a downside coronavirus scenario for sensitivity purposes whereby a more severe and prolonged period of stress is assumed, which accommodates a further 15% increase to the portfolio weighted average foreclosure frequency (WAFF) and a 15% decrease to the WA recovery rates (WARR; see "EMEA RMBS: Criteria Assumptions Updated due to Impact of the Coronavirus Pandemic" at www.fitchratings.com). The application of this downside scenario has only a minor impact on the model outputs. The Stable Outlooks on the notes reflect the ratings' relative resilience to the downside coronavirus sensitivity. The revision of the Outlooks on the class A and B notes to Stable from Positive is driven by the changed macroeconomic scenario in the country since Fitch’s last review in March 2020, reflected by the revision of the Outlook on Greece's Long-Term IDR to Stable from Positive (see "Fitch Revises Outlook on Greece to Stable; Affirms at 'BB' dated 23 April 2020 available at www.fitchratings.com). Credit Enhancement; Stable Asset Performance. The class A and B notes' ratings are sustained by the substantial and increasing CE. CE for the class B and C notes relies more on the cash reserve held with Elavon Financial Services DAC (AA-/Negative). The Stable Outlook also reflects the overall stable asset performance since the last surveillance review, a trend that Fitch expects to continue. As at the cut-off date of the pool, loans with over three monthly payments missed, as calculated by Fitch, stood at 1.4%, in line with the previous review. Credit Support and Liquidity Mechanism The transaction continues to amortise sequentially as its non-amortising cash reserve is at target, resulting in increasing credit support. Grifonas also features a standby liquidity facility that provides adequate liquidity to support the timely payment of the notes' interest and senior expenses. The facility is non-amortising, due to breached triggers, which could be erosive to the transaction's available funds given the associated commitment expenses expressed as an interest rate charged on the facility amount. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Improving asset performance and increasing credit enhancement could lead to upgrades of the senior and mezzanine tranches. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- A longer-than-expected coronavirus crisis that weakens macroeconomic fundamentals and the mortgage market in Greece beyond Fitch's current base case and downside sensitivity. Insufficient CE to fully compensate the credit losses and cash flow stresses associated with the current rating scenarios. 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 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transaction. Fitch has not reviewed the results of any third- party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transaction' initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is, therefore, satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ============= I R E L A N D ============= EIRCOM HOLDINGS: Moody's Completes Review, Retains B1 Rating ------------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of eircom Holdings (Ireland) Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS eir's B1 rating reflects the company's integrated business model and improving network quality, leading position in the fixed-line market as Ireland's incumbent operator, its position as the third-largest operator in the mobile segment and potential for improvement in free cash flow generation. The rating also reflects eir's exposure to the highly competitive environment in the Irish market resulting in persistent revenue pressure. Because of the moderate leverage, eir is currently weakly positioned in the rating category, with potential for increased downward pressure should the company maintain appetite for material shareholder distributions. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. ========= I T A L Y ========= MONTE DE PASCHI: Moody's B1 Rating Still on Review for Upgrade -------------------------------------------------------------- Moody's Investors Service extended its review for upgrade on the long-term ratings of Banca Monte dei Paschi di Siena S.p.A. and its fully-owned subsidiary MPS Capital Services S.p.A., initiated on July 21, 2020. MPS's B1 long-term local and foreign-currency bank deposit ratings, Caa1 long-term senior unsecured rating, and b3 Baseline Credit Assessment remain on review for upgrade. RATINGS RATIONALE The review for upgrade on MPS was initiated after the bank's announcement of an agreement with state-owned Asset Management Company S.p.A. for the transfer of around EUR8 billion gross problem loans, in addition to other assets and liabilities, allowing MPS to decrease its non-performing loans ratio to around 4% with a 140 basis points negative impact on its Common Equity Tier 1 ratio. The review for upgrade reflected Moody's view that the positive impact on MPS's asset quality from the transaction would more than offset the short-term negative impact on capital. On December 1, 2020, MPS completed the transaction with AMCO, with a pro-forma fully loaded CET1 ratio of just below 10%, based on Moody's calculations, still above the bank's Supervisory Review and Evaluation Process requirement of 8.8%. However, in November 2020 MPS also announced that it expected a capital shortfall, which would require a new capital injection. In the meantime, the Italian government, which controls the bank with a 64% share, committed to maintain the bank's capital ratios above regulatory requirements. The announcement of a new capital plan came after the bank booked EUR400 million of provisions for legal risks in the third quarter of 2020, with potentially more provisions to be booked in the next quarters, in Moody's opinion. These provisions relate to almost EUR10 billion of pending litigation with MPS's previous shareholders and investors. MPS assessed an increased risk of losses after the MPS's previous CEO and Chairman had been convicted for false accounting in October 2020. The extension of the review for upgrade reflects Moody's view that MPS is likely to announce and finalise a capital plan in the next weeks, also sustained by the Italian Ministry of Finance and possibly private investors. In Moody's view, a capital increase from the government would bolster the creditworthiness of the bank and facilitate its privatization in accordance with the Italian government's commitment vis-a-vis the European Union. Failure to strengthen capitalization and to maintain MPS's capital ratios above regulatory requirements could have negative implications for the bank, including regulatory intervention, but Moody's considers this scenario to be unlikely given the Italian government's commitment to MPS's capital plan. Moody's now expects to conclude the review on MPS's long-term ratings after the bank finalises its capital plan, including the decisions taken by the Italian government. The review on MPS Capital Services S.p.A. was extended in line with its parent MPS. Moody's considers this entity to be Highly Integrated and Harmonized with MPS and its standalone characteristics have limited credit significance. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS MPS's ratings and assessments could be upgraded if the bank were to strengthen its capitalization with a low level of problem loans and low litigation risk. MPS's long-term deposit and senior unsecured ratings could also be upgraded following the issuance of material amount of bail-in-able debt. MPS' ratings and assessments could be confirmed at current levels if at the end of the review period, Moody's were to assess that the net benefit of the planned capital increase relative to the additional provisions for legal risks was not sufficient to lead to a stronger credit profile. As neither the size of a potential capital increase nor the total amount of provisions are known at this stage, Moody's will assess the net impact on MPS's credit profile after the amounts are more certain. A downgrade of MPS's long-term ratings and assessments is unlikely given the review for upgrade, however they could be downgraded if the bank failed to complete its announced capital plan and the bank was at greater risk of breaching regulatory capital requirements. MPS Capital Services S.p.A.'s ratings and assessments could be upgraded or downgraded following and upgrade or downgrade of MPS's ratings and assessments. LIST OF RATINGS Issuer: Banca Monte dei Paschi di Siena S.p.A. Extended Review for Upgrade: Long-term Counterparty Risk Ratings, currently Ba3 Long-term Bank Deposits, currently B1, outlook remains Rating under Review Long-term Counterparty Risk Assessment, currently Ba3(cr) Baseline Credit Assessment, currently b3 Adjusted Baseline Credit Assessment, currently b3 Senior Unsecured Regular Bond/Debenture, currently Caa1, outlook remains Rating under Review Senior Unsecured Medium-Term Note Program, currently (P)Caa1 Subordinate Regular Bond/Debenture, currently Caa1 Subordinate Medium-Term Note Program, currently (P)Caa1 Issuer: MPS Capital Services S.p.A. Extended Review for Upgrade: Long-term Counterparty Risk Ratings, currently Ba3 Long-term Bank Deposits, currently B1, outlook remains Rating under Review Long-term Counterparty Risk Assessment, currently Ba3(cr) Baseline Credit Assessment, currently b3 Adjusted Baseline Credit Assessment, currently b3 PRINCIPAL METHODOLOGY The methodology used in these ratings was Banks Methodology published in November 2019. TELECOM ITALIA: Moody's Completes Review, Retains Ba2 Rating ------------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of Telecom Italia S.p.A. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The Ba2 rating reflects Telecom Italia's scale and position as the incumbent service provider in Italy together with geographical diversification in Brazil. It also reflects the company's strong market share and strong operating margins and continued focus on cost control. The rating also reflects high competitive pressures in Italy leading continued revenue declines through 2022 as well as high net leverage and continued need for capex investments. Challenges balanced by a strong liquidity and diversified funding sources, and a confirmed and successful management's effort in improving cash flow by reinforcing cost cutting. The rating has been recently downgraded to Ba2 reflecting: the challenging operating environment both fixed and mobile segments in Italy, the increasing complexity of the group structure as Telecom Italia dilutes its equity ownership in key infrastructure assets, and a more aggressive financial policy. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. =================== K A Z A K H S T A N =================== FORTEBANK JSC: Moody's Hikes Long-Term Bank Deposit Ratings to Ba3 ------------------------------------------------------------------ Moody's Investors Service upgraded the long-term bank deposit ratings of ForteBank JSC to Ba3 from B1, its long-term Counterparty Risk Ratings to Ba2 from Ba3, subordinated debt rating to B3 from Caa1 as well as the bank's Baseline Credit Assessment and Adjusted BCA to b2 from b3. In addition, the bank's long-term Counterparty Risk Assessment was upgraded to Ba2(cr) from Ba3(cr). The bank's short-term foreign currency bank deposit rating and CRRs were affirmed at Not Prime as well as the short-term CR Assessment at Not Prime(cr). The outlook on the long-term ratings is stable. RATINGS RATIONALE The upgrade of ForteBank's ratings recognizes the consistent improvements of its solvency metrics along with strong liquidity and resilience of the bank's revenues to business pressures related to the coronavirus containment measures and the economic contraction in Kazakhstan. ForteBank displayed strong profits and modest loan growth in recent years, which enabled the bank to notably improve its solvency and materially reduce uncertainties surrounding its historically high level of problem loans. The bank's ratio of problem loans to tangible common equity and loan loss reserves stood at 61% as of 30 September 2020, having improved from 87% as of year-end 2017. The improvements were achieved through the gradual increase of problem loans coverage with loan loss reserves as well as the capital build up, owing to the bank's strong profitability in recent years. In the first 9 months of 2020, the bank reported annualized net income at around 2.8% of average tangible assets, a stronger level compared to 2.3% in 2019 and 1.9% in 2018. Despite the ongoing coronavirus containment measures, Moody's is now expecting ForteBank's to remain profitable in 2021 and beyond, but profitability is expected to normalize at a lower level compared to this year's strong earnings. ForteBank's capital adequacy has been strong to date, with tangible common equity to risk-weighted assets at 17.0% as of 30 September 2020 and regulatory capital ratios being well above the required minima. ForteBank's liquidity also remains healthy. The bank was rapidly growing its deposit base while being conservative with loan origination in the most recent years. As a result, loan-to-deposit ratio declined to 60% at 30 September 2020 from 64% in 2019 and 71% in 2018, with liquid banking assets standing at around 40% of tangible banking assets, providing comfortable cushion to face potential liquidity headwinds. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Further improvement in asset quality and/or in the coverage of problem loans by loan loss reserves together with a maintenance of good profitability, capital adequacy and liquidity could lead to a rating upgrade. A decline in capital adequacy, weaker liquidity or material asset quality problems could lead to lower ratings. A reduction in the probability of government support could also lead to a downgrade of the long-term ratings. LIST OF AFFECTED RATINGS Issuer: ForteBank JSC Upgrades: Adjusted Baseline Credit Assessment, Upgraded to b2 from b3 Baseline Credit Assessment, Upgraded to b2 from b3 Long-term Counterparty Risk Assessment, Upgraded to Ba2(cr) from Ba3(cr) Long-term Counterparty Risk Ratings, Upgraded to Ba2 from Ba3 Subordinate Regular Bond/Debenture, Upgraded to B3 from Caa1 Long-term Bank Deposit Ratings, Upgraded to Ba3 from B1, Outlook Remains Stable Affirmations: Short-term Counterparty Risk Assessment, Affirmed NP(cr) Short-term Counterparty Risk Ratings, Affirmed NP Short-term Bank Deposit Ratings, Affirmed NP Outlook Action: Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in November 2019. =================== L U X E M B O U R G =================== ALTICE FRANCE: Moody's Completes Review, Retains B2 Rating ---------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Altice France Holding S.A. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Altice France Holding's B2 rating primarily reflects the company's scale and position as of one of the leading convergent telecom operators in France. The rating is constrained by the group's highly leveraged capital structure and its limited free cash flow, and also accounts for the complexity of the group structure and the competitive nature of the French telecom market. The combination of the September 2020 debt issuance mostly used to repay debt outside of the restricted group, and the announcement of the delisting of Altice Europe have increased downward pressure on the already weakly positioned ratings. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. ALTICE INTERNATIONAL: Moody's Completes Review, Retains B2 Rating ----------------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Altice International S.a.r.l. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Altice International's B2 rating primarily reflects the company's geographical diversification and strong market position in the countries where it operates. The rating is constrained by the group's highly leveraged capital structure and its limited free cash flow, and also reflects the complexity of the group structure and the competitive market conditions in Israel and the Dominican Republic. The announcement of the delisting of Altice Europe has increased downward pressure on the already weakly positioned ratings. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. ENDO LUXEMBOURG: Moody's Completes Review, Retains B3 CFR --------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Endo Luxembourg Finance I Company S.a.r.l. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Endo's B3 Corporate Family Rating reflects its high financial leverage and considerable uncertainty stemming from lawsuits related to its branded opioid products. The rating is also constrained by product concentration risk as Vasostrict, Endo's largest product, will constitute more than 20% of Endo's earnings in 2021. The rating is supported by strong scale, decent growth potential of a newly approved product, Qwo, for cellulite, and its balanced business mix between branded and generic drugs. The rating is also supported by Endo's high cash balance and strong cash flow before litigation payments. The principal methodology used for this review was Pharmaceutical Industry published in June 2017. ===================== N E T H E R L A N D S ===================== DCDML 2016-1: Moody's Affirms B2 (sf) EUR4.4MM Class E Notes Rating ------------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of five classes of notes and affirmed the ratings of seven classes of notes in two Dutch RMBS transactions. The rating action reflects the increased levels of credit enhancement for the affected notes, and, for DCDML 2016-1 B.V., better than expected collateral performance. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain their current ratings. List of affected ratings: Issuer: DCDML 2016-1 B.V. EUR250.2M Class A Notes, Affirmed Aaa (sf); previously on Jun 13, 2019 Affirmed Aaa (sf) EUR6.9M Class B Notes, Affirmed Aa1 (sf); previously on Jun 13, 2019 Upgraded to Aa1 (sf) EUR6.7M Class C Notes, Upgraded to Aa2 (sf); previously on Jun 13, 2019 Upgraded to Aa3 (sf) EUR3.7M Class D Notes, Upgraded to A3 (sf); previously on Jun 13, 2019 Affirmed Baa2 (sf) EUR4.4M Class E Notes, Affirmed B2 (sf); previously on Jun 13, 2019 Affirmed B2 (sf) Issuer: EDML 2018-1 B.V. EUR452.5M Class A Notes, Affirmed Aaa (sf); previously on Mar 28, 2018 Definitive Rating Assigned Aaa (sf) EUR11.5M Class B Notes, Upgraded to Aa2 (sf); previously on Mar 28, 2018 Definitive Rating Assigned Aa3 (sf) EUR11M Class C Notes, Upgraded to A1 (sf); previously on Mar 28, 2018 Definitive Rating Assigned A2 (sf) EUR7M Class D Notes, Upgraded to A3 (sf); previously on Mar 28, 2018 Definitive Rating Assigned Baa1 (sf) EUR3M Class E Notes, Affirmed Baa3 (sf); previously on Mar 28, 2018 Definitive Rating Assigned Baa3 (sf) EUR2.5M Class F Notes, Affirmed Ba1 (sf); previously on Mar 28, 2018 Definitive Rating Assigned Ba1 (sf) EUR3.75M Class G Notes, Affirmed Ba3 (sf); previously on Mar 28, 2018 Definitive Rating Assigned Ba3 (sf) RATINGS RATIONALE The rating actions are prompted by an increase in credit enhancement for the affected tranches for both transactions, and for DCDML 2016-1 B.V. only, better than expected collateral performance, resulting in decreased key collateral assumptions, namely the portfolio Expected Loss assumption. Moody's affirmed the ratings of the tranches that had sufficient credit enhancement to maintain their current ratings. Increase in Available Credit Enhancement Sequential amortization and non-amortizing reserve funds led to the increase in the credit enhancement available in these transactions. In both transactions the reserve funds can only start to amortise down to a floor once, among other conditions, the current pool balance drops below 50% of the original pool balance, and have therefore not amortized yet since closing. For instance, in DCDML 2016-1 B.V. the credit enhancement for Classes D and E Notes increased to 8.2% and 6.1% from 6.5% and 4.9% respectively since the last rating action in June 2019. In EDML 2018-1 B.V. the credit enhancement for Classes B, C, and D Notes increased to 9.9%, 7.4%, and 5.7%, from 8.5%, 6.3%, and 4.9% respectively since closing in March 2018. Revision of Key Collateral Assumptions As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolio reflecting the collateral performance to date. The performance of DCDML 2016-1 B.V. has continued to be strong since the last rating action in June 2019. Total delinquencies increased only marginally in April of this year to 0.15% and have since decreased back down to 0.00% from July onward, with no losses since closing. Moody's decreased the expected loss assumption to 1.00% as a percentage of original pool balance from 1.30% due to the strong performance. The performance of EDML 2018-1 B.V. has been stable since closing in March 2018. As of October 2020 total delinquencies stood at 0.44%, however only 0.18% of the pool was more than 30 days in arrears, with no losses since closing. Moody's maintained the expected loss assumption at 1.30% as a percentage of original pool balance due to the stable performance. 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 at 10% and 12.5% for DCDML 2016-1 B.V. and EDML 2018-1 B.V., respectively. The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of consumer assets from the current weak Dutch economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our 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 these ratings 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. Please see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS. 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 performance of the underlying collateral that is better than Moody's expected, an increase in available credit enhancement and improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include an increase in sovereign risk, performance of the underlying collateral that is worse than Moody's expected, deterioration in the notes' available credit enhancement and deterioration in the credit quality of the transaction counterparties. IHS NETHERLANDS: Moody's Completes Review, Retains B2 CFR --------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of IHS Netherlands Holdco B.V. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The B2 corporate family rating and B2-PD probability of default rating reflects IHS' leading position as a mobile communications tower operator in Nigeria, with stable generation of cash flow largely contracted from Nigerian subsidiaries of international telecommunications service providers. The ratings also recognise IHS' ownership by IHS Holding Limited, which provides best practice operational know-how that was gained through operating approximately 27,500 towers spanning nine countries across Africa, Middle East and Latin America. The ratings are constrained by the Nigerian sovereign rating, because of the complete concentration of IHS' cash flows and assets in the country and foreign currency risk given the dollar illiquidity and naira/US dollar currency volatility. This is partly mitigated given approximately 60% of IHS' revenues are contractually agreed in US dollars. The ratings assume no material debt-funded acquisitions or equitisation of the intercompany shareholder loans while the senior unsecured notes are outstanding. The principal methodology used for this review was Communications Infrastructure Industry published in September 2017. IPD3 BV: Fitch Assigns 'B' Final Long-Term IDR, Outlook Negative ---------------------------------------------------------------- Fitch Ratings has assigned IPD3 B.V. (IPD) a final Long-Term Issuer Default Rating (IDR) of 'B' with a Negative Outlook. It has also assigned IPD's issue of EUR700 million notes final senior secured 'B+'/'RR3' rating. The rating of IPD reflects its high leverage triggered by the pandemic and the acquisition of Haynes group. However, it also reflects Fitch’s expectation of recovery and improvement in credit metrics post 2020, the leading position of IPD in its product niches with a high share of subscription revenues underpinned by strong renewal rates, established and reputable brands as well as moderate barriers of entry. The Negative Outlook reflects uncertainties over the pace of recovery in end-markets in 2021, limited visibility around the return of activities in the trade-show segment as well as the negative impact of economic recession on IPD's customer base and renewal rates in the subscription business. KEY RATING DRIVERS High Leverage: The debt- and cash-funded acquisition of Haynes completed in April 2020, coupled with the impact of social restrictions on IPD's face-to-face business and marketing services, is expected to drive funds from operations (FFO) gross leverage to around 10x by end-2020 (pro-forma for the Haynes acquisition) from 6.6x in 2019. Fitch expects that the resilient subscription business, in tandem with a gradual market recovery and full-year earnings contribution from Haynes, to drive FFO gross leverage lower to 7.4x by end-2021. In the absence of large, debt-funded acquisitions, Fitch expects the company to deleverage during 2022 to below Fitch’s 7.0x threshold for the 'B' rating. Exposure to Cyclical End-Markets: Pro-forma for the Haynes acquisition, IPD in 2019 generated approximately 70% of its revenue from more cyclical end markets such as construction (34%), auto and aftermarket (20%), and industrials (15%). The company is therefore exposed to the impact of a prolonged economic downturn triggered by the pandemic. IPD's customer base comprises predominately small and medium-sized enterprises (SMEs), which may be more vulnerable to a recession than larger companies. Services Less Prone to Cutbacks: Services offered by IPD are often an essential part of its customer's business and account for a low proportion of operating costs, which make them less likely to be scaled back. Ongoing government support for companies in concert with less severe lockdowns in 4Q20 and in early 2021 versus 2Q20 could limit the number of SME defaults. High Proportion of Subscription Revenues: Contracted sales remain the backbone of IPD's business. The company has been gradually increasing its share of subscriptions to around 60% of total revenue following the acquisition of Haynes, from 50% in 2016. Customer contracts with typical durations of one to three years provide some visibility of profit and cash flow generation. IPD also benefits from strong retention rates, which vary from around 80% for trade shows to almost 100% in subscriptions in the automotive aftermarket business. Decline in Face-To-Face Business: The negative impact of the pandemic on trade shows and other face-to-face activities was the key driver behind an 11% revenue decline in 9M20 (19% like-for-like decline excluding Haynes). On average, over the past two years, trade shows generated around 45% of its revenues and information & insights around 33% in the final quarter. While this seasonality will continue to impact earnings in 2020, Fitch assumes that as national restrictions on events gradually relax in 2021 revenues from these high-margin businesses should recover strongly in 2H21. The majority of face-to-face events organised by IPD are local and are therefore, potentially, less impacted by international travel restrictions. Bolt-on M&A to Continue: Since inception in 2001 IPD completed 31 acquisitions and inorganic growth has accelerated markedly over the past three years. Fitch expects that the company will continue to pursue opportunities in the highly fragmented market. Fitch’s base case assumes EUR25 million of bolt-ons p.a., financed largely by internally generated free cash flow (FCF). While IPD has successfully integrated recently acquired companies, it has been also incurring restructuring costs of up to EUR10 million p.a. In Fitch’s view, IPD will focus on the full integration of Haynes before considering any sizable acquisitions. Established Position in Niches: IPD offers a wide range of platforms and services but two- thirds of its revenue are generated from 15 key brands, which are strongly positioned within their respective niche markets. IPD intends to step up its investments from 2021 to expand its existing service offerings, as well as launching solutions focused on virtualisation and digitalisation of content-driven events. Broad data sets and experience in tailoring information towards customer needs, combined with reliable services, also increases the loyalty of IPD customers and creates barrier of entry for potential competitors. DERIVATION SUMMARY IPD is a leading European business services provider focused on six core sub-segments including automotive aftermarket, construction and industrials. High leverage and smaller scale are the key differentiating factors compared with larger peers such as RELX (BBB+/Stable), Thomson Reuters Corporation (BBB+ /Stable) and Daily Mail and General Trust Plc (BBB-/Stable). IPD benefits from a strong share of subscription revenues (60%) and has well-established position in its core segments, but is more exposed to more cyclical end-markets and less diversified globally. Its scale also makes it more vulnerable in this economic recession, especially with the face-to-face businesses impacted by Covid-19 restrictions. KEY ASSUMPTIONS -- Reported revenue to decline 17% in 2020, reflecting a 23% of reduction in sales from information & insights and drop in trade shows revenue to EUR18 million -- Recovery in revenues with 20% growth in 2021, driven by growth in trade-show revenue to over EUR50 million and improving results in other segments, followed by 8% revenue growth in 2022 and by 5% in 2023 -- Fitch-adjusted EBITDA margins of around 22% in 2020, and rising gradually to 27% in 2023 -- Capex averaging 8%-9% of sales in 2021-2023 -- Bolt-on acquisitions of EUR25 million p.a. for the next three years Restructuring costs of EUR10 million p.a. for the next three years No dividends until 2023 KEY RECOVERY RATING ASSUMPTIONS -- IPD would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated. -- A 10% administrative claim. -- Fitch estimates post-restructuring going concern EBITDA of EUR92 million, which is around 17% lower than Fitch’s 2021 defined EBITDA forecast. -- Fitch uses an enterprise value (EV) multiple of 5.5x to estimate a post-reorganisation value. -- After deduction of 10% administrative claims, Fitch calculates the recovery prospects for the senior secured instruments at 51%, assuming the super senior secured revolving credit Facility (RCF) of EUR95 million is fully drawn, which implies a one notch uplift of the ratings relative to the company's IDR to arrive at 'B+' with a Recovery Rating of 'RR3' for the company's EUR700 million of senior secured debt. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- FFO gross leverage sustainably below 5.0x -- FFO interest charge cover sustainably above 3x -- FCF margin above 8% on a sustained basis -- Improved visibility on EBITDA and cashflow generation, with reduced exposure to the face-to-face businesses -- Stronger-than-expected rebound in the trade show and information and insights segments Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO gross leverage sustainably above 7.0x -- FFO interest cover failing to improve to around 2.5x -- EBITDA margin deterioration towards 20% -- FCF margin sustainably below 3% -- Sizeable, fully debt-funded acquisitions -- Material loss of subscription contracts and lack of recovery in trade show and information and insights businesses during 2021. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. 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 IPD has healthy liquidity following the refinancing in November 2020, with its next debt maturities after 2024 as well as a RCF of EUR95 million and an estimated post-refinancing cash balance of EUR35 million. Liquidity could be negatively impacted if amounts spent on acquisitions exceed FCF generation. SUMMARY OF FINANCIAL ADJUSTMENTS In 2019, Fitch treated EUR10.4 million (EUR8.8 million of depreciation and amortisations on rights-of-use assets, and EUR1.6 million of lease interest expense) as operating expenses. SIGMA HOLDCO: Fitch Cuts Long-Term IDR to 'B', Outlook Stable ------------------------------------------------------------- Fitch Ratings has downgraded Dutch food group Sigma Holdco BV's (Upfield) Long-Term Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Stable. Fitch also downgraded the rating of the senior secured facilities issued by Upfield US Corp and Upfield B.V. to 'B+'/RR3 from 'BB-'/RR3 and the senior unsecured notes rating to 'CCC+'/RR6 from 'B-'/RR6. The downgrade reflects Fitch’s revised expectations on Upfield's deleveraging trajectory given higher-than-projected one-off costs and working capital outflows related to its separation from Unilever PLC. Fitch now assumes that Upfield is unlikely to reduce its leverage to levels commensurate with a 'B+' rating following its largely debt-funded acquisition of Arivia and high incurred separation-related cash outflows. Moreover, Fitch believes Arivia's acquisition signals the heightened propensity of the group to allocate surplus cash to M&A. The rating assumes that any further potential M&A will be small in size and conservatively funded. Upfield has limited leverage headroom under its 'B' IDR. However the rating is underpinned by Fitch’s expectation of strong free cash flow (FCF) generation from 2021, once its working capital stabilises and separation and restructuring one-offs reduce. The rating is also supported by the company's strong business profile of a geographically diversified global category leader counterbalanced by the challenge of reversing the trend of revenue declines in developed markets and the company's high leverage. KEY RATING DRIVERS Significant Carve-out Costs: Upfield acquired the spreads and margarine business of Unilever in July 2018 and has made significant progress in its carve-out process between 2H19 and 3Q20. This included investments in its own back-office, headquarters, IT infrastructure and a dedicated sales force, as it had initially only taken ownership of its manufacturing operations and brands. However, related separation and restructuring costs have materially exceeded Fitch’s expectations and eroded Upfield's FCF and deleveraging profile. Upfield has continued to incur one-off costs in 2H20 and will also report them in 2021, despite being a standalone company since end-June 2020. Fitch estimates that total cumulative one-off expenses, including those reported under capex, will near EUR1 billion by the end-2021, which is materially higher than the EUR253 million carve out and cost rationalisation charges Fitch projected at transaction close. Material Working Capital Adjustment: As a part of its separation process, Upfield shifted to direct market terms with its customers and suppliers in 2020 as it exited transitional service agreements (TSAs) with Unilever. Previously these relationships were managed by Unilever and Upfield benefited from favourable payment terms under the TSAs. The change resulted in a material adjustment, driven by timing of payments under new and old arrangements and differences in payment terms in working capital, leading to a substantial cash outflow in 9M20, which Fitch estimates could reach around EUR300 million by end-2020. Despite the permanent nature of the adjustment, Fitch assumes that Upfield may achieve some improvement in working capital turnover in 2021 through the renegotiation of terms with its counterparties. Step-Up in Debt, Elevated Leverage: Upfield's Fitch-adjusted gross debt increased by around EUR1 billion during 9M20 as a result of EUR375 million debt taken on for the acquisition of Arivia and almost full utilisation of its EUR700 million revolving credit facility (RCF) to fund cash outflows under working capital. Excluding one-off expenses of EUR300 million expected in 2020, Fitch projects funds from operations (FFO) gross leverage to increase to around 10x in 2020 (2019: 7.5x), which is high for a 'B' rating category packaged food company. FCF Prerequisite for Deleveraging: FCF was close to zero in 2019 and Fitch expects it to be materially negative in 2020, pressured by outflows under working capital and non-recurring costs in relation to the carve-out process and the implementation of the cost-restructuring programme. As Fitch expects one-off charges for restructuring will reduce in 2021 and disappear in 2022, FCF has scope to significantly improve to close to 10% of sales, enabling Upfield to pay down its RCF and improve its liquidity position, enhancing financial flexibility under the rating. This could lead to FFO gross leverage reducing to around 8.5x, the highest level commensurate with Upfield's 'B' rating. Expected EBITDA Growth: The combination of a mature business profile with strong market positions enabled Upfield to achieve Fitch-adjusted EBITDA margins of about 22% over 2015-2017, which grew to 24% in 2018-2019. This is already superior to many packaged food companies, but Fitch projects a further increase to above 25% in 2021, benefiting from revenue stabilisation and cost savings, which should be only partly offset by higher re-investment in marketing and sales efforts. Fitch has revised down Fitch’s EBITDA margin expectations as Fitch now factors in recurring restructuring charges at 1% of revenue from 2022. Fitch believes that after completing the business transformation process related to the carve-out, the company will continue to undertake smaller restructuring projects aimed at improving efficiency, digitalisation and automation. Global Category Leader: The rating reflects Upfield's leading position in the global margarine market, with a 59% share in 2018, and the fact that its sales are over three times larger than the second-leading company in its broader reference market of butter and margarine. It has a more than 50% share of the key margarine markets of the US, Germany, the UK and the Netherlands, and is the leader in another 40 markets. It also sells vegetable fat-based creams and spreadable melanges (a mixture of butter and margarine). However, Upfield's position has been challenged by innovative new entrants and Fitch believes continued innovation will be key to defending its strong position. Turnaround for Margarine Sales: Upfield's product portfolio centres around margarine, a family of products that, under its former owner Unilever, has been in long-term decline in the group's core developed markets. This is due to changing eating habits and consumer perceptions of the health benefits and flavour of margarine compared with butter. However, margarine continues to benefit from its lower price. This is reflected in Upfield's ESG Relevance Score of '4' for Exposure to Social Impacts. Under the new ownership, the group has launched a major communication, product innovation and relaunch plan to turn around the perception of its products, leveraging on trends favouring consumption of plant-based food products. The results of this strategy have been encouraging, with organic revenues staying almost flat in 2019 and 9M20 (0.1% growth and -0.4% decline respectively), despite the separation and restructuring process and challenges from the pandemic. Fitch also acknowledges the strategic fit and contribution to growth of Arivia, which allowed Upfield to enter the plant-based cheese category. DERIVATION SUMMARY Upfield is capable of generating significantly higher FCF than most packaged-food companies with comparable revenue due to a higher-than-average EBITDA margin and very low capex needs. These considerations are also relevant when Fitch compares Upfield with consumer goods companies such as Sunshine Luxembourg VII SARL (Galderma; B/Negative) or Oriflame Investment Holding Plc (B/Stable). Upfield's profits also benefit from being more stable than those of Galderma and Oriflame, despite the long-term decline in Upfield's sales from its core product (margarine) and disruption to the business suffered during 2020 from the carve-out process. However, this is balanced by Upfield's significantly higher expected leverage compared with rated peers in the packaged food segment, or relative to Oriflame. No Country Ceiling, operating environment or parent-subsidiary linkage aspects were applicable to this rating. KEY ASSUMPTIONS Fitch's key assumptions within Fitch’s rating case for the issuer include: -- Flat organic sales in 2020; organic sales growth accelerating to around 4.5% in 2021 and then stabilising at around 2.5% in 2022-2023. -- Unfavourable changes in FX rates, negatively affecting sales in 2020 and 2021. -- No major commodity price shocks. -- EBITDA margin improving above 25% in 2021 (24% in 2019) driven mostly by cost-base rationalization. -- Working capital outflow of around EUR300 million in 2020, only partly compensated by inflow of around EUR100 million in 2021. -- No one-off cash outflows related to the business transformation and separation from Unilever after 2022. -- Capex of EUR180 million in 2020, EUR95 million in 2021 and EUR70 million per year over 2022-2023. -- No M&A assumed until the RCF is repaid. Fitch's Key Recovery Assumptions: -- The recovery analysis assumes that Sigma would remain a going concern in restructuring and that it would be reorganized rather than liquidated. Fitch has assumed a 10% administrative claim in the recovery analysis. -- The EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level of EUR560 million, on which Fitch bases the enterprise value, implying a 20% discount to FY19 pro-forma EBITDA (including Arivia) of EUR700 million, a Level at which the capital structure would become unsustainable. -- Fitch also assumes a distressed multiple of 6.0x, reflecting Sigma's comparative size, leading market positions and high inherent profitability compared with sector peers. -- Fitch assumes Sigma's EUR700 million RCF would be fully drawn in a restructuring scenario. Fitch’s waterfall analysis generates a ranked recovery for TLB creditors in the 'RR3' band, indicating a 'B+' instrument rating assigned to the secured debt, one notch above the IDR. The waterfall analysis output percentage on current metrics and assumptions is 60%. Conversely, Fitch’s analysis generates a ranked recovery in the 'RR6' band, indicating a 'CCC+' rating for the unsecured notes with 0% recovery expectations based on current metrics and assumptions. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Evidence of EBITDA margin sustained at around 24%-25% after the carve-out process is completed. -- Recovery of revenue performance with FCF margin improving to high single digits on a sustained basis. -- FFO gross leverage reducing to 7.5x by 2022 and trending towards 7.0x in the medium term. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to execute the product relaunch strategy resulting in sustained organic decline in sales and structural deterioration of EBITDA margin -- Visibility that FFO gross leverage would remain above 8.5x on a sustained basis -- Inability to generate positive FCF margin at mid-single digits from 2021 due to higher-than-expected restructuring charges or unfavourable changes in working capital. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: At end-September 2020, Upfield's liquidity was satisfactory as its cash of EUR351 million was sufficient to fund negative FCF, resulting from one-off costs and adjustment of working capital related to the company's separation from Unilever. Upfield had only EUR25 million available under its EUR700 million RCF at end-September 2020 but Fitch expects the facility to be repaid over 2021-2023 once Upfield restores its FCF. Fitch expects Upfield to generate around EUR300 million of FCF per year over 2021-2023. ESG CONSIDERATIONS Sigma Holdco BV: Exposure to Social Impacts: '4' Upfield has an ESG Relevance Score of '4' for Exposure to Social Impacts as shifts in consumer preferences away from the company's products have represented a challenge for Upfield historically. This ESG score currently has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. However, once the market trend for plant-based products consolidates further, Fitch expects this risk to significantly reduce. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========== P O L A N D =========== ALIOR BANK: Fitch Affirms 'BB' LT IDR, Outlook Remains Negative --------------------------------------------------------------- Fitch Ratings has affirmed Alior Bank S.A.'s Long-Term Issuer Default Rating (IDR) at 'BB' and Viability Rating (VR) at 'bb'. The Outlook remains Negative. Fitch has also downgraded Alior's National Short-Term Rating to 'F2(pol)' from 'F1(pol)'. The affirmation reflects Fitch's view that the bank's ratings have sufficient headroom under Fitch’s updated assessment to absorb pressure on asset quality, earnings and capitalisation, which Fitch expects in Fitch’s baseline scenario for Poland. The Negative Outlook on Alior' s Long-Term IDR reflects the downside risks to Fitch’s baseline scenario, as further pressure on the bank's asset quality, profitability and capitalisation would increase substantially if the coronavirus-related downturn is deeper or more prolonged than Fitch expects. The downgrade of Alior's National Short-Term rating is Fitch’s reassessment of the relative strength of bank's funding and liquidity profile in comparison with Polish peers' and in line with Fitch’s revised National Scale Rating Criteria. KEY RATING DRIVERS The outlook for the operating environment for Polish banks remains negative, reflecting downside risks to Fitch's baseline economic scenario and related profitability pressures on the sector. The negative impact of the pandemic has not yet fed through to the reported asset-quality metrics at Polish banks. This is due mostly to payment moratoriums offered by banks to both corporate and retail customers. Corporate customers' financial flexibility has also been supported by large state support in the form of guarantees, liquidity support and loans. As state-support measures will gradually be withdrawn and most of the moratoriums expire in 4Q20, only then and in the following quarters will the magnitude of asset-quality stress become visible. Fitch expects asset quality at large Polish banks to deteriorate, albeit only moderately owing to less severe GDP contraction as lockdowns have so far been less severe and shorter than in some other countries. Poland's economy has recovered from a steep decline in 2Q20, aided by robust household consumption growth. Economic growth in 4Q20 is likely to be weaker, however, given new restrictions on activity from October in the wake of a second wave of infections. Fitch expects real GDP to contract 3.4% in 2020 and to grow moderately by 3.3% in 2021 and 5.1% in 2022. Underlying asset-quality deterioration in the sector was only marginal in 9M20, but most banks have already set up provisions to cover expected credit losses resulting from the expected weaker performance of the Polish economy. Fitch expects pressure on profitability to be significant due to weaker revenue generation and despite Fitch’s expectations that asset-quality deterioration and related loan impairment charges are likely to be contained. Interest-rate cuts of 140bp over 1H20, bringing the base interest rate down to only 10bp, have materially reduced banks' main revenue component through lower net interest margins. Fitch still expects modest negative impact to feed through in 4Q20, before net interest margins stabilise in 2021. IDRS, NATIONAL RATINGS Alior's IDRs and National Ratings are driven by the bank's standalone strength, as reflected in the VR. The National Ratings also reflect the bank's creditworthiness relative to Polish peers'. SUPPORT RATINGS AND SUPPORT RATING FLOOR The Support Rating Floor of 'No Floor' and the Support Rating of '5' for Alior express Fitch's opinion that potential sovereign support for the bank cannot be relied on. This is underpinned by the Polish resolution legal framework, which requires senior creditors to participate in losses, if necessary, instead or ahead of a bank receiving sovereign support. VR Alior's VR reflect weak asset quality, a high-risk loan exposure, business model vulnerability to the low interest-rate environment and Fitch’s expectation that capitalisation will be materially eroded in the near term. The VR also reflects the bank's approximate 5% market share in retail loans and deposits in a competitive Polish banking sector and a healthy funding profile. Alior's asset quality remains a rating weakness due to a considerably higher impaired loans ratio, larger credit losses than peers' and material concentration in higher-risk exposures, such as unsecured retail loans (38% of loans at end-September 2020). Deterioration in asset quality was modest in 9M20 but Fitch expects credit losses to remain large in the near term and the bank's impaired loan ratio (comprising Stage 3 under IFRS9) to increase to about 16% at end-2021 from 14.7% at end-September 2020. At end-September 2020, about 4% of Alior's loan book was subject to payment moratoriums (12.6% at end-June 2020) and only a small fraction of customers required forbearance or were in arrears after the end of payment holidays. Alior's business model is vulnerable to the current operating environment due to a high reliance on net interest income and structurally high loan impairment charges (LICs). Fitch expects Alior to return to profit in 2021, after an estimated sizeable loss in 2020. The bank plans to mitigate margin pressure through credit expansion and optimisation of operating and funding costs. The high execution risk of management's updated business plan has a negative impact on the bank's rating in combination with the economic fallout from the coronavirus outbreak. Consequently, Fitch has assigned a '4' ESG relevance score for management strategy for Alior. Pressure on Alior's capitalisation stems from the bank's sizeable risk appetite, weak asset quality and material stock of unreserved impaired loans (44% of common equity Tier 1 (CET1) at end-2019). Alior's access to capital market is limited given the bank's subdued performance. The bank received but has not used a credit-risk guarantee from its minority, but controlling, shareholder Powszechny Zaklad Ubezpieczen (PZU) for emergency, which increases the bank's CET1 ratio by up to about 60bp. Fitch expects Alior's CET1 ratio to decrease to about 12% at end-2021 from almost 13% at end-September 2020. The ratio could deteriorate further due to subdued internal capital generation, the planned credit expansion and the need to phase in a material IFRS 9 impact. Alior's conservative funding strategy remains a rating strength because it is predominantly based on granular customer deposits (91% of funding at end-September 2020), dominated by retail savings. At end-September 2020, Alior's available pool of liquid assets was about PLN15 billion (about 19% of assets) and liquidity coverage ratio was healthy at 170% (about 140% pre-Covid-19). RATING SENSITIVITIES IDRS and VR Alior's IDRs are sensitive to changes in the bank's VR. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The most immediate downside rating sensitivity for the bank's ratings relates to the economic fallout arising from the coronavirus outbreak and the low interest-rate environment. This represents a clear risk to Fitch’s assessment of profitability, asset quality and capitalisation. -- Ratings would be downgraded if Fitch expects another loss in 2021 or if the bank is unable to restore its operating profit/risk weighted assets sustainably to around 1% in the near term. This could be due to significantly weaker-than expected revenues or higher-than-expected LICs driven by a prolonged recession and high unemployment, which remains a downside risk to Fitch’s baseline scenario. -- Alior's ratings could also be downgraded if Fitch expects that The impaired loans ratio will durably increase to about 20% or If Fitch expects Alior to be unable to maintain its CET1 ratio above 10% or to restore it to that level within a short period. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The revision of Outlook on the Long-Term IDR to Stable would require evidence of resilience to the economic fallout from the coronavirus outbreak coupled with a stabilisation in the bank's revenue and LICs. -- In the event Alior is able to withstand rating pressure arising from the coronavirus outbreak, the most likely trigger for an upgrade would be a significant improvement in its impaired loans ratio and lower loan-book concentrations, an extended sustainable record of improved profitability and stronger capital buffers. NATIONAL RATINGS The National Ratings are sensitive to changes to the bank's Long-Term IDR and the bank's credit profile relative to Polish peers'. SUPPORT RATING Domestic resolution legislation limits the potential for positive rating action on the bank's Support Rating and Support Rating Floor. The Support Rating could be upgraded if Fitch takes the view of at least a limited probability of support from PZU. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond 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. ESG CONSIDERATIONS Alior has an ESG Relevance Score of '4' for management strategy due to high execution risk of its updated business plan given frequent management turnover in the bank and the challenging operating environment in the near term. This is not a key rating driver but has an impact on the credit profile in combination with other factors. Unless otherwise stated in this section Alior's other ESG factors have a Relevance Score of '3'. This means they are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity. CYFROWY POLSAT: Moody's Completes Review, Retains Ba1 CFR --------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Cyfrowy Polsat S.A. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Cyfrowy Polsat's Ba1 CFR reflects the company's strong positioning as a leading convergent operator in the Polish telecom market, its good liquidity profile and its prudent financial policy inclusive of a net leverage target of 1.75x over the medium term. It also takes into consideration the company's strong and predictable free cash flow generation and the company's relative resiliency to the coronavirus outbreak. The rating also factors in the delay in the company's deleveraging prospects as a result of the acquisition of a minority stake in Asseco Poland and the acquisition of Interia group, its lack of international diversification and the strong competitive pressures affecting the Polish telecom market. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. =========== R U S S I A =========== PAYMENT STANDARD SNCO: Bank of Russia Revokes Banking License ------------------------------------------------------------- The Bank of Russia, by virtue of its Order No. OD-2172, dated December 25, 2020, revoked the banking license of Novosibirsk-based Payment Standard Settlement Nonbank Credit Organization Limited Liability Company (Payment Standard SNCO LLC) (Reg. No. 3530-K; hereinafter, Payment Standard SNCO). The credit institution ranked 395th by assets in the Russian banking system. Payment Standard SNCO is not a member of the deposit insurance system. The Bank of Russia made this decision in accordance with Clause 6.1, Part 1, Article 20 of the Federal Law "On Banks and Banking Activities", based on the facts that Payment Standard SNCO: Failed to comply with the anti-money laundering and counter-terrorist financing laws. In its operation, Payment Standard SNCO was highly involved in dubious transit operations and dubious cash-out transactions, due to which its business model may not be deemed to be viable and competitive. The Bank of Russia appointed a provisional administration to Payment Standard SNCO for the period until the appointment of a receiver or a liquidator. In accordance with federal laws, the powers of the credit institution’s executive bodies were suspended. SAMARA OBLAST: Moody's Completes Review, Retains Ba2 Rating ----------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Samara, Oblast of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Oblast of Samara's (Ba2) credit profile reflects the region's sound budgetary performance, reflecting local authorities' conservative budgetary management as well as relatively diversified economy. Refinancing risks are low given the favourable maturity structure and a moderate debt burden. These strengths are partially offset by volatility of the revenue streams and strong needs to develop transport and social infrastructure. The principal methodology used for this review was Regional and Local Governments published in January 2018. TATARSTAN: Moody's Completes Review, Retains Ba1 Rating ------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Tatarstan, Republic of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Republic of Tatarstan's (Ba1) credit profile reflects the region's wealthy economy in the Russian context that is predominantly based on extraction and processing of oil. Moderate leverage which consists of low-cost federal government budget loans with favourable debt repayment schedule limits refinancing risks and sound operating performance with healthy gross operating balance also reinforces the republic's standalone credit metrics. The credit profile also incorporates risks associated with the local economy's high reliance on hydrocarbon industry and the performance of a handful of major taxpayers making the region's tax revenues potentially vulnerable to a prolonged weakness in commodity prices. The principal methodology used for this review was Regional and Local Governments published in January 2018. TATTELECOM PJSC: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Russia-based PJSC Tattelecom's Long-Term Issuer Default Rating (IDR) and senior unsecured rating at 'BB'. The Outlook on the Long-Term IDR is Stable. Tattelecom is a regional fixed-line incumbent operator in the Russian Republic of Tatarstan (BBB/Stable) with leading or strong market positions in wireline broadband, pay-TV and traditional voice telephony services. The company also launched mobile operations in 2014 and held less than 10% mobile market share in its region at end-2019. Tattelecom has significant leverage flexibility as its debt is low but the ratings are constrained by the company's small size, resulting in lower profitability and economies of scale versus peers, limited access to capital markets and strategic challenges with longer-term mobile development. KEY RATING DRIVERS Strong Incumbent Position: Fitch views Tattelecom's strong position as a regional fixed-line incumbent operator as sustainable. The company's extensive network coverage across its geographical franchise, dedicated regional focus and full bundling capabilities including mobile services support its above 50% market shares in key segments of broadband, pay-TV and traditional voice telephony. Intense Competitive Environment: Fitch expects facilities-based competition to remain intense and gradually increase. Large Russia-wide telecoms operators are building up their network infrastructure in Tatarstan and exploring options to improve its productive use including through promotional activities. Tattelecom is facing lower threats in rural and less developed areas, but competitive pressure is spreading from the large cities to their outskirts and less densely populated areas. Pay-TV Vulnerable: Fitch believes the company's pay-TV segment may stall or come under modest pressure as Tattelecom heavily relies on cable network with no encryption protection and its overall small scale limits its negotiating power in relations with premium content providers. Un-encrypted technology ensures low-cost provision of basic TV services but may also entail customer fraud and is not suitable for premium services. Growth in IP-TV mitigates this but the transition to IP-TV technology is likely to be slow and the legacy cable network customer base remains vulnerable to competition. Accelerated Fibre Development Positive: An accelerated fibre roll-out should help Tattel better withstand competitive threats, allowing it to widely offer new and improved services and strengthen its role as the key infrastructure provider in its region. This supports its credit profile, in Fitch’s view. The company's fibre deployment also includes less densely populated areas, where it has a higher market share. A faster network should help the company to offer new services such as video surveillance and make it more likely to be a contractor under federal initiatives such as provision of internet services to 'socially important' customers designated by the government. The resulting rise in capex is unlikely to lead to an increase in leverage as Tattel generates ample cash flow and can fund fibre development internally. Longer-Term Mobile Challenges: Continuing delays in 5G spectrum allocation in Russia and the government's plan to heavily rely on domestically-produced 5G radio equipment that is yet to be designed and tested provides temporary relief for Tattel and postpones the need to make any strategic 5G choices in the short term, in Fitch’s view. The company is facing strategic uncertainty over its ability to offer 5G services in the medium to long term. There is no clarity on how 5G spectrum would be awarded and if any 5G wholesale or sufficient regional options would be available. Mild Covid-19 Impact: Fitch believes Tattel is likely to remain largely unscathed by the pandemic. The company's financial performance was strong in 1H20 when the lockdown measures were strictest in Russia so far. With mass vaccination launched in Russia in December 2020 and the government's efforts to avoid new severe lockdown restrictions, the company is facing brighter prospects to manage the Covid-19 impact. Tattel's revenue declined by 1% yoy in 1H20 with most pressure in legacy voice and pay-TV services while broadband and mobile revenues continued to grow. With almost no roaming revenues to lose, Covid-19 only slowed down its mobile expansion due to a temporary closure of retail outlets. The company reported that yoy revenue growth switched to marginally positive in 9M20 under Russian accounting standards (RAS), with the EBITDA margin significantly improving. Focus on Cost Cutting: Fitch expects Tattel's management to remain focused on maintaining strict cost discipline, which would support its profitability and cash flow generation. Fitch projects that EBITDA margin should continue to gradually improve (it grew to 32.1% in 1H20 from 28.9% in 1H19) as it benefits also from the mobile segment's improved profitability as it scales in size. Low Leverage: The company's leverage is low (FFO net leverage was 0.4x at end-2019), which provides it with strategic flexibility to undertake new large-scale organic development projects such as accelerated fibre roll-out. It also mitigates 5G strategic challenges and its scale disadvantages. Fitch expects Tattel to remain strongly cash flow positive with dividend distributions moderate and pegged to net profit under RAS. The company is likely to refrain from actively developing new products such as fintech or mobile applications as such projects would be too large scale in the context of the company's overall small absolute size, even with low leverage. Weak Parental Support: Fitch views operational and strategic ties between the company and its controlling shareholder, OJSC Svyazinvestneftekhim (SINEK; BBB-/Stable), as weak. Tattelecom's rating therefore primarily reflects the company's Standalone Credit Profile. However, it is likely that SINEK would provide liquidity or lobbying support if necessary. DERIVATION SUMMARY Tattelecom's wireline market positions (including all of fixed-line telephony, broadband and pay-TV) are strong in its territory of operations and compare well with those of Rostelecom, the Russian nationwide incumbent telecoms operator. However, Tattelecom is only a regional mobile challenger with significantly lower market share than any of Russian federal mobile operators, PJSC Mobile Telesystems (BB+/Stable), PJSC MegaFon (BB+/Stable), VEON Ltd. (BBB-/Stable) and LLC T2 RTK Holding (BBB-/Stable). It is facing larger and better capitalised competitors that can offer a wider array of services. Tattelecom's ratings are lower than its larger peers, reflecting its significantly lower size, limited geographical franchise, constrained funding options and strategic mobile challenges mitigated by its low leverage. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for Tattelecom include: -- Stable market positions in the fixed-line segments with legacy voice fixed-line revenues continuing to decline by about 10% in 2020-2023 -- Low single digit broadband revenue growth in 2020-2023 -- Mobile revenues growing by mid-high single digits on average in 2020-2023 -- EBITDA margin gradually improving from 30% in 2020 to 31% by 2023 -- Capex intensity increasing to 18%-20% in 2020-2023 -- Dividend distributions of between RUB400 million-RUB500 million per year RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Rating upside is constrained by the company's small size, its lack of geographical diversification, limited access to capital markets and strategic challenges. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A rise in FFO net leverage to above 2.3x on a sustained basis. -- More intense competition, as competitors offer fixed-mobile bundled packages and a wider range of new services that would lead to market share, revenue and cash flow pressures -- Deterioration in liquidity or higher refinancing risk. 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 Comfortable Liquidity. Tattelecom's available cash of RUB1,214 million comfortably covered its short-term (up to one year) debt of RUB976 million at end-1H20. The company significantly downsized its total debt in 2019-1H20 and further debt redemptions are likely in 2H20 which would further reduce its refinancing exposure. Tattelecom's liquidity management is helped by its strong relationships with local banks, including the affiliated Ak Bars Bank, low leverage and some flexibility in capex and dividend payments. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. VOLGOGRAD CITY: Moody's Completes Review, Retains B2 Rating ----------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Volgograd, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of the City of Volgograd (B2) incorporates a moderate likelihood of extraordinary support from the regional authorities given the city's importance for the Oblast of Volgograd. The credit profile also reflects the city's high debt burden and significant refinancing risks due to short-to-medium term debt maturity and low liquidity. Its net direct and indirect debt relative to own-source revenues remains the highest among Moody's rated Russian regional and local governments. Operating performance will continue to suffer from low budgetary flexibility whereby over 60% of revenues consists of higher-level government transfers and low own-source revenues entitlements in relation to expenditures responsibilities. More positively, the credit profile reflects relatively diversified and potentially less volatile own revenues as well as authorities' clear policy to reduce leverage. The principal methodology used for this review was Regional and Local Governments published in January 2018. =========== S E R B I A =========== BELGRADE CITY: Moody's Completes Review, Retains Ba3 Rating ----------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Belgrade, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of City of Belgrade (Ba3) reflects its prudent fiscal management, which results in healthy operating performance and enhanced self-funding capacity. The rating also reflects Belgrade's declining debt levels and manageable debt servicing costs, comfortable liquidity position and its crucial role in the national economy. At the same time, the rating takes into account the city's high investment requirements, associated with the pressure stemming from the transport company and limited financial flexibility under the current legislative framework. Besides the fundamental factors reflected in the city's baseline credit assessment of ba3, its credit profile also benefits from Moody's assessment of a strong likelihood of extraordinary support from the Government of Serbia (Ba3) in the event that the issuer were to face acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. NOVI SAD: Moody's Completes Review, Retains Ba3 Rating ------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of Novi Sad, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of the City of Novi Sad (Ba3) rating reflects its prudent budgetary management, which results in sound operating performance. The rating is also underpinned by low and manageable debt levels and adequate liquidity, which helps the city to mitigate foreign currency exposure. Novi Sad's rating also takes into account the city's important role in the national economy as the second largest city in the country. At the same time, the rating remains constrained by the city's high investment requirements and limited expenditure control under the current evolving framework. Besides the fundamental factors reflected in the city's baseline credit assessment of ba3, its credit profile also benefits from Moody's assessment of a moderate likelihood of extraordinary support from the Government of Serbia (Ba3) in the event that the issuer were to face acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. PROJMETAL: Bankruptcy Auction Scheduled for January 20 ------------------------------------------------------ Radomir Ralev at SeeNews reports that Serbia's Bankruptcy Supervision Agency said it is offering for sale insolvent engineering and construction company Projmetal at an auction on Jan. 20. According to SeeNews, the Bankruptcy Supervision Agency said in a notice the starting price in the auction is set at RSD411.3 million (US$4.2 million/EUR3.5 million). The Bankruptcy Supervision Agency said a deposit of RSD164.5 million which should be paid until Jan. 14 is required in order to participate in the auction, SeeNews relates. An agreement for the sale of the company will be signed in a period of up to three days after the auction, SeeNews notes. Projmetal was declared insolvent in April 2019 and its board of creditors approved the sale of the company in October 2020, SeeNews recounts. VALJEVO CITY: Moody's Completes Review, Retains B1 Rating --------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Valjevo, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The credit profile of the City of Valjevo (B1) reflects its consistently prudent budgetary management as evidenced by the city's sound operating margins. Valjevo's rating is also underpinned by the city's very low debt levels and adequate liquidity position. At the same time, the rating remains constrained by high infrastructure needs, which could put a moderate pressure on the city's finances and limited expenditure control under the current evolving framework. Besides the fundamental factors reflected in the city's baseline credit assessment of b1, its credit profile also benefits from Moody's assessment of a moderate likelihood of extraordinary support from the Government of Serbia (Ba3) in the event that the issuer were to face acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. =============== S L O V E N I A =============== POLZELA: Assets to Be Put Up for Sale at EUR2.3MM Asking Price -------------------------------------------------------------- Iskra Pavlova at SeeNews reports that the production and office buildings of Slovenia's troubled hosiery manufacturer Polzela will soon be put up for sale again at an ask price of EUR2.3 million (US$2.8 million). The date of the new action will be set depending on the epidemiological situation in the country, state news agency STA quoted the bankruptcy receiver of Polzela, Zlatko Hohnjec, as saying over the weekend, SeeNews relates. He added that Polzela's store in the southeastern town of Novo Mesto will also be put up for sale for some EUR44,000, SeeNews discloses. According to SeeNews, in January, STA reported that Hohnjec had extended the deadline for completing the bankruptcy procedure at Polzela by a year, until the end of 2021, after failing to sell all the company assets by the original deadline. The company went bankrupt in December 2016 and stopped production in July 2018, SeeNews recounts. ========= S P A I N ========= LORCA HOLDCO: Moody's Completes Review, Retains B1 CFR ------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of Lorca Holdco Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review on Day Month 2021 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Lorca Holdco Limited's (Masmovil) B1 corporate family rating reflects its position as the fourth largest operator in Spain, its strong management and successful implementation of its challenger strategy in Spain as well as expected solid performance in the next 12-18 months. Additionally, the rating reflects Masmovil's efficient cost structure, supported by its network-related contract, as well as the limited impact from the coronavirus outbreak. However, the rating also reflects the company's moderate scale, its reliance on third party agreements for the provision of mobile services, the relatively high leverage and negative free cash flow generation and a certain degree of event risk. The principal methodology used for this review was Telecommunications Service Providers published in January 2017. =========== T U R K E Y =========== ICBC TURKEY: Fitch Withdraws 'B+' LT IDR for Commercial Reasons --------------------------------------------------------------- Fitch Ratings has affirmed ICBC Turkey Bank A.S.'s (ICBC Turkey) Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at 'B+' and Viability Rating (VR) at 'b'. The Outlook on the LTFC IDR is Negative. A full list of rating actions is provided below. Fitch has simultaneously withdrawn the ratings for commercial reasons and will no longer provide ratings and analytical coverage for ICBC Turkey. KEY RATING DRIVERS IDRS ICBC Turkey's Long-Term IDRs are driven by potential support from the bank's 92.8% owner, Industrial and Commercial Bank of China Limited (ICBC; A/Stable). Fitch's view of support is based on the bank's ownership, strategic importance, integration and role within the ICBC group. The LTFC IDR is capped at 'B+', one notch below Turkey's, reflecting the risk of government intervention that might impede the bank's ability to service FC obligations. This drives the Negative Outlook on the bank's rating. The bank's 'BB-' Long-Term Local-Currency (LTLC) IDR, which is also driven by institutional support, is one notch above ICBC Turkey's, reflecting Fitch’s view of a lower likelihood of government intervention that would impede the bank's ability to service LC obligations versus FC obligations. However, the LTLC IDR is also on Negative Outlook, mirroring the sovereign's, reflecting Fitch’s view that the likelihood of government intervention that would impede the bank's ability to service LC obligations is not lower than the probability of a sovereign default in LC. VR Risks to the bank's standalone credit profile were already significant prior to the pandemic and have been heightened by the coronavirus outbreak and lockdown measures. The Turkish lira depreciated 24% in 11M20 and Fitch expects Turkey's GDP to grow only 0.2% in 2020, before rebounding 3.5% in 2021. The VR of ICBC Turkey reflects its very weak core capitalisation (its reported Tier 1 ratio was in breach of the regulatory minimum at end-9M20), limited franchise, the concentration of its operations in the challenging Turkish operating environment and high reliance on parent funding. Impaired loans at ICBC Turkey' were a low 0.3% of gross loans while its Stage 2 loans ratio was a moderate 4.9% at end-9M20. However, asset-quality risks are significant given operating environment pressures, material FC lending (83% of loans) and single-name risk. Mitigating concentration risk to some extent is the bank's focus on generally high-quality corporate borrowers or Turkish financial institutions and projects under government guarantee (including revenue and debt assumption guarantees and feed-in tariffs on energy projects), among others. ICBC Turkey reports below-sector-average profitability metrics, reflecting a lack of economies of scale, limited pricing power and a below-sector average net interest margin due to its largely FC-denominated loan book. The bank's operating profit-to-risk-weighted assets (RWAs) was 0.9% in 9M20, including large trading gains from its open foreign-exchange (FX) position. Its performance is likely to remain muted given capital constraints on growth and asset-quality risks. ICBC Turkey 's breach of the regulatory minimum Tier 1 ratio reflects core capital pressures from RWA growth and indicates potential delays to required support. Nonetheless, ICBC Turkey expects a new capital injection in 2021, which should moderately improve its core capital ratios and help restore compliance with the minimum Tier 1 regulatory requirement. Fitch continues to believe that ordinary capital support for ICBC Turkey from its parent will be forthcoming given its small size, strategic importance to its parent and role in ICBC's 'Road and Belt Initiative'. The bank's total capital adequacy ratio of 24.9% at end-9M20 was strong and comfortably above the 12% regulatory minimum, supported by a large buffer of subordinated FC funding from ICBC, which provides a partial hedge against lira depreciation. Deposit funding, which was 83% in FC, accounted for 51% of total funding at end-9M20 (sector: 54%). The remainder mainly comprised parent funding (9M20: 42%), mitigating refinancing risk. At end-1H20 FC liquid assets (16% of total assets) sufficiently covered short-term FC non-deposit liabilities. NATIONAL RATING The affirmation of the National Rating reflects Fitch’s view that the bank's creditworthiness in LC relative to that of other Turkish issuers has not changed. RATING SENSITIVITIES Rating sensitivities are no longer relevant given today's rating withdrawal. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond 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. SUMMARY OF FINANCIAL ADJUSTMENTS An adjustment has been made in Fitch's financial spreadsheets for ICBC Turkey, which has impacted Fitch's core and complimentary metrics. Fitch has taken a loan classified as a financial asset measured at fair value through other comprehensive income in the bank's financial statements and reclassified it under gross loans as Fitch believes this is the most appropriate line in Fitch spreadsheets to reflect this exposure. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS ICBC Turkey's Long-Term IDRs are credit-linked to ICBC's Long-Term IDRs. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Following the withdrawal of ratings for ICBC Turkey, Fitch will no longer be providing the associated ESG Relevance Scores. ============= U K R A I N E ============= KHARKIV CITY: Moody's Completes Review, Retains B3 Issuer Rating ---------------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Kharkiv, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS The issuer's rating of B3 and the bca of b3 of the City of Kharkiv reflects the city's relatively developed economy, low debt burden and high budget discipline. Historically conservative approach to budget spending allowed the city to maintain its position close to the balanced budget over the last four years. Despite debt levels growing in 2019 due to new borrowings and growing indirect exposure, debt burden is still low at 16% of operating revenues. The city rating also incorporates a strong linkage with the sovereign credit profile and is constrained by the weak operating, legislating and economic environment for Ukrainian sub-sovereigns, which is reflected in the Ukraine government bond rating of B3. Moody's also considers the City of Kharkiv to have a low likelihood of extraordinary support from the Government of Ukraine in the event that the issuer were to face acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. KYIV CITY: Moody's Completes Review, Retains B3 Rating ------------------------------------------------------ Moody's Investors Service has completed a periodic review of the ratings of Kyiv, City of and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS City of Kyiv's final rating of B3 and bca of b3 reflects the city's wealthy, diversified and dynamic economy, which outperforms country's economy and improving financial fundamentals. Standalone profile is reinforced by improving operating performance and decreasing debt level. However, the city's additional investment requirements continue to exert pressure on already volatile budget. The city rating also incorporates a strong linkage with the sovereign credit profile and is constrained by the weak operating, legislating and economic environment for Ukrainian sub-sovereigns, which is reflected in the Ukraine government bond rating of B3. Moody's also considers the City of Kyiv to have moderate likelihood of extraordinary support from the Government of Ukraine in the event that the issuer were to face acute liquidity stress. The principal methodology used for this review was Regional and Local Governments published in January 2018. =========================== U N I T E D K I N G D O M =========================== ASHLEY HOUSE: Enters Administration After CVA Fails --------------------------------------------------- The Construction Index reports that attempts to rescue AIM-listed developer and modular builder Ashley House have failed and the company has gone into administration. Ashley House, parent company of Powys-based F1 Modular, secured a company voluntary arrangement (CVA) in July to protect it from creditors while negotiating a rescue, The Construction Index recounts. There were discussions with Midlands house-builder Piper Homes, involving a reverse takeover that would enable Piper Homes to take Ashley House's place on the alternative investment market (AIM), The Construction Index discloses. But in a statement on Dec. 11, Ashley House, as cited by The Construction Index, said: "Despite all parties' best efforts, Piper has withdrawn from the proposed transaction and as such the company confirms it is no longer in discussions with Piper. It added: "Following the failure of the CVA, the directors have no option but to file a notice of intention to appoint an administrator." Begbies Traynor is expected to be appointed administrator within the next few days, The Construction Index states. With the Piper deal falling, Ashley House is left unable to publish its overdue annual accounts for the year to October 2019 and so is in breach of AIM rules, The Construction Index notes. BRANSTON HALL: Placed Into Administration ----------------------------------------- Joseph Verney at The Lincolnite reports that Branston Hall Hotel, the company that is owned by South Spring Limited, has been placed into administration. All staff members have been affected by the news at the country house retreat and wedding venue on Lincoln Road, which houses 53 guest bedrooms, The Lincolnite discloses. Branston Hall Hotel had closed until Dec. 2 as part of the national coronavirus lockdown, The Lincolnite relates. It will now not reopen again and people have been asked not to attempt to contact the hotel as there's only security personnel on site, The Lincolnite notes. It has been advised that all enquiries about the venue should be directed to RSM Restructuring Advisory LLP, The Lincolnite states. EUNETWORKS HOLDINGS: Moody's Completes Review, Retains B2 CFR ------------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of euNetworks Holdings 2 Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS euNetworks Holdings 2 Limited's B2 corporate family rating is supported by the company's good revenue growth and high margins supported by structurally favorable secular trends such as rising demand for data, bandwidth and cloud services; its leading positions in key European data center connectivity and fiber bandwidth services markets; and its stable recurring revenue base, with low churn from a diversified customer base, and long contract terms. However, euNetworks' CFR is constrained by the company's limited scale as measured by revenues and niche market position in a fragmented market; its high leverage; and its high discretionary capex resulting in materially negative free cash flow for a prolonged period of time. The principal methodology used for this review was Communications Infrastructure Industry published in September 2017. FINSBURY SQUARE 2018-2: Moody's Affirms 2 Note Classes at Caa2 (sf) ------------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of five notes in Finsbury Square 2018-1 plc and Finsbury Square 2018-2 plc. The rating action reflects the increased levels of credit enhancement for the affected notes for both transactions and better than expected collateral performance for Finsbury Square 2018-1 plc. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain the current ratings on the affected notes. Issuer: Finsbury Square 2018-1 plc GBP 522.75M Class A Notes, Affirmed Aaa (sf); previously on Jan 29, 2018 Definitive Rating Assigned Aaa (sf) GBP 30.75M Class B Notes, Upgraded to Aaa (sf); previously on Jan 29, 2018 Definitive Rating Assigned Aa1 (sf) GBP 30.75M Class C Notes, Upgraded to Aaa (sf); previously on Jan 29, 2018 Definitive Rating Assigned Aa2 (sf) GBP 12.3M Class D Notes, Upgraded to Aa2 (sf); previously on Jan 29, 2018 Definitive Rating Assigned A2 (sf) GBP 18.45M Class E Notes, Affirmed B2 (sf); previously on Jan 29, 2018 Definitive Rating Assigned B2 (sf) Issuer: Finsbury Square 2018-2 plc GBP 513.0M Class A Notes, Affirmed Aaa (sf); previously on Nov 15, 2018 Definitive Rating Assigned Aaa (sf) GBP 30.0M Class B Notes, Upgraded to Aa1 (sf); previously on Nov 15, 2018 Definitive Rating Assigned Aa2 (sf) GBP 33.0M Class C Notes, Upgraded to Aa3 (sf); previously on Nov 15, 2018 Definitive Rating Assigned A1 (sf) GBP 6.0M Class D Notes, Affirmed Baa1 (sf); previously on Nov 15, 2018 Definitive Rating Assigned Baa1 (sf) GBP 18.0M Class E Notes, Affirmed Caa2 (sf); previously on Nov 15, 2018 Definitive Rating Assigned Caa2 (sf) GBP 13.5M Class X Notes, Affirmed Caa2 (sf); previously on Nov 15, 2018 Definitive Rating Assigned Caa2 (sf) Both transactions are static cash securitisations of primarily first lien residential mortgages extended to obligors located in the UK with some exposure to buy-to-let mortgages. RATINGS RATIONALE The rating action is prompted by sequential amortization and fully funded non-amortizing General Reserve Funds, resulting in an increase in credit enhancement for the affected tranches as well as the decrease of key collateral assumption for Finsbury Square 2018-1 plc, namely the portfolio Expected Loss assumption due to better than expected collateral performance. Increase in Available Credit Enhancement Sequential amortization and fully funded non-amortizing General Reserve Funds led to the increase in the credit enhancement available in both transactions. General Reserve funds, sized at 12.3 million and 12 million in Finsbury Square 2018-1 plc and Finsbury Square 2018-2 plc respectively, can be used to cover shortfalls in interest payments as well as to cure PDL for Classes A to D in both transactions. In Finsbury Square 2018-1 plc the credit enhancement for Classes B, C and D increased to 29.3%, 17.1% and 12.2% from 12.0%, 7.0% and 5.0% respectively since closing, as a result of significant deleveraging. As of September 2020, the pool balance has decreased by 59% from the original pool balance, due to high prepayment when loans reached their interest reset date. In Finsbury Square 2018-2 plc, the credit enhancement for Classes B and C increased to 14.2% and 7.4% from 11.6% and 6.1% repectively since closing. As of September 2020, the size of the pool has decreased by 18% from the original pool. Key Collateral Assumptions: As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolio reflecting the collateral performance to date. In Finsbury Square 2018-1 plc, 90 days plus arrears are currently standing at 1.59% of current pool balance with no losses since closing. Moody's decreased the expected loss assumption to 1.2% as a percentage of original pool balance from 2% due to the better than expected performance and significant decline in pool balance to date. In Finsbury Square 2018-2 plc, 90 days plus arrears are currently standing at 1.69% of current pool balance with no losses since closing. Moody's maintained the expected loss assumption as a percentage of original pool balance at 2.2%. 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 assumptions at 13% and 14% for Finsbury Square 2018-1 plc and Finsbury Square 2018-2 plc respectively. The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of consumer assets from the current weak UK economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The principal methodology used in these ratings 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 a rating for an RMBS security may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS. 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 performance of the underlying collateral that is better than Moody's expected, an increase in available credit enhancement, improvements in the credit quality of the transaction counterparties, and a decrease in sovereign risk. Factors or circumstances that could lead to a downgrade of the ratings include an increase in sovereign risk, performance of the underlying collateral that is worse than Moody's expected, deterioration in the notes' available credit enhancement, and deterioration in the credit quality of the transaction counterparties. GOODWIN: Owed GBP2.9MM to Creditors at Time of Administration ------------------------------------------------------------- Dan Whelan at North West Place reports that cashflow issues stemming from a contract dispute at the end of 2019, compounded by the impact of the Covid-19 pandemic, resulted in the Manchester-based construction firm appointing FRP Advisory as administrators last month. The company owes around GBP2.9 million to creditors, according to the administrators' first report: -- GBP1.3 million to suppliers and subcontractors -- GBP700,000 to Barclays -- GBP120,000 to employees -- GBP784,000 to HM Revenue & Customs The company is expected to realise GBP360,000 from the sale of assets, the recovery of inter-company debts and the repayment of the director's loan account, North West Place relays, citing the administrator. Lyceum Manchester, the special purpose vehicle delivering an 82-bedroom apartment scheme in Eccles, was also placed into administration last month owing GBP30,000 to Goodwin's, North West Place states. The report said employees owed GBP23,000 in wages and pension contributions are expected to be paid in full whereas unsecured creditors are anticipated to receive payment of 1p in the pound, North West Place notes. Barclays, North West Place says, is also unlikely to be repaid in full. The shortfall will not be known until later in the administration process, North West Place states. The company in administration, Goodwin's Construction Services Group, is a subsidiary of Goodwin Construction Group Holdings, which is in turn wholly owned by the Goodwin Group, neither of which are in administration. According to North West Place, Goodwin's director Richard Goodwin informed administrators that, when lockdown hit, the firm was in talks with developers over contracts worth GBP15 million but, due to the developers' inability to access funding as a result of the pandemic, the contracts were put on hold. Prior to being appointed as administrator, FRP was instructed to market the company for sale but, despite interest from 20 parties, a buyer could not be found, North West Place recounts. The joint administrators are Yasmin Bhikha, John Lowe and Anthony Collier, North West Place discloses. GREAT HALL 2007-2: Fitch Affirms Bsf Ratings on Class Ea, Eb Debts ------------------------------------------------------------------ Fitch Ratings has upgraded one tranche of three Great Hall Mortgages (GHM) transactions and affirmed 27 others. A full list of rating actions is detailed below. DEBT RATING PRIOR ---- ------ ----- Great Hall Mortgages No. 1 plc (Series 2006-1) Class A2a XS0276086393 LT AAAsf Affirmed AAAsf Class A2b XS0276092797 LT AAAsf Affirmed AAAsf Class Ba XS0276086989 LT AAAsf Affirmed AAAsf Class Bb XS0276093332 LT AAAsf Affirmed AAAsf Class Ca XS0276087524 LT AAAsf Affirmed AAAsf Class Cb XS0276093928 LT AAAsf Affirmed AAAsf Class Da XS0276088506 LT Asf Affirmed Asf Class Db XS0276095030 LT Asf Affirmed Asf Class Ea XS0276089223 LT BB+sf Affirmed BB+sf Great Hall Mortgages No. 1 plc (Series 2007-1) Class A2a XS0288626525 LT AAAsf Affirmed AAAsf Class A2b XS0288627507 LT AAAsf Affirmed AAAsf Class Ba XS0288628224 LT AAAsf Affirmed AAAsf Class Bb XS0288628810 LT AAAsf Affirmed AAAsf Class Ca XS0288629545 LT AAAsf Affirmed AAAsf Class Cb XS0288630121 LT AAAsf Affirmed AAAsf Class Da XS0288630394 LT BBB+sf Affirmed BBB+sf Class Db XS0288630550 LT BBB+sf Affirmed BBB+sf Class Ea XS0288630808 LT BBsf Upgrade BB-sf Great Hall Mortgages No. 1 plc (Series 2007-2) Class Aa XS0308354504 LT AAAsf Affirmed AAAsf Class Ab XS0308354843 LT AAAsf Affirmed AAAsf Class Ac XS0308462141 LT AAAsf Affirmed AAAsf Class Ba XS0308356970 LT AAAsf Affirmed AAAsf Class Ca XS0308357358 LT AAsf Affirmed AAsf Class Cb XS0308355733 LT AAsf Affirmed AAsf Class Da XS0308357788 LT BBBsf Affirmed BBBsf Class Db XS0308356111 LT BBBsf Affirmed BBBsf Class Ea XS0308357861 LT Bsf Affirmed Bsf Class Eb XS0308356467 LT Bsf Affirmed Bsf TRANSACTION SUMMARY The transactions comprise UK buy-to-let (BTL) and non-conforming mortgage loans that were originated by Platform Homeloans Limited and purchased by JPMorgan Chase Bank N.A. KEY RATING DRIVERS Coronavirus-Related Alternative 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 the related containment measures. As a result, Fitch applied alternative coronavirus assumptions to the mortgage portfolios. The combined application of revised 'Bsf' representative pool weighted average foreclosure frequency (WAFF) and revised rating multiples for both the owner-occupied and the BTL sub-pools resulted in a multiple to the current FF assumptions of about 1.2x at 'Bsf' and 1.0x at 'AAAsf' in GHM 2006-1 and GHM 2007-1 and of about 1.3x at 'Bsf' and 1.0x at 'AAAsf' in GHM 2007-2. The alternative coronavirus assumptions are more modest for higher rating levels as the corresponding rating assumptions are already intended to withstand more severe shocks. Limited Impact of Payment Holidays Borrowers on payment holidays in the GHM transactions represent between 1% and 2% of the portfolio balances as of November 2020. For this reason, Fitch did not apply any stress for payment holidays in its cash-flow analysis and does not view payment holidays as a liquidity risk in these transactions. Increasing Arrears Levels The transactions' performance has slightly worsened in terms of the proportion of loans in arrears amid the deteriorating economic environment. As of end-September 2020, three month-plus arrears were 4.8% for GHM 2006-1, 5.7% for GHM 2007-1 and 5.7% for GHM 2007-2, up from 2.8%, 3.6% and 3.2%, respectively, at end-2019. The portion of loans in arrears in all three transactions remains among the lowest for UK non-conforming deals rated by Fitch. Trigger Breaches Boost Credit Enhancement Following breaches in cumulative possessions and cumulative loss triggers, the reserve funds cannot amortise further and a switch to pro-rata amortisation of the notes is not permitted. As a result, credit enhancement (CE) has increased steadily for all tranches and Fitch expects this trend to continue. The CE for the most senior classes of the three transactions increased since the last review in February 2020 to 64.4% from 60.8% (GHM 2006-1), to 63.8% from 60.4% (GHM 2007-1) and to 54.2% from 50.9% (GHM 2007-2). The build-up in CE resulted in the upgrade of the class Ea notes of GHM 2007-1. Interest-only Loan Concentration The redemption profile of the loans is concentrated, with 62.7% (GHM 2006-1), 63.7% (GHM 2007-1) and 60.2% (GHM 2006-2) of interest-only (IO) loans maturing in a single three-year period. Fitch tested the maturity concentration as per criteria and this affected the results for GHM 2006-1 and GHM 2007-1. Due to the high proportion of IO loans in the owner-occupied sub-pools, Fitch applied a floor to its performance adjustment factor of 100%. This floor accounts for the heightened default risk at the maturity of the mortgage loans when the principal instalment is due. Fitch also reviewed the maturity schedule of owner-occupied IO loans relative to the note legal final maturity dates to assess the extent to which the ratings may be affected by delayed repayment of owner-occupied IO loans. The respective portfolios have the following proportions of owner-occupied IO loans falling due in the five years prior to legal final-maturity: 1% (GHM 2006-1), 2.6% (GHM 2007-1) and 3.2% (GHM 2007-2). The ratings of the class D and E notes have been assigned below their model-implied rating as a result of the potential performance volatility arising from the IO loan concentration. In assigning the ratings, Fitch considered its downside sensitivity described in the rating sensitivity section. RATING SENSITIVITIES Factor 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 CE levels and potential upgrades. Fitch tested an additional rating sensitivity scenario by applying a decrease in the FF of 15% and an increase in the recovery rate (RR) of 15%. The results indicate an upgrade of up to two categories for the junior notes of the respective transactions. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The broader global economy remains under stress from the coronavirus pandemic, with surging unemployment and pressure on businesses stemming from social-distancing guidelines. Recent government measures related to the coronavirus pandemic initially introduced a suspension on tenant evictions and mortgage payment holidays, both for up to three 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", Fitch 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% increase in WAFF and a 15% decrease in WARR. The results indicate downgrades of up one category for the junior notes in GHM 2007-2 and no downgrade for the equivalent notes in GHM 2006-1 or GHM 2007-1. -- The transactions' performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes. -- Additionally, unanticipated declines in recoveries could also result in lower net proceeds, which may make certain notes' ratings susceptible to potential negative rating actions depending on the extent of the decline in recoveries. Fitch conducts sensitivity analyses by stressing both a transaction's base-case FF and RR assumptions, and examining the rating implications on all classes of issued notes. 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 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Great Hall Mortgages No. 1 plc (Series 2006-1, 2007-1 and 2007-2): Customer Welfare - Fair Messaging, Privacy & Data Security: 4, Human Rights, Community Relations, Access & Affordability: 4 Great Hall Mortgages No. 1 plc Series 2006-1, 2007-1 and 2007-2 have an ESG Relevance Score of '4' for "Human Rights, Community Relations, Access & Affordability" due to a significant proportion of the pools containing owner-occupied loans advanced with limited affordability checks, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Great Hall Mortgages No. 1 plc Series 2006-1, 2007-1 and 2007-2 have an ESG Relevance Score of '4' for "Customer Welfare - Fair Messaging, Privacy & Data Security" due to the pools exhibiting an IO maturity concentration of legacy non-conforming owner-occupied loans of greater than 20%, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. JASCOTS WINE: Goes Into Administration Amid Covid Lockdowns ----------------------------------------------------------- Lisa Riley at Harpers reports that on-trade supplier Jascots Wine Merchants has gone into administration. Matthew Wild and Matthew Haw were appointed joint administrators of the business on Nov. 30, Harpers relates. The move comes at a time when the already hard hit hospitality sector, and its supply chain, has had to contend with Covid-induced lockdowns and tough restriction, Harpers notes. According to Harpers, in a bid to find alternative revenue streams, towards the end of March the specialist importer and distributor announced it was switching its focus to home-delivery and wholesale retail after sales plummeted from 85% of "normal" to zero in the space of four days, marking the latest on-trade supplier at the time to reorientate its business strategy. In April, it followed this up with the launch of a full ecommerce site selling direct to consumers across the UK, offering a range of over three hundred exclusive wines sold at "normal trade prices", Harpers recounts. LK BENNETT: Creditors Approve CVA, Five Stores to Close ------------------------------------------------------- Isabella Fish at Drapers reports that earlier last week, LK Bennett's creditors approved its company voluntary arrangement, which comprises five store closures and moving its remaining shops to turnover-based rent. The Westfield store in White City is one of the five closures, Drapers discloses. It will shutter at the end of February, unless the landlord agrees to a last-minute turnover rent deal, Drapers states. The remaining four stores designated for closure have not been revealed, Drapers notes. Drapers revealed womenswear retailer LK Bennett was to launch a CVA last month, Drapers recounts. At the time, it attributed its financial difficulty to the pandemic, Drapers relays. According to Drapers, a spokeswoman said Covid-19 restrictions had made it challenging to sell event wear and workwear. A lack of international tourism had also been a factor in the decision, Drapers discloses. MONEYTHING: Enters Administration Due to Litigation Costs --------------------------------------------------------- Business Sale reports that peer-to-peer (P2P) lender MoneyThing has fallen into administration, citing the unaffordable costs of litigation by a borrower. According to Business Sale, the company said: "The directors of MoneyThing have taken this decision in order to protect the interests of the companies' creditors as a whole. "We have taken into account the tougher trading conditions experienced in 2020 as well as litigation by a MoneyThing borrower. "The joint administrators will assume responsibility for managing the companies' affairs. They will continue the orderly wind-down of the remaining MoneyThing P2P loanbook, return monies to lenders and conclude the firm's business activities." "The appointment is not expected to have a material impact on lenders or borrowers. MoneyThing's existing directors will continue to provide full support to ensure a smooth handover and will remain involved in the business's operational activities, reporting to the joint administrators." Moorfields Advisory's Tom Straw -- tstraw@moorfieldscr.com -- and Milan Vuceljic -- milan.vuceljic@moorfieldscr.com -- have been appointed as joint administrators for the company, Business Sale relates. MoneyThing investors will continue to receive capital and interest according to the terms they have agreed, Business Sale discloses. The lender had pledged to continue providing updates, but said that specific questions about the administration should be directed to Moorfields, Business Sale notes. MYJAR: Goes Into Administration Following Customer Complaints ------------------------------------------------------------- Lucy Brown at Choose reports that payday lender MYJAR has appointed administrators and all new lending is stopped, although existing loans should continue to be paid. Anyone with an outstanding loan should continue to pay their balance as usual, Choose notes. Customers with claims about mis-selling are classed as unsecured creditors so will be unlikely to receive as much compensation as they are owed, Choose states. It was announced on MYJAR's website and on the Financial Conduct Authority's (FCA) website that the firm had appointed administrators on Dec. 22, Choose relates. According to Choose, the company say external factors had placed financial pressure on the business and hampered its ability to trade, meaning they had no option but to fold. The external factors the company say led to their collapse are most likely down to the number of complaints they have received in recent years, Choose says. Mis-selling loans to customers who could not afford them has become a problem in the payday loans sector, and MYJAR were one of numerous companies struggling with them, Choose relays. In the first half of the 2020/21 year, the Financial Ombudsman Service (FOS) received 849 complaints about MYJAR, Choose states. During the same period, they resolved 55% of all claims involving MYJAR in the claimant's favor, Choose discloses. VEDANTA RESOURCES: Moody's Completes Review, Retains B2 CFR ----------------------------------------------------------- Moody's Investors Service has completed a periodic review of the ratings of Vedanta Resources Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology, recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since January 1, 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. KEY RATING CONSIDERATIONS Vedanta Resources Limited's B2 corporate family rating reflects the company's large-scale and diversified low cost operations; exposure to a diversified range of commodities; strong market position in key markets with an ability to command a pricing premium; and history of relative margin stability through commodity cycles. Counterbalancing these credit strengths, the CFR incorporates as credit weaknesses its weak liquidity, high refinancing risks and elevated governance risks. The CFR also incorporates Vedanta's stretched financial profile and the company's exposure to volatile commodity prices. It further includes the company's large capital spending and dividend payment needs, which constrain free cash flow generation. The principal methodology used for this review was Mining published in September 2018. ********* 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. 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