/raid1/www/Hosts/bankrupt/TCREUR_Public/210223.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, February 23, 2021, Vol. 22, No. 33
Headlines
I R E L A N D
AQUEDUCT EUROPEAN 4-2019: Fitch Affirms B- Rating on F Notes
BLUEMOUNTAIN EUR 2021-1: S&P Gives Prelim. B-(sf) Rating on F Notes
CAIRN CLO IV: Fitch Affirms B- Rating on Class F-R Debt
HAYFIN EMERALD II: Fitch Alters Outlook on Class E Notes to Stable
MADISON PARK XI: Fitch Affirms B- Rating on Class F Notes
M A C E D O N I A
NORTH MACEDONIA: S&P Affirms 'BB-/B' Sovereign Credit Ratings
N E T H E R L A N D S
ACCUNIA EUROPEAN I: Fitch Affirms B- Rating on Class F Notes
R U S S I A
DALNAYA STEP: Kalmykia Court Completes Bankruptcy Proceedings
URALKALI PJSC: S&P Withdraws 'BB-' LongTerm Issuer Credit Rating
S P A I N
BANKINTER 13: S&P Lowers Class E Notes Rating to 'D(sf)'
T U R K E Y
TURKEY: Fitch Alters Outlook on BB- Foreign Currency IDR to Stable
U N I T E D K I N G D O M
254 KILBURN: Enters Administration, Owes More Than GBP26 Million
ARCADIA GROUP: HMRC to Recoup Fraction of GBP44.2MM Owed
ARCADIA GROUP: Pension Schemes Likely to Avoid PPF Rescue
CANADA SQUARE 2021-1: S&P Assigns Prelim. B Rating on X-Dfrd Notes
COMET BIDCO: Moody's Completes Review, Retains Caa1 CFR
DURHAM MORTGAGES A: S&P Assigns B- Rating on Cl. F-Dfrd Notes
FINSBURY SQUARE 2019-1: DBRS Confirms BB(high) Rating on E Notes
MONEYTHING: Remaining Peer-to-Peer Loanbook Still Performing
NEWDAY FUNDING 2021-1: DBRS Finalizes BB(low) Rating on E Notes
PRECIOUSLITTLEONE: The Pud Store Takes Over Business
TAURUS UK 2021-1: DBRS Gives Prov. BB(low) Rating on Class E Notes
TOGETHER ASSET 2021-CRE1: S&P Assigns Prelim BB+ Rating on X Notes
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I R E L A N D
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AQUEDUCT EUROPEAN 4-2019: Fitch Affirms B- Rating on F Notes
------------------------------------------------------------
Fitch Ratings has affirmed Aqueduct European CLO 4-2019 DAC and
revised the Outlook on the class E and F notes to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
Aqueduct European CLO 4-2019 DAC
A XS2004871849 LT AAAsf Affirmed AAAsf
B-1 XS2004872573 LT AAsf Affirmed AAsf
B-2 XS2004873035 LT AAsf Affirmed AAsf
C XS2004873894 LT Asf Affirmed Asf
D XS2004874439 LT BBB-sf Affirmed BBB-sf
E XS2004874512 LT BBsf Affirmed BBsf
F XS2004875758 LT B-sf Affirmed B-sf
X XS2004871336 LT AAAsf Affirmed AAAsf
TRANSACTION SUMMARY
This is a cash flow CLO mostly comprising senior secured
obligations. The transaction is still in its reinvestment period
and is actively managed by the manager.
KEY RATING DRIVERS
Stable Asset Performance
Asset performance has been stable since the last review in May
2020. The transaction was 17bp below target par as of the latest
investor report available. As of the same report, all coverage
tests, Fitch collateral quality tests and portfolio profile tests
were passing, except the Fitch weighted average rating factor
(WARF) test. Exposure to assets with a Fitch-derived rating of
'CCC+' and below is 2.9% (excluding unrated names, which Fitch
treats as 'CCC' but for which the manager can classify as 'B-' up
to 10% of the portfolio) above the 7.5% limit. There are no
defaulted assets in the portfolio.
Resilient to Coronavirus Stress
The affirmation reflects the broadly stable portfolio credit
quality since May 2020. The Stable Outlook on all investment grade
notes, and the revision of the Outlook on the sub-investment grade
notes to Stable from Negative reflect the resilience in the
sensitivity analysis ran in light of the coronavirus pandemic.
Fitch recently updated its CLO coronavirus stress scenario to
assume half of the corporate exposure on Negative Outlook is
downgraded by one notch instead of 100%.
Average Portfolio Quality
'B'/'B-'Portfolio: Fitch assesses the average credit quality of the
obligors to be in the 'B'/'B-' category. The Fitch WARF calculated
by Fitch of the current portfolio is 34.3(assuming unrated assets
are CCC) while the Fitch WARF as of the last investor report was
34.0 equal to the maximum covenant of 34.0. The Fitch WARF would
increase by 1.6 after applying the coronavirus stress.
High Recovery Expectations: Of the portfolio, 98.4% comprises
senior secured obligations. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets. In the latest invest report, the Fitch weighted
average recovery rate (WARR) of the current portfolio is 65.2%
equal to the minimum covenant of 65.2%
Portfolio Well Diversified: The portfolio is well diversified
across obligors, countries and industries. The top 10 obligor
concentration is 14.8%, and no obligor represents more than 1.8% of
the portfolio balance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- At closing, Fitch used a standardized stress portfolio
(Fitch's stressed portfolio) that was customized to the
portfolio limits as specified in the transaction documents.
Even if the actual portfolio shows lower defaults and smaller
losses (at all rating levels) than Fitch's stressed portfolio
assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely. This is because the portfolio
credit quality may still deteriorate, not only by natural
credit migration, but also because of reinvestment.
-- After the end of the reinvestment period, upgrades may occur
in the event of better-than-expected portfolio credit quality
and deal performance, leading to higher credit enhancement and
excess spread available to cover for losses in the remaining
portfolio.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades may occur if build-up of the notes' credit
enhancement following amortisation does not compensate for a
higher loss expectation than initially assumed due to
unexpected high level of default and portfolio deterioration.
As the disruptions to supply and demand due to the Covid-19
disruption become apparent for other sectors, loan ratings in
those sectors would also come under pressure. Fitch will
update the sensitivity scenarios in line with the view of
Fitch's Leveraged Finance team.
-- Coronavirus Potential Severe Downside Stress Scenario: Fitch
has added a sensitivity analysis that contemplates a more
severe and prolonged economic stress caused by a re-emergence
of infections in the major economies. The potential severe
downside stress incorporates the following stresses: applying
a notch downgrade to all the corporate exposure on Negative
Outlook. This scenario would result in a maximum two notch
downgrade across the capital structure.
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
Aqueduct European CLO 4-2019 DAC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
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.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Overall, and together with any assumptions referred to above,
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.
BLUEMOUNTAIN EUR 2021-1: S&P Gives Prelim. B-(sf) Rating on F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned preliminary credit ratings to
BlueMountain EUR 2021-1 CLO DAC's class A, B, C, D, E, and F notes.
At closing, the issuer will issue subordinated notes.
The preliminary ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior-secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio Benchmarks
Current
S&P weighted-average rating factor 2,819.74
Default rate dispersion 491.54
Weighted-average life (years) 4.86
Obligor diversity measure 128.55
Industry diversity measure 18.40
Regional diversity measure 1.37
Transaction Key Metrics
Current
Portfolio weighted-average rating derived
from S&P's CDO evaluator B
'CCC' category rated assets (%) 1.10
Covenanted 'AAA' weighted-average recovery (%) 36.36
Covenanted weighted-average spread (%) 3.75
Covenanted weighted-average coupon (%) 3.75
Workout obligations
Under the transaction documents, the issuer can purchase workout
obligations, which are assets of an existing collateral obligation
held by the issuer offered in connection with bankruptcy, workout,
or restructuring of the obligation, to improve the related
collateral obligation's recovery value.
Workout obligations allow the issuer to participate in potential
new financing initiatives by the borrower in default. This feature
aims to mitigate the risk of other market participants taking
advantage of CLO restrictions, which typically do not allow the CLO
to participate in a defaulted entity's new financing request.
Hence, this feature increases the chance of a higher recovery for
the CLO. While the objective is positive, it can also lead to par
erosion, as additional funds will be placed with an entity that is
under distress or in default. This may cause greater volatility in
our ratings if the positive effect of the obligations does not
materialize. In our view, the presence of a bucket for workout
obligations, the restrictions on the use of interest and principal
proceeds to purchase those assets, and the limitations in
reclassifying proceeds received from those assets from principal to
interest help to mitigate the risk.
The purchase of workout obligations is not subject to the
reinvestment criteria or the eligibility criteria. The issuer may
purchase workout obligations using interest proceeds, principal
proceeds, or amounts in the collateral enhancement account. The use
of interest proceeds to purchase workout obligations is subject
to:
-- The manager determining that there are sufficient interest
proceeds to pay interest on all the rated notes on the upcoming
payment date; and
-- Following the purchase of a workout obligation, all coverage
tests must be satisfied.
The use of principal proceeds is subject to:
-- Passing par coverage tests;
-- The manager having built sufficient excess par in the
transaction so that the aggregate collateral balance is equal to or
exceeds the portfolio's reinvestment target par balance after the
reinvestment;
-- The workout obligation has a par value greater than or equal to
its purchase price.
Workout obligations that have limited deviation from the
eligibility criteria will receive collateral value credit in the
principal balance definition and for overcollateralization carrying
value purposes. To protect the transaction from par erosion, the
carrying value from any workout distributions will form part of the
issuer's principal account proceeds. The amounts above the carrying
value can be recharacterized as interest at the manager's
discretion. Workout obligations that do not meet this version of
the eligibility criteria will receive zero credit.
The cumulative exposure to workout obligations purchased with
principal is limited to 5% of the target par amount. The cumulative
exposure to workout obligations purchased with principal and
interest is limited to 10% of the target par amount.
Rating rationale
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments. The portfolio's
reinvestment period will end approximately 4.5 years after
closing.
S&P said, "We understand that at closing the portfolio will be
well-diversified, primarily comprising broadly syndicated
speculative-grade senior-secured term loans and senior-secured
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR350 million target par
amount, the covenanted weighted-average spread (3.75%), the
reference weighted-average coupon (3.75%), and covenant
weighted-average recovery rates at each rating level. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios for each liability rating category.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned preliminary ratings.
Until the end of the reinvestment period on July 15, 2025, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
S&P said, "At closing, we expect that the transaction's documented
counterparty replacement and remedy mechanisms will adequately
mitigate its exposure to counterparty risk under our current
counterparty criteria.
"We expect the transaction's legal structure and framework to be
bankruptcy remote, in line with our legal criteria (see "Asset
Isolation And Special-Purpose Entity Methodology," published on
March 29, 2017).
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our preliminary ratings
are commensurate with the available credit enhancement for the
class A to E notes. Our credit and cash flow analysis indicates
that the available credit enhancement for the class B, C, D, and E
notes could withstand stresses commensurate with higher rating
levels than those we have assigned. However, as the CLO will be in
its reinvestment phase starting from closing, during which the
transaction's credit risk profile could deteriorate, we have capped
our preliminary ratings assigned to the notes.
"For the class F notes, our credit and cash flow analysis indicates
that the available credit enhancement could withstand stresses that
are commensurate with a 'CCC' rating. However, we have applied our
'CCC' rating criteria resulting in a 'B-' rating to this class of
notes."
The one notch of ratings uplift (to 'B-') from the model generated
results (of 'CCC'), reflects several key factors, including:
-- Credit enhancement comparison: S&P noted that the available
credit enhancement for this class of notes is in the same range as
other CLOs that S&P rates, and that have recently been issued in
Europe.
-- Portfolio characteristics: The portfolio's average credit
quality is similar to other recent CLOs.
-- S&P's model generated break even default rate at the 'B-'
rating level of 25.29% (for a portfolio with a weighted-average
life of 4.86 years), versus if we were to consider a long-term
sustainable default rate of 3.1% for 4.86 years, which would result
in a target default rate of 15.07%.
-- S&P also noted that the actual portfolio is generating higher
spreads and recoveries versus the covenanted thresholds that it has
have modelled in its cash flow analysis.
S&P said, "For us to assign a rating in the 'CCC' category, we also
assessed (i) whether the tranche is vulnerable to non-payments in
the near future, (ii) if there is a one in two chances for this
note to default, and (iii) if we envision this tranche to default
in the next 12-18 months.
"Following this analysis, we consider that the available credit
enhancement for the class F notes is commensurate with the 'B-
(sf)' rating assigned."
Taking the above factors into account and following our analysis of
the credit, cash flow, counterparty, operational, and legal risks,
we believe that our preliminary ratings are commensurate with the
available credit enhancement for all the rated classes of notes.
In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
to five of the 10 hypothetical scenarios we looked at in our
publication "How Credit Distress Due To COVID-19 Could Affect
European CLO Ratings," published on April 2, 2020.
As S&P's ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and it would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, it has not included the above scenario analysis results
for the class F notes.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Given the dynamic/fluid circumstances associated with the
coronavirus pandemic, S&P will continually evaluate and update this
disclaimer as warranted.
The transaction securitizes a portfolio of primarily senior-secured
leveraged loans and bonds, and it will be managed by Assured
Investment Management LLC.
Ratings List
Class Prelim. Prelim. amount Interest Credit
rating (mil. EUR) rate (%) enhancement (%)
A AAA (sf) 217.00 3mE + 0.83 38.00
B AA (sf) 35.00 3mE + 1.35 28.00
C A (sf) 22.80 3mE + 2.05 21.49
D BBB (sf) 23.60 3mE + 3.20 14.74
E BB- (sf) 16.60 3mE + 5.41 10.00
F B- (sf) 10.50 3mE + 7.76 7.00
Sub NR 31.90 N/A N/A
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
CAIRN CLO IV: Fitch Affirms B- Rating on Class F-R Debt
-------------------------------------------------------
Fitch Ratings has affirmed Cairn CLO IV B.V. and Cairn CLO VI B.V.
and revised the Outlooks on the junior tranches to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
Cairn CLO IV B.V.
A-RR XS1983350882 LT AAAsf Affirmed AAAsf
B-RR XS1983351427 LT AAsf Affirmed AAsf
C-RR XS1983352151 LT Asf Affirmed Asf
D-RR XS1983352409 LT BBB-sf Affirmed BBB-sf
E-R XS1983352821 LT BB-sf Affirmed BB-sf
F-R XS1983353126 LT B-sf Affirmed B-sf
Cairn CLO VI B.V.
Class A-R XS1850309466 LT AAAsf Affirmed AAAsf
Class B-R XS1850309896 LT AAsf Affirmed AAsf
Class C-R XS1850310126 LT Asf Affirmed Asf
Class D-R XS1850310555 LT BBBsf Affirmed BBBsf
Class E-R XS1850310803 LT BBsf Affirmed BBsf
Class F-R XS1850310985 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
The transactions are cash flow CLOs, mostly comprising senior
secured obligations. They are both managed by Cairn Loan
Investments LLP. Cairn IV is within its reinvestment period and
Cairn VI has been out of its reinvestment period since July 2020.
KEY RATING DRIVERS
Stable Performance : Cairn IV was below par by 1.4% as of the
latest investor report dated 19 January 2021. All portfolio profile
tests, collateral quality tests and coverage tests were passing.
Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' and
below was 2.5%.
The transaction had EUR7.6 million in defaulted assets as of the
same report.
Cairn VI was below par by 1.5% as of the latest investor report
dated 12 January 2021. All portfolio profile tests, collateral
quality tests and coverage tests were passing except for the
weighted average life test (4.6 years versus a limit of 4.59) and
the Fitch and another agency's weighted average rating factor
(WARF) test (34.64 versus a limit of 33). The transaction had
EUR7.2 million in defaulted assets as of the same report.
Resilient to Coronavirus Stress
The affirmations reflect the broadly stable portfolio credit
quality since September 2020. The Stable Outlooks on all investment
grade notes, and the revision of the Outlooks on the sub-investment
grade notes to Stable from Negative reflect the default rate
cushion in the sensitivity analysis ran in light of the coronavirus
pandemic. Fitch recently updated its CLO coronavirus stress
scenario to assume half of the corporate exposure on Negative
Outlook is downgraded by one notch instead of 100%.
'B'/'B-' Portfolio
Fitch assesses the average credit quality of the obligors in the
'B'/'B-' category in both portfolios. The Fitch WARF calculated by
Fitch (assuming unrated assets are CCC) and by the trustee for
Cairn IV current portfolio was 33.03 and 33.4, respectively, below
the maximum covenant of 34.00. The Fitch WARF calculated by Fitch
(assuming unrated assets are CCC) and by the trustee for Cairn VI
was 34.61 and 34.64, respectively, above the maximum covenant of
33.00. The Fitch WARF would increase by 1.3 and 1.5 for Cairn IV
and VI, respectively, after applying the coronavirus stress.
High Recovery Expectations
Senior secured obligations comprise 100% of both portfolios. Fitch
views the recovery prospects for these assets as more favourable
than for second-lien, unsecured and mezzanine assets. The Fitch
weighted average recovery rate of the portfolio was reported by the
trustee at 64.1% for Cairn IV and 64.5% for Cairn VI as of the
latest investor reports.
Diversified Portfolio
Both portfolios are well-diversified across obligors, countries and
industries. The top 10 obligor concentration is no more than 18.50%
in both CLOs, and no obligor represents more than 2.75% of the
portfolio balance in either CLO.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- At closing, Fitch used a standardised stress portfolio
(Fitch's stressed portfolio) that was customized to the
portfolio limits as specified in the transaction documents.
Even if the actual portfolio shows lower defaults and smaller
losses (at all rating levels) than Fitch's stressed portfolio
assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely. This is because the portfolio
credit quality may still deteriorate, not only by natural
credit migration, but also because of reinvestment.
-- After the end of the reinvestment period, upgrades may occur
in the event of better-than-expected portfolio credit quality
and deal performance, leading to higher credit enhancement and
excess spread available to cover for losses in the remaining
portfolio.
-- For Cairn VI, a reduction of the default rate (RDR) at all
rating levels by 25% of the mean RDR and an increase in the
recovery rate (RRR) by 25% at all rating levels would result
in an upgrade of one to three notches across the structure.
-- Except for the class A notes, which are already at the highest
'AAAsf' rating, upgrades may occur should there be better
than-expected portfolio credit quality and deal performance,
leading to higher credit enhancement and excess spread
available to cover for losses on the remaining portfolio.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- While not Fitch's base case scenario, downgrades may occur if
build-up of the notes' credit enhancement following
amortisation does not compensate for a higher loss expectation
than initially assumed due to unexpected high level of default
and portfolio deterioration. As the disruptions to supply and
demand due to the Covid-19 disruption become apparent for
other sectors, loan ratings in those sectors would also come
under pressure. Fitch will update the sensitivity scenarios in
line with the view of Fitch's Leveraged Finance team.
-- For Cairn VI, an increase of the RDR at all rating levels by
25% of the mean RDR and a decrease of the RRR by 25% at all
rating levels will result in downgrades of up to five notches,
depending on the notes.
-- Coronavirus Potential Severe Downside Stress Scenario: Fitch
has added a sensitivity analysis that contemplates a more
severe and prolonged economic stress caused by a re-emergence
of infections in the major economies. The potential severe
downside stress incorporates the following stresses: applying
a notch downgrade to all the corporate exposure on Negative
Outlook. This scenario does not result in downgrades across
the capital structure.
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
Cairn CLO IV B.V., Cairn CLO VI B.V.
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
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.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Overall, and together with any assumptions referred to above,
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.
HAYFIN EMERALD II: Fitch Alters Outlook on Class E Notes to Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Hayfin Emerald CLO II DAC and revised
the Outlook on the class E notes to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
Hayfin Emerald CLO II DAC
A-1 XS1962604986 LT AAAsf Affirmed AAAsf
A-2 XS1962605520 LT AAAsf Affirmed AAAsf
B-1 XS1962606254 LT AAsf Affirmed AAsf
B-2 XS1962606841 LT AAsf Affirmed AAsf
C XS1962607575 LT Asf Affirmed Asf
D XS1962608110 LT BBBsf Affirmed BBBsf
E XS1962609357 LT BBsf Affirmed BBsf
TRANSACTION SUMMARY
Hayfin Emerald CLO II DAC is a cash flow CLOs mostly comprising
senior secured obligations. The transactions is still within its
reinvestment period and is actively managed by Hayfin Emerald
Management LLP.
KEY RATING DRIVERS
Resilient to Coronavirus Stress: The revision of Outlook on the
class E notes to Stable from Negative and the Stable Outlooks on
the other notes reflect the default-rate cushion in the sensitivity
analysis Fitch ran in light of the coronavirus pandemic. Fitch has
recently updated its CLO coronavirus stress scenario to assume that
half of the corporate exposure on Negative Outlook is downgraded by
one notch, instead of 100%.
Stable Asset Performance: The affirmation reflects the
transaction's broadly stable portfolio credit quality since
September 2020. The transaction is still in its reinvestment period
and its portfolio is actively being managed by the collateral
manager. The transaction was above par by 1.9% as of the investor
report in January 2021. All portfolio profile tests, collateral
quality tests and coverage tests were passing except for another
agency's weighted average rating factor (WARF) test and Fitch's
weighted average recovery rate (WARR) test. Exposure to assets with
a Fitch-derived rating (FDR) of 'CCC+' and below was 4.15%
(excluding non-rated assets). The transaction had no defaulted
assets.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors in the 'B'/'B-' category for the transaction. The WARF
as calculated by Fitch was 34.65 (assuming unrated assets are
'CCC') and as calculated by the trustee was 33.89, as opposed to
the maximum covenants of 34.00. The Fitch WARF would increase by
1.8 after applying the coronavirus stress.
High Recovery Expectations: Senior secured obligations comprise
96.3% of the portfolio. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets.
Well Diversified Portfolio: The portfolio is well diversified
across obligors, countries and industries. The top 10 obligor
concentration is 18.7%, and no obligor represents more than 2.2% of
the portfolio balance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- At closing, Fitch used a standardised stress portfolio
(Fitch's Stressed Portfolio) that was customised to the
portfolio limits as specified in the transaction documents.
Even if the actual portfolio shows lower defaults and smaller
losses (at all rating levels) than Fitch's Stressed Portfolio
assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely as the portfolio credit
quality may still deteriorate, not only through natural credit
migration, but also through reinvestments.
-- Upgrades may occur after the end of the reinvestment period on
better-than-expected portfolio credit quality and deal
performance, leading to higher credit enhancement and excess
spread available to cover for losses in the remaining
portfolio.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades may occur if the build-up of credit enhancement
following amortisation does not compensate for a larger loss
expectation than initially assumed due to unexpectedly high
levels of default and portfolio deterioration. As the
disruptions to supply and demand due to the pandemic become
apparent, loan ratings in those sectors will also come under
pressure. Fitch will update the sensitivity scenarios in line
with the view of its Leveraged Finance team.
-- Fitch has added a sensitivity analysis that contemplates a
more severe and prolonged economic stress caused by a re
emergence of infections in the major economies. The downside
sensitivity incorporates a single-notch downgrade to all FDRs
on Negative Outlook. For this transaction this scenario would
not result in downgrades of any of the 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
Hayfin Emerald CLO II DAC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. 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.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Overall, and together with any assumptions referred to above,
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.
MADISON PARK XI: Fitch Affirms B- Rating on Class F Notes
---------------------------------------------------------
Fitch Ratings has affirmed Madison Park Euro Funding XI DAC and
revised the Outlook on the junior notes to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
Madison Park Euro Funding XI DAC
A-1 XS1833623306 LT AAAsf Affirmed AAAsf
A-2 XS1833623561 LT AAAsf Affirmed AAAsf
B-1 XS1833624379 LT AAsf Affirmed AAsf
B-2 XS1833624965 LT AAsf Affirmed AAsf
C XS1833625426 LT Asf Affirmed Asf
D XS1833626150 LT BBBsf Affirmed BBBsf
E XS1833626747 LT BB-sf Affirmed BB-sf
F XS1833627471 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
Madison Park Euro Funding XI DAC is a cash flow CLO, mostly
comprising senior secured obligations. The transactions is still
within its reinvestment period and is actively managed by Credit
Suisse Asset Management.
KEY RATING DRIVERS
Resilient to Coronavirus Stress: The revision of the Outlook on the
class D, E and F notes to Stable from Negative and the Stable
Outlooks on the other notes reflect the default rate cushion in the
sensitivity analysis Fitch ran in light of the coronavirus
pandemic. Fitch has recently updated its CLO coronavirus stress
scenario to assume that half of the corporate exposure on Negative
Outlook is downgraded by one notch, instead of 100%.
Stable Asset Performance: The affirmation reflects the broadly
stable portfolio credit quality of the transaction since July 2020.
The transaction is still in its reinvestment period and its
portfolio is actively being managed by the collateral manager. The
transaction was below par by 1.3% as of the investor report in
January 2021. All portfolio profile tests, collateral quality tests
and coverage tests were passing except for another agency and
Fitch's weighted average rating factor (WARF) tests. Exposure to
assets with a Fitch-derived rating (FDR) of 'CCC+' and below was
9.14% (excluding non-rated assets). The transaction had one
defaulted asset.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors in the 'B'/'B-' category for the transaction. The WARF
as calculated by Fitch was 35.86 (assuming unrated assets are
'CCC') and as calculated by the trustee was 36.19, above the
maximum covenant of 35.00. The Fitch WARF would increase by 1.6
after applying the coronavirus stress.
High Recovery Expectations: Senior secured obligations comprise
98.2% of the portfolio. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets.
Well Diversified Portfolio: The portfolio is well diversified
across obligors, countries and industries. The top 10 obligor
concentration is 11.8%, and no obligor represents more than 1.75%
of the portfolio balance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- At closing, Fitch used a standardised stress portfolio
(Fitch's Stressed Portfolio) that was customised to the
portfolio limits as specified in the transaction documents.
Even if the actual portfolio shows lower defaults and smaller
losses (at all rating levels) than Fitch's Stressed Portfolio
assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely as the portfolio credit
quality may still deteriorate, not only through natural credit
migration, but also through reinvestments.
-- Upgrades may occur after the end of the reinvestment period on
better-than-expected portfolio credit quality and deal
performance, leading to higher credit enhancement and excess
spread available to cover for losses in the remaining
portfolio.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades may occur if the build-up of credit enhancement
following amortisation does not compensate for a larger loss
expectation than initially assumed due to unexpectedly high
levels of default and portfolio deterioration. As the
disruptions to supply and demand due to the pandemic become
apparent, loan ratings in those sectors will also come under
pressure. Fitch will update the sensitivity scenarios in line
with the view of its Leveraged Finance team.
Coronavirus Downside Sensitivity
Fitch has added a sensitivity analysis that contemplates a more
severe and prolonged economic stress caused by a re-emergence of
infections in the major economies. The downside sensitivity
incorporates a single-notch downgrade to all FDRs on Negative
Outlook. For this transaction this scenario would result in
downgrades of no more than one notch across the ratings.
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
Madison Park Euro Funding XI DAC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. 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.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Overall, and together with any assumptions referred to above,
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.
=================
M A C E D O N I A
=================
NORTH MACEDONIA: S&P Affirms 'BB-/B' Sovereign Credit Ratings
-------------------------------------------------------------
S&P Global Ratings, on Feb. 19, 2021, affirmed its 'BB-/B' long-
and short-term foreign and local currency sovereign credit ratings
on the Republic of North Macedonia. The outlook is stable.
Outlook
The stable outlook reflects S&P's expectation that North
Macedonia's projected economic recovery will help rein in fiscal
and external deficits over the coming year.
Upside scenario
S&P could raise the ratings if continued reforms strengthened the
sovereign's institutional arrangements while preserving sustainable
fiscal policies. North Macedonia's EU accession aspirations could
remain an anchor for institutional improvements and structural
reform progress.
Downside scenario
S&P could lower the ratings if fiscal and current account deficits
are higher than we project over the next one-to-two years, coupled
with a continuous rise in net government debt or the buildup of
external stress. The ratings could also come under pressure if the
domestic financial system stability were to weaken materially in a
hypothetical scenario of sustained asset quality deterioration and
persistent deposit conversion to foreign currency.
Rationale
S&P expects North Macedonia will weather the pandemic-induced shock
to its economy, as well as its external and fiscal metrics. To
mitigate the impact of the containment measures and the reduced
foreign demand for the country's exports, the government has
deployed substantial stimulus to preserve employment and productive
capacity in the country's economy. As a result, net general
government debt will increase to 53% of GDP in 2021 from 41% in
2019.
S&P expects North Macedonia's economic growth to accelerate over
2021, particularly through public investment spending, private
consumption, and recovering exports. The long-term growth outlook
underpins our expectation that debt accumulation will slow to
still-moderate levels over the coming two-to-three years. At the
same time, access to funding from official and market sources
underpin the ratings.
S&P's ratings on North Macedonia remain constrained by our view of
the country's comparably low income levels; still-developing
institutional settings, despite recent improvements; and monetary
policy flexibility that is limited by the fixed exchange-rate
regime.
Institutional and economic profile: Growth is set to resume in
2021
-- We project that North Macedonia's economy will expand by 3.6%
in 2021 after contracting by over 4% in 2020.
-- The Bulgarian veto blocked the start of North Macedonia's EU
accession talks in late 2020.
-- Nonetheless, we think that the Social Democratic Union of
Macedonia (SDSM)-led government will keep its Euro-Atlantic
orientation.
S&P said, "We estimate that North Macedonia's economy contracted by
4.4% in 2020. After the 15% decline in second-quarter 2020, the
deepest on record, we expect that the economy gradually recovered
toward the end of 2020. Short-term indicators point to a very
moderate contraction, if any, in the fourth quarter. In December,
industrial production recorded the first positive monthly growth
rate since February. North Macedonia is integrated in global supply
chains, especially in the auto sector, and less reliant on the
services sector--for example tourism--than regional peers. This
integration, along with the impact of domestic containment
measures, explains the pandemic's significant impact in spring 2020
through the trade channel.
"We expect that the revival of the global auto sector over the past
few months will underpin North Macedonia's economy recovery in
2021. We project 3.6% real GDP growth this year, but the country's
economic perspectives depend on developments in key trading
partners--for example, Germany accounts for about 50% of the
country's exports.
"At the same time, domestic demand will underpin growth in 2021.
The government's fiscal stimulus of around 4% of GDP in 2020, in
various sets of support measures, helped preserve employment and
cushion the pandemic's economic impact. We expect that support
measures will gradually be withdrawn, depending on the recovery, or
replaced by other measures such as the fifth support package
announced in February 2021. Broadly constant employment and sound
wage growth in 2020 are supporting disposable incomes and the
recovery of private consumption into 2021. Conversely, private
consumption suffered notably in 2020 through declining worker
remittances from abroad. We estimate private transfers to have
declined by 20%-25% in 2020 due to adverse economic developments in
the workers' (mostly European) host countries and travel
restrictions.
"We expect sizable government infrastructure investment to fuel
growth over 2021-2024. Public investment will be one focus of the
SDSM-led government formed in fall 2020. This aims, for example, at
improving North Macedonia's physical infrastructure in transport,
health, and education, and a total of EUR3.2 billion (almost 30% of
2021 GDP) is projected for capital investment from 2021-2025. In
that regard, we note the government's efforts to improve the
execution of capital expenditure plans."
"Other domestic policy priorities include ensuring fiscal
sustainability and implementing growth-supportive structural
reforms. We note the importance of preserving North Macedonia's
competitiveness in the context of rising labor costs and falling
productivity in 2020. We view positively the government's sustained
efforts to attract foreign direct investment (FDI) into the free
economic zones, which it has expanded in recent years and have
boosted the country's goods exports. Nevertheless, the economic
structure remains fairly basic, with a prevalence of
lower-value-added goods exports. Companies in the free economic
zones are concentrated in the electronics and auto sectors, but a
large proportion of inputs are still imported, rather than sourced
domestically, which limits the free zones' wider integration into
the domestic economy."
The government's foreign policy priorities received a setback when
Bulgaria vetoed the negotiating framework and effectively blocked
the start of EU accession talks late last year. S&P does not think
this will change the Euro-Atlantic course of North Macedonia, but
disappointment with recurring roadblocks despite the country's
efforts in recent years (among others, the change of name to North
Macedonia following the Prespa agreement with Greece to resolve the
long-standing name dispute) could tilt foreign policy sentiment in
the population.
At the same time, domestic political polarization between SDSM and
nationalist VMRO-DPMNE remains high. Close election outcomes have
occurred many times, including 2020, and often resulted in a
parliamentary gridlock, with neither side easily securing a working
majority. However, SDSM and the ethnic Albanian party DUI agreed on
continuing their coalition government. Despite reforms in recent
years, S&P thinks North Macedonia's institutions have shortcomings,
which the government will aim to address. If EU accession
negotiations were to open, this could be an important anchor for
these reforms.
Flexibility and performance profile: Government debt is inching
upward, following the pandemic-induced surge
-- North Macedonia's fiscal deficits will average almost 4% in
2021-2024, consequently raising net general government debt to 57%
of GDP by 2024.
-- The recent widening of the current account deficit will reverse
over the forecast horizon through 2024.
-- S&P expects the peg of the Macedonian denar to the euro to
continue.
North Macedonia's general government deficit widened to 8.1% of GDP
in 2020 due to the effect of automatic stabilizers and fiscal
measures in response to the pandemic. These comprised support to
affected sectors, social security contribution subsidies to
preserve employment, employment support to affected companies, and
were accompanied by an accommodative monetary policy stance. S&P
said, "For 2021, we expect the general government deficit to narrow
to 4.9% of GDP and then further to 3.1% by 2024. Our forecast
assumes deficits will decrease more gradually compared to the
government's projections, which reflects our lower economic growth
estimate."
S&P siad, "We understand that the government aims to strengthen the
fiscal framework. The government adopted the tax system reform
strategy in December 2020, aiming for, among other goals, improving
revenue collection and ultimately at supporting economic growth.
The Organic Budget Law is in the legislative process and contains,
among other provisions, the introduction of fiscal rules (which in
essence mirror the eurozone's Maastricht criteria), and
establishing a fiscal council. We also understand that improving
revenue collection plays an important role in the government's
consolidation plans, as revenue in relation to GDP lags that of
higher-income European peers.
"North Macedonia has significantly dipped into its fiscal space in
2020 and net general government debt is rising substantially to 53%
of GDP in 2021 from 41% in 2019. With our projection of an average
increase in net debt of over 4% in 2021-2024, net debt to GDP will
gradually increase to 57% of GDP by 2024. This underlines that some
of the pre-pandemic fiscal buffers have eroded. In 2020, the
deficit was partially financed with international financial
institutions facilities, such as from the IMF's Rapid Financing
Instrument and an EU Macro-Financial Assistance facility. North
Macedonia also issued a EUR700 million Eurobond in June 2020.
"We estimate that the current account deficit widened to 3.7% of
GDP in 2020. While exports declined broadly in tandem with imports,
we expect remittances to have dropped by 20%-25% in 2020. In
2021-2024, we expect the current account deficit to narrow,
particularly as exports recover in line with global auto demand,
and private transfers increase. Government external borrowing
partly replaced private external inflows in 2020. We project narrow
net external debt to have increased to 29% of current account
receipts in 2020 from 23% in 2019, and expect it to average 23%
over our 2021-2024 forecast horizon.
"In mid-August, the regulator revoked a license from a small
domestic bank, Eurostandard. We understand that the bank had been
vulnerable and undercapitalized. Its share in total domestic credit
and deposits was small at below 2% and the license withdrawal did
not have any systemic repercussions. The government is not involved
in its resolution, and the deposit guarantee fund will assume
insured deposit payouts with no government budget involvement.
However, we understand that parties adversely affected by the
license withdrawal voiced concerns in the media regarding banking
sector surveillance and performance. While this was refuted by
relevant authorities and international observers (such as the IMF)
in North Macedonia, these episodes highlight the importance of
maintaining trust in banking sector and exchange rate stability to
avoid sudden volatility in deposits. There were some deposit
withdrawals and conversions to foreign currencies briefly
throughout April 2020 and some withdrawals following the
Eurostandard bank license revocation. However, the overall rise in
the deposit base in 2020 underpins that confidence was maintained.
"In our view, North Macedonia's banking system is stable, but asset
quality will likely weaken once the currently granted regulatory
flexibility expires. However, the nonperforming-loan ratio was low
at 3.4% as of third-quarter 2020. At year-end 2020, central bank
reserves were 3% higher from year-end 2019, reflecting foreign
borrowing.
"We anticipate inflation will remain low, but increase to 1.7% by
2024, slightly above our projections for the eurozone.
"We expect the pegged denar-euro exchange rate to continue for the
foreseeable future. The absence of large-scale portfolio flows into
North Macedonia somewhat relieves immediate risks related to the
weaker outlook for remittances and FDI. Our baseline expectation is
that there will be no large-scale resident conversion to foreign
currencies, so the exchange rate will remain intact. The National
Bank of the Republic of North Macedonia also recently agreed a
EUR400 million repo line with the European Central Bank, which
could be deployed in a downside scenario but has not been used so
far."
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
North Macedonia
Sovereign Credit Rating BB-/Stable/B
Transfer & Convertibility Assessment BB
Senior Unsecured BB-
=====================
N E T H E R L A N D S
=====================
ACCUNIA EUROPEAN I: Fitch Affirms B- Rating on Class F Notes
------------------------------------------------------------
Fitch Ratings has affirmed Accunia European CLO I B.V. and revised
the Outlooks on the class C, D and F notes to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
Accunia European CLO I B.V.
A XS1966591452 LT AAAsf Affirmed AAAsf
B-1 XS1966593151 LT AAsf Affirmed AAsf
B-2 XS1966595016 LT AAsf Affirmed AAsf
C XS1966596683 LT Asf Affirmed Asf
D XS1966598382 LT BBB-sf Affirmed BBB-sf
E XS1966599430 LT BB-sf Affirmed BB-sf
F XS1966599869 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
This is a cash flow CLO mostly comprising senior secured
obligations. The transaction is still in the reinvestment period
and is actively managed by the manager.
KEY RATING DRIVERS
Stable Asset Performance
Asset performance has been stable since the last review in
September 2020. The transaction was 1.26%bp below target par as of
the latest investor report available. As of the same report, all
coverage tests, Fitch collateral quality tests and portfolio
profile tests were passing, except the Fitch weighted average
recovery rate (WARR) test and the weighted average spread test.
Exposure to assets with a Fitch-derived rating of 'CCC+' and below
is 7.9% (excluding unrated names, which Fitch treats as 'CCC' but
for which the manager can classify as 'B-' up to 10% of the
portfolio) above the 7.5% limit. The are no defaulted assets in the
portfolio.
Resilient to Coronavirus Stress
The affirmation reflects the broadly stable portfolio credit
quality since September 2020. The Stable Outlook on all investment
grade notes, and the revision of the Outlook on the class F notes
to Stable from Negative reflect the default rate cushion in the
sensitivity analysis ran in light of the coronavirus pandemic. The
Negative Outlook on the class E notes reflects the tranche's lack
of resilience under Fitch's baseline scenario sensitivity. Fitch
recently updated its CLO coronavirus stress scenario to assume half
of the corporate exposure on Negative Outlook is downgraded by one
notch instead of 100%.
Average Portfolio Quality
'B'/'B-'Portfolio: Fitch assesses the average credit quality of the
obligors to be in the 'B'/'B-' category. The Fitch weighted average
rating factor (WARF) calculated by Fitch of the current portfolio
is 35.4(assuming unrated assets are CCC) while the Fitch WARF as of
the last investor report was 34.8 equal to the maximum covenant of
34.8. The Fitch WARF would increase by 1.5 after applying the
coronavirus stress.
High Recovery Expectations: Senior secured obligations make up 93%
of the portfolio . Fitch views the recovery prospects for these
assets as more favourable than for second-lien, unsecured and
mezzanine assets. In the latest invest report, the Fitch WARR of
the current portfolio is 62.8% below the minimum covenant of 62.9%
Portfolio Well Diversified: The portfolio is well diversified
across obligors, countries and industries. The top 10 obligor
concentration is 19.5%, and no obligor represents more than 2.3% of
the portfolio balance.
Deviation from Model-Implied Ratings (MIR)
Fitch used a customised proprietary cash flow model to replicate
the principal and interest waterfalls and the various structural
features of the transactions, and to assess their effectiveness -
including the structural protection provided by excess spread
diverted through the par value and interest coverage tests. The
transactions were modelled using the current portfolios and the
current portfolios with a coronavirus sensitivity analysis. Fitch's
coronavirus sensitivity analysis was based on a stable
interest-rate scenario only but included the front-, mid- and
back-loaded default timing scenarios, as outlined in Fitch's
criteria.
Based on the current portfolio analysis, the MIR for the class E
notes is one notch below the current rating. However, Fitch has
deviated from the MIR given the breakeven default rate shortfall is
marginal and driven by back loaded default timing scenario only,
which is not Fitch's immediate expectation.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- At closing, Fitch used a standardised stress portfolio
(Fitch's stressed portfolio) that was customized to the
portfolio limits as specified in the transaction documents.
Even if the actual portfolio shows lower defaults and smaller
losses (at all rating levels) than Fitch's stressed portfolio
assumed at closing, an upgrade of the notes during the
reinvestment period is unlikely. This is because the portfolio
credit quality may still deteriorate, not only by natural
credit migration, but also because of reinvestment.
-- After the end of the reinvestment period, upgrades may occur
in the event of better-than-expected portfolio credit quality
and deal performance, leading to higher credit enhancement and
excess spread available to cover for losses in the remaining
portfolio.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades may occur if build-up of the notes' credit
enhancement following amortisation does not compensate for a
higher loss expectation than initially assumed due to
unexpected high level of default and portfolio deterioration.
As the disruptions to supply and demand due to the Covid-19
disruption become apparent for other sectors, loan ratings in
those sectors would also come under pressure. Fitch will
update the sensitivity scenarios in line with the view of
Fitch's Leveraged Finance team.
-- Coronavirus Potential Severe Downside Stress Scenario: Fitch
has added a sensitivity analysis that contemplates a more
severe and prolonged economic stress caused by a re-emergence
of infections in the major economies. The potential severe
downside stress incorporates the following stresses: applying
a notch downgrade to all the corporate exposure on Negative
Outlook. This scenario would result in a maximum one-notch
downgrade across the capital structure.
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
Accunia European CLO I B.V.
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
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.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Overall, and together with any assumptions referred to above,
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.
===========
R U S S I A
===========
DALNAYA STEP: Kalmykia Court Completes Bankruptcy Proceedings
-------------------------------------------------------------
RAPSI reports that the Commercial Court of the Republic of Kalmykia
has completed bankruptcy proceedings against a firm believed to be
formerly controlled by William Browder's Hermitage Capital
Management, according to court records.
According to RAPSI, the court has granted a petition lodged by
Kirill Nogotkov, a bankruptcy manager of the former Browder's
company.
In November 2019, the Sixteenth Commercial Court of Appeals upheld
recovery of RUR388,400 (US$5,200) from HSBC Bank and HSBC
Management in favor of Dalnaya Step, denying granting its claim in
full, RAPSI recounts. Dalnaya Step therefore lost an appeal filed
against a lower court's ruling of August 16 ordering the two
companies to pay Dalnaya Step this sum instead of RUR125.3 million
(nearly US$2 million) demanded by the claimant, RAPSI notes.
According to RAPSI, Mr. Nogotkov said these costs accumulated
during review of his claim on recovery of RUR1.2 billion (US$16
million at the current exchange rate) in debts of the Dalnaya Step
from the HSBC Management and HSBC Bank (RR).
In June 2017, the plaintiff filed a claim to collect funds totaling
to RUR1.2 billion, US$255,500 and GBP1,800,000 from the defendants,
who were formerly in control of the company, RAPSI relays. In
August of that year, the Commercial Court of the Republic of
Kalmykia granted the lawsuit, RAPSI notes.
The Sixteenth Commercial Court of Appeals upheld the ruling in
October 2017, RAPSI recounts. However, in November, the North
Caucasus District Commercial Court reduced the amount to be
collected from the defendants in favor of Dalnaya Step by
US$255,500 and GBP1,800,000 respectively, RAPSI states.
On March 21, 2016, the court ruled to resume bankruptcy proceedings
with regard to Dalnaya Step, RAPSI discloses. According to an
acting manager back then, proceedings were still in effect and
there was a need to make former controllers of the company
accountable, RAPSI relays.
In 2015, the department of Russia's Federal Tax Service (FTS) for
the Republic of Kalmykia filed a motion with the court to declare
void a decision made in October 2007 to complete the liquidation of
Dalnaya Step, RAPSI states. The FTS department said the reason for
the petition was that Russia's Interior Ministry was investigating
Alexander Dolzhenko, a former bankruptcy manager at Dalnaya Step,
on suspicion of premeditated bankruptcy, RAPSI notes.
URALKALI PJSC: S&P Withdraws 'BB-' LongTerm Issuer Credit Rating
----------------------------------------------------------------
S&P Global Ratings has withdrawn its 'BB-' long-term issuer credit
ratings on potash producer Uralkali PJSC, owing to the issuer's
request and a lack of sufficient and timely information on Uralchem
JSC, Uralkali's majority shareholder. At the time of the
withdrawal, the ratings were on CreditWatch with negative
implications, where S&P placed them on Dec. 10, 2020, after Russian
fertilizer producer Uralchem increased its stake in Uralkali to
81.47% from 46.37%.
S&P said, "We have not been able to obtain sufficient relevant
information on Uralchem's operations, debt position, cash flows,
and strategic views on Uralkali, or on Uralchem's influence on
Uralkali's financial and dividend policies which is required under
our group rating methodology. We do not expect to obtain this
information in the future and are therefore unable to maintain the
ratings on Uralkali. Based on public sources of information, we
believe Uralchem's credit quality might be weaker than
Uralkali's."
=========
S P A I N
=========
BANKINTER 13: S&P Lowers Class E Notes Rating to 'D(sf)'
--------------------------------------------------------
S&P Global Ratings lowered to 'D (sf)' from 'CCC- (sf)' its credit
rating on Bankinter 13's class E notes. Bankinter 13's other
classes of notes are unaffected.
On the most recent interest payment date (IPD) in January 2021, the
issuer failed to pay the entire amount of interest due on the class
E notes. The interest and principal payments to this class rely
entirely on excess spread. The transaction mechanics require that
an increase in defaulted assets ("doubtful loans") is provisioned
for by a corresponding amortization of the asset-backed notes,
which is typically done using interest funds, thus reducing excess
spread. Satisfying senior payments in the revenue waterfall (such
as the swap payments, among others) also reduces the funds
available to pay the class E notes. In recent years, the reserve
fund's amortization supported the payment of lower-ranked items in
the waterfall, mainly class E notes' interest and principal
payments. This will no longer continue since the reserve fund
reached its floor level in January 2021.
As the reserve has now reached the floor, the timely payment of
interest to the class E notes will rely solely on the excess
spread, which we consider very limited due to the swap payment
amounts and default provisioning mechanism. S&P said, "Therefore,
in our view, the class E notes' interest shortfall that occurred in
January 2021 reflects structural weaknesses, which we expect to
prevail in the longer term. Even if on future IPDs the class E
notes receive interest payments--for example, if no new defaults
are recorded in the corresponding quarter–-we would expect
shortfalls to occur on a sporadic and inconsistent basis,
especially under the current macroeconomic conditions.
Acknowledging a breach in the imputed promise and the long-term
nature of structural factors that limit the ability to pay timely
interest, we have lowered our credit rating on the class E notes to
'D (sf)'."
Bankinter 13 is a Spanish RMBS transaction that securitizes a
portfolio of mortgage loans originated by Bankinter. It closed in
November 2006.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
===========
T U R K E Y
===========
TURKEY: Fitch Alters Outlook on BB- Foreign Currency IDR to Stable
------------------------------------------------------------------
Fitch Ratings has revised the Outlook on Turkey's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to Stable from
Negative and affirmed the IDR at 'BB-'.
KEY RATING DRIVERS
The revision of the Outlook reflects the following key rating
drivers and their relative weights:
HIGH
Turkey's return to a more consistent and orthodox policy mix under
a new economic team has helped ease near-term external financing
risks derived from last year's falling international reserves, a
high current account deficit and deteriorating investor confidence.
Monetary policy has been significantly tightened, international
reserves have stabilised and the Turkish lira has appreciated by
18% against the US dollar since early November.
Under its new leadership, the central bank has simplified monetary
policy by reverting to a single policy interest rate (one-week repo
rate) to improve transparency and predictability, strengthened its
communication strategy and stepped-up its tightening cycle by
increasing policy rate rates by 675bp in November-December. The
real policy rate (adjusted for 12-month inflation expectations)
increased to 6.8% in February 2021 compared with -1.55% in August.
Authorities have also reversed previous regulatory measures to rein
in rapid credit growth.
The central bank current policy settings are aimed at achieving
sustained disinflation (reaching its inflation target of 5% in
2023), a reversal in dollarisation and rebuilding FX reserves.
Fitch considers that rebuilding policy credibility will take time,
given limited central bank independence, exemplified by the sacking
of two of its governors since July 2019, and a recent track record
of delayed response to mounting macroeconomic pressures or
premature policy easing.
In line with its intention to strengthen inflation targeting
credentials, the central bank has renewed its previous
long-standing commitment to a floating exchange rate, after large
scale interventions in 2020. The change in investor sentiment and
domestic actors has led to significant lira appreciation, lower
risk premium and some net capital inflows.
International reserves have stabilised and recovered slightly.
Gross FX reserves (including gold) have increased from a low
USD86.7 billion in November to USD95.6 billion in early February,
still below the USD105.7 billion at the end of 2019. Nevertheless,
the underlying position of international reserves remains weak. Net
reserves (net of FX claims, mainly from Turkish bank placements)
rose to USD15.3 billion in early February (still considerably below
the USD41.1 billion at end-2019). Reserves net of FX swaps with
local banks remain negative.
Turkey's reserve buffers, at 4.5 months of CXP cover compared with
5.3 months for the 'BB' median, are low relative to the country's
large external financing requirement, high deposit dollarisation
and the risk of changes investor sentiment. In the absence of
shocks, and assuming the continuation of the current policy
settings, Fitch forecasts international reserves to increase
gradually to USD104 billion in 2021 and USD110 billion in 2022.
Upside risks to this forecast are dependent on net capital inflows
or a quicker-than-expected reversal in deposit dollarisation.
Turkey's 'BB-' IDRs also reflect the following key rating drivers:
The rating is supported by Turkey's moderate levels of government
and household debt, large and diversified economy with a vibrant
private sector, and GDP per capita and Ease of Doing Business
indicators that compares favourably with 'BB' medians. Set against
these factors are Turkey's weak external finances, a track record
of economic volatility, high inflation, increased dollarisation and
political and geopolitical risks.
Public finances continue to be a key rating strength. Stronger than
expected revenues and a modest anti-crisis package (2.5% of GDP)
resulted in a central government deficit of 3.5% of GDP in 2020. At
the general government level, Fitch estimates that the deficit
reached approximately 4.5% of GDP, significantly below the 8.5%
estimated for the 'BB' median, assuming moderate deficits at the
local government, social security and unemployment insurance fund
close to the projections under the 2021-2023 National Economic
Programme.
The Ministry of Finance and Treasury has also announced it may
lower its 2021 budget target to 3.5% from 4.3% of GDP in 2021,
partly to support the disinflation process. The combination of
slower revenue growth due to cooling economic activity and the use
of some of the available fiscal space to provide additional support
to cushion the economic and social impact of the pandemic will
result in a 3.9% central government deficit in 2021 and 3.7% in
2022, according to Fitch's projections. The general government
deficit will then decline to 4.1% of GDP in 2021 and 3.9% in 2022,
still below the projected 5.7% and 4.3% 'BB' median.
Government debt rose by 7pp to 40% of GDP in 2020, 20pp below the
estimated 'BB' median 2020 estimate. High nominal GDP growth and
lower primary deficit will underpin a modest decline to 37% by
2022. However, currency risk has increased (56% of central
government debt was foreign currency linked or denominated at
end-2020, up from 39% in 2017). Turkey's debt management strategy
aims at strengthening domestic debt composition in terms of costs,
duration and currency taking advantage of improved confidence and
macroeconomic stability prospects.
Inflation averaged 11.7% in 2015-2020, compared with the 'BB'
median of 3.4% and Fitch expects the disinflation process to be
gradual. Despite high real rates and the lira appreciation, cost
pressures, higher commodity prices including food, still high
inflation expectations and a 21% increase in the minimum wage will
maintain inflation in double digits in 2021, in Fitch's view. Fitch
forecasts that inflation will decline to 11.0% at end-2021 and 9.2%
at end-2022, compared with the current central bank forecast of
9.4% and 7%, respectively.
After a strong sequential recovery in 3Q20, the economy has likely
maintained positive growth momentum despite the tightening of
anti-pandemic measures, thus resulting in a full-year growth of
1.4% in 2020. Although a strong carry-over effect will lead to a
full year growth of 5.7%, domestic demand will slow down in 1H21.
Fitch expects the economy to benefit from the vaccination drive and
easing of restrictions domestically and abroad later in the year
and forecast GDP growth of 4.7% in 2022.
Recent polls show that the support for the ruling AKP and its
coalition partner, the MHP, has come under pressure, partly
reflecting the negative economic impact of the pandemic and
financial stress. Fitch considers that the sustainability of the
current orthodox policy mix and implementation of reform measures,
such as those expected to be announced by the government in the
near term, will also be influenced by the proximity of the 2023
general elections.
Sanctions and other geopolitical risks continue to weigh on
Turkey's rating with the potential to impair investor sentiment and
external finances. In December 2020, the US applied limited
sanctions (against Turkey's defense procurement agency) under the
Countering America's Adversaries Through Sanctions Act (CAATSA) due
to the 2019 purchase of the S-400 Russian missile system. While
Fitch expects sanctions to remain narrow in scope and not
significantly impact the Turkish economy, this issue will likely
remain a source of tension in addition to US cooperation with the
Kurdish People's Protection Units (YPG) in Syria.
The EU issued personal sanctions against Turkish officials involved
in natural gas prospecting in the Eastern Mediterranean. Although
Turkey has withdrawn its exploration ship and announced its
willingness to improve relations with the EU, a sustainable
improvement in relations remains uncertain. In addition to
operations in Northern Syria and Libya, Turkey has supported for
Azerbaijan in the Nagorno Karabakh conflict, which could represent
an additional source of tension with Russia.
Fitch forecasts the current account deficit to narrow to 2.9% in
2021 and 2.1% in 2022, from a high 5.3% of GDP in 2020, reflecting
slower domestic demand and reduced gold imports, both supported by
Fitch's expectation of a tight monetary policy stance and improved
confidence. The recovery in external demand and the tourism sector
will benefit export of goods and services, albeit at a more gradual
pace.
Fitch forecasts external financing requirements (current account
balance plus private and public debt amortizations), at 83% and 65%
of international reserves in 2021 and 2022, respectively, remaining
higher than peers driven by the private sector. However, the
external financing positions of the banking and corporate sector
have remained resilient throughout periods of stress since the 2018
crisis and maintained relatively comfortable roll-over rates in
2020.
Credit growth has decelerated markedly since mid-2020, declining to
18% yoy (FX adjusted) and 0.8% on a 13-week annualised basis,
reflecting the tightening in financial conditions, phasing out of
credit stimulus largely intermediated by state-owned banks and
changes to regulations that previously incentivised lending.
Slowdown in credit growth to more sustainable levels, including
consumer credit, is key to support disinflation and reduction of
the current account deficit.
The banking system has demonstrated relative resilience to the
Covid-19 pandemic shock and financial markets' stress in 2020. Both
capitalisation (capital adequacy ratio at 18.8% end-2020) and asset
quality (non-performing loans (NPL) at 4.1% end-2020) metrics have
benefited from regulatory forbearance expected to remain in place
until mid-2021 and the Credit Guarantee Fund' stimulus. However,
Turkish banks continued to provision against loans in 2020 as if
there was no regulatory forbearance. Fitch expects a further
moderate increase in NPL, partly reflecting the still high Stage 2
loans and loan seasoning risks amid waning government stimulus and
the higher interest rate environment. Fitch also believes the share
of restructured loans could further rise.
The banking sector is vulnerable to exchange rate volatility due to
the impact on capitalisation, asset quality, refinancing risk
(given short-term foreign-currency financing) and high deposit
dollarisation (54% including precious metals). The relative
stickiness of deposits in the Turkish banking system during periods
of stress in recent years is a supportive factor for the rating. In
addition, the banking sector's available foreign currency liquidity
is sufficient to meet its short-term external debt, in particular
when adjusting the latter for more stable sources of funding
ESG - Governance: Turkey has an ESG Relevance Score (RS) of 5 for
both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption, as
is the case for all sovereigns. Theses scores reflect the high
weight that the World Bank Governance Indicators (WBGI) have in
Fitch's proprietary Sovereign Rating Model. Turkey has a low WBGI
ranking at the 39th percentile.
RATING SENSITIVITIES
The main factors that could, individually or collectively, lead to
positive rating action/upgrade are:
-- External Finances: A reduction in external vulnerabilities,
for example evident in a sustained reduction in the current
account deficit, stronger external liquidity position and
reduced dollarisation.
-- Macro: A sustained decline in inflation and a rebuilding of
monetary policy credibility, which could cause the removal of
the -1 QO notch on Macroeconomic Policy and Performance.
-- Structural: A reduction in geopolitical risks for example from
the conflict in Syria, and from US sanctions, which would
cause the removal of the -1 QO notch on Structural Features.
The main factors that could, individually or collectively, lead to
negative rating action/downgrade:
-- Macroeconomic policy and performance & External finances: Re
intensification of balance of payments and macroeconomic
stability risks, including sustained erosion of international
reserves or severe stress in the corporate in banking sector,
for example due to weaker investor confidence as a result of
premature monetary easing
-- Structural features: A serious deterioration in the domestic
political or security situation or international relations
that severely affects the economy.
-- Public finances: A marked worsening in the government debt/to
GDP ratio or broader public balance sheet.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Turkey a score equivalent to a
rating of 'BBB-' on the Long-Term Foreign-Currency (LT FC) IDR
scale.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final LT FC IDR by applying its QO, relative to
SRM data and output, as follows:
-- Macroeconomic policy and performance: -1 notch, to reflect
weak macroeconomic policy credibility and a recent track
record of delayed response to mounting macroeconomic pressures
or premature policy easing.
-- External finances: -1 notch, to reflect a very high gross
external financing requirement, low international liquidity
ratio, and risks of renewed balance of payments pressure in
the event of changes in investor sentiment.
-- Structural features: -1 notch, to reflect the risk of
developments in geopolitics and foreign relations, including
sanctions, that could impact economic stability as well as
downside risks in the banking sector due to significant
reliance on foreign financing and high financial
dollarization.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within
Fitch's criteria that are not fully quantifiable and/or not fully
reflected in the SRM
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
KEY ASSUMPTIONS
Fitch forecasts Brent Crude to average USD45/b in 2021 and USD50/b
in 2022.
ESG CONSIDERATIONS
Turkey has an ESG Relevance Score of 5 for Political Stability and
Rights as World Bank Governance Indicators have the highest weight
in Fitch's SRM and are highly relevant to the rating and a key
rating driver with a high weight. Turkey faces geopolitical risks
and security threats and is involved in conflicts in neighbouring
countries.
Turkey has an ESG Relevance Score of 5 for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
World Bank Governance Indicators have the highest weight in Fitch's
SRM and are therefore highly relevant to the rating and are a key
rating driver with a high weight.
Turkey has an ESG Relevance Score of 4 for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
World Bank Governance Indicators are relevant to the rating and a
rating driver.
Turkey has an ESG Relevance Score of 4 for International Relations
and Trade. Bilateral relations with key partners have been
volatile, including threats of US sanctions and periodic tensions
with the EU. This turbulence hurts investor confidence, brings
risks to external financing and can impact trade performance and is
a rating driver for Turkey.
Turkey has an ESG Relevance Score of 4 for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Turkey, as for all sovereigns.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, is a score of 3. This means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity(ies), either due to their nature or to the way in which
they are being managed by the entity(ies).
===========================
U N I T E D K I N G D O M
===========================
254 KILBURN: Enters Administration, Owes More Than GBP26 Million
----------------------------------------------------------------
Charles Thomson at Ham & High reports that a luxury development
intended to rejuvenate Kilburn High Road went into administration
owing more than GBP26 million.
"Park Place", an apartment block ten minutes' walk from West
Hampstead station, was the brainchild of developer Paul Godfrey,
Ham & High discloses.
Mr. Godfrey borrowed GBP19 million from OakNorth Bank in 2017 to
fund the project, Ham & High states. But the bank appointed
administrators in December after a string of delays, Ham & High
relays.
They found the company's bank account was empty and other creditors
were owed GBP630,000, Ham & High notes.
Mr. Godfrey used OakNorth's cash, along with GBP13 million from
other sources, to purchase a plot of land overlooking Kilburn
Grange Park, Ham & High discloses.
He set up a limited partnership -- 254 Kilburn HR LLP -- to manage
the project, which was expected to make more than GBP10 million
profit, Ham & High says.
But in December, the LLP went into administration owing OakNorth
GBP25.52 million, Ham & High relays.
In January, buyers who paid deposits in 2018 and were told they
could move in by spring 2019 had still not moved in, Ham & High
relates.
Another said the delays had cost him almost GBP25,000 in rent and
legal fees, Ham & High discloses.
According to Ham & High, Mr. Godfrey said Brexit and Covid-19 had
caused "unprecedented" delays and claimed the project had been
hampered by planning conditions.
Planning permission granted by Camden Council said buyers could not
move in until a housing association agreed to take on the
"affordable" units, Ham & High notes.
A housing association had signed up but pulled out last summer,
citing economic uncertainty due to the pandemic, Ham & High
discloses.
The council agreed to let a handful of buyers move in while a new
housing association was found, but it was not enough to stop
OakNorth calling in administrators, Ham & High states.
Moorfields, the appointed administrator, said in its report that
its priority was to repay the bank, Ham & High notes. However, it
does not expect to be able to do that in full, Ham & High says.
It hopes to minimize the bank's losses by finishing and selling all
of the flats in the development, currently described as "90 per
cent complete", according to Ham & High.
However, other creditors -- including HMRC, which is owed more than
GBP500,000 -- are not expected to get anything, Moorfields wrote.
ARCADIA GROUP: HMRC to Recoup Fraction of GBP44.2MM Owed
--------------------------------------------------------
Daily Mail City & Finance reports that taxpayers will only recoup a
fraction of the GBP44.2 million owed by Sir Philip Green's fallen
Arcadia retail empire, according to newly released documents.
The Topshop owner was put into administration on Nov. 30 -- hours
before a change in insolvency laws would have bumped HMRC up ahead
of other unsecured creditors, Daily Mail City & Finance relates.
HMRC is now forced to fight it out alongside GBP163 million owed to
suppliers, GBP36.5 million owed to landlords and GBP5.6 million for
gift card holders, Daily Mail City & Finance discloses.
ARCADIA GROUP: Pension Schemes Likely to Avoid PPF Rescue
---------------------------------------------------------
Jonathan Eley and Josephine Cumbo at The Financial Times report
that Arcadia's pension schemes look increasingly likely to avoid
rescue by the UK's Pension Protection Fund, after most of the
insolvent fashion group's brands were sold and with further
proceeds expected from property sales.
According to the FT, people involved with the process said that
although the three schemes would almost certainly still be in
deficit after all the group's assets had been liquidated, the level
of funding would probably generate better benefits for scheme
members than a PPF rescue.
The exact size of Arcadia's pension deficit has not been publicly
revealed, the FT notes. On an accounting basis -- the figure
reported on company balance sheets -- it was just over GBP100
million as of September 2019, the FT discloses. The buyout
deficit, the difference between the schemes' assets and the
estimated cost of securing members' benefits with an insurer, was
stated as GBP510 million by the company's directors in their latest
report on the administration, the FT states.
However, that figure does not reflect current and future proceeds
from asset sales, the FT says. Once these are factored in, those
close to the process think the final "section 75" deficit, which
measures the employer's share of the cost of insuring full benefits
for members, at about GBP250 million, the FT relays.
"We are encouraged by the strong level of recovery that has been
obtained for the schemes so far," the FT quotes The Pensions
Regulator as saying.
"We are working with the trustees and the PPF to assess the overall
impact of the company sales, and the insolvencies more widely, on
the Arcadia pension schemes."
Deloitte, the administrators for Arcadia, have sold Topshop, Topman
and Miss Selfridge to Asos, Evans to Australian group Chic City
Collective and Burton, Wallis and Dorothy Perkins to Boohoo, the FT
relates. A building on London's Tottenham Court Road that had been
pledged as security to the pension fund was sold for GBP65 million
in December, the FT notes.
The gross proceeds from these disposals are almost GBP400 million,
and although other creditors have claims against these funds, the
pension schemes have already received GBP180 million, the FT
states.
Lady Tina Green, Sir Philip Green's wife and the ultimate owner of
Arcadia, has also paid in full the GBP100 million of deficit
recovery contributions agreed with the regulator and the PPF ahead
of a previous financial restructuring in 2019, the FT recounts.
According to the FT, a property on Oxford Circus housing the
group's flagship Topshop store has also been pledged as security to
the pension scheme. Although it has a GBP300 million loan secured
against it, the building is thought to be worth more than GBP400
million, implying another GBP100 million contribution before
disposal costs, the FT states.
Other significant assets remaining in the group include three
distribution centres, though one of these has a GBP50 million loan
from Tina Green secured against it, and various freehold shops, the
FT discloses.
The trustees' spokesman said the expected process of selling these
"will further increase the schemes' likelihood of being able to
secure benefits for members in excess of PPF compensation levels
outside the PPF", the FT notes.
But the PPF, which is funded by a levy on all defined benefit
schemes, was more cautious, saying it was still too early in the
assessment process to know whether the Arcadia schemes would
transfer to the PPF or not, the FT states.
CANADA SQUARE 2021-1: S&P Assigns Prelim. B Rating on X-Dfrd Notes
------------------------------------------------------------------
S&P Global Ratings has assigned preliminary ratings to Canada
Square Funding 2021-1 PLC's (CSF 2021-1) class A notes and class
B-Dfrd to X-Dfrd interest deferrable notes.
CSF 2021-1 is a static RMBS transaction that securitizes a
portfolio of GBP244.6 million BTL mortgage loans secured on
properties located in the U.K. The loans in the pool were
originated by Fleet Mortgages Ltd. (53.4%), Landbay Partners Ltd.
(34.2%), Topaz Funding Ltd. (under the brand name Zephyr Homeloans)
(9.5%), and Hey Habito Ltd. (2.9%). All loans were originated
between December 2019 and January 2021.
At closing, the issuer will use the issuance proceeds to purchase
the full beneficial interest in the mortgage loans from the seller.
The issuer will grant security over all of its assets in favor of
the security trustee.
The transaction features a prefunding period when the issuer may
buy certain loans listed on the loan sale agreements and already
originated whose first installment will not have happened before
the closing date.
In terms of collateral and the structural features, this
transaction is very similar to Canada Square Funding 2020-2 PLC, to
which S&P assigned ratings in July 2020.
Of the preliminary pool, only six of the mortgage loans have been
granted payment holidays due to COVID-19.
Citibank, N.A., London Branch, will retain an economic interest in
the transaction in the form of a vertical risk retention loan note
accounting for 5% of the pool balance at closing. The remaining 95%
of the pool will be funded through the proceeds of the
mortgage-backed rated notes.
S&P considers the collateral to be prime, based on the overall
historical performance of Fleet Mortgages', Landbay Partners',
Zephyr Homeloans', and Habito's respective BTL residential mortgage
books as of Jan. 2021, the originators' conservative lending
criteria, and the absence of loans in arrears in the securitized
pool.
Credit enhancement for the rated notes will consist of
subordination from the closing date and overcollateralization,
which will result from the release of the liquidity reserve excess
amount to the principal priority of payments.
The class A notes will benefit from liquidity support in the form
of a liquidity reserve, and the class A and B-Dfrd through E-Dfrd
notes will benefit from the ability of principal to be used to pay
interest, provided that, in the case of the class B-Dfrd to E-Dfrd
notes, the respective tranche's principal deficiency ledger does
not exceed 10% unless they are the most senior class outstanding.
There are no rating constraints in the transaction under our
counterparty, operational risk, or structured finance sovereign
risk criteria. S&P considers the issuer to be bankruptcy remote.
Ratings List
Class Prelim. rating* Class size (%)*
A AAA (sf) 88.50
B-Dfrd AA- (sf) 6.00
C-Dfrd A- (sf) 2.75
D-Dfrd BBB (sf) 1.50
E-Dfrd BB (sf) 1.25
X-Dfrd B (sf) 4.00
VRR loan note NR 5.00
S1 certificates NR N/A
S2 certificates NR N/A
Y certificates NR N/A
*As a percentage of 95% of the pool for the class A to X-Dfrd
notes.
NR--Not rated.
N/A--Not applicable.
VRR--Vertical risk retention.
COMET BIDCO: Moody's Completes Review, Retains Caa1 CFR
-------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Comet Bidco Limited and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review discussion held on February 11, 2021 in
which Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology(ies), 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 Caa1 corporate family rating of Comet Bidco Limited (the
holding company of the restricted group that owns Clarion Events)
reflects the prolonged uncertainty around events scheduled for 2021
(calendar year) and beyond, as trade shows globally continue to be
cancelled and postponed due to coronavirus disruptions, putting
significant pressure on Clarion's revenue and EBITDA. Clarion's
liquidity has improved after the injection of a first Lien term
loan by its controlling shareholder in November 2020, although the
company continues to utilize cash.
Prospects of recovery in FY2022 (fiscal year ending January 2022)
appear to be uncertain at this stage and will depend on how long
the coronavirus related travel disruptions continue and how well
Clarions can adapt its business model to suit the changing
environment. The rating remains supported by Clarion's leading
market positions as a global events' organizer.
The principal methodology used for this review was Business and
Consumer Service Industry published in October 2016.
DURHAM MORTGAGES A: S&P Assigns B- Rating on Cl. F-Dfrd Notes
-------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Durham Mortgages A
PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, and X-Dfrd
U.K. RMBS notes. At closing, Durham Mortgages A also issued unrated
class Z and R notes.
The transaction is a refinancing of the Durham Mortgages A PLC
transaction, which closed in May 2018 (the original transaction).
S&P has based its credit analysis on the closing pool, which totals
GBP2.00 billion. The pool comprises first-lien U.K. residential
mortgage loans that Bradford & Bingley PLC (B&B), and Mortgage
Express PLC (MX) originated. The loans are secured on properties in
England, Wales, Scotland, and Northern Ireland and were originated
between 1994 and 2009.
The underlying loans in the securitized portfolio are and will
continue to be serviced by Topaz Finance Ltd.
S&P considers the collateral to be nonconforming based on the
prevalence of loans to self-certified borrowers and borrowers with
adverse credit history, such as prior county court judgments
(CCJs), an individual voluntary arrangement, or a bankruptcy order.
The current performance of the pool is notably better than
nonconforming collateral originated at a similar time in the U.K.
S&P's rating on the class A notes addresses the timely payment of
interest and the ultimate payment of principal. Its ratings on the
class B-Dfrd to F-Dfrd notes and X-Dfrd notes reflect the ultimate
payment of interest and principal. Its rating definitions are in
line with the notes' terms and conditions.
The timely payment of interest on the class A notes is supported by
the principal borrowing mechanism, the general reserve, and the
liquidity reserve. These reserve funds were funded at closing.
S&P said, "Our ratings reflect our assessment of the transaction's
payment structure, cash flow mechanics, and the results of our cash
flow analysis to assess whether the notes would be repaid under
stress test scenarios. Subordination, excess spread, the general
reserve fund and the liquidity reserve fund provide credit
enhancement to the rated notes.
"Our cash flow analysis indicates that the available credit
enhancement for the class B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes
is commensurate with higher ratings than those currently assigned.
The ratings on these notes reflect their ability to withstand the
potential repercussions of the COVID-19 outbreak, including
extended recovery timings and higher default sensitivities. We have
also considered their relative positions in the capital structure,
and potential increased exposure to tail-end risk. In our analysis,
the class F-Dfrd notes are unable to withstand the stresses we
apply at our 'B' rating level. We do not consider that meeting the
obligations of this class of notes is reliant on favorable
business, financial, and economic conditions. Consequently, we have
assigned a 'B- (sf)' rating to the notes in line with our criteria.
In our analysis, the class X-Dfrd notes are unable to withstand the
stresses we apply at our 'B' rating level. We consider that in the
event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment. Consequently, we have assigned a 'CCC (sf)' rating to
the notes in line with our criteria.
"There are no rating constraints in the transaction under our
counterparty, legal, operational risk, or structured finance
sovereign risk criteria. We consider the issuer to be bankruptcy
remote.
"Our credit and cash flow analysis and related assumptions consider
the ability of the transaction to withstand the potential
repercussions of the coronavirus outbreak, namely, higher defaults,
liquidity stresses, and longer recovery timing stresses.
Considering these factors, we believe that the available credit
enhancement is commensurate with the ratings assigned."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings List
Class Rating* Amount (mil. GBP)
A AAA (sf) 1,723.7
B-Dfrd AA (sf) 79.9
C-Dfrd A+ (sf) 66.9
D-Dfrd BBB+ (sf) 51.0
E-Dfrd BB (sf) 38.0
F-Dfrd B- (sf) 21.0
Z NR 18.0
R NR 33.6
X-Dfrd CCC (sf) 15.0
X certs NR N/A
Y certs NR N/A
NR--Not rated.
N/A--Not applicable.
FINSBURY SQUARE 2019-1: DBRS Confirms BB(high) Rating on E Notes
----------------------------------------------------------------
DBRS Ratings Limited confirmed the following ratings on the notes
issued by Finsbury Square 2019-1 plc (Finsbury Square 2019-1):
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (high) (sf)
The ratings on the Class A Notes, B, C, D, and E notes address the
timely payment of interest and ultimate payment of principal on or
before the legal final maturity date, on the payment date in June
2069.
DBRS Ratings Limited also confirmed the following ratings on the
notes issued by Finsbury Square 2020-1 plc (Finsbury Square
2020-1):
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)
-- Class C Notes at A (high) (sf)
-- Class D Notes at BBB (high) (sf)
-- Class X Notes at BB (high) (sf)
The rating on the Class A Notes addresses the timely payment of
interest and ultimate repayment of principal on or before the final
maturity date on the payment date in March 2070. The ratings on the
Class B, C, and D notes address the timely payment of interest once
most senior and the ultimate repayment of principal on or before
the final maturity date on the payment date in March 2070. The
rating on the Class X Notes addresses the ultimate payment of
interest and repayment of principal by the final maturity date on
the payment date in March 2070.
DBRS Morningstar also discontinued its rating on the Class X Notes
of Finsbury Square 2019-1, following their full repayment on the 16
December 2020 payment date. Prior to their repayment, the
outstanding principal of the Class X Notes was GBP 2,071,739.79,
with a rating of CC (sf).
The confirmations follow a review of the transactions and are based
on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses, as of the December 2020 payment date.
-- Lifetime Portfolio Default Rates (PD), Loss Given Default Rates
(LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the
expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable
performance, as a result of the Coronavirus Disease (COVID-19)
pandemic.
Both transactions are securitizations collateralized by a portfolio
of residential mortgage loans granted by Kensington Mortgage
Company Limited (KMC) in England, Wales, and Scotland. Notable
features of the portfolio are Help-to-Buy (HTB), Right-to-Buy (RTB)
mortgages, Buy-to-Let (BTL) properties, borrowers with adverse
borrower features including self-employed borrowers and borrowers
with prior county court judgments and the presence of arrears at
closing, albeit in limited proportions. The outstanding portfolio
balance increased to GBP 515,688,018 from GBP 375,649,014 and to
GBP 632,411,120 from GBP 497,326,203, for Finsbury Square 2019-1
and Finsbury Square 2020-1, respectively, between closing and the
first payment date falling in September 2019 and in June 2020, for
Finsbury Square 2019-1 and Finsbury Square 2020-1, respectively, as
additional loans were purchased during that period. The portfolio
has been amortizing since in both transactions.
PORTFOLIO PERFORMANCE
Both transactions have seen an increasing trend in delinquencies
over the 2020 year in the context of the coronavirus pandemic. KMC
offered principal payment holidays between one and three months
from March 2020.
In the case of the Finsbury Square 2019-1 transaction, the 90+
delinquency ratio represented 2.0% of the outstanding portfolio
balance as of the December 2020 payment date, up from 1.2%,
respectively at last annual review and total arrears were 7.8% of
the outstanding portfolio balance, up from 4.6% at last annual
review. As of the December 2020 payment date, loans granted
principal payment holidays in the context of the coronavirus
pandemic represented 2.0% of the outstanding portfolio balance,
compared with 34.1% at the end of May 2020.
In the case of the Finsbury Square 2020-1 transaction, the 90+
delinquency ratio represented 1.4% of the outstanding portfolio
balance as of the December 2020 payment date, up from 1.2% at the
first payment date and total arrears were 3.0% of the outstanding
portfolio balance, up from 2.0% at the first payment date. As of
the December 2020 payment date, loans granted principal payment
holidays in the context of the coronavirus pandemic represented
2.7% of the outstanding portfolio balance, compared with 34.6% at
the end of May 2020.
As of the December 2020 payment date, cumulative net losses were
immaterial in both transactions.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining
pool of receivables.
In the case of Finsbury Square 2019-1, DBRS Morningstar has
increased its base case PD and LGD assumptions to 10.1% and 18.7%,
respectively, from 7.4% and 17.0%, respectively, at last annual
review.
In the case of Finsbury Square 2020-1, DBRS Morningstar has
increased its base case PD and LGD assumptions to 6.7% and 20.8%,
respectively, from 5.1% and 19.6%, respectively, at closing.
For both transactions, DBRS Morningstar's analysis factors the
presence of HTB mortgages (6.7% and 5.7% of the outstanding
portfolio balance for Finsbury Square 2019-1 and Finsbury Square
2020-1, respectively) and BTL mortgages (28.9% and 32.7% of the
outstanding portfolio balance for Finsbury Square 2019-1 and
Finsbury Square 2020-1, respectively) as well as a high proportion
of self-employed borrowers (45.3% and 47.6% of the outstanding
portfolio balance for Finsbury Square 2019-1 and Finsbury Square
2020-1, respectively). DBRS Morningstar incorporated these adverse
features as well as adjustments resulting from the coronavirus
pandemic into its analysis for both transactions.
CREDIT ENHANCEMENT
As of the December 2020 payment date, the credit enhancement (CE)
for Finsbury Square 2019-1 increased since the last annual review
as follows:
-- CE to the Class A Notes increased to 21.8%, up from 19.1%
-- CE to the Class B Notes increased to 15.7%, up from 13.8%
-- CE to the Class C Notes increased to 10.3%, up from 9.0%
-- CE to the Class D Notes increased to 7.3%, up from 6.4%
-- CE to the Class E Notes increased to 6.1%, up from 5.3%
In the case of the Finsbury Square 2019-1 transaction, the CE for
the Class A to E notes consists of the subordination of the
respective junior notes and a General Reserve Fund (GRF).
As of the December 2020 payment date, the CE for Finsbury Square
2020-1 increased since the DBRS Morningstar initial rating as
follows:
-- CE to the Class A Notes increased to 15.3%, up from 14.5%
-- CE to the Class B Notes increased to 10.6%, up from 10.0%
-- CE to the Class C Notes increased to 6.9%, up from 6.5%
-- CE to the Class D Notes increased to 5.3%, up from 5.0%
-- CE to the Class X Notes remained at 0.0%
In the case of the Finsbury Square 2020-1 transaction, the CE for
the Class A to D notes also consists of the subordination of the
respective junior notes and a GRF.
In both transactions, the GRF is nonamortizing and is available to
cover senior fees, senior swap payments, interest on the Class A to
F notes in the case of Finsbury Square 2019-1 (on the Class A to E
notes in the case of Finsbury Square 2020-1) and principal losses
via the principal deficiency ledgers (PDLs) on the Class A to F
notes in the case of Finsbury Square 2019-1 (on the Class A to E
notes in the case of Finsbury Square 2020-1).
The GRF was funded at GBP 9,997,500 and GBP 13,975,000 at closing,
for Finsbury Square 2019-1 and Finsbury Square 2020-1,
respectively, and reduced to GBP 9,300,000 and GBP 13,000,000 at
the first payment date, for Finsbury Square 2019-1 and Finsbury
Square 2020-1, respectively. As of the December 2020 payment date,
both GRFs were at their target level of GBP 9,300,000 and GBP
13,000,000, for Finsbury Square 2019-1 and Finsbury Square 2020-1,
respectively, equal to 2% of the initial Class A to F notes in the
case of Finsbury Square 2019-1 (Class A to E notes in the case of
Finsbury Square 2020-1). Once the Class E Notes in the case of
Finsbury Square 2019-1 (Class D Notes in the case of Finsbury
Square 2020-1) are fully redeemed, the target balance of the GRF
becomes zero. As of the December 2020 payment date, all PDLs were
clear in both transactions.
In both transactions, a Liquidity Reserve Fund (LRF) provides
additional liquidity support to cover senior fees, senior swap
payments, and interest on the Class A and Class B notes. The LRF is
funded through available principal funds if the GRF balance falls
below 1.5% of the outstanding Class A to F notes for Finsbury
Square 2019-1 (Class A to E notes in the case of Finsbury Square
2020-1). In this event, the LRF is funded to 2% of the outstanding
Class A and Class B notes balances and is replenished at each
payment date, in both transactions.
Both transactions are exposed to interest rate risk as 87.0% and
85.1% of the outstanding portfolio balance, for Finsbury Square
2019-1 and Finsbury Square 2020-1, respectively, pays a fixed rate
of interest on a short-term basis and a floating rate of interest
indexed to three-month GBP Libor afterwards, while the rated notes
are indexed to three-month GBP Libor and Sonia, for Finsbury Square
2019-1 and Finsbury Square 2020-1, respectively.
In addition, loans can be subject to a variation in the length of
the fixed-rate period, the applicable interest rate, and maturity
date through a "Product Switch" up to 20% of the Class A to F
original balance in the case of Finsbury Square 2019-1 (Class A to
E original balance in the case of Finsbury Square 2020-1). As of
the December 2020 payment date, Product Switch loans represented
0.6% and 0.0% for Finsbury Square 2019-1 and Finsbury Square
2020-1, respectively.
Citibank N.A./London Branch (Citibank London) acts as the account
bank for both transactions. Based on the DBRS Morningstar private
rating of Citibank London, the downgrade provisions outlined in the
transaction documents, and other mitigating factors inherent in the
transaction structures, DBRS Morningstar considers the risk arising
from the exposure to the account bank to be consistent with the
ratings assigned to the Class A Notes, as described in DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
BNP Paribas London Branch (BNP Paribas London) acts as the swap
counterparty for both transactions. DBRS Morningstar's private
rating of BNP Paribas London Branch is above the First Rating
Threshold as described in DBRS Morningstar's "Derivative Criteria
for European Structured Finance Transactions" methodology.
DBRS Morningstar analyzed the structure of each transaction in
Intex DealMaker.
The Coronavirus Disease (COVID-19) and the resulting isolation
measures have caused an economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
borrowers. DBRS Morningstar anticipates that delinquencies may
continue to arise in the coming months for many RMBS transactions,
some meaningfully. The ratings are based on additional analysis and
adjustments to expected performance as a result of the global
efforts to contain the spread of the coronavirus.
For these transactions, DBRS Morningstar increased the expected
default rate for self-employed borrowers, and incorporated a
moderate reduction in residential property values.
Notes: All figures are in British pound sterling unless otherwise
noted.
MONEYTHING: Remaining Peer-to-Peer Loanbook Still Performing
------------------------------------------------------------
Marc Shoffman at Peer2Peer Finance News reports that half of
MoneyThing's remaining peer-to-peer loan portfolio is still
performing, its administrator has revealed.
MoneyThing was pushed into administration in December 2020 after
revealing it could not afford to defend itself against future
litigation from a borrower, Peer2Peer Finance News recounts.
According to Peer2Peer Finance News, administrator Moorfields
Advisory has published proposals revealing the state of
MoneyThing's loanbook at the time of administration.
The document showed there are 50 loans outstanding to 18 borrowers,
collectively owing GBP19.3 million, Peer2Peer Finance News
discloses.
Of these, 24 loans to two borrowers are classed as performing and
have outstanding capital of GBP1.1 million, Peer2Peer Finance News
states.
Five loans to four borrowers worth GBP5.9 million are
non-performing, meaning they are in default, Peer2Peer Finance News
notes.
Another 21 loans to 12 borrowers worth GBP12.1 million are in
recovery, meaning legal action is being pursued to get funds back,
Peer2Peer Finance News says.
A capital loss has been taken on three loans worth GBP261,186 since
the start of the administration, Peer2Peer Finance News notes.
According to Peer2Peer Finance News, all investor and loan accounts
have been reconciled and Moorfields Advisory said it expects to
generate enough income to "protect creditor interest whilst
continuing to manage and maintain the value of the loan portfolio,
maximizing recoveries for lenders."
Under the structure of MoneyThing, loans are held and protected by
a separate company, MoneyThing Security Trustee Limited (MTSL),
Peer2Peer Finance News notes.
The main platform, MoneyThing Capital or MCL, acted as an agent for
MTSL, and took charge of arranging loans and chasing payments,
Peer2Peer Finance News states.
MCL is entitled to certain administrative charges for its
activities from MTSL such as monitoring and managing loans,
according to Peer2Peer Finance News.
It is owed GBP646,697 as an unsecured creditor, Peer2Peer Finance
News relays, citing the administrator's report.
NEWDAY FUNDING 2021-1: DBRS Finalizes BB(low) Rating on E Notes
---------------------------------------------------------------
DBRS Ratings Limited finalized its provisional ratings of AAA (sf),
AAA (sf), AA (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and
B (high) (sf) on the Class A1, Class A2, Class B, Class C, Class D,
Class E, and Class F Notes of Series 2021-1 (collectively, the
Notes) issued by NewDay Funding Master Issuer plc (the Issuer).
The ratings address the timely payment of scheduled interest and
the ultimate repayment of principal by the relevant legal final
maturity dates.
The Notes are backed by a portfolio of own-branded credit cards
granted by NewDay Cards, the originator, to individuals domiciled
in the UK.
The ratings are based on the following analytical considerations:
-- The transaction's capital structure, including form and
sufficiency of available credit enhancement to support DBRS
Morningstar's revised expectation of charge-off, principal payment,
and yield rates under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repays the Notes.
-- The originator's capabilities with respect to origination,
underwriting, and servicing.
-- An operational risk review of the originator, which DBRS
Morningstar deems to be an acceptable servicer.
-- The transaction parties' financial strength regarding their
respective roles.
-- The credit quality, diversification of the collateral, and
historical and projected performance of the securitized portfolio.
-- DBRS Morningstar's sovereign rating of the United Kingdom of
Great Britain and Northern Ireland at AA (high) with a Stable
trend.
-- The consistency of the transaction's legal structure with DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
TRANSACTION STRUCTURE
The Notes are to be issued out of a newly established NewDay
Funding Master Issuer as part of the NewDay Funding-related master
issuance structure, where all series of notes are supported by the
same pool of receivables and generally issued under the same
requirements regarding servicing, amortization events, priority of
distributions, and eligible investments.
The transaction includes a scheduled revolving period. During this
period, additional receivables may be purchased and transferred to
the securitized pool, provided that the eligibility criteria set
out in the transaction documents are satisfied. The revolving
period may end earlier than scheduled if certain events occur, such
as the breach of performance triggers or servicer termination. The
scheduled revolving period may be extended by the servicer by up to
12 months. If the Notes are not fully redeemed at the end of the
respective scheduled revolving periods, the transaction enters into
a rapid amortization.
As the Class A2 Notes are denominated in U.S. dollars (USD), there
is a balance-guaranteed, cross-currency swap to hedge the currency
and interest rate risk between the British pound sterling (GBP)
denominated receivables and the USD-based Class A2 Notes. For the
GBP-denominated classes of the Notes, which carry floating-rate
coupons based on the rate of Daily Compounding Sterling Overnight
Index Average (Sonia), the interest rate mismatch risk arising from
the fixed-interest rate collateral is mitigated to a degree by the
excess spread in the transaction and is considered in DBRS
Morningstar's cash flow analysis.
The transaction includes a series-specific liquidity reserve that
is available to cover the shortfalls in senior expenses, swap costs
if applicable, and interests on the Class A1, Class A2, Class B,
Class C, and Class D Notes and would amortize down to a floor
amount of GBP 250,000.
COUNTERPARTIES
HSBC Bank plc is the account bank and swap collateral account bank
for the transactions. Based on DBRS Morningstar's private rating of
HSBC Bank and the downgrade provisions outlined in the transaction
documents, DBRS Morningstar considers the risk arising from the
exposure to the account bank and swap collateral account bank to be
commensurate with the ratings assigned.
Banco Santander S.A., London Branch is the swap counterparty for
the Class A2 swap. DBRS Morningstar has a Long-Term Issuer Debt
rating of A (high) on Banco Santander S.A., which meets its
criteria to act in such capacity. The swap documentation also
contains downgrade provisions consistent with DBRS Morningstar's
criteria.
PORTFOLIO ASSUMPTIONS AND COVID-19 CONSIDERATIONS
The Coronavirus Disease (COVID-19) and the resulting isolation
measures have caused an economic contraction, leading to increases
in unemployment rates and adverse financial impact on many
borrowers. DBRS Morningstar anticipates that delinquencies could
continue to rise, and payment and yield rates could remain subdued
in the coming months for many credit card portfolios. The ratings
are based on additional analysis and adjustments to expected
performance as a result of the global efforts to contain the spread
of the coronavirus.
The most recent December 2020 service report of the securitized
portfolio shows an improved total payment rate of 12.9% including
the interest collections after reaching a record low level of 10.4%
in April 2020 due to the impact of the coronavirus. The payment
rates appear to have stabilized but remain slightly below
historical levels. After removing the interest collections, the
estimated monthly principal payment rates (MPPRs) of the
securitized portfolio have been stable above 8%. Based on the
analysis of historical data, macroeconomic factors, and the
portfolio-specific coronavirus adjustments, DBRS Morningstar
maintains the expected MPPR at 8%.
Similarly, the portfolio yield has been largely stable over the
reported period until March 2020. The most recent performance in
December 2020 shows a total yield of 27.5%, increased from the
record low of 26.5% in May 2020 because of higher delinquencies and
the forbearance measures of payment holiday and payment freeze
offered. Based on the observed trend and the potential yield
compression because of the forbearance measures, in November 2020,
DBRS Morningstar revised the expected yield down to 24.5% from
28%.
The reported historical charge-off rates had been high but stable
at approximately 16% until March 2020. The most recent performance
in December 2020 showed a historical low annualized charge-off rate
of 8.7%, after reaching a record high of 17.6% in April 2020. Based
on the analysis of delinquency trends, macroeconomic factors, and
the portfolio-specific adjustment because of the impact of
coronavirus, in November 2020, DBRS Morningstar revised the
expected charge-off rate upward to 18% from 16%.
DBRS Morningstar also elected to stress the asset performance
deterioration over a longer period for the Notes rated below
investment grade in accordance with its "Rating European Consumer
and Commercial Asset-Backed Securitizations” methodology.
DBRS Morningstar analyzed the transaction structure in its
proprietary cash flow tool.
Notes: All figures are in British pound sterling unless otherwise
noted.
PRECIOUSLITTLEONE: The Pud Store Takes Over Business
----------------------------------------------------
Tracey Davies at Grantham Journal reports that PreciousLittleOne, a
Grantham baby store, has been taken over by an online children's
clothing retailer.
According to Grantham Journal, PreciousLittleOne, formally located
on London Road Industrial Estate, is now in the hands of The Pud
Store, which was founded by The Apprentice star Frances Bishop in
2015.
The deal comes after Precious Little One entered administration
last month, Grantham Journal notes.
Andrew Smith and Kenneth Marland of Harrisons Business Rescue were
appointed as joint administrators to Precious Little One last month
with many customers left in limbo over their outstanding orders,
Grantham Journal relates.
TAURUS UK 2021-1: DBRS Gives Prov. BB(low) Rating on Class E Notes
------------------------------------------------------------------
DBRS Ratings Limited assigned provisional ratings to the following
notes expected to be issued by Taurus 2021-1 UK DAC (the Issuer or
the Transaction):
-- Class A notes at AAA (sf)
-- Class B notes at AA (low) (sf)
-- Class C notes at A (low) (sf)
-- Class D notes at BBB (low) (sf)
-- Class E notes at BB (low) (sf)
All trends are Stable.
Taurus 2021-1 UK DAC is the securitization of a GBP [340.1] million
senior commercial real estate (CRE) loan secured by 45
light-industrial and logistics assets in the United Kingdom with a
large concentration in London and the South East. The Transaction
is arranged by Merrill Lynch International and jointly managed by
Barclays Bank Plc for the benefit of funds managed by Blackstone
Group Inc. (Blackstone or the Sponsor).
At issuance, the Issuer will purchase the senior loan from the loan
seller, Bank of America Europe DAC, using the proceeds from the
note issuance and the issuer loan provided by the loan seller. The
issuer loan is sized to be 5% of the senior loan amount in order to
satisfy risk retention requirements. In conjunction with the senior
loan, a GBP [85.0] million mezzanine facility will be subordinated
to the securitized senior facility. The senior loan margin will
directly mirror the weighted-average coupon on all the issued
notes; therefore, there will be no excess spread and no excess
spread notes will be issued. The Sponsor will pay Issuer costs in
accordance with the ongoing financing costs letter.
The senior loan aims to refinance Blackstone's acquisitions since
Q1 2020. More specifically, 38 assets (original portfolio or United
IV subportfolio) were acquired before October 2020 and seven assets
were acquired between November and December 2020 (add-on
portfolio). As such, the data tape was produced based on various
cut-off dates ranging from 31 August 2020 to 23 December 2020.
However, the official cut-off date of the portfolio was set at 23
December 2020 and 31 December 2020 was used to calculate weighted
average unexpired loan terms. The entire portfolio has now been
renamed United V and will be integrated into Blackstone's logistics
platform Mileway, which already covers four other DBRS
Morningstar-rated CMBS transactions: Taurus 2020-2 UK DAC, BAMS
CMBS 2018-1 DAC, Taurus 2019-2 UK DAC, and Scorpio (European Loan
Conduit No.34) DAC.
The United V portfolio is characterized by its strong presence of
light-industrial assets in and surrounding the Greater London area
including London, the South East, and East of England with a total
27 assets covering a 46.9% lettable area and 59.8% gross rent. CBRE
Limited (CBRE) valued the United IV subportfolio at GBP 442.8
million including a 4.9% portfolio premium. The sum of the market
values (MV) of the individual properties amounted to GBP 422.0
million as of 30 September 2020. Similarly, C&W (U.K.) LLP (C&W)
valued the add-on assets and concluded an aggregated MV of GBP
103.9 million and a portfolio value of GBP 114.3 million. For the
purpose of covenants calculations, the portfolio premium will be
capped at 5%, bringing the Transaction's portfolio value to GBP
551.8 million. DBRS Morningstar underwrote the portfolio's value at
GBP 361.5 million, which represents a 31.0% haircut to the
aggregated MV or a 34.3% haircut to the portfolio MV.
As of the Cut-Off Dates, the portfolio generated a total gross
rental income (GRI) of GBP 26.6 million with a weighted-average
unexpired lease term (WAULT) of 4.6 years to break and 6.5 years to
expiry. DBRS Morningstar noted that one of the largest 10 tenants,
Commodore Kitchens Limited, will be switched from holding over to a
lease expiring in August 2021 upon the completion of the
acquisition. The Sponsor will then engage with the tenant to move
to a long term lease. Overall, DBRS Morningstar concluded a total
stressed net cash flow (NCF) of GBP 22.7 million, which is 10.4%
lower than the net operating income (NOI) pre-rent free.
Although the economic fallout from the Coronavirus Disease
(COVID-19) has negatively affected all CRE sectors, the portfolio's
light-industrial and logistics properties have experienced a less
severe impact compared with other asset types. As of the relevant
acquisition date, the United IV portfolio registered a 90% rent
collection rate (between April and August 2020) while the add-on
portfolio recorded a 78% collection rate. The lower collection rate
of the add-on portfolio is mainly related to M.S. International
Investment Ltd. in the Summit Centre asset. DBRS Morningstar
considers the location of the assets to have helped to protect the
portfolio from being hit hard by the pandemic, the impact of which
is expected to reduce as the mass vaccination campaign by the
government continues to be rolled out.
Similar to other Blackstone loans, only cash trap (rather than
financial default) covenants are applicable prior to a permitted
change of control (CoC). The cash trap covenants are [71.6%]
loan-to-value (LTV) during the loan term but the debt yield (DY)
covenant will tighten from [6.1]% in the first year to [6.7%] in
year two and then to [7.4]% during the three-year extended term.
After a permitted CoC, the financial default covenants on the LTV
and the DY will be applicable; they are set at 15 percentage points
higher than the LTV at the time of the permitted CoC for LTV
covenant and at the higher of [6.1]% or 85% of the DY at the time
of the permitted CoC for DY covenant. The senior loan must have,
among other requirements, a LTV no higher than [61.6]% in order for
the CoC to qualify as permitted CoC.
The two-year senior loan has three one-year extension options,
which can be exercised if certain conditions are met. During the
loan term, the borrower will purchase an interest cap agreement to
hedge against increases in the interest payable under the loan.
[BNP Paribas] will provide a cap agreement that will cover 100% of
the outstanding balance with a cap strike rate that ensures a
hedged interest coverage ratio of no less than 2X but should be no
more than 1.5%. After the loan maturity, the Sterling Overnight
Index Average (Sonia) rate on the notes will be capped at [4]%.
To cover any potential interest payment shortfalls, Bank of America
N.A. London Branch will provide the Issuer with a liquidity
facility of GBP [11.4] million. The liquidity facility will cover
the Class A, Class B, and Class C notes as well as the
corresponding portion of the Issuer loan. DBRS Morningstar
estimates that the commitment amount at closing will be equivalent
to approximately [16] months of coverage based on the hedging terms
mentioned above or approximately [nine] months of coverage based on
the [4%] Sonia cap. The liquidity facility will be reduced based on
the amortization, if any, and the MV decline of the property.
The Class E Notes are subject to an available funds cap where the
shortfall is attributable to an increase in the weighted-average
margin of the notes.
The final legal maturity of the notes is in [2031], [five] years
after the fully extended loan maturity date. DBRS Morningstar
believes that this provides sufficient time to enforce the loan
collateral and repay the bondholders, given the security structure
and jurisdiction of the underlying loan.
To comply with the applicable regulatory requirements, [Bank of
America Europe DAC] will advance a GBP [*] million representing 5%
of the total securitized balance to the Issuer as an Issuer loan.
The ratings will be finalized upon receipt of execution version of
the governing transaction documents. To the extent that the
documents and information provided to DBRS Morningstar as of this
date differ from the executed version of the governing transaction
documents, DBRS Morningstar may assign different final ratings to
the notes.
The Coronavirus Disease (COVID-19) and the resulting isolation
measures have caused an economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
tenants and borrowers. DBRS Morningstar anticipates that vacancy
rate increases and cash flow reductions may continue to arise for
many CMBS borrowers, some meaningfully. In addition, CRE values
will be negatively affected, at least in the short term, impacting
refinancing prospects for maturing loans and expected recoveries
for defaulted loans.
Notes: All figures are in British pound sterling unless otherwise
noted.
TOGETHER ASSET 2021-CRE1: S&P Assigns Prelim BB+ Rating on X Notes
------------------------------------------------------------------
S&P Global Ratings has assigned preliminary credit ratings to
Together Asset Backed Securitisation 2021-CRE1 PLC's (TABS 2021
CRE) class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd notes, and X-Dfrd
notes. At closing, TABS 2021 CRE will also issue unrated class Z
notes.
The transaction is a static transaction that securitizes a
provisional portfolio of £329 million mortgage loans, secured on
commercial (77.4%), mixed-use (19.3%), and residential (3.3%)
properties in the U.K.
This is the first transaction S&P has rated in the U.K. that
securitizes small ticket commercial mortgage loans.
The loans in the pool were originated by Together Commercial
Finance Ltd. (a nonbank specialist lender) between 2016 and 2020.
S&P said, "We consider the nonresidential nature of most of the
pool as higher risk than a fully residential portfolio,
particularly the loss severity. We have nevertheless assessed these
loans' probability of default using our RMBS criteria as the method
by which the loans were underwritten and are serviced is similar to
that of Together's residential mortgage portfolio. On the loss
severity side however, we have used our covered bond commercial
real estate criteria to fully capture the market value declines
associated with commercial properties."
At closing, credit enhancement for the rated notes will consist of
subordination and the non-liquidity reserve portion of the general
reserve fund. Following the step-up date, additional
overcollateralization will also provide credit enhancement. The
overcollateralization will result from the release of the excess
amount from the revenue priority of payments to the principal
priority of payments.
Liquidity support for the class A notes is in the form of an
amortizing liquidity reserve fund. The nonamortizing reserve fund
can provide liquidity support to the class A to E-Dfrd notes.
Principal can also be used to pay interest on the most-senior class
outstanding (for the class A to E-Dfrd notes only).
At closing, the issuer will use the issuance proceeds to purchase
the beneficial interest in the mortgage loans from the seller. The
issuer grants security over its assets in the security trustee's
favor.
S&P said, "Our cash flow analysis indicates that the available
credit enhancement for the class C-Dfrd, E-Dfrd, and X-Dfrd notes
is commensurate with higher ratings than those currently assigned.
The ratings on these notes reflect their ability to withstand the
potential repercussions of the extended recovery timings and higher
default sensitivities. We also consider the relative position of
the class E-Dfrd and X-Dfrd notes in the capital structure, and
potential increased exposure to tail-end risk.
"There are no rating constraints in the transaction under our
counterparty, operational risk, or structured finance sovereign
risk criteria. We consider the issuer to be bankruptcy remote."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Given the dynamic/fluid circumstances associated with the
coronavirus pandemic, S&P will continually evaluate and update this
disclaimer as warranted.
Preliminary Ratings
Class Prelim. rating* Class size (%)
A AAA (sf) 79.75
B-Dfrd AA+ (sf) 5.50
C-Dfrd AA- (sf) 4.25
D-Dfrd A (sf) 3.90
E-Dfrd BBB (sf) 3.60
X-Dfrd BB+ (sf) 4.50
Z NR 5.00
Residual certificates NR N/A
*S&P's preliminary ratings address timely receipt of interest and
ultimate repayment of principal on the class A notes, and the
ultimate payment of interest and principal on the other rated
notes.
NR--Not rated.
N/A--Not applicable.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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