/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/210714.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, July 14, 2021, Vol. 22, No. 134 Headlines B U L G A R I A BULGARIAN ENERGY: Fitch Gives 'BB(EXP)' on Upcoming Unsec. Eurobond BULGARIAN ENERGY: Moody's Rates New Senior Unsecured Bonds 'Ba2' F R A N C E SIACI SAINT HONORE: S&P Puts 'CCC+' ICR on CreditWatch Positive G E R M A N Y APCOA PARKING: Moody's Assigns B3 CFR & Rates New Secured Notes B3 NEXT.E.GO MOBILE: In Talks to Go Public After Insolvency Rescue I R E L A N D ACCUNIA EUROPEAN CLO I: Fitch Raises Class F Notes to 'Bsf' AURIUM CLO II: S&P Assigns B- Rating on Class F Notes GOLDENTREE LOAN: Fitch Affirms B- Rating on Class F Notes HAYFIN EMERALD VII: Moody's Assigns (P)B3 Rating to Class F Notes MONTMARTRE EURO 2020-2: Fitch Gives 'B-(EXP)' Rating to F-R Notes MONTMARTRE EURO 2020-2: S&P Assigns Prelim. 'B-' Rating on F Notes NORWEGIAN AIR: NAI to Cut 22 of 31 Jobs Under New Business Plan PENTA CLO 9: S&P Assigns B- Rating on $12MM Class F Notes PERRIGO CO: Egan-Jones Retains BB+ Sr. Unsecured Debt Ratings TIKEHAU CLO II: Fitch Affirms B- Rating on Class F Notes [*] IRELAND: Company Insolvencies Decline in First Half 2021 L U X E M B O U R G SUNSHINE LUXEMBOURG VII: Fitch Affirms 'B' LT IDR, Outlook Neg. P O L A N D SYNTHOS SPOLKA: Fitch Gives Final 'BB+' on EUR600MM Sec. Notes R U S S I A UZBEKISTAN: S&P Assigns 'BB-' Rating on New Senior Unsecured Notes S P A I N FT RMBS SANTANDER 7: DBRS Gives Prov. BB Rating on Class B Notes JOYE MEDIA: S&P Lowers ICR to 'D' on Missed Interest Payment T U R K E Y TURKISH AIRLINES: S&P Lowers 2015-1 Certs Rating to 'B(sf)' U N I T E D K I N G D O M ARCADIA GROUP: Mazars Appointed to Liquidate Remnants of Business CANTERBURY FINANCE 4: DBRS Assigns B Rating on Class X Notes COLD FINANCE: DBRS Confirms BB(high) Rating on Class E Notes CONSTELLATION AUTOMOTIVE: Fitch Gives 'B-(EXP)' to Secured Debt ELVET MORTGAGES 2019-1: Fitch Affirms B- Rating on Class F Notes GFG ALLIANCE: AIP Launches Legal Proceedings Over Belgian Mill GLOBAL SHIP: Moody's Hikes CFR to B1 on Improving Credit Metrics JAGUAR LAND: S&P Alters Outlook to Stable & Affirms 'B' ICR NEWDAY FUNDING 2021-2: DBRS Finalizes B(high) Rating on F Notes TOWER BRIDGE 2021-2: DBRS Finalizes BB(high) Rating on X Notes TOWER BRIDGE 2021-2: S&P Assigns B(sf) Rating on Class X Notes TOWER BRIDGE 4: DBRS Confirms BB Rating on Class F Notes - - - - - =============== B U L G A R I A =============== BULGARIAN ENERGY: Fitch Gives 'BB(EXP)' on Upcoming Unsec. Eurobond ------------------------------------------------------------------- Fitch Ratings has assigned Bulgarian Energy Holding EAD's (BEH) upcoming Eurobond an expected foreign-currency senior unsecured rating of 'BB(EXP)' with a Recovery Rating of 'RR4'. Fitch has also affirmed BEH's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BB' with a Positive Outlook, and BEH's existing senior unsecured debt at 'BB'/'RR4'. Proceeds from the new Eurobond are intended for refinancing BEH's EUR550 million Eurobond maturing in August 2021. The bond's expected rating is in line with BEH's senior unsecured rating, as the bond will constitute direct, unconditional, unsecured and unsubordinated obligations of the company. The final rating is contingent on the receipt of final documents conforming materially to the preliminary documentation received. KEY RATING DRIVERS Strong Market Position: BEH is the largest utility in Bulgaria with a wide range of operations composing an integrated business profile. In 2020 the group generated 23TWh of electricity, of which 73% was from nuclear (NPP Kozloduy), 17% from lignite (TPP Maritsa East 2) and 10% from hydro power plants (NEK), leading to on average a low carbon footprint. It is also active in more stable electricity transmission (ESO) and gas transmission and transit (Bulgartransgaz), which contributed 35% to total reported EBITDA in 2020, supporting its credit profile. BEH is present also in electricity and gas supply (NEK and Bulgargaz, respectively), excavates lignite (Mini Maritsa) and indirectly controls a telecom business (Bulgartel). Gas Network Expansion: BEH's main investment, via fully owned Bulgartransgaz, is the expansion of a gas transmission-and-transit infrastructure between the Bulgarian-Turkish and the Bulgarian-Serbian borders (Balkan Stream). Completed in 4Q20 the project is partly in operation but full capacity will only be reached after the launch of a new compressor station, Nova Provadia, expected in 2H21. The output capacity at the Serbian border (14bcm vs. 19bcm input at the Turkish border) will allow for gas transit to Serbia and further to Hungary and Austria. The second large investment is the construction of a gas interconnector between Greece and Bulgaria (IGB). It will have a capacity of 3bcm (extendable to 5bcm) and should be completed by end-2021 with full operational capacity in 1H22. Large Capex: BEH is going through a large wave of investments triggered by the gas projects. It spent BGN1.6 billion capex in 2020, after BGN1.1 billion in 2019. For 2021 Fitch expects around BGN1.1 billion in capex, before it stabilises at around BGN0.6 billion-BGN0.7 billion from 2022. Pressure from Expensive CO2: Booming CO2 prices have a negative impact on BEH's lignite-fired power plant TPP Maritsa East 2. In 5M21 the power plant's generation output was 14% lower yoy. For 2020 the plant's generation output decreased 42% yoy (while NPP Kozloduy reported higher generation output, BEH as a group reported a decrease by around 10%). Lower generation output in 2020 was driven also by lower demand for electricity during the pandemic. High Leverage to Decrease: Fitch expects BEH's funds from operations (FFO) net leverage will peak in 2021 at around 6x due to high capex, while material profits from the new infrastructure will materialise only from 2022. FFO net leverage should then trend lower towards 4x by 2025, building up leverage headroom for BEH's Standalone Credit Profile (SCP) of 'b+', for which Fitch's FFO net leverage sensitivities are 4x to 6x. Rating Uplift Constrained: The IDR of BEH reflects a two-notch uplift from its SCP for strong links with its sole owner, the Bulgarian state (BBB/Positive). Based on Fitch's Government-Related Entities Rating Criteria, Fitch views the status, ownership and control links between BEH and the state as 'Strong', while the support track record and socio-political and financial implications of a BEH default are 'Moderate'. These all lead to a support score of 17.5, which would have allowed for a three-notch uplift to BEH's SCP if not constrained by a cap defined as the sovereign rating minus three notches. Therefore, if Bulgaria is upgraded to 'BBB+', the uplift to BEH's SCP could widen to three notches, which is reflected in the Positive Outlook on BEH's IDR. Relatively Weak SCP: BEH's SCP of 'b+' is low for the group's strong market position, diversified business mix and compared with peers'. The main constraints are high capex (in particular over 2020-2021), a still fairly weaker regulatory framework in Bulgaria, albeit becoming more liberalised, and corporate-governance limitations. Liberalisation on Track: Since 1 July 2021, the Bulgarian wholesale electricity market has become fully liberalised. This should have a positive impact on BEH's SCP over time, due to the company's strong asset base and low average carbon footprint. The retail market should become liberalised by end-2024, although non-households are already unregulated since October 2020. Corporate-Governance Limitations: BEH's corporate-governance limitations include a qualified audit opinion for the group's 2009-2020 consolidated financial statements, a relatively complex group structure, and lower financial transparency than EU peers'. This ESG constraint has a negative impact on BEH's SCP in combination with other factors. Positively, the group reports under IFRS. DERIVATION SUMMARY BEH has a leading position in the Bulgarian electricity and gas market through its ownership of most of Bulgaria's power generation assets (including a nuclear power plant, lignite-fired and hydro power plants), the country's largest mining company, the country's electricity transmission network, gas transmission and transit networks and through its position as public supplier of both electricity and gas in Bulgaria. BEH's integrated business structure and strategic position in the domestic market make the group comparable to some central European peers such as Poland's PGE Polska Grupa Energetyczna S.A. (PGE, BBB+/Stable) and Hungary's MVM Zrt. (BBB/Stable). However, BEH operates in a more volatile and less transparent regulatory environment than PGE or MVM, has higher leverage and its results are less predictable with some corporate-governance issues. BEH's rating includes a two-notch uplift from the SCP to reflect links with the sovereign, while this is not the case for PGE and MVM. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Mildly positive trend in EBITDA with an average of BGN1 billion a year over 2021-2025; -- Total capex at BGN3.8 billion over 2021-2025; -- No dividends until 2022 and BGN30 million a year from 2023; -- Refinancing of the EUR550 million bond in July 2021; -- State-provided financing to NEK (EUR602 million) refinanced at the BEH level on maturity in December 2023. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Upgrade of Bulgaria; -- Further tangible government support to BEH, such as additional state guarantees materially increasing the share of state guaranteed debt, or cash injections, which would more tightly link BEH's credit profile with Bulgaria's stronger credit profile; -- Stronger SCP due to FFO net leverage falling below 4x on a sustained basis, lower regulatory and political risk, higher earnings predictability, and better corporate governance. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Negative action on Bulgaria; -- Weaker links with the Bulgarian state; -- Weaker SCP, e.g. due to FFO net leverage exceeding 6x on a sustained basis, escalation of regulatory and political risk, or insufficient liquidity. An SCP of 'b' would only trigger a revision of the Outlook to Stable, provided that the sovereign rating remains unchanged. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Refinancing Required: As per Fitch's rating case, BEH would marginally lack liquidity in 2021 (liquidity score at 0.9x) if it does not refinance its EUR550 million bond maturing in August 2021. The refinancing, assuming largely the same amount, will boost BEH's liquidity and should be sufficient at least until state-provided financing to NEK matures in December 2023. Large Fitch-adjusted Debt: Fitch adds three items to Fitch-adjusted debt on top of BEH's reported debt, and exclude leasing. The three items are the state-provided financing to NEK in connection with the Belene arbitration of EUR602 million, financing provided to Bulgartransgaz by the Arkad-led consortium in connection with the Balkan Stream project (BGN1,045 million at end-2020, to amortise over 10 years), and the bank guarantees provided for BEH, Bulgartransgaz and Bulgargaz in connection with EU claims in the gas market of EUR77 million. Consequently, Fitch-adjusted debt at end-2020 reached BGN5.7 billion, compared with an unadjusted BGN3.3 billion. State-related Debt: As per Fitch rating case, the state-guaranteed debt (at single-digit percentages of gross debt) together with state-provided financing to NEK will account for 20%-25% of Fitch-adjusted debt until NEK financing's maturity in 2023. Fitch deems it a still considerable amount, reflecting close links between BEH and its sovereign owner. Fitch assumes the NEK facility will be refinanced at the BEH level in 2023, similarly to the existing Eurobonds or, if results are better than in the current rating case, repaid from on-balance-sheet cash. However, BEH and the state are also considering converting the NEK facility into equity, but no decisions have been taken yet. SUMMARY OF FINANCIAL ADJUSTMENTS Financial debt is increased by the face value of the state-financing to NEK to settle Belene obligations, by the financing provided by Arkad-led consortium to Bulgartransgaz for the Balkan Stream project, and by the bank guarantees given to BEH, Bulgartransgaz and Bulgargaz to cover EU claims. ESG CONSIDERATIONS BEH has ESG scores of 4 for "Group Structure" and "Financial Transparency" to reflect a qualified audit opinion, a fairly complex group structure, and lower financial transparency than EU peers'. This ESG constraint has a negative impact on BEH's SCP in combination with other factors, in particular high capex and a volatile regulatory framework. BEH has also some exposure to carbon-intensive generation via its lignite-fired power plant. However, the fuel mix is diversified with most of electricity generated from nuclear and hydro sources, therefore the scores for "GHG Emissions & Air Quality" and "Energy Management" are at 3. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. BULGARIAN ENERGY: Moody's Rates New Senior Unsecured Bonds 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has assigned a Ba2 long-term debt rating to the senior unsecured bonds to be issued by Bulgarian Energy Holding EAD (BEH). BEH's outlook is stable. RATINGS RATIONALE The Ba2 rating assigned to the new bonds is in line with that of the existing bonds of BEH, reflecting their senior unsecured ranking. The issuance amount is expected to be EUR600 million but execution is subject to market conditions. Moody's expects the proceeds of the issuance to be largely used to repay the company's outstanding EUR550 million bond which matures on August 2, 2021. BEH has a corporate family rating of Ba1, which is underpinned by growing income from the liberalized power market, given its competitive generation mix featuring high output from low-variable cost nuclear and hydro power; by significant earnings from regulated electricity and gas grid operations; and by a history of relatively low investment expenditures and dividend restraint from BEH's 100% owner, the Government of Bulgaria (Baa1 stable). Consequently, the company's credit metrics are currently strong, but Moody's expects leverage to increase, caused by high gas infrastructure spending. Limiting factors for BEH's rating include an evolving regulatory regime, marked by a lack of predictability of cash flows; little transparency regarding the path to full liberalization of the Bulgarian power market; and the near exclusive reliance on operating cash flows as a funding source, reflecting the absence of sound liquidity management. BEH's rating incorporates the company's Baseline Credit Assessment (BCA) of b1 and Moody's view of a high default dependence and high support by its owner in case of financial distress, given that the company is in charge of important domestic energy infrastructure. Notwithstanding Moody's support assumption, the rating agency views BEH as exposed to risks from political interventions and adverse regulation. RATIONALE FOR THE STABLE OUTLOOK The outlook is stable, reflecting Moody's view that BEH generally benefits from the liberalization of Bulgaria's wholesale energy markets, reflected in an improved credit profile, expressed as BCA of b1. This is partly offset by the uncertainties with regard to the implementation timeline and eventual design of the fully liberalised markets in which BEH operates. Moody's expects that the company will be able to maintain a financial profile, expressed as Funds from operations (FFO)/debt, commensurate with its BCA in the high teens in percentage terms on a sustained basis, notwithstanding a temporary weakening over the next 2 years, owing to larger investment projects. A one-notch downgrade or upgrade of the BCA may not necessarily result in a change in the final rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The rating could be upgraded if (1) the market liberalization process is completed and proves to remain beneficial for BEH; and (2) the credit quality and Moody's support expectations of the Government of Bulgaria remain at least unchanged. Downward pressure on the BCA could occur if BEH's financial profile were to deteriorate persistently below guidance as a result of, but not limited to, (1) adverse changes in the operating environment, including a significant delay in the completion of the market liberalization process; or (2) negative regulatory changes, or both. Downward pressure on the final rating may develop if (1) Moody's was to reassess the estimate of high support from the Bulgarian government, or (2) the government's rating was to be downgraded. A corporate family rating (CFR) is an opinion of the BEH group's ability to honor its financial obligations and is assigned to BEH as if it had a single class of debt and a single consolidated legal structure. The Ba2 senior unsecured rating of BEH's outstanding senior bonds is one notch below the rating level of BEH's CFR and reflects a degree of structural subordination of noteholders to the claims of other BEH group creditors. The methodologies used in this rating were Unregulated Utilities and Unregulated Power Companies published in May 2017. Headquartered in Sofia, Bulgarian Energy Holding EAD is the holding company of the largest utility group in Bulgaria. The group owns more than 50% of the country's generation capacity, owns and operates the electricity and gas transmissions networks and is sole importer and main supplier of gas in the country. Bulgarian Energy Holding is 100% owned by the Government of Bulgaria. For the financial year 2020, Bulgarian Energy Holding reported consolidated total revenues of BGN5,596 million (around EUR2,860 million) and EBITDA of BGN898 million (around EUR459 million). =========== F R A N C E =========== SIACI SAINT HONORE: S&P Puts 'CCC+' ICR on CreditWatch Positive --------------------------------------------------------------- S&P Global Ratings placed its 'CCC+' issuer credit rating on Siaci Saint Honore SAS (Acropole Holding) and its subsidiary Sisaho International on CreditWatch with positive implications, while affirming its 'CCC+' ratings on the existing EUR485 million senior secured term loan B; S&P expect to withdraw the rating on this loan once it is repaid as part of the transaction. S&P said, "We are assigning a preliminary 'B' issue rating to the proposed EUR850 million senior secured term loan B, pending completion of the merger transaction and implementation of the new capital structure as planned. "We expect to resolve the CreditWatch once the transaction is finalized, which we expect will be in the second half of 2021. If its terms and conditions are in line with expectations, we could raise the issuer credit ratings by up to two notches." Siaci's plans to merge with Groupe Burrus Courtage (GBC), a top-10 player in the French corporate insurance brokerage market, involve a change of ownership since Christian Burrus, GBC's majority shareholder, and Siaci's management will own the majority of the combined group's share capital and voting rights. The CreditWatch placement indicates the probability of an upgrade by up to two notches if the proposed transaction is completed, boosting Siaci's liquidity position. Under the proposed transaction terms, which values the combined business at about EUR2.4 billion, Siaci will raise a new EUR850 million term and a new EUR150 million revolving credit facility (RCF) to partly finance the merger with GBC. S&P said, "Our rating on Siaci is currently constrained by the group's very high leverage, negative free operating cash flow (FOCF), and weak liquidity due to its negative cash balance and fully drawn RCF. With the proposed full refinancing of the capital structure, we expect these liquidity constraints will be lifted. We therefore expect to revise upward our liquidity assessment, in view of the new fully available RCF and our expectation of a positive cash balance at closing." S&P said, "We believe the merger will strengthen the group's business risk profile. We expect the combined group will generate about EUR620 million of net sales in 2021 and become the leading corporate insurance broker in France, and No. 7 globally, within a very fragmented market." The combination of Siaci with GBC will strengthen the group's market positions in core business segments, such as Health and Protection and Pensions and Savings (HP/PS), and Property and Casualty (P&C), and in niche markets such as regulated professionals or international medical protection. The merger will enhance the group's product portfolio, with a complementary product offering from both companies, which will enable it to better serve large multinational blue-chip customers. S&P expects the group's profitability will benefit from GBC's somewhat higher stand-alone margins, thanks to its positioning in higher-margin segments such as credit and specialties, as well as from expected synergies between the two groups. However, with an average adjusted EBITDA margin of 22% projected in the next three years, the group's profitability will remain weaker than that of its direct peers, whose adjusted margins tend to exceed 25%. In addition, the combined group will remain a small player concentrated in France (about 73% of combined revenue) compared with large global insurance brokers such as Aon Plc, Marsh & McLennan Cos, and Willis Tower Watson PLC, who benefit from a well-established global presence through a global distribution network and extensive technical resources. S&P said, "We expect credit metrics will improve following the transaction. Although we expect the combined group's financial risk profile will remain highly leveraged, we anticipate a significant improvement after the transaction, with lower leverage and stronger FOCF. We calculate that our adjusted leverage ratio will decrease to 7.6x at year-end 2021 from 12.6x at year-end 2020 (9.8x excluding shareholder loans). Our adjusted debt figure estimate of about EUR1.04 billion includes the proposed EUR850 million term loan B, EUR11 million of nonrefinanced debt, EUR49 million of acquisition-related liabilities, about EUR157 million of lease liabilities, and about EUR30 million of pension commitments, minus our forecast of about EUR50 million in cash on hand at year-end 2021. We factor into our EBITDA calculation a significant amount of nonrecurring expenses, as well as integration and restructuring costs. Moreover, we forecast that expected synergies will largely take effect from 2022-2023 only, resulting in our forecast pro forma adjusted EBITDA figure of about EUR137 million in 2021 for the combined group. We note that minority financial investors, including Ontario Teachers Pension Plan (OTPP), will provide equity, part of it in the form of preferred shares. We have excluded this financing from our financial analysis, including our leverage and coverage calculations, since we believe the common equity and non-common-equity financing are sufficiently aligned." The combined group will no longer be controlled by a financial sponsor. Following completion of the proposed transaction, GBC, headed by Christian Burrus, together with the management of the newly formed group, will hold the majority of the share capital and voting rights (50.1%). Minority financial investors will acquire the remaining 49.9% stake, led by OTPP (30%). Other minority investors include BPI France (10%), Cathay Capital (5%), and Ardian, among others. Charterhouse will completely exit. In our view, the group will no longer be financial-sponsor controlled, since Mr. Burrus and management will exercise control, and drive the group's strategy and execution, supported by OTPP as the main financial investor. S&P said, "We believe Mr. Burrus and the management team will have a long-term investment strategy for the group and a lower tolerance for leverage compared with a private-equity sponsor. We do not think the minority financial investors will have the ability to dictate the group's strategy and cash flow. Despite the likely high leverage at closing of the transaction, and our expectation that the group will continue to make bolt-on acquisitions to expand, we believe the owners' priority will be to deleverage. "We base our preliminary 'B' rating on the proposed EUR850 million senior secured term loan B on the pro forma capital structure after the transaction. This rating reflects our view of the future capital structure assuming the successful completion of the merger and refinancing. Should the transaction not be completed as expected, or the final terms of the EUR850 million term loan B differ significantly from our expectations, we could withdraw or revise our preliminary issue rating. "The CreditWatch reflects our view of a potential improvement to Siaci's credit profile following the change of ownership and merger with GBC. We believe the new proposed capital structure and combined group's increased EBITDA will result in stronger credit metrics, liquidity, and business risk profile. "We expect to resolve the CreditWatch in the second half of 2021, subject to the transaction completion timeline. We are likely to raise the ratings by up to two notches if the transaction is completed as expected." ============= G E R M A N Y ============= APCOA PARKING: Moody's Assigns B3 CFR & Rates New Secured Notes B3 ------------------------------------------------------------------ Moody's Investors Service has assigned a B3 corporate family rating and a B3-PD probability default rating to APCOA Parking Holdings GmbH, a Germany-based European parking operator which is the top entity of the new restricted group following the refinancing transaction. Concurrently, Moody's has assigned B3 ratings to the new proposed EUR665 million guaranteed senior secured notes due 2027 issued by Apcoa. The outlook on Apcoa is stable. The CFR of B3 and the PDR of B3-PD and the stable outlook at Park LuxCo 3 S.C.A., the direct parent entity of Apcoa have been withdrawn. The B3 ratings on the existing guaranteed senior secured bank credit facilities at Apcoa are unchanged and will be withdrawn upon completion of the refinancing transaction. Net proceeds from the new EUR665 million notes will be used to the refinance the existing credit facilities as well as provide additional cash buffer of EUR48 million. RATINGS RATIONALE Apcoa's B3 CFR with a stable outlook reflects Moody's expectation that its credit metrics will remain depressed through 2022 because of continuing mobility restrictions and Moody's expectations that there will be a slow recovery in traffic in some of its end-markets, such as travel, events and hospitality, once restrictions are lifted. On the other hand, Moody's expects, and has so far witnessed, a faster recovery in traffic in the company's main city centres and shopping areas end-markets. The rating agency forecasts that its Moody's-adjusted debt/EBITDA will gradually improve towards 7.0x in 2022 from 9.7x in 2020. The higher gross debt of EUR73 million post-refinancing will increase gross leverage by around 0.5x based on Moody's-adjusted EBITDA in 2021, but this will be offset to some extent by improved liquidity including the additional cash buffer of EUR48 million and the larger new RCF of EUR80 million compared to the existing RCF of EUR35 million. The improved liquidity is credit positive because Moody's expects free cash flow (FCF) to be negative through Q3/Q4 2021 until mobility restrictions are lifted. Moody's forecasts negative FCF of around EUR50 million in 2021, before turning slightly positive in 2022. Moody's expects that the negative effects from the coronavirus outbreak will only start to ease from the second half of 2021. The rating reflects Apcoa's strong operating track record with respect to new business wins, retention rates, volume and pricing improvements on existing contracts, and cost efficiencies. This led to an increase in management EBITDA to around EUR84 million in 2019 from EUR62 million in 2016. LIQUIDITY Moody's views Apcoa's liquidity as adequate. Post refinancing, the unrestricted cash balance will be EUR87 million and the company will have EUR50 million available under its new RCF. The RCF has a maximum super senior leverage ratio of 1.5x if the RCF is utilized by more than 40% and applicable from September 2022. In the meantime, there is a minimum liquidity test of EUR10 million that the company needs to comply with. Breach of any of these covenants constitutes an event of default. The nearest debt maturity has been pushed to 2027 with this refinancing. STRUCTURAL CONSIDERATIONS The senior secured notes are rated B3, at the same level as the CFR, reflecting the comparatively small amount of super senior RCF and upstream guarantees from operating companies. The senior secured notes and the RCF are secured by shares, bank accounts and intragroup receivables of material subsidiaries. However, the RCF will rank ahead of the notes in an enforcement scenario under the provisions of the intercreditor agreement. Moody's typically views debt with this type of security package to be akin to unsecured debt. The notes and the RCF benefit from upstream guarantees from operating companies accounting for at least 80% of consolidated EBITDA. RATING OUTLOOK The stable outlook assumes that Apcoa's earnings will gradually improve once mobility restrictions are lifted and this will lead to deleveraging to around 7.0x in 2022 and breakeven to slightly positive free cash flow. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Negative rating action could materialize if operating performance does not materially recover in the coming quarters and this leads to a further deterioration in credit metrics and liquidity than currently forecast by Moody's -- for example if Moody's-adjusted debt/EBITDA remains sustainably above 7.5x and liquidity is not comfortably above the minimum liquidity covenant of EUR10 million. Negative rating pressure could also develop if changes in customer habits, including less passenger car travel and car parking, look likely to weaken the company's operating performance and cash flow over the longer-term. Upward rating pressure is unlikely to arise until the coronavirus outbreak is brought under control, travel restrictions are lifted, and car park traffic returns to more normal levels. Over time, Moody's could upgrade Apcoa' ratings if Moody's-adjusted debt/EBITDA is sustainably below 6.5x and the company maintains a solid liquidity profile including positive Moody's-adjusted free cash flow. PRINCIPAL METHODLOGY The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. COMPANY PROFILE Apcoa is a leading European parking operator, with a strong presence in Germany, Italy, the UK and Nordic countries. It generated revenues of EUR532 million in 2020 (EUR721 million in 2019). NEXT.E.GO MOBILE: In Talks to Go Public After Insolvency Rescue --------------------------------------------------------------- William Wilkes at Bloomberg News reports that German EV hopeful Next.e.GO Mobile SE is in talks to go public through a blank-check company or an initial public offering that could value the manufacturer of compact cars for shorter trips at as much as EUR2 billion (US$2.4 billion). According to Bloomberg, E.GO Chairman Ali Vezvaei said in an interview the company, saved from insolvency last year, may go through with the plan within the next 12 months. "There are advantages to both and we're examining our options," Mr. Vezvaei, as cited by Bloomberg, said, while the company has plans to produce a total of 300,000 vehicles over the next five years. "It could happen within the next 12 months." Offering no-frills electric cars, e.GO restarted its factory in Aachen this month after Dutch private equity firm ND Industrial Investments B.V plucked it from insolvency proceedings last year, Bloomberg recounts. E.GO's current model, the Life, has a driving range of 125 kilometers (78 miles) and a price tag of 26,560 euros that's reduced to 16,990 euros in Germany after subsidies, Bloomberg discloses. The automaker has plans to expand to larger and sportier models, Bloomberg states. Proceeds from a listing would go toward vehicle development and the manufacturers' production network. In addition to its Aachen production site, e.GO has signed agreements to build factories in Greece, Mexico and is set to unveil a third European location next week, Bloomberg relates. Mr. Vezvaei said the company is in initial talks about setting up two production sites in Asia, Bloomberg notes. E.GO's expansion plans under its new owner come after production shutdowns in the first wave of the coronavirus pandemic tipped the company into insolvency, Bloomberg relates. ND Industrial Investments, with holdings in the logistics, transport and energy sectors, became its majority shareholder last year and installed Mr. Vezvaei as chairman, Bloomberg notes. ============= I R E L A N D ============= ACCUNIA EUROPEAN CLO I: Fitch Raises Class F Notes to 'Bsf' ----------------------------------------------------------- Fitch Ratings has upgraded Accunia European CLO I B.V.'s class B-1, B-2, C, D and F notes, affirmed the other notes and revised the Outlooks on the class E notes to Stable from Negative. DEBT RATING PRIOR ---- ------ ----- Accunia European CLO I B.V. A XS1966591452 LT AAAsf Affirmed AAAsf B-1 XS1966593151 LT AA+sf Upgrade AAsf B-2 XS1966595016 LT AA+sf Upgrade AAsf C XS1966596683 LT A+sf Upgrade Asf D XS1966598382 LT BBBsf Upgrade BBB-sf E XS1966599430 LT BB-sf Affirmed BB-sf F XS1966599869 LT Bsf Upgrade B-sf TRANSACTION SUMMARY The transaction is a cash flow CLO, mostly comprising senior secured obligations. The transaction has just exited its reinvestment period and is actively managed by Accunia Fondsmaeglerselskab A/S. KEY RATING DRIVERS Reinvestment Period Exited: The upgrade of the class B-1, B-2, C, and D notes reflects that the transaction has just exited its reinvestment period and is expected to begin deleveraging. The upgrade of the class F notes reflects the tranche's partial deleveraging through excess spread. In addition, the transaction's weighted-average life (WAL) is shorter than at Fitch's last review. Stable Asset Performance: The transaction was below par by 1.1% as of the latest investor report dated 28 May 2021. It was passing all portfolio profile tests, collateral quality tests and coverage tests. As per the trustee report, there is one defaulted asset in the portfolio, with a total principal balance of EUR4 million. Outlooks Revised to Stable: Fitch has revised the Outlooks on the class E notes to Stable from Negative as it no longer runs the coronavirus baseline stress scenario as a driver of the Outlook. The Stable Outlook reflects the default rate cushion that each tranche benefits from at current rating. For more details see "Coronavirus Stress Scenario Removed in EMEA CLO Analyses" dated 28 June at www.fitchratings.com. 'B/B-' Portfolio: Fitch assesses the average credit quality of the obligors in the 'B'/'B-' category. The Fitch WARF calculated by Fitch (assuming unrated assets are CCC) and by the trustee for Accunia European CLO I B.V.'s current portfolio was 34.92 and 34.27, respectively, versus the maximum covenant of 35.00. High Recovery Expectations: Senior secured obligations comprise at least 94% of the portfolio. 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 (WARR) of the current portfolio under Fitch's calculation is 62.27%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is no more than 18.75%, and no obligor represents more than 2.8% of the portfolio balance. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- 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 up to four notches, depending on the notes. -- Except for the class A notes, which are already at the highest rating on Fitch's scale and cannot be upgraded, upgrades may occur in case 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. Further tranches may be upgraded as the notes start to amortise, leading to higher credit enhancement across the structure, and if the portfolio's credit quality remains stable. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- 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. -- 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. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset 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. 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. AURIUM CLO II: S&P Assigns B- Rating on Class F Notes ----------------------------------------------------- S&P Global Ratings assigned its credit ratings to Aurium CLO II DAC's class A-1, A-2, B, C, D, E, and F notes. At closing, the issuer also issued unrated subordinated notes. Under the transaction documents, after a long first interest period, the rated notes will pay quarterly interest unless there is a frequency switch event. Following this, the notes will switch to semiannual payment. The portfolio's reinvestment period will end approximately four-and-a-half years after closing, and the portfolio's maximum average maturity date will be eight-and-a-half years after closing. The ratings assigned to the notes 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 considers to be bankruptcy remote. -- The transaction's counterparty risks, which S&P considers to be in line with its counterparty rating framework. Portfolio Benchmarks CURRENT S&P Global Ratings weighted-average rating factor 2,705.95 Default rate dispersion 647.12 Weighted-average life (years) 4.67 Obligor diversity measure 113.40 Industry diversity measure 20.32 Regional diversity measure 1.31 Transaction Key Metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator 'B' 'CCC' category rated assets (%) 5.24 Covenanted 'AAA' weighted-average recovery (%) 35.50 Covenanted weighted-average spread (%) 3.65 Covenanted weighted-average coupon (%) 4.25 S&P said, "Our assigned ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We consider that the portfolio will be well-diversified on the effective date, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations. "In our cash flow analysis, we considered the EUR350 million par amount, the covenanted weighted-average spread of 3.65%, the covenanted weighted-average coupon of 4.25%, and the covenanted weighted-average recovery rates for all rating levels. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. Our cash flow analysis considers scenarios where the underlying pool comprises 100% of floating-rate assets (i.e., the fixed-rate bucket is 0%) and where the fixed-rate bucket is fully utilized (in this case 10%). Under the transaction documents, the issuer can purchase workout loans, 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. The purchase of workout loans is not subject to the reinvestment criteria or the eligibility criteria. However, if the workout loan meets the eligibility criteria with certain exclusions, it can be accorded defaulted treatment in the principal balance and par coverage tests. The issuer's cumulative exposure to workout loans that can be acquired with principal proceeds is limited to 5% of the reinvestment target par balance, while the cumulative exposure to those purchased with principal and interest proceeds is limited to 10% of the reinvestment target par balance. The issuer may purchase workout loans using interest proceeds, principal proceeds, or amounts in the supplemental reserve account. The use of interest proceeds to purchase workout loans is subject to all coverage tests passing and there being sufficient interest proceeds to pay interest on all the rated notes, on the upcoming payment date. The use of principal proceeds is subject to certain conditions, including the following: the par coverage tests are passed following the purchase, the manager has built sufficient excess par in the transaction so that the collateral principal amount is equal to or exceeds the reinvestment target par balance after the acquisition, and the obligation is a debt obligation that is pari passu or senior to the obligation already held by the issuer. In this transaction, if a non-principal funded workout loan for which no credit is given in the par coverage tests, subsequently becomes an eligible CDO, the manager can designate it as such and transfer the market value of the asset to the interest or the supplemental reserve account from the principal account. S&P considered the alignment of interests for this re-designation and took into account factors, including that either the reinvestment criteria is met or the collateral principal amount is equal to or exceeds the reinvestment target par balance after such designation, and that the manager cannot self-mark the market value. S&P said, "We consider that the transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "We consider the transaction's legal structure to be bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our assigned ratings are commensurate with the available credit enhancement for the class A-1 to F 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 ratings than those we have assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our assigned ratings on the notes. "In 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-1 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. The results shown in the chart below are based on the actual weighted-average spread, coupon, and recoveries. "For the class F notes, our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met." Environmental, social, and governance (ESG) credit factors S&P said, "We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to certain activities, including, but not limited to, the following: tobacco, mining of thermal coal, oil sands extraction, and production of controversial weapons. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings List CLASS RATING AMOUNT CREDIT INTEREST RATE* (MIL. EUR) ENHANCEMENT (%) A-1 AAA (sf) 187.000 38.00 Three/six-month EURIBOR plus 0.93% A-2 AAA (sf) 30.000 38.00 Three/six-month EURIBOR plus 1.18%§ B AA (sf) 35.000 28.00 Three/six-month EURIBOR plus 1.60% C A (sf) 24.500 21.00 Three/six-month EURIBOR plus 2.15% D BBB (sf) 21.000 15.00 Three/six-month EURIBOR plus 3.10% E BB (sf) 17.500 10.00 Three/six-month EURIBOR plus 6.08% F B- (sf) 11.285 6.78 Three/six-month EURIBOR plus 9.01% Subordinated NR 23.700 N/A N/A *The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. §The index is capped at 2.10%. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. GOLDENTREE LOAN: Fitch Affirms B- Rating on Class F Notes --------------------------------------------------------- Fitch Ratings has revised the Outlook on GoldenTree Loan Management EUR CLO 2 DAC's junior notes to Stable from Negative. All ratings have been affirmed. DEBT RATING PRIOR ---- ------ ----- GoldenTree Loan Management EUR CLO 2 DAC A XS1911601000 LT AAAsf Affirmed AAAsf B-1-A XS1911601349 LT AAsf Affirmed AAsf B-1-B XS1914357022 LT AAsf Affirmed AAsf B-2 XS1911601778 LT AAsf Affirmed AAsf C-1-A XS1911602073 LT Asf Affirmed Asf C-1-B XS1914370553 LT Asf Affirmed Asf D XS1911602313 LT BBB-sf Affirmed BBB-sf E XS1911602669 LT BB-sf Affirmed BB-sf F XS1911602743 LT B-sf Affirmed B-sf TRANSACTION SUMMARY GoldenTree Loan Management EUR CLO 2 DAC is a cash flow CLOs mostly comprising senior secured obligations. The transaction is still within its reinvestment period and is actively managed by GoldenTree Loan Management, LP. KEY RATING DRIVERS Outlooks Revised to Stable: Fitch has revised the Outlooks on the class E and F notes to Stable as it no longer runs the coronavirus baseline stress scenario as a driver of the Outlook. The Stable Outlook across the capital structure reflects the default-rate cushion, and for the class F notes a limited shortfall, at their current ratings. The class F notes' rating reflects a significant margin of safety within the tranche given its credit enhancement level at closing. As a result, the class F notes do not present a "real possibility of default", which is the definition of 'CCC' in Fitch's Rating Definitions. Broadly Stable Asset Performance: Similar to the last rating action on 15 January 2021, the transaction is passing all portfolio profile, collateral quality, and coverage tests. The transaction's metrics are broadly similar to those at the last review. The transaction was below par by 2.87% as of the investor report on 15 June 2021, which is slightly lower than the last review when it was 1.51% below par. Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' and below was 5.98% (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 weighted average rating factor (WARF) as calculated by Fitch was 33.66 (assuming unrated assets are 'CCC') and as calculated by the trustee was 33.91, below the maximum covenant of 36. High Recovery Expectations: Senior secured obligations plus cash comprise 98.4% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- At closing, Fitch used a standardised stressed 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 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 an outlook sensitivity analysis that incorporates a single-notch downgrade to all FDRs on Negative Outlook. For this transaction this scenario will result in downgrades of no more than one notch. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset 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 recognised statistical rating organisations 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. 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 VII: Moody's Assigns (P)B3 Rating to Class F Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to the notes to be issued by Hayfin Emerald CLO VII DAC (the "Issuer"): EUR236,900,000 Class A-1 Senior Secured Floating Rate Notes due 2034, Assigned (P)Aaa (sf) EUR32,000,000 Class A-2 Senior Secured Floating Rate Notes due 2034, Assigned (P)Aaa (sf) EUR54,000,000 Class B Senior Secured Floating Rate Notes due 2034, Assigned (P)Aa2 (sf) EUR27,200,000 Class C Senior Secured Deferrable Floating Rate Notes due 2034, Assigned (P)A2 (sf) EUR32,400,000 Class D Senior Secured Deferrable Floating Rate Notes due 2034, Assigned (P)Baa3 (sf) EUR23,900,000 Class E Senior Secured Deferrable Floating Rate Notes due 2034, Assigned (P)Ba3 (sf) EUR12,600,000 Class F Senior Secured Deferrable Floating Rate Notes due 2034, Assigned (P)B3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured obligations and up to 10% of the portfolio may consist of senior unsecured obligations, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be 75% ramped as of the closing date and to comprise of predominantly corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the 7 month and 10 days ramp-up period in compliance with the portfolio guidelines. Hayfin Emerald Management LLP ("Hayfin") will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's 4.5 year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations. In addition to the seven classes of notes rated by Moody's, the Issuer will issue EUR38,400,000 Subordinated Notes due 2034 which are not rated. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology underlying the rating action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2020. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2020. Moody's used the following base-case modeling assumptions: Par Amount: EUR450,000,000 Diversity Score(*): 45 Weighted Average Rating Factor (WARF): 3,000 Weighted Average Spread (WAS): 3.65% Weighted Average Coupon (WAC):4.00% Weighted Average Recovery Rate (WARR):43% Weighted Average Life (WAL): 8.5 years MONTMARTRE EURO 2020-2: Fitch Gives 'B-(EXP)' Rating to F-R Notes ----------------------------------------------------------------- Fitch Ratings has assigned Montmartre Euro CLO 2020-2 DAC 's refinancing notes expected ratings. The assignment of final ratings is contingent on the final documents conforming to information already received. DEBT RATING ---- ------ Montmartre Euro CLO 2020-2 DAC A-1-R LT AAA(EXP)sf Expected Rating A-2-R LT AAA(EXP)sf Expected Rating B-R LT AA(EXP)sf Expected Rating C-R LT A(EXP)sf Expected Rating D-R LT BBB-(EXP)sf Expected Rating E-R LT BB-(EXP)sf Expected Rating F-R LT B-(EXP)sf Expected Rating TRANSACTION SUMMARY Montmartre Euro CLO 2020-2 DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Notes proceeds will be used to redeem the existing notes, except the subordinated notes, which are not being reissued, and pay expenses in connection with the refinancing, including making a distribution to subordinated noteholders. The portfolio will be actively managed by CBAM CLO Management Europe Limited. The collateralised loan obligation (CLO) has a four-and-a-half-year reinvestment period and an eight-and-a-half-year weighted average life (WAL). KEY RATING DRIVERS Above Average Portfolio Credit Quality (Positive): Fitch considers the average credit quality of obligors in the 'B' category. The Fitch weighted average rating factor (WARF) of the identified portfolio is 32.64, below the maximum WARF covenant for assigning expected ratings of 33.5. High Recovery Expectations (Positive): At least 90% of the portfolio will comprise senior secured obligations. 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 (WARR) of the identified portfolio is 64.65%, above the minimum WARR covenant for assigning expected ratings of 64%. Diversified Asset Portfolio (Positive): The indicative maximum exposure of the 10 largest obligors for assigning the expected ratings is 20% of the portfolio balance and maximum fixed rated obligations are limited at 12.5% of the portfolio. The transaction also includes various concentration limits, including the maximum exposure to the three largest (Fitch-defined) industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Positive): The transaction has a 4.5-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Deviation from Model-implied Rating (Negative): The expected ratings on the class D and F notes are one notch higher than the model-implied rating (MIR). The ratings are supported by the significant default cushion on the identified portfolio at the assigned ratings due to the notable cushion between the covenants of the transactions and the portfolio's parameters including a higher diversity (133 obligors) for the identified portfolio. The class F notes' deviation from the MIR reflects Fitch's view that the tranche has a significant margin of safety given the credit enhancement level at closing. The notes do not present a "real possibility of default", which is the definition of 'CCC' in Fitch's Rating Definitions. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- 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 up to five notches depending on the notes, except for the class A notes, which are already at the highest rating on Fitch's scale and cannot be upgraded. -- At closing, Fitch uses 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 by natural credit migration, but also through reinvestments and the manager has the possibility to update the Fitch collateral quality tests. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- 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 no more than five notches depending on 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 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. 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. MONTMARTRE EURO 2020-2: S&P Assigns Prelim. 'B-' Rating on F Notes ------------------------------------------------------------------ S&P Global Ratings assigned its preliminary credit ratings to Montmartre Euro CLO 2020-2 DAC's class A-1, A-2, B, C, D, E, and F notes. The transaction is a reset of the existing Montmartre Euro CLO 2020-2, which closed in August 2020. The issuance proceeds of the refinancing notes will be used to redeem the refinanced notes (class A, B-1, B-2, C, D, E, and F notes of the original Montmartre Euro CLO 2020-2 DAC CLO transaction), and pay fees and expenses incurred in connection with the reset. Under the transaction documents, the rated notes will pay quarterly interest unless there is a frequency switch event. Following this, the notes will switch to semiannual payment. The portfolio's reinvestment period will end approximately 4.5 years after closing. The preliminary ratings assigned to the notes reflect S&P's assessment of: -- The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. Portfolio Benchmarks CURRENT S&P Global Ratings weighted-average rating factor 2,774.59 Default rate dispersion 593.84 Weighted-average life (years) 5.35 Obligor diversity measure 110.60 Industry diversity measure 20.60 Regional diversity measure 1.42 Transaction Key Metrics CURRENT Total par amount (mil. EUR) 300.00 Defaulted assets (mil. EUR) 0.00 Number of performing obligors 135 Portfolio weighted-average rating derived from S&P's CDO evaluator 'B' 'CCC' category rated assets (%) 3.8 Covenanted 'AAA' weighted-average recovery (%) 35.94 Covenanted weighted-average spread (%) 3.60 Covenanted weighted-average coupon (%) 3.75 S&P said, "Our preliminary ratings reflect our assessment of the preliminary collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We consider that the portfolio will be well-diversified on the effective date, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations. "In our cash flow analysis, we used the EUR300 million par amount, the covenanted weighted-average spread of 3.60%, the covenanted weighted-average coupon of 3.75%, and the covenanted weighted-average recovery rates for all rating levels designated by the collateral manager. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "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. "Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned preliminary ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "At closing, we consider that the transaction's legal structure will be bankruptcy remote, in line with our legal criteria. "In our view the portfolio is granular in nature, and well-diversified across obligors, industries, and asset characteristics when compared to other CLO transactions we have rated recently. As such, we have not applied any additional scenario and sensitivity analysis when assigning ratings on any classes of notes in this transaction. "Until the end of the reinvestment period on Jan. 15, 2026, the collateral manager is allowed to substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may, through trading, deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe 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 and C notes could withstand stresses commensurate with higher ratings 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 preliminary 'B- (sf)' 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: -- 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. -- 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 24.81% (for a portfolio with a weighted-average life of 5.35 years), versus if we were to consider a long-term sustainable default rate of 3.1% for 5.35 years, which would result in a target default rate of 16.58%. -- The actual portfolio is generating higher spreads and coupons versus the covenanted threshold that S&P has 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 chance 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 preliminary 'B- (sf)' rating assigned. "Taking the above 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 of the rated classes of notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-1 to E notes to five of the 10 hypothetical scenarios we looked at in our recent publication. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Montmartre Euro CLO 2020-2 DAC is a European cash flow CLO securitization of a revolving pool, comprising euro-denominated senior secured loans and bonds issued mainly by speculative-grade borrowers. CBAM CLO Management Europe LLC will manage the transaction. Environmental, social, and governance (ESG) credit factors S&P said, "We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to the following industries: climate risks excluded obligor, a controversial weapons excluded obligor, a palm oil excluded obligor, a tobacco excluded obligor. It also excludes companies where the principal business is generated from the manufacture, production, distribution of or trade in pornography, adult entertainment or prostitution related activities, predatory or payday lending activities, production or trade of illegal drugs or narcotics, including recreational marijuana, the development, production, maintenance, trade or stock-piling of weapons of mass destruction, including radiological, nuclear, biological and chemical weapons. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings List CLASS PRELIMINARY PRELIMINARY SUB(%) INTEREST RATE* RATING AMOUNT (MIL. EUR) A-1 AAA (sf) 144.00 40.00 Three/six-month EURIBOR plus 0.96% A-2 AAA (sf) 36.00 40.00 Three/six-month EURIBOR plus 1.335%§ B AA (sf) 36.00 28.00 Three/six-month EURIBOR plus 1.70% C A (sf) 21.00 21.00 Three/six-month EURIBOR plus 2.10% D BBB(sf) 19.50 14.50 Three/six-month EURIBOR plus 3.10% E BB- (sf) 14.40 9.70 Three/six-month EURIBOR plus 6.04% F B- (sf) 8.70 6.80 Three/six-month EURIBOR plus 8.83% Sub. notes NR 24.735 N/A N/A *The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. §The class A2 notes will have a cap on EURIBOR at 2.1% in addition to a floor on EURIBOR at 0%. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. NORWEGIAN AIR: NAI to Cut 22 of 31 Jobs Under New Business Plan --------------------------------------------------------------- John Mulligan at The Irish Independent reports that Dublin-based Norwegian Air International is planning to axe 22 of the 31 roles at the company, it has told Minister for Social Protection Heather Humphreys. The Irish Independent first reported last month that job losses were planned at the Irish unit of the Scandinavian carrier. The restructuring proposals come despite the High Court approving a rescue plan for the Norwegian's units in March -- including Norwegian Air International (NAI) -- because it was deemed a more favourable outcome for creditors and staff than if the firms had been wound up, The Irish Independent discloses. In its examinership process, the High Court heard that the survival of companies including NAI was "central to the survival of the group as a whole", The Irish Independent relates. The examinership was the largest ever seen in Ireland, The Irish Independent notes. "The reason for the proposed redundancies is as a consequence of Norwegian's new business plan," said Tore Kristian Jenssen of NAI told Minister Humphreys in a letter seen by The Irish Independent. "It is proposed to restructure current departments to ensure a lean and efficient organization adjusted to the new fleet size, business plan and strategy," he added. Of the 22 staff members to be laid off, 12 are involved in flight operations, seven in technical roles, two in crew training and one in ground operations, The Irish Independent states. A consultation process began last week and it's expected that staff will be laid off by Aug. 6, according to The Irish Independent. PENTA CLO 9: S&P Assigns B- Rating on $12MM Class F Notes --------------------------------------------------------- S&P Global Ratings assigned credit ratings to Penta CLO 9 DAC's class A, B-1, B-2, C, D, E, and F notes. At closing, the issuer also issued EUR36.45 million of unrated subordinated notes. Portfolio Benchmarks CURRENT S&P Global Ratings weighted-average rating factor 2,758.01 Default rate dispersion 507.28 Weighted-average life (years) 5.41 Obligor diversity measure 126.23 Industry diversity measure 17.02 Regional diversity measure 1.34 Weighted-average rating 'B' 'CCC' category rated assets (%) 1.46 'AAA' weighted-average recovery rate 35.39 Weighted-average spread (net of floors; %) 3.63 Weighted-average coupon (%) 3.33 Under the transaction documents, the rated notes 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 five years after closing. S&P said, "In our cash flow analysis, we used the EUR400 million target par amount, a weighted-average spread of 3.55%, the reference weighted-average coupon (4.00%), and the weighted-average recovery rates as calculated under our CLO criteria. 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 ratings. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1, B-2, C, and D notes could withstand stresses commensurate with higher ratings than those we have assigned. However, the CLO benefits from a reinvestment period until July 25, 2026, during which the transaction's credit risk profile could deteriorate, subject to CDO monitor results. We have therefore capped our ratings assigned to the notes. "Elavon Financial Services DAC is the bank account provider and custodian. Its documented replacement provisions are in line with our counterparty criteria for liabilities rated up to 'AAA'. "The issuer is bankruptcy remote, in accordance with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for each class 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 our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance (ESG) credit factors S&P said, "We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to the following industries (non-exhaustive list): tobacco, controversial weapons, and thermal coal and fossil fuels from unconventional sources. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." The transaction securitizes a portfolio of primarily senior-secured leveraged loans and bonds, and it is managed by Partners Group (UK) Management Ltd. Ratings List CLASS RATING AMOUNT (MIL. EUR) A AAA (sf) 243.00 B-1 AA (sf) 33.50 B-2 AA (sf) 9.00 C A (sf) 26.50 D BBB (sf) 28.00 E BB- (sf) 20.00 F B- (sf) 12.00 Sub notes NR 36.45 NR--Not rated. PERRIGO CO: Egan-Jones Retains BB+ Sr. Unsecured Debt Ratings ------------------------------------------------------------- Egan-Jones Ratings Company, on July 9, 2021, maintained its 'BB+' foreign currency and local currency senior unsecured ratings on debt issued by Perrigo Company PLC. Headquartered in Dublin, Ireland, Perrigo Company PLC engages in providing over-the-counter (OTC) self-care and wellness solutions. TIKEHAU CLO II: Fitch Affirms B- Rating on Class F Notes -------------------------------------------------------- Fitch Ratings has upgraded Tikehau CLO II DAC 's class B, C-R, and D-R notes and affirmed the class E and F notes and revised their Outlooks to Stable from Negative. DEBT RATING PRIOR ---- ------ ----- Tikehau CLO II DAC A-R XS2011003139 LT AAAsf Affirmed AAAsf B XS1505669678 LT AA+sf Upgrade AAsf C-R XS2011004616 LT A+sf Upgrade Asf D-R XS2011005266 LT BBB+sf Upgrade BBBsf E XS1505671062 LT BBsf Affirmed BBsf F XS1505671732 LT B-sf Affirmed B-sf TRANSACTION SUMMARY Tikehau CLO II DAC is a cash flow CLO mostly comprising senior secured obligations. The transaction is out of its reinvestment period and is actively managed by Tikehau Capital Europe Limited. KEY RATING DRIVERS Amortisation Supports Upgrades: The upgrades are supported by the partial deleveraging of the senior notes since the reinvestment period ended in December 2020. Credit enhancement for the class A-R, B, C-R and D-R notes has increased to 43.8%, 30.4%., 23.7% and 18.5%, respectively. As the transaction is currently outside its reinvestment period, reinvestment of sale proceeds of credit risk obligations, credit-improved obligations and from unscheduled principal proceeds is constrained by the transaction's breach of its Fitch weighted average rating factor (WARF) and another rating agency's WARF collateral quality tests. Reinvestment of these proceeds is only allowed if the test complies after the reinvestment. Outlooks Revised to Stable: Fitch has revised the Outlooks on the class E and F notes to Stable from Negative as it no longer considers the coronavirus baseline scenario a driver of the Outlook. The Stable Outlook reflects the default rate cushion on each tranche. For more details see "Coronavirus Stress Scenario Removed in EMEA CLO Analyses" dated 28 June at www.fitchratings.com. Stable Asset Performance: The transaction's metrics have remained relatively stable since the last rating action. The transaction was below par by 1.48% as of the investor report in May 2021. It failed the Fitch WARF, and Fitch weighted average recovery rate (WARR) tests but passed all portfolio profile tests and coverage tests. Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' and below was 5.14 % (excluding non-rated assets). 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors in the 'B'/'B-' category. The WARF as calculated by Fitch was 34.51, above the maximum covenant of 34.50. High Recovery Expectations: Senior secured obligations plus cash comprise 99.48% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 16.70%, and no obligor represents more than 1.85% of the portfolio balance. Deviation from Model-implied Rating (MIR): The class B notes' rating is one notch lower than the MIR. The rating deviation reflects the extremely slim default-rate cushion at the MIR. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- 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 up to five notches depending on the notes. -- Except for the class A notes, which are already at the highest rating on Fitch's scale and cannot be upgraded, further upgrades may occur if the portfolio's quality remains stable and notes continue to amortise, leading to higher credit enhancement across the structure. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- 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 no more than five notches depending on the notes. -- While not Fitch's base case, downgrades may occur if build-up of the notes' credit enhancement following amortisation does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of defaults and portfolio deterioration. 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 Tikehau CLO II 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. [*] IRELAND: Company Insolvencies Decline in First Half 2021 ------------------------------------------------------------ Geoff Percival at Irish Examiner reports that the number of company insolvencies significantly declined in the first half of the year, but business failure rates are still expected to rise again on the back of a delayed full reopening of the economy and the eventual phasing out of government supports. A total of 169 company insolvencies were recorded during the first six months of this year, according to data from Deloitte; that was down by 38% on the 273 company failures reported in the first half of 2020, Irish Examiner discloses. However, Deloitte has warned that the full effects of the Covid crisis on companies and the economy "have not fully materialized as yet", Irish Examiner notes. The latest figures show that 58 insolvencies were reported in the second quarter of the year, down 48% on the first three months of the year, when there were 111 cases, Irish Examiner relates. According to Irish Examiner, David Van Dessel, financial advisory partner with Deloitte Ireland, said the reasons for the quarterly improvement are "unclear", but that the broader picture is being masked by the Government's Covid support measures for businesses. He said that a firmer reading of the health of corporate Ireland will only be able to be taken mid-way through next year when most supports have been phased out, Irish Examiner relays. "It is generally accepted that the full effects of Covid-19 on the Irish economy have not fully materialized in terms of corporate insolvencies," Irish Examiner quotes Mr. Van Dessel as saying. "The current crisis has created a significant challenge for many otherwise viable Irish companies and we anticipate that the first half of 2022 will paint a more accurate picture of how the Covid-19 pandemic has influenced the economy and the knock-on effect on our SME sector," Mr. Van Dessel said. The broad services sector was the worst hit for insolvencies in the first six months -- particularly financial services, which made up 70% of cases, Irish Examiner states. But, predictably construction, retail, and hospitality were also hit -- accounting for 18%, 12%, and 10% of cases, respectively, Irish Examiner notes. Mr. Van Dessel, as cited by Irish Examiner, said increased levels of business closures could be seen in the hospitality sector due to the delayed reopening of indoor dining and drinking as well as the gradual cessation of supports. Voluntary liquidations have made up the bulk of cases this year, but receiverships are on the rise, while examinerships remain low, according to Irish Examiner. =================== L U X E M B O U R G =================== SUNSHINE LUXEMBOURG VII: Fitch Affirms 'B' LT IDR, Outlook Neg. --------------------------------------------------------------- Fitch Ratings has affirmed Sunshine Luxembourg VII S.a.r.l's (Galderma) Long-Term Issuer Default Rating (IDR) at 'B' and senior secured rating at 'B+' with a Recovery Rating of 'RR3'. The Outlook remains Negative. The IDR of Galderma reflects the balance of its continuing high leverage against its exceptionally strong aesthetics business. It also considers the volatility and execution risks in other parts of its skincare portfolio. Galderma's funds from operations (FFO) gross leverage of above 10x at end-2020 remains high and largely unchanged from levels post-LBO in 2019. While Fitch believes the company's profit growth from 2021 and cash flow generation from 2022 should enable deleveraging towards 8.5x by 2022, leverage will remain high in 2021. Also, deleveraging remains reliant on operational performance continuing at a strong pace while the carve-out from Nestle remains in progress, the pandemic continues to evolve and as working-capital remains somewhat volatile. Rating strengths are the company's strong profit resilience, in particular its aesthetics operations, during the pandemic as well as good progress with its cost-rationalisation plan and carve-out from Nestle. KEY RATING DRIVERS High Leverage, Delayed Trajectory: FFO remained low in 2020 and debt position was little changed on the LBO closing level of 2019. This led to 2020 FFO gross leverage still at a high 10.3x. Fitch however believes that FFO gross leverage will resume its declining trajectory to a still high 9.5x in 2021 and likely to around 8.5x in 2022 and below thereafter, consistent with the rating. This is based on FFO growth and expected positive free cash flow (FCF) from 2022. Greater visibility of deleveraging is key to determining its future rating trajectory. Aesthetics Anchors Credit Profile: Aesthetics operations anchor the overall robustness of Galderma's business profile due to their material contribution to consolidated profits (50% of 2020 EBITDA before adjustments), the company's leading market position as the global number two and steady growth opportunities. Aesthetic treatments have proven very resilient during the pandemic, with Galderma only suffering in the first few months of heavy lockdown and patients very quickly returning to their doctors since June 2020. Aesthetics Strongest Performer: Demand resilience allowed Galderma to maintain steady EBITDA growth for its aesthetics operations in 2020. As lockdowns ease and doctors become more skillful at administering aesthetic treatments amid pandemic restrictions, Galderma has seen a sharp growth of sales so far in 2021. Fitch believes that the weaker performance of its main competitor, Allergan - partly resulting from its merger with Abbvie - may have favoured Galderma in 2020 and the earlier part of 2021. Firm Aesthetics Growth Prospects: Fitch believes that savings accumulation, the reallocation of consumers' discretionary spending away from travel and online-enabled social occasions, will support growth of aesthetic treatments over at least 2021-2022. A pipeline of new treatments should also allow Galderma's aesthetics division to continue to see its revenues grow at least in the high single digits annually. Execution Risks from Prescriptions, Pro-activ: While Galderma's consumer products unit (32% of EBITDA) continues to see healthy growth, sales and profits of the prescription business (15% of EBITDA) have, as expected, contracted as a result of patent expiry. Also, a promising high-growth prescription product that the company was planning to launch in 2023 has been suffering delays, which is leading to higher development costs. Positively, in 2020 Galderma managed to turn around its Pro-activ business, which had been suffering from continued decline. Satisfactory Profitability: Fitch expects the strong profitability of the growing aesthetics business and resources being released by cost rationalisation to allow Galderma to absorb the higher R&D costs for the development of the Nemo drug and stronger investment in marketing. This should enable it to maintain an approximately 20% EBITDA margin while product launches should drive mid-single digit revenue growth on a consolidated basis. Its EBITDA margin is in line with other fast-moving consumer goods companies', however it is lower than that of industry-leading personal care companies, which have margins closer to 25%, due to its comparatively lower scale and the dilutive effect of the lower-margin Pro-Activ. Improving Cash Flow: Fitch projects that FCF will be negative by approximately USD30 million in 2021, due to working-capital absorption compounding one-off P&L costs for cost rationalisation. This should be followed by positive FCF in 2022-2023 despite stronger capex in connection to milestone payments for the development of Nemo. While Fitch does not rule out Galderma using its large cash balance for small acquisitions, Fitch expects it to generate sustainable annual FCF of around USD150 million after 2022, due to its healthy EBITDA margin and modest capex. Organic deleveraging via steady FCF improvement and conservative capital allocation favouring debt paydown will be key to a revision of the Outlook to Stable. DERIVATION SUMMARY Fitch rates Galderma using its global rating navigator framework for consumer companies. Under this framework, Fitch recognises that its operations are driven by marketing investments, a well-established and diversified distribution network and a moderately important R&D-led innovation capability. The prescription business benefits the consolidated business profile by offering diversification by product and geography, with good exposure to mature markets but carries execution risks. Compared with global consumer peers, such as Johnson & Johnson and Unilever PLC (A/Stable), Galderma's business risk profile has smaller scale and less diversification. This is also the case when benchmarking Galderma against its most relevant pharma peer, Allergan plc. Nevertheless, high financial leverage is the key constraint on the rating, compared with international global peers across both the consumer and pharma sectors. Relative to personal care peers Natura Cosmeticos (BB/Stable) and Avon Products, Inc. (BB/Stable) which Fitch rates on the basis of the consolidated profile of their parent Natura & Co, Galderma has smaller scale as well as significantly higher leverage. Fitch also compares Galderma with packaged food company Sigma HoldCo (B/Stable), which has comparable EBITDA, a similarly high leverage of 10x in 2020 but which is projected to reduce below 8.5x in 2021, due to strong FCF. Of the two companies, Fitch views Galderma as having slightly higher execution risk in turning around its overall operations, given the risks in its prescription portfolio. However, Fitch anticipates a stronger revenue performance by Galderma longer term due to its product portfolio. Oriflame Investment Holding Plc's 'B+' IDR (Stable), one notch above Galderma's, reflects significantly lower leverage (around 4.5x on a net basis), which is supported by a conservative financial policy and offsets its smaller scale and exposure to volatile developing economies. It also reflects a currency mis-match between its revenues in emerging- market currencies and costs in hard currency as well as euro-denominated debt. Galderma is rated at the same level of Nidda Bondco GmbH (Stada; B/Stable), a producer of generic pharmaceuticals with slightly better profitability (around 23% against Galderma's 20%). Fitch views Stada's business model as anchored in the 'BB' category, offsetting aggressive leverage, which Fitch expects to remain high at around 8.0x given an acquisitive strategy. This is despite stronger deleveraging capacity through organic means with its FCF margin forecast to trend above 5% over the next four years. Fitch expects the two companies to exhibit similar leverage over the rating horizon as Galderma's FFO grows with gradually rising cash reserves that could be allocated to small bolt-on acquisitions and to debt reduction. KEY ASSUMPTIONS -- Consolidated revenues trending towards USD3.5 billion by 2023; -- Fitch-defined EBITDA margin improving towards 20% in 2022, from 19.1% expected in 2021; -- Annual capex on average at USD100 million to 2023. In addition, milestone payments of USD50 million p.a. to external R&D providers in 2022 and 2023; -- Working-capital outflows of around USD125 million and USD70 million in 2021 and 2022, respectively, indicative of working capital normalisation and key prescription products coming off patent; -- No material M&A and no dividend payments to 2023. KEY RECOVERY ASSUMPTIONS The recovery analysis assumes that Galderma would be restructured as a going concern (GC) rather than liquidated in an event of default. Galderma's post-reorganisation GC EBITDA reflects Fitch's view of a sustainable EBITDA of around USD500 million, ie around 15% below Fitch-defined EBITDA for 2020 of USD577 million. In this scenario, the stress on EBITDA would most likely result from operational issues in connection to the company's prescription business (loss of patent protection; delays or higher investments to develop the pipeline of new products) or perpetuated by lower growth and weaker margin expansion than currently envisaged in the aesthetics and consumer divisions. Fitch applies a distressed enterprise value (EV)/EBITDA multiple of 6.0x to calculate a GC EV reflecting Galderma's large scale and business diversity. This is below 7.0x used for Stada, given Galderma's operating challenges in two of the company's business segments, and Stada's high-margin business. Based on the payment waterfall Galderma's revolving credit facility (RCF) of USD500 million ranks pari-passu with the company's senior secured term loans (US dollar and euro term loans B for USD3,129 million and USD569 million-equivalent, respectively). Therefore, after deducting 10% for administrative claims, Fitch's waterfall analysis generated a ranked recovery for the senior secured loans in the 'RR3' band, leading to a 'B+' instrument rating, one notch above the IDR. Fitch's waterfall generated recovery computation (WGRC) output percentage is 64% based on current metrics and assumptions (59% previously). RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Delivery of management business plan with each of the aesthetics and consumer portfolios delivering continued EBITDA growth over 2021-2023 and stabilisation of the prescription business; -- FFO gross leverage trending towards 7.0x or below; -- FFO interest coverage above 2.0x. Factors that could, individually or collectively, lead to a revision of the Outlook to Stable from Negative: -- Recovery of revenue performance in line with the business plan leading to consolidated revenues above USD3,000 million in tandem with Fitch-defined EBITDA margin trending towards 20% in 2021-2022; -- Visibility on FFO gross leverage trending to 8.5x or below. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to deleverage below 8.5x FFO gross basis by 2022; -- FFO interest coverage weakening below 1.5x; -- Adjusted consolidated EBITDA margin failing to reach 19.5% by 2022; -- FCF margin sustainably below 2%. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Galderma's undrawn RCF of USD500 million-equivalent and USD331 million of cash at end-2020 provides a comfortable liquidity position. Fitch's assessment takes into consideration the normalisation of working capital (including the loss in exclusivity of two prominent prescription products) and remaining cash outflows earmarked for the completion of the company's carve-out. Galderma benefits from a long-term debt maturity profile with no meaningful debt redemptions before 2026. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ISSUER PROFILE With USD3 billion net sales, Galderma is the number two global manufacturer of skincare aesthetics preparations, also offering prescription and over-the-counter skincare. It has been the subject of a leveraged buy-out in 2019 and will be fully carved-out from Nestle SA in 2021. =========== P O L A N D =========== SYNTHOS SPOLKA: Fitch Gives Final 'BB+' on EUR600MM Sec. Notes --------------------------------------------------------------- Fitch Ratings has assigned Synthos Spolka Akcyjna's EUR600 million 2.5% seven-year notes a final senior secured rating of 'BB+' with a Recovery Rating of 'RR2'. The 'BB' Long-Term Issuer Default Rating (IDR) of Synthos is constrained by its modest scale, exposure to the transportation and construction sectors, price volatility of butadiene and styrene derivatives as well as Fitch's expectation of funds from operations (FFO) net leverage of around 3x over 2021-2024. The expected acquisition of synthetic rubber assets from Trinseo LLC, Synthos's net debt/EBITDA target of 2.0x-2.5x and a lack of a clearly defined dividend distribution policy will not, in Fitch's view, support material deleveraging. Rating strengths are its strong position in European-market niches, such as the production of synthetic rubber and insulation materials, consistent pre-dividend free cash flow (FCF) generation, a fairly resilient EBITDA margin, backward integration and access to competitively priced feedstock. The Stable Outlook reflects Fitch's expectation that pro-forma of the acquisition, EBITDA will recover to an average of PLN1.2 billion (EUR0.3 billion) over 2021-2024, from around PLN0.9 billion in 2020, and that the company will have sufficient cash flow generation to cover planned investments. KEY RATING DRIVERS Notching for Notes: Fitch rates the senior secured notes using a generic approach for 'BB' category issuers, which reflects the relative instrument ranking in the capital structure, in accordance with Fitch's Corporates Recovery Ratings and Instrument Ratings Criteria. The notes are secured by a share pledge of guarantors comprising 99% of group adjusted EBITDA as of March 2021 and mortgage over real estate in Poland. This results in the senior secured rating being notched up once from the IDR. The Recovery Rating is 'RR2'. Niche Leader, Small Scale: Synthos benefits from a strong position in niche markets and the proximity of manufacturing facilities to an established and diversified customer base. However, its rating is constrained by its small-scale operations versus 'BB' category chemical peers'. Around 75% of sales are derived from Europe, where Synthos has a leading production capacity of emulsion styrene butadiene rubber (ESBR) and expandable polystyrene. It will also become a global leader for solution styrene-butadiene rubber once the rubber assets of Trinseo are acquired. Nevertheless its scale remains moderate based on Fitch's estimated pro-forma EBITDA of around EUR0.3 billion on average over 2021-2024. Exposure to transportation sector will increase to about 50% of EBITDA post acquisition from 30% in 2020, which can contribute to earnings volatility, mitigating the benefits of larger scale. Acquisition Credit-Neutral: The EUR358 million (PLN1.7 billion) acquisition of rubber assets will be funded by a mixture of debt, cash and, if necessary, equity injection to maintain net debt-to-EBITDA within management's target of 2.0x-2.5x. Excluding potential synergies, Fitch estimates approximately EUR60 million of accretive EBITDA from the target and FFO net leverage of 2.8x in 2022. Failure to reach targeted earnings or unexpected costly integration of the acquired business may result in a breach of Fitch's negative leverage sensitivity of 3x. Financial Policy Limits De-Leveraging: Fitch forecasts FFO net leverage at around 2.8x-2.9x over 2021-2024 due to the acquisition, significant growth capex, and Fitch's assumption of dividend distributions on the basis of neutral post-dividend FCF. Synthos's target of 2.0x-2.5x net debt/EBITDA indicates that FCF could be channelled to dividend payments, additional investments or acquisitions. Adhering to such a policy can lead to sharp increases in leverage ratios during times of poorly performing end-markets or fluctuations in raw-material prices, given the inherent volatility of the sector. Increasing Capacity, Green Investments: Fitch estimates 2021-2024 capex at PLN2.3 billion (pro-forma for the acquisition), versus PLN1.3 billion in 2017-2020. Its new CCGT plant, to be commissioned by end-2023, accounts for about PLN0.5 billion of investments, while PLN0.7 billion will support growth across the rubber, styrene and dispersion segments. Fitch regards CCGT plant capex and PLN0.5 billion of maintenance capex in the next four years as committed, but see scope for a cut in capacity-expansion capex, if needed. Fitch estimates the entire capex plan can be financed from internally generated cash flow, assuming the CCGT plant is constructed within budget and market conditions remain stable. Backward Integration: Synthos's competitive position is underpinned by an integrated production chain, which provides access to competitively priced feedstock, and self-sufficiency in electricity and steam generation, which supports profitability. Synthos currently sources approximately 35% of butadiene from its joint venture with Unipetrol and, on average, half of its styrene supply from its Czech Republic-based subsidiary, Synthos Kralupy, and its Poland-based subsidiary, Synthos Dwory. A further 19% of butadiene is supplied by Unipetrol's parent, Polski Koncern Naftowy ORLEN S.A. (PKN) (BBB-/RWP). Exposed to Supply Chain: Synthos remains exposed to supply-chain disruption, despite self-sufficiency in raw materials, as evident in a force majeure at Unipetrol in 2015. Investments in the reconstruction of Unipetrol's steam cracker post-force majeure, strong and long-lasting relationship with external suppliers plus overcapacity in Europe mitigate the interruption risk of access to feedstock. However, profitability can still be hit if raw materials are purchased at market prices should internal sources be disrupted. The target company is not vertically integrated and exposed to two key providers of butadiene and styrene. The continuity of the target company's supplies is, however, supported by long-term contracts and proximity of suppliers. Relative Resilience of Margins: Synthos has consistently generated positive pre-dividend FCF since 2017. Its EBITDA margin is also resilient for a commodity producer, despite fluctuations in butadiene and styrene derivative prices that can drive large swings in revenue and earnings. This is due to partial protection from a formula-linked and pass-through contract structure in the rubber business and steady EBITDA generation from mostly internally utilised heat and power plants. Moreover, a low-cost position in central Europe allows Synthos to maintain high utilisation rates. Fitch forecasts its EBITDA margin to improve to 15%-16% over 2021-2024, from 12%-14% over the past four years, following the introduction of new and more value-added products. DERIVATION SUMMARY Synthos's business profile is weaker than that of peers, such as Ineos Quattro Holdings Limited (BB/Stable), Ineos Group Holdings S.A. (BB+/Negative), OCI N.V. (BB/Stable), and PAO SIBUR Holding (BBB-/Stable), due to its smaller scale, lower diversification and weaker global product leadership, albeit strengthening in the synthetic rubber segment with the acquisition of assets from Trinseo. Its profitability is broadly similar to that of Ineos Quattro and Ineos Group, but is weaker than that of SIBUR, which has the strongest cost position among the peers. However, Fitch forecasts Synthos's FFO net leverage to be much lower than that of peers, except for SIBUR. KEY ASSUMPTIONS -- Butadiene prices correlated with Fitch's oil price deck: USD63/barrel (bbl) in 2021 followed by USD55/bbl in 2022, USD53/bbl in 2023 and 2024; -- Revenue CAGR of 6% over 2020-2024 excluding acquired assets; -- Volume CAGR of 2% over 2020-2024 excluding acquired assets; -- Acquisition of synthetic rubber assets from Trinseo completed by end-2021, contributing from 2022 on average incremental PLN250 million EBITDA per year; -- Equity injection of PLN250 million upon closing of the acquisition; -- EBITDA margin of 15%-16% over 2021-2024; -- Total capex of PLN2.3 billion over 2021-2024; -- Dividends of PLN600 million in 2024. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- FFO net leverage consistently below 2.0x (2020: 2.6x); -- EBITDA consistently above USD0.4 billion; -- Record of adherence to a more conservative financial policy, including a clearly defined dividend distribution policy. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO net leverage consistently above 3.0x due to, among other things, weaker-than-expected market performance and/or sizeable debt-funded acquisitions; -- Decline in EBITDA margin to below 10% for a sustained period. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Synthos issued seven-year EUR600 million (PLN2.8 billion-equivalent) notes in June 2021 to refinance term loans coming due in 2025. Therefore, it does not have meaningful debt repayments due before 2025, when its recently-upsized EUR500 million (PLN2.3 billion-equivalent) revolving credit facility (RCF) matures, and Synthos has contractual options to extend it by two years. Fitch expects it to be about 20% drawn by end-2021 upon closing of the acquisition of the synthetic rubber assets from Trinseo. Fitch expects Synthos's cash flows and the available RCF will be sufficient to maintain adequate liquidity throughout its growth capex programme. ISSUER PROFILE Synthos is a Poland-based, privately-owned, producer of synthetic rubbers, expandable polystyrene and other chemical products, with vertical integration into energy, styrene and butadiene. SUMMARY OF FINANCIAL ADJUSTMENTS -- Depreciation of right-of-use assets of PLN31 million reclassified as operating expenses. Lease liabilities of PLN196 million excluded from financial debt. -- EBITDA of joint-venture excluded from EBITDA and FFO. Dividend received from joint venture included in FFO (net impact positive of PLN13 million). -- PLN150 million non-recurring expenses excluded from EBITDA and FFO. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========== R U S S I A =========== UZBEKISTAN: S&P Assigns 'BB-' Rating on New Senior Unsecured Notes ------------------------------------------------------------------ S&P Global Ratings assigned its 'BB-' long-term foreign currency issue rating to the U.S. dollar-denominated benchmark-sized senior unsecured notes and 'BB-' long-term local currency issue rating to the Uzbekistani sum-denominated senior unsecured notes to be issued by Uzbekistan (BB-/Stable/B). The amount and interest rate of the issuances, among other details, will be determined during the placement. The notes represent direct, general, unconditional, and unsecured obligations of the sovereign, and rank equally with the sovereign's other unsecured debt obligations. ========= S P A I N ========= FT RMBS SANTANDER 7: DBRS Gives Prov. BB Rating on Class B Notes ---------------------------------------------------------------- DBRS Ratings GmbH assigned provisional ratings to the following classes of notes to be issued by FT RMBS Santander 7 (the Issuer): -- Class A Notes at AA (sf) -- Class B Notes at BB (sf) The provisional rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the final maturity date. The provisional rating on the Class B Notes addresses the ultimate payment of interest and the ultimate repayment of principal on or before the final maturity date. The Class A and Class B Notes will be issued at closing to finance the purchase of a portfolio of first-lien residential mortgage loans originated by Banco Santander SA (Santander; rated A (high) with a Stable trend by DBRS Morningstar); Banco Español de Credito, S.A. (Banesto); and Banco Popular, S.A. (Popular). The mortgage loans are secured over residential properties located in Spain. Santander will be the Servicer, while Santander de Titulizacion SGFT, SA (the Management Company) will manage the transaction. Both Banesto and Banco Popular are a part of Santander. In 1994, Santander acquired majority ownership of Banesto, bringing it into the Santander Group. Since then, Santander increased its ownership of Banesto until its absorption in April 2013. In June 2017, the Single Resolution Board (SRB) and the Fondo de Reestructuracion Ordenada Bancaria (FROB) resolved Popular and the bank was transferred to Santander, which finally absorbed Popular in September 2018. Santander has managed the mortgage loans since the absorption dates. The Class A Notes benefit from the EUR 530 million (10.0%) subordination of the Class B Notes plus the EUR 265 million (5.0%) reserve fund, which is available to cover senior expenses as well as interest and principal on the Class A Notes until paid in full. The reserve fund will amortize with a target equal to the lower of EUR 265 million and 10.0% of the outstanding balance of the Class A and Class B Notes, subject to a floor of EUR 132.5 million. The reserve fund will not amortize if certain performance triggers are breached. The Class A Notes will benefit from full sequential amortization whereas principal on the Class B Notes will not be paid until the Class A Notes have been redeemed in full. Additionally, the Class A Notes principal will be senior to the Class B Notes interest payments in the priority of payments. DBRS Morningstar was provided with a provisional portfolio equal to EUR 5.5 billion as of 14 June 2021 (the cut-off date), which consisted of 43,360 loans extended to 42,606 borrowers. Most of the loans in the portfolio (80.6%) were included in previous Santander RMBS funds that have already been cancelled, resulting in a high WA seasoning of 11.9 years. The weighted-average (WA) original loan-to-value (LTV) ratio stands at 86.6% whereas the WA current indexed LTV is 87.7%. The mortgage loan portfolio is distributed among the Spanish regions of Andalusia (22.2% by current balance), Madrid (20.4%), and Catalonia (13.2%). 15.2% of the loans are classified as second homes. All the loans in the pool amortize on a monthly basis, with no interest-only loans. Of the portfolio balance, 11.7% of the loans were granted to self-employed borrowers and 4.2% to Santander employees. As of the cut-off date, 0.55% of the mortgage loans were no more than 30 days in arrears. The WA coupon of the mortgages is 0.63%. The Servicer is allowed to grant loan renegotiations for margin compressions, change of interest rate type, extension of maturity, and payment holidays due to legal or sector moratoria, without consent of the Management Company. These permitted variations are included in the transaction's documents, and limited to a portion of the pool in most cases. Furthermore, loans representing 18.5% of the portfolio currently benefit from margin or interest rate reduction due to cross selling of Santander products, a benefit which can increase in the future for some of these loans. DBRS Morningstar extended the maturity for loans representing 10% of the portfolio and decreased the margin of the loans in the portfolio in its cash flow analysis. Currently, 94.98% of the portfolio are floating-rate loans linked to 12-month Euribor, while 3.96% are linked to other Spanish indices (either IRPH or TRH). The remaining 1.06% of the portfolio are fixed rate loans. The notes are floating rate linked to three-month Euribor. Both the interest rate risk and the basis risk mismatch will remain unhedged. Santander acts as the treasury account bank. The transaction's account bank agreement requires the Management Company to find (1) a replacement account bank or (2) an account bank guarantor, upon loss of an applicable A (low) account bank rating. DBRS Morningstar's Long Term Critical Obligations Rating (COR) and Long-Term Deposits rating on Santander are AA (low) and A (high), respectively, as of the date of this press release. The applicable account bank rating is the higher of one notch below the COR, and the Long-Term Deposits rating on Santander. DBRS Morningstar based its ratings on the following analytical considerations: -- The transaction capital structure and form and sufficiency of available credit enhancement. -- The credit quality of the portfolio and DBRS Morningstar's qualitative assessment of Santander's capabilities with regard to originations, underwriting, and servicing. DBRS Morningstar was provided with Santander's historical mortgage performance data as well as loan-level data for the mortgage portfolio. DBRS Morningstar was not supplied with an Agreed Upon Procedures report. DBRS Morningstar calculated probability of default (PD), loss given default (LGD), and expected loss levels on the mortgage portfolio, which are used as inputs in the cash flow tool. DBRS Morningstar analyzed the mortgage portfolio in accordance with DBRS Morningstar's "European RMBS Insight Methodology" and “European RMBS Insight: Spanish Addendum". -- The transaction's ability to withstand stressed cash flow assumptions and repay the noteholders according to the terms and conditions in the transaction documents. DBRS Morningstar analyzed the transaction structure using Intex DealMaker. DBRS Morningstar considered additional conditional prepayment rate sensitivity scenarios. -- The transaction parties' financial strength to fulfil their respective roles. -- The transaction's legal structure and its consistency with DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology as well as the presence of the appropriate legal opinions that address the assignment of the assets to the Issuer. -- DBRS Morningstar's sovereign rating on the Kingdom of Spain of "A" with a Stable trend as of the date of this press release. The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading in some cases to increases in unemployment rates and income reductions for borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many structured finance transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar incorporated an increase in probability of default for certain borrower characteristics, and conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolio. Notes: All figures are in euros unless otherwise noted. JOYE MEDIA: S&P Lowers ICR to 'D' on Missed Interest Payment ------------------------------------------------------------ S&P Global Ratings downgraded Joye Media S.L., the parent of European audio-visual group Mediapro, to 'D' (default) from 'CCC-', and lowered its issue ratings on its EUR740 million first-lien debt, including the EUR60 million revolving credit facility (RCF), and its EUR180 million second-lien debt to 'D' from 'CCC' and 'C', respectively. Joye Media failed to pay interest and amortization on its first- and second-lien debt instruments, which constitutes a default under our criteria. Joye Media's lenders recently agreed to waive the EUR20 million interest and EUR25 million amortization due on June 28, 2021, until July 31, 2021, which secures the company additional time for restructuring negotiations. Lenders also waived the minimum liquidity covenant and the obligation to provide audited financial statements within 150 days from the end of the financial year. The one-month waiver on interest and amortization payments is beyond the three-day grace period allowed by the documentation, and as such constitutes a default under S&P's criteria. This is because the company has breached a stated promise on all of its financial obligations, regardless of lenders' forbearance and the fact that no contractual event of default has occurred. Since the nonpayment concerned all of the company's rated debt instruments, including the EUR60 million RCF, the amortizing EUR300 million term loan A, the EUR380 million term loan B, and the EUR180 million second-lien facility, S&P downgraded Joye Media to 'D'. The company and lenders are considering various restructuring options as uncertainty remains high. S&P said, "We understand that Joye Media has engaged and appointed external advisors to explore the company's options for restructuring, as the company's capital structure is unsustainable in our view, with gross debt approaching EUR1.0 billion and negative EBITDA in 2020. We understand that the company's lenders and advisors are discussing restructuring proposals with the shareholders and the board. The company's liquidity as of the first week of July is about EUR115 million, with no minimum liquidity maintenance covenant, having been waived until July 31. We understand that Joye Media may consider additional liquidity-raising options in the near term, such as bridge financing in connection with ongoing potential restructuring negotiations." S&P said, "We will reevaluate our rating on the company at the end of the forbearance period, or when the company announces updates, if any, to its capital structure. "Our existing '2' recovery rating (recovery prospects: 70%-90%; rounded estimate: 75%) on the EUR740 million first-lien debt, including the EUR60 million RCF, and our '6' recovery rating (0%-10%; rounded estimate 0%) on the EUR180 million second-lien debt are unchanged. Our recovery analysis does not take into account any additional financing that the company may consider raising before, or as part of the restructuring process." =========== T U R K E Y =========== TURKISH AIRLINES: S&P Lowers 2015-1 Certs Rating to 'B(sf)' ----------------------------------------------------------- S&P Global Ratings revised its issue-level ratings on Turkish Airlines' 2015-1 Enhanced Equipment Trust Certificates (EETCs) following a review prompted by its publication of new criteria for rating such issues. S&P removed its "under criteria observation" (UCO) indicator from the affected rating." S&P said, "Our analysis of equipment trust certificate (ETC) or EETC ratings under the new criteria typically starts with our issuer credit rating (ICR) on the airline that operates the aircraft, and adds any applicable notches for the likelihood that an airline will successfully reorganize in bankruptcy and continue to make payments on the ETC or EETC (which we call "affirmation credit"). We may adjust--by reducing those notches--for any adverse legal considerations that may arise from the jurisdiction in which the airline operates. For EETCs, we may also add notches for the likelihood that repossession and sale of the aircraft collateral will be sufficient to repay the EETC's principal and accrued interest, avoiding a default, if the airline does not reorganize or rejects the aircraft securing the certificates (which we call "collateral credit"). "We lowered our issue rating on Turkish Airlines' 2015-1 EETCs to 'B(sf)' from 'B+(sf)'. This reflected reduced affirmation credit dictated by our new criteria. Firstly, if our ICR on an airline is 'B' or 'B+' (our ICR on Turkish Airlines is 'B') and there is a difference of more than 10 percentage points between the loan-to-value (LTV) ratio calculated using appraised base value and a higher (worse) LTV calculated using appraised current market value, then we use an average of those two LTVs. Secondly, the average LTV exceeds our 85% threshold, resulting in our view of a higher risk that an airline could reject or renegotiate an EETC." For the principal elements of our analysis of the reviewed EETCs under S&P's new criteria see table 1. Table 1 Turk Hava Yollari A.O. Reviewed EETCS ISSUER Turk Hava Yollari A.O. ISSUE 2015-1 AIRLINE ICR B AFFIRMATION CREDIT 0 EETC PROFILE BEFORE b COLLATERAL CREDIT COLLATERAL CREDIT 0 ISSUE RATING B DIFFERENCE FROM -1 PREVIOUS RATING =========================== U N I T E D K I N G D O M =========================== ARCADIA GROUP: Mazars Appointed to Liquidate Remnants of Business ----------------------------------------------------------------- Jonathan Eley at The Financial Times reports that Mazars has been appointed to liquidate the Arcadia group of companies, winding up a fashion empire that helped make Sir Philip Green one of UK's richest and most flamboyant retail entrepreneurs. Although it had lost market share since the glory days of Kate Moss opening a flagship Topshop on New York's Fifth Avenue, Arcadia still employed around 13,000 people before it fell into administration last November, the FT notes. According to the administrator's report, just a handful of people are now engaged in winding the group down, the FT states. Mazars, the FT says, is targeting a recovery of at least GBP30 million, largely from reconciling intercompany loans and winding up the many businesses that made up Arcadia. The process could take up to a year and the main beneficiary is likely to be HM Revenue & Customs, which is among the largest unsecured creditors, though the tax authority will not get back the full amount it is owed, the FT discloses. Administrators to the main holding company have already recovered almost GBP250 million, largely from the GBP295 million sale of Topshop to Asos which enabled the repayment of an intercompany loan, the FT says. Hilco, another specialist recovery firm, has auctioned off much of the contents of the group's West End headquarters earlier this year, including an executive suite designed by a firm owned by Mr. Green's wife, Lady Tina, the FT recounts. According to the most recent administrators' report, some proceeds from the sale of two freehold shops and rebates on business rate payments are still to come through, the FT discloses. Secured creditors are likely to be repaid in full, the FT says. They include HSBC and Bank of Scotland along with Tina Green, who had lent the group GBP50 million secured against a distribution centre that has since been sold, according to the FT. Unsecured creditors with claims of almost GBP1.8 billion will get around 10p in the pound, the FT notes. The recoveries will improve the position of the pension schemes sufficiently to avoid having to be bailed out by the Pension Protection Fund, the FT relays, citing independent pensions expert John Ralfe. CANTERBURY FINANCE 4: DBRS Assigns B Rating on Class X Notes ------------------------------------------------------------ DBRS Ratings Limited assigned ratings to the following classes of notes issued by Canterbury Finance 4 plc (Canterbury 4 or the Issuer): -- Class A1 and Class A2 notes (together the 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 (sf) -- Class F notes at B (low) (sf) -- Class X notes at B (sf) The ratings assigned to the Class A notes address the timely payment of interest and ultimate payment of principal. The ratings assigned to the Class B, Class C, Class D, Class E and Class F notes address the timely payment of interest when most senior and ultimate payment of principal. The ratings on Class X notes address timely payment of interest and ultimate payment of principal. The transaction features a general reserve fund at closing, which will be funded at 1.5% of the Class A to Class F notes' outstanding balance (beginning balance of the relevant payment period). The General Reserve Fund (GRF) can amortize subject to the following performance conditions: (1) the call option is not exercised falling in May 2026, (2) the general reserve fund balance in the relevant interest payment date falls below 1.25% of Class A to F outstanding balance, (3) cumulative defaults are greater than 5%. Once any of the three events occurs, the GRF required amount will be 1.5% of the Class A to F beginning balance of the relevant interest payment period in which the event occurred. In the event that the GRF balance in the relevant interest payment date falls below 1.25% of the Class A to F notes' outstanding balance, the structure provisions for a liquidity reserve fund. The liquidity reserve will be funded from principal receipts at a required amount of 1.5% of the Class A and B notes' outstanding balance. The liquidity reserve fund can be used for Class A notes interest payments and senior expenses after use of revenue collections, the GRF and use of principal. The liquidity reserve can only be used for Class B interest payments if the Class B principal deficiency ledger (PDL) is zero or once the Class B notes are senior notes outstanding. At closing, credit enhancement will be 17.75% for the Class A Notes provided by overcollateralization and the GRF. Credit enhancement will be 13.75% for Class B, 9.50% for Class C, 6.75% for Class D, 4.25% for Class E, and 1.5% for Class F. The Class X notes are excess spread notes and only benefit from soft credit enhancement. In case of an event of default, the Class A1 and Class A2 notes are repaid pro rata and pari passu; otherwise they are paid sequentially, i.e. Class A1 first. As of 31 May 2021, the GBP 1.7 billion portfolio consisted of 7,111 buy to let (BTL), loans originated by OneSavings bank plc (OSB) to 5,839 borrowers. The weighted-average (WA) seasoning of the portfolio is 1.7 years, with a WA remaining term to maturity of 21.4 years. The WA indexed loan-to-value of the portfolio is 72.7% (as calculated by DBRS Morningstar). The portfolio primarily contains interest-only loans (95.9%), yielding a WA coupon of 3.7%. The WA teaser period on the portfolio is 34.1 months (only for the fixed-rate and discount-rate loans proportion). About 63.9% of the loans are granted on properties located in London and South East. The portfolio consists of 9.7% loans granted to properties used as a house in multiple occupation with no holiday lets included. In response to the Coronavirus Disease (COVID-19), some borrowers were allowed to seek payment moratoriums. As of the cut-off date, 0.4% of the loans are in payment moratoriums or have received performance arrangements. Most loans, 87.7%,pay a fixed rate of interest with a reset frequency of five years, followed by discount-rate loans (11.6%) and the remaining are floating-rate loans. All loans are indexed to the Standard Variable Rate (SVR) after their reversion date. The SVR is currently at 6.18%. Historically, the SVR has followed the Bank of England rate, but the basis risk between the SVR and the daily compounded Sterling Overnight Index Average (SONIA) is hedged via a SVR covenant where the minimum SVR rate can be set at a rate of SONIA plus 3% (with SONIA floored at zero). The interest rate risk that arises due to fixed-rate loans will be hedged using an interest rate swap agreement between the issuer and Lloyds Bank Corporate Markets plc (LBCM). The notional schedule on the swap was provided to DBRS Morningstar and is based on a 2% prepayment rate. The current swap rate is 0.3605%. Based on the private rating of LBCM and the collateral posting provisions included in the documentation, DBRS Morningstar considers the risk of such counterparty to be consistent with the ratings assigned, in accordance with its "Derivative Criteria for European Structured Finance Transactions" methodology. The Issuer account bank is Elavon Financial Services, D.A.C., UK Branch. Based on the account bank's private ratings and the replacement provisions included in the transaction documents, DBRS Morningstar considers the risk of such counterparty to be consistent with the ratings assigned, in accordance with the "Legal Criteria for European Structured Finance Transactions" methodology. DBRS Morningstar based its rating primarily on the following analytical considerations: -- The transaction capital structure, including the form and sufficiency of available credit enhancement. -- The credit quality of the mortgage loan portfolio and the ability of the parties to perform servicing and collection activities. -- DBRS Morningstar calculated the portfolio default rate (PD), loss given default (LGD), and expected loss (EL) assumptions on the portfolio by using the European RMBS Insight Model. -- The ability of the transaction to withstand stressed cash flow assumptions and repay the noteholders according to the terms and conditions of the notes. The transaction cash flows were analyzed using Intex DealMaker. -- The consistency of the legal structure with DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer. -- The relevant counterparties, as rated by DBRS Morningstar, are appropriately in line with DBRS Morningstar's criteria to mitigate the risk of counterparty default or insolvency. -- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as downgrade and replacement language in the transaction documents. The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading in some cases to increases in unemployment rates and income reductions for borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many structured finance transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar incorporated an increase in probability of default for certain borrower characteristics, and conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolio. Notes: All figures are in British pound sterling unless otherwise noted. COLD FINANCE: DBRS Confirms BB(high) Rating on Class E Notes ------------------------------------------------------------ DBRS Ratings Limited confirmed its ratings of the following classes of notes of the Commercial Mortgage-Backed Floating Rate Notes due August 2029 issued by Cold Finance Plc: -- Class A at AAA (sf) -- Class B at AA (low) (sf) -- Class C at A (low) (sf) -- Class D at BBB (sf) -- Class E at BB (high) (sf) All trends remain Stable. Cold Finance PLC is the securitization of a GBP 282.8 million floating-rate senior commercial real estate loan (the senior loan) advanced by Cold Finance PLC (the Issuer) to four borrowers: Wisbech Propco Ltd, Real Estate Gloucester Limited, Harley International Properties Limited, and Yearsley Group Limited (Yearsley Group). All four borrowers are ultimately owned by Lineage Logistics Holdings LLC (Lineage or the Sponsor). The purpose of the loan was to refinance an initial bridge facility provided by Goldman Sachs International for the acquisition of the Yearsley Group, a large cold storage logistics service provider, and a further refinancing of two existing UK cold storage assets. Loan proceeds were also used for general operation purposes. To maintain compliance with applicable regulatory requirements, the Sponsor holds 5.0% interest in the transaction through the issuance of non-rated Class R notes. The senior loan is backed by a portfolio of 14 temperature-controlled and ambient storage industrial properties located throughout the United Kingdom. In November 2018, Lineage acquired Yearsley Group, which included 12 temperature-controlled storage facilities and its operational platform. The portfolio offers largely frozen storage facilities, with five of the assets providing a mixture of chilled and ambient storage options. The portfolio is located strategically close to customers' distribution centers as well as their target market throughout the United Kingdom, including one property in Scotland. The two largest assets by market value are located in Gloucester and Wisbech, Cambridgeshire. Since issuance, the overall performance of the portfolio has been stable. As of May 2021, 74% of the portfolio's capacity in terms of pallet space was occupied, quarterly EBITDA was reported to be GBP 8.7 million and the 12-month trailing EBITDA GBP 34.6 million which is in line with the budget. The debt yield of 10.5% is well above the cash trap and default covenants of 9.6% and 8.6%, respectively. The portfolio's storage space is split with approximately 61% allocated to retail supermarkets and operators who supply to supermarkets. It is understood that this segment of the business has performed strongly during the Coronavirus Disease (COVID-19) pandemic and is still performing well. The rest of the space is taken up by restaurants and storage space for this segment of the business was still being utilized during the pandemic up to May 2021, albeit with a lower churn of inventory; however, as the UK restrictions begin to ease and more restaurants open and operate at normal levels, inventory turnover and utilization is expected to improve. DBRS Morningstar is of the opinion that and there is sufficient headroom in the transaction for the borrower to maintain its obligations under the senior loan term. The loan structure includes financial default covenants such that the borrower must ensure that the LTV ratio is less than 83.6% and that the DY on each interest payment date must not be equal to or less than 8.6%. Other standard events of default (EOD) include: (1) any missing payment, including failure to repay the loan at the maturity date; (2) borrower insolvency; and (3) a loan default arising as a result of any creditor's process or cross-default. The transaction benefits from a liquidity support facility of GBP 12.9 million (13 million at issuance) and is provided by Crédit Agricole Corporate and Investment Bank. The liquidity facility may be used to cover shortfalls on the payment of certain amounts of interest due by the Issuer to the holders of the Class A to Class D notes and no more than 20% of the outstanding Class E notes. According to DBRS Morningstar's analysis, the liquidity reserve amount will be equal to approximately 12 months on the covered notes, based on the interest rate cap strike rate of 3.0% per annum (p.a.), and approximately nine months of coverage, based on the LIBOR cap after loan maturity of 5.0% p.a. The final legal maturity of the notes is expected to be in August 2029, five years after the fully extended loan term. The latest expected loan maturity date, including potential extensions, is 15 August 2024. Given the security structure and jurisdiction of the underlying loan, DBRS Morningstar believes this provides sufficient time to enforce on the loan collateral, if necessary, and repay the bondholders. COVID-19 CONSIDERATIONS 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 arise for many CMBS borrowers, some meaningfully. In addition, commercial real estate values will be negatively affected, at least in the short-term, impacting refinancing prospects for maturing loans and expected recoveries for defaulted loans. The ratings are based on additional analysis as a result of the global efforts to contain the spread of the coronavirus. Notes: All figures are in British pound sterling unless otherwise noted. CONSTELLATION AUTOMOTIVE: Fitch Gives 'B-(EXP)' to Secured Debt --------------------------------------------------------------- Fitch Ratings has assigned Constellation Automotive Limited an expected senior secured debt rating of 'B-(EXP)' with a Recovery Rating 'RR4'. Its new term loan B (TLB) issue along with other senior secured debt are part of a proposed recapitalisation of Constellation Automotive Group Limited (CAG). Post-transaction, Fitch expects to affirm CAG's Long-Term Issuer Default Rating (IDR) at 'B-' with a Stable Outlook. The 'B-' IDR reflects an aggressive financial profile, based on the proposed shareholder corporate actions, including a proposed debt-funded parent distribution of around GBP400 million, and high appetite for financial leverage. Fitch forecasts funds from operations (FFO) gross leverage at around 9.0x in fiscal year ending March 2022 (FY22), following the expected recapitalisation, and for it to remain above 8.0x until at least FY23. Nonetheless, Fitch continues to view CAG's business model as sustainable with market-leading positions as an integrated auto-service provider in the UK and continental Europe. The group's central position in the used-car value chain provides multiple sources of fee income with limited price risk and strong underlying free cash flow (FCF) generation. Furthermore, the group has now successfully adapted its business model to operate fully online auctions following a pandemic-disrupted 2020 and is boosting profitability by taking advantage of strong vehicle-buying margins in its WBAC (Fitch Buys Any Car) division. KEY RATING DRIVERS Leverage Key Rating Constraint: Following the planned recapitalisation alongside a parent distribution payment of around GBP400 million, Fitch expects financial leverage to rise to 9.0x in FY22, a level higher than Fitch-rated peers' and a key rating constraint at the group's 'B-' IDR. Furthermore, the sizeable parent distribution highlights an aggressive financial policy and a willingness to keep the balance sheet leveraged. Nevertheless, Fitch is confident in the group's deleveraging abilities via earnings growth and forecast steady deleveraging to around 7.5x by end-2024. Shift to Online Auctions: CAG's swift transition to online auctions during the lockdown period highlights the resilience of the group's business model. Fitch expects the shift to online auctions to remain following the pandemic, and Fitch anticipates neutral impact on underlying profitability as lower rental costs for auction sites are counterbalanced by higher logistics costs. Strong Operational Performance: CAG benefited from a resilient used-car market during 2020, and was able to preserve earnings by swiftly transitioning its business model to fully online auctions, leading to a fairly small 15% decline in EBITDA in FY21 to GBP164 million. Its 1HFY22 financial trading has been very strong as the group has taken advantage of benign trading conditions in WBAC, and Fitch expects EBITDA to reach GBP245 million for FY22, assuming no further lockdowns this winter. Fitch expects this higher earnings base to be sustainable, driven by continued growth in WBAC, expanding remarketing volumes in Europe, and a pick-up in automotive services as the new car market improves. Strong Market Position: CAG's market leading positions (around 2.5x larger than its nearest competitor), density of auction networks across the UK, large land requirements and in-house logistics capabilities are strong competitive advantages against new entrants. An integrated business model means CAG benefits from fees across the automotive value chain, generating diversified revenue streams from preparation, logistics, vehicle-buying and financing of vehicles on top of the core fees generated from operating car auctions. This positions CAG at the centre of the used-car market and supports its stable cash flows, while providing a large pool of vehicle data that informs its valuation models. Growing Used-Car Market: Fitch expects the used-automotive market in the UK and continental Europe to remain solid despite the ongoing perturbation triggered by the pandemic, with expected medium- term annual growth in the total number of vehicles of around 1.5%. Volatility is typically lower in used-car sales than for new car sales but the long-term impact of new mobility trends such as car sharing remains unclear. Weak Economy to Aid CAG: Fitch believes CAG is firmly positioned to benefit from the weak economic backdrop expected in the UK as consumers typically "trade down" from purchases of new to used cars during an adverse or uncertain economic environment. This was illustrated by CAG increasing its volumes and EBITDA during the last downturn in 2008-2009. Platforms such as WBAC are successful in commoditising the used-car market for all participants. DERIVATION SUMMARY CAG benefits from a robust business model with a market-leading position in the UK and growing presence in Europe, with the transition to fully online auctions complete post-pandemic. CAG is larger and better-integrated across the value chain than peers in the automotive service industry, which allows for diversified sources of income and a more resilient financial profile. Its integration of vehicle-buying, partner-finance and logistics services is unique among direct peers and results in strong cash flow generation and positive FCF. The key rating constraint for CAG is its aggressive financial policy, with the planned parent distribution of around GBP400 million in 2H21, and the group's highly leveraged balance sheet, with gross leverage expected to be above 8.0x until at least FY23. Its leverage is line with a 'ccc+' financial structure factor rating under Fitch's generic navigator. Leverage is higher than that of 'B' category business services peers such as Irel Bidco S.a.r.l. (B+/Stable), which typically has a leverage of 5.0x to 6.5x. KEY ASSUMPTIONS -- Fitch-adjusted EBITDA of around GBP245 million in FY22, growing by 8%-9% p.a. thereafter to FY25; Fitch-adjusted EBITDA margin gradually declining toward 4.7% in FY25 due to higher revenue contribution from WBAC; -- Working-capital outflows of around GBP40 million-GBP50m per year to support growth in WBAC; -- Capex at around 1.5% of revenue in FY22, falling to 0.7%-0.8% thereafter to FY25; -- One-off parent distribution of around GBP400 million in FY22; -- Small bolt-on M&A activity of GBP15 million per year to FY25. KEY RECOVERY ASSUMPTIONS -- Fitch's recovery analysis assumes CAG would be restructured as a going concern rather than be liquidated in an event of default; -- CAG's post-reorganisation, going-concern EBITDA reflects Fitch's view of a sustainable EBITDA of GBP175 million. In such a scenario, the stress on EBITDA would most likely result from a loss of market share or severe competitive pressure; -- A distressed enterprise value (EV)/EBITDA multiple of 5.5x has been applied to calculate a going-concern EV; this multiple reflects CAG's leading market positions and logistics capabilities, strong cash generation, and trusted brand; -- CAG's partner-finance facility (ring-fenced) ranks super senior in the recovery analysis; it is assumed drawn down at its average level of utilisation, of roughly GBP150 million; -- Fitch's calculations using the distressed EV result in a 'RR4' assumption on Fitch's recovery scale, leading to an instrument rating for the new estimated GBP1.4 billion senior secured debt at 'B-', in line with the IDR. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- FFO gross leverage sustainably below 8.0x; -- EBITDA margin above 5.5%; -- Positive FCF generation. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO gross leverage remaining above 9.5x; -- Extension of pandemic-related closures leading to increasing liquidity risk; -- Sustained negative FCF. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE CAG's liquidity position has improved since the lockdown disruptions in 2020 and since June 2020, FCF generation has added to the group's cash buffer. Fitch deems total liquidity of around GBP102 million, pro-forma for the expected dividend recapitalisation, plus a fully available enlarged revolving credit facility (RCF) of GBP250 million, as satisfactory to cover internal capex and intra-year working-capital requirements. The envisaged new debt structure is long-dated with main debt maturities in 2027-2028. Its partner financing facility, which extends credit to car dealers for purchases of vehicles, is fully secured against the value of the vehicles sold and personal guarantees obtained from the owners of dealerships. ISSUER PROFILE CAG operates the UK's and Europe's largest digital used vehicle exchanges (both business-to-business and consumer-to-business) and are a leading provider of automotive solutions in the UK, including vehicle movement, logistics, storage, pre-delivery inspections, fleet management, de-fleeting services and refurbishment. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ELVET MORTGAGES 2019-1: Fitch Affirms B- Rating on Class F Notes ---------------------------------------------------------------- Fitch Ratings has upgraded three tranches of Elvet Mortgages 2019-1 plc (Elvet 2019-1) and Elvet Mortgages 2020-1 plc (Elvet 2020-1) and affirmed all others. Fitch has also revised the Outlooks on Elvet 2019-1's class E and F notes to Stable from Negative. DEBT RATING PRIOR ---- ------ ----- Elvet Mortgages 2020-1 plc Class A XS2176220429 LT AAAsf Affirmed AAAsf Class B XS2176220775 LT AAAsf Affirmed AAAsf Class C XS2176220858 LT A+sf Upgrade Asf Class D XS2176220932 LT BBB+sf Affirmed BBB+sf Class E XS2176221070 LT BB+sf Affirmed BB+sf Elvet Mortgages 2019-1 plc A XS2080552321 LT AAAsf Affirmed AAAsf B XS2080552594 LT AAAsf Affirmed AAAsf C XS2080552677 LT A+sf Affirmed A+sf D XS2080552750 LT A+sf Upgrade A-sf E XS2080552834 LT BBB+sf Upgrade BBB-sf F XS2080552917 LT B-sf Affirmed B-sf TRANSACTION SUMMARY The transactions are Atom Bank plc's second and third securitisation since starting its mortgage lending business in 2016. The portfolios comprise prime owner-occupied mortgage loans. KEY RATING DRIVERS Additional Coronavirus Assumptions: Fitch applied additional assumptions to the mortgage portfolio (see EMEA RMBS: Criteria Assumptions Updated due to Impact of the Coronavirus Pandemic). The combined application of a revised 'Bsf' representative pool weighted average foreclosure frequency (WAFF) and revised rating multiples resulted in a multiple to the current FF assumptions of 1.1x at 'Bsf' and had no impact at 'AAAsf'. Prime Assets, Limited History: The loans in the pools have characteristics in line with Fitch's expectations for a prime mortgage pool. These include no previous adverse credit, full income verification, full or automated valuation model property valuation and a clear lending policy. The limited history of origination and subsequent performance data are sufficiently mitigated through available proxy data and an originator adjustment of 1.1x applied in Fitch's analysis. Increased Credit Enhancement: Credit enhancement (CE) has built up for all notes since closing due to the good asset performance, sequential amortisation of the notes and increasing non-liquidity reserve fund balance. The upgrades to Elvet 2019-1's class D and E notes and Elvet 2020-1's class C notes reflect the increased CE, which is able to withstand losses commensurate with these higher ratings. Elvet 2020-1's Junior Notes Capped: The class C notes are capped at 'A+sf' as they may defer interest at any time and lack dedicated liquidity support. Consequently they are exposed to payment interruption risk under Fitch's Structured Finance and Covered Bonds Counterparty Rating Criteria. The collateral portfolio has a lower-than-average weighted average (WA) fixed interest rate than similar RMBS pools rated by Fitch (2% as of April 2021), due to Atom's competitive pricing. Each mortgage also reverts to Atom's standard variable rate (SVR) of 3.5%, which is one of the lowest in the market. Low levels of revenue reduce the amount of excess spread available for clearing principal deficiency ledgers. Fitch tested the sensitivity to the SVR assumption which ultimately impacts excess spread. This resulted in significantly lower ratings for the junior tranches. The class D and E notes' ratings remain capped at 'BBB+sf' and 'BB+sf', respectively. Outlooks Revised to Stable: Fitch has revised Outlooks on Elvet 2020-1's class E and F notes to Stable from Negative. Total arrears are below 0.2% of the current principal balance in both transactions, and the pools' composition is broadly unchanged since closing. The Stable Outlooks incorporate the impact of Fitch's downside sensitivity, a 15% increase in FF and a 15% decrease in recovery rate (RR). RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE and potential upgrades. Fitch tested an additional rating sensitivity scenario by applying a decrease in the FF of 15% and an increase in the RR of 15%. The ratings for the subordinated notes could be upgraded by up to five notches for Elvet 2019-1 and one notch for Elvet 2020-1. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The transactions' performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes. -- Additionally, unanticipated declines in recoveries could also result in lower net proceeds, which may make certain note ratings susceptible to potential negative rating actions depending on the extent of the decline in recoveries. Fitch conducts sensitivity analyses by stressing both a transaction's base-case FF and RR assumptions, and examining the rating implications on all classes of issued notes. Fitch tested a sensitivity scenario by applying 15% increase in WAFF and a 15% decrease in WARR. The results indicate a rating impact of up to six notches for Elvet 2019-1 and four notches for Elvet 2020-1. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. 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. Prior to the transactions closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transactions closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. GFG ALLIANCE: AIP Launches Legal Proceedings Over Belgian Mill -------------------------------------------------------------- Robert Smith, Kaye Wiggins and Sylvia Pfeifer at The Financial Times report that Sanjeev Gupta is battling to hold on to a Belgian aluminium mill after a US private equity firm took legal action in the UK to seize control. Mr. Gupta's metals group GFG Alliance, which is the subject of an investigation by the UK's Serious Fraud Office, has been fighting to refinance more than US$5 billion of debt after the collapse of Greensill Capital, its main lender, the FT relates. But the lender to GFG's rolling mill in Duffel outside Antwerp -- which people familiar with the matter said was private equity firm American Industrial Partners -- launched legal proceedings in the past week, the FT notes. AIP successfully persuaded a court to appoint administrators at a UK holding company that owns the asset, the FT discloses. The process could result in ownership of the Duffel mill transferring to AIP, the holder of the US$59 million debt, the FT says. According to the FT, a spokesman for GFG said it is "vigorously challenging" the administration. "A full refinancing package for the Duffel business has been agreed with a major international group, which would see all of Duffel's creditors paid in full, and we expect that process to complete soon," GFG added. AIP's challenge threatens to complicate a rescue loan Mr. Gupta recently negotiated with commodity trader Glencore, which is offering to refinance the debt across his European aluminium business, the FT states. The London-listed miner and trading firm has offered to refinance some of the more than US$500 million of debt at both the Duffel site and its French sister plant in Dunkirk with a new six-year loan, the FT discloses. Earlier this year, AIP bought up all of the Duffel plant's debt and a portion of the debt at the Dunkirk aluminium smelter, while approaching Gupta with an offer to buy the two assets, the FT recounts. According to the FT, in a memo to senior management last week, Mr. Gupta confirmed that the group had rejected AIP's bid for the two assets, adding that GFG was "targeting an amicable settlement of their debts using the facilities agreed with Glencore". However, people familiar with the situation said it could result in Mr. Gupta maintaining control of the French smelter, but losing control of the Belgian mill to the US private equity firm, the FT relays. GLOBAL SHIP: Moody's Hikes CFR to B1 on Improving Credit Metrics ---------------------------------------------------------------- Moody's Investors Service has upgraded the corporate family rating of Global Ship Lease, Inc. (GSL, the company) to B1 from B2, and its probability of default rating to B1-PD from B2-PD. The outlook was changed to stable from positive. RATINGS RATIONALE The rating action reflects the company's increased scale after a number of vessel purchases in the first half of 2021 and improving credit metrics. It also reflects further refinancing actions resulting in an extended maturity profile, continued high revenue visibility given its long-term charters and the continued strong market environment in container shipping. Following the secondary offering of private equity shareholder Kelso the company's free float also now exceeds 50%, although Kelso retains its board position and a reduced ownership. GSL purchased 23 vessels in the first half of 2021, increasing its fleet by around 50% to 66 from 43 vessels, and increasing its capacity by around 41% to 344,650 TEU. Most of the new vessels come with multi-year charters, but some have charters maturing in 2021 and 2022 at charter rates well below current market prices limiting any rechartering risk. As of March 2021, company-adjusted EBITDA was largely contracted for 2021, at 96%, and to a large extent for 2022, at 70%. Pro-forma for the new vessels Moody's expects the contracted levels to be maintained at least at similar levels. The ratings continue to consider a degree of customer concentration. The new vessels will be delivered in the second and third quarter 2021 and Moody's expects the purchase price of nearly $500 million to be largely funded by debt and to a lesser extent from cash on hand, also considering the equity raise in January 2021, but this will be more than offset once the vessels fully contribute in 2022 with leverage likely between 2-3x. The container market also remains strong with record high charter rates that minimize any rechartering risk at this stage. Moody's views the increasing free float as positive. It was also accompanied by the conversion of Series C Preferred Shares further simplifying the company's structure. LIQUIDITY PROFILE Moody's views the liquidity profile as adequate. The company had $142 million of cash on balance sheet as of March 2021, although this will be partly used for the company's vessel acquisitions. Nevertheless, Moody's expects the company to maintain meaningful cash positions also in light of some minimum liquidity requirements under its debt facilities and for collateral or reserve purposes. GSL has been and is expected to continue to remain free cash flow generative after interest but before vessel acquisitions and divestments. Following the high refinancing activity in the first half, GSL has no material balloon maturities until 2024. However, the company is subject to mandatory debt amortization peaking at $157 million in 2022 before reducing. Moody's additionally notes that the company has commenced paying a dividend, which Moody's expect to remain at broadly similar levels going forward. Moody's expects the company to cover these outflows from its ongoing cash flows. RATING OUTLOOK The stable outlook reflects Moody's expectation of continued deleveraging helped by currently supportive underlying industry fundamentals and ongoing debt amortization, but also balanced by some potential for further debt-funded vessel acquisitions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure could arise if the business continues to grow and diversify with debt/EBITDA sustainably below 3x and (funds from operations + interest)/interest sustainably above 5.0x, free cash flow remains visibly positive, rechartering risks remains limited through longer-dated charters and the maturity profile well managed. Conversely, negative pressure could develop if the company's (funds from operations + interest)/interest falls to 3x, debt/EBITDA reaches 4.5x or free cash flow weakens. Downward pressure on the ratings could also result if GSL experiences strained liquidity and difficulties in terms of the rechartering of vessels at adequate rates when contracts expire. Global Ship Lease, Inc. is a Republic of the Marshall Islands corporation, with administrative offices in London. Including currently pending vessel acquisitions, GSL owns a fleet of 66 container vessels with a combined capacity of 344,650 twenty-foot equivalent units (TEU), mostly small to medium-sized vessels with an average TEU-weighted age above 10 years. GSL has been publicly traded on the New York Stock Exchange since August 15, 2008. Its largest shareholders include Kelso, a US private equity firm, and CMA CGM S.A., a top five global container liner. GSL generated revenue of $283 million and EBITDA of $162 million for the year 2020. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Shipping published in June 2021. JAGUAR LAND: S&P Alters Outlook to Stable & Affirms 'B' ICR ----------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit rating on U.K.-based premium car manufacturer Jaguar Land Rover Automotive PLC (JLR) and revised the outlook to stable. S&P also affirmed its 'B' issue rating on the company's debt, and assigned our 'B' issue rating and '3' recovery rating to JLR's new senior unsecured notes. The stable outlook indicates that JLR will be able to continue adapting its cost base to protect profitability and cash flow, while exhibiting good liquidity management. JLR's cost-savings programs made significant gains through FY2021, with management steering the business back to profitability, positive cash flows, and improved credit metrics. Despite a contraction in volumes for FY2021--a demand-side challenge fueled by governments locking down to contain the spread of COVID-19--that we previously predicted--JLR continued to adapt its cost base. It posted improvements to S&P Global Rating-adjusted EBITDA, with FOCF turning positive and credit metrics of debt to EBITDA and funds from operations (FFO) to debt strengthening versus the prior fiscal year. This left JLR well positioned for FY2022, before the chip shortage started to negatively affect many automotive OEMs' production rates just as the sector started to recover from the impact of the COVID-19 pandemic. JLR's management is already adept at operating in adverse conditions, because in recent years it has had to prepare to navigate the business through a potential no-deal Brexit, possible U.S. import tariffs, a slump in demand for diesel engines, and the COVID-19 pandemic. In addition, management has exceeded its previous cost-cutting expectations via Project Charge and Charge+ and identified up to GBP1 billion of potential further value via Project Refocus. In terms of sales volumes in many of JLR's core markets, the chip shortage will weigh on the expected recovery. S&P has revised its forecast down for wholesale and retail volumes through FY2022, and now expect that JLR will sell about 450,000 vehicles in 2022 (a total growth of about 2.4% versus 2021), with favorable pricing conditions taking total revenue growth toward GBP21 billion. JLR is still on track to eventually achieve breakeven FOCF. S&P said, "The business is now effectively structured to be cash flow breakeven at 400,000 wholesales (or about 470,000 total retails; we assume that the difference between total wholesales and total retails is about 70,000 units in our projections). We forecast a slight contraction in adjusted EBITDA margins to about 5% and that FOCF will turn negative, with a total outflow for FY2022 of GBP700 million-GBP800 million. Excluding the GBP500 million of restructuring costs that JLR plans, FOCF would have been negative GBP200 million-GBP300 million FOCF in FY2022. In other words, in spite of the large impact on volumes by the chip shortage and GBP500 million tail of cost-cutting charges, JLR continues to approach breakeven FOCF from an operational cash flow perspective. The fact that management has trimmed capital expenditure (capex) and research and development (R&D) costs to GBP2.5 billion (from more than GBP4 billion historically) and tightened working capital also supports future cash flow generation. We forecast debt to EBITDA to be 3.0x-3.5x, with FFO to debt in excess of 12% at the same time. Despite improving leverage metrics, our focus very much remains on FOCF and the potential volatility in cash flow (and therefore credit metrics) until the chip shortage abates." Proactive liquidity management coupled with a long-dated debt maturity profile supports the rating. Due to multiple positive actions taken through FY2021 to bolster its liquidity position, JLR is in a good position to weather short-term economic uncertainty. As of June 30, 2021, JLR had about GBP5.6 billion of total liquidity, including a GBP1.935 billion undrawn committed revolving credit facility (RCF). Since our last publication, the company has taken several positive measures to bolster liquidity, including a Chinese renminbi (RMB) 1 billion loan (GBP560 million equivalent) signed with Chinese banks, $700 million of new senior unsecured issued in October 2020, and $650 million of new senior unsecured notes issued in December 2020. JLR has just launched a dual tranche $500 million/EUR500 million offering at the time of this publication. S&P estimates that the ongoing chip shortage could require JLR to burn up to GBP1 billion of cash per fiscal quarter, and in its forecast it assumes this rate of cash burn for first-quarter (Q1) and Q2 2022, with a gradual reversal through the second half of the year. S&P said, "We expect the chip shortage to weigh on the automotive industry's recovery prospects and negatively affect OEM production through end-2021.In our view, global light vehicle sales will increase by between 8% and 10% this year to 83 million-85 million units, from 77 million in 2020. This does not materially diverge from our previous forecast of 7%-9% growth for 2021. However, we now see a quicker global rebound, after sales in 2020 exceeded our expectations because of pent-up demand and successful measures to stimulate demand in the second half of the year. Given the record low inventories across the industry at the end of 2020, we initially anticipated a fast rebound of light vehicle production in 2021. However, we have substantially realigned our projections, owing to the shortage of electronic components since the end of 2020, further exacerbated by unexpected supply-chain disruptions in 2021, such as the fire at a major Renesas Electronics Corp. semiconductors supplier in Japan and climate issues in Texas that triggered the closure of chip-making plants. We now expect restocking to be delayed into 2022 and 2023. "Visibility over when supplies will normalize remains very poor. Based on manufacturers' Q1 results, we expect supply disruption to further deteriorate in Q2, and hopes for a recovery in units in the second half of the year are starting to fade. While almost all global auto manufacturers will have to idle production at some stage this year, the impact of the chip shortage varies substantially between companies. This leads us to believe that our initial assessment of net loss production of up to 3 million units for the industry as a whole in 2021 may have been too optimistic. Nonetheless, demand has been sustained, particularly in China and the U.S. In combination with low inventories, this has resulted so far in record pricing effects across the industry and solid residual values. These factors are mitigating the supply-disruption effect on manufacturers' earnings. Our base-case scenario, however, is that normalization will take the whole of 2021." The wider economic recovery hangs on the vaccination program reaching critical mass and existing vaccines preventing severe illness, even against new variants. In the U.K. and EU, 63% and 47% of the population, respectively, has received at least one dose of vaccine, with supply sufficient to provide second doses to 70% of the adult population over the next couple of months. Evidence points to vaccinations limiting the severity of disease and lowering the rate of hospital admissions; even those caused by the highly contagious Delta variant currently dominant across the U.K. This is encouraging for the EU, which is bracing for a Delta wave, and should help motivate more people to get vaccinated as soon as possible. However, vaccine supply constraints, particularly in South America, Africa, and many parts of East Asia, will delay widespread immunization globally until well into 2022, if not 2023. This carries a significant risk that further mutations of the virus could undermine the protection provided by first-generation vaccines. The stable outlook indicates that, despite the COVID-19 pandemic and chip shortage, JLR will be able to continue adapting its cost base to protect profitability and cash flow, while exhibiting good liquidity management. S&P said, "We could raise the ratings if JLR improves its performance and manages to improve and sustain its EBITDA margin to more than 6%, despite the headwinds in the supply chain from the current chip shortage, with FOCF improving toward breakeven at the same time, coupled with supportive industry conditions. "We would lower the ratings if we thought the effect of the pandemic or chip shortage on global automotive markets would become materially worse than we currently assume, with further downward revisions to our base case for volumes, profitability and cash flow. We could also lower the ratings on JLR if the company's liquidity position weakened." NEWDAY FUNDING 2021-2: DBRS Finalizes B(high) Rating on F 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 2021-2 (collectively, the Notes) issued by NewDay Funding Master Issuer plc. 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 repay 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 were issued out of the 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. BNP Paribas SA is the swap counterparty for the Class A2 swap. DBRS Morningstar has a Long-Term Issuer Debt rating of AA (low) on BNP Paribas SA, 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 June 2021 servicer report of the securitized portfolio shows an improved total payment rate of 14.3% 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 May 2021 shows a total yield of 28.9%, 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, DBRS Morningstar maintains the expected yield at 24.5%. The reported historical charge-off rates had been high but stable at approximately 16% until March 2020. The most recent performance in May 2021 showed a charge-off rate of 11.5%, 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 maintains the expected charge-off rate at 18%. 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. TOWER BRIDGE 2021-2: DBRS Finalizes BB(high) Rating on X Notes -------------------------------------------------------------- DBRS Ratings Limited finalized the provisional ratings on the following classes of notes issued by Tower Bridge Funding 2021-2 plc (TBF21-2 or the Issuer): -- 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 X notes at BB (high) (sf) The rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the final maturity date in November 2063. The ratings on the Class B, Class C, and Class D notes address the timely payment of interest once most senior and the ultimate repayment of principal on or before the final maturity date. The rating on the Class X notes addresses the ultimate payment of interest and principal on or before the final maturity date. DBRS Morningstar does not rate the Class Z1, Class Z2 notes, or the residual certificates. TBF21-2 is the seventh securitization of residential mortgages by Belmont Green Finance Limited (BGFL). The asset portfolio comprises first-lien owner-occupied and buy-to-let (BTL) mortgages, originated by BGFL through the Vida Homeloans brand and secured by properties in the United Kingdom. BGFL is the named mortgage portfolio servicer but has appointed Computershare Limited (formerly Homeloan Management Limited) to perform certain servicing activities. In order to maintain servicing continuity, CSC Capital Markets UK Limited has been appointed as the backup servicer facilitator. BGFL is a specialist UK lender that offers a full suite of mortgage products including owner-occupied, BTL and adverse credit history loans. BGFL only started originating loans in 2016 and hence has limited performance history. The structure includes a pre-funding mechanism where BGFL has the option to sell recently originated mortgage loans to the Issuer, subject to certain conditions to prevent a material deterioration in credit quality. The acquisition of these assets shall occur before the first interest payment date (IPD), using the proceeds standing to the credit of the pre-funding reserves. Any funds that are not applied to purchase additional loans will flow through the pre-enforcement principal priority of payments and pay down the principal-backed notes and the Class X notes on a pro rata basis. The Issuer issued five tranches of collateralized mortgage-backed securities (the Class A, Class B, Class C, Class D, and Class Z1 notes, the Principal Backed Notes) to finance the purchase of the initial portfolio and fund the pre-funding reserves. Additionally, TBF21-2 issued two classes of noncollateralized notes, the Class Z2 and Class X notes. The proceeds of the Class Z2 notes have been used to fund the General Reserve Fund (GRF) and the proceeds of the Class X notes have been used to fund pre-funding Class X reserve ledger at closing. Any funds remaining in the pre-funding principal reserve and pre-funding Class X reserve on the first IPD will flow through the pre-enforcement principal priority of payments. To mitigate the risk of negative carry arising during the first quarter, the GRF is sized at its target level directly as of the closing date. The transaction is structured to initially provide 16.5% of credit enhancement to the Class A notes. This includes subordination of the Class B to Class Z1 notes (Classes X and Class Z2 are not collateralized) and the nonamortizing GRF. The GRF is available to cover shortfalls in senior fees, interest, and any PDL debits on the Class A to Class D notes after the application of revenue. On the closing date and prior to the redemption in full of the Class A to Class D notes, the required amount will be equal to 2.5% of the Principal Backed Notes as of closing. The reserve will form part of available principal on the payment date that the Class D notes will be redeemed in full. The liquidity reserve fund (LRF) is available to cover shortfalls of senior fees and interest on the Class A and Class B notes after the application of revenue and the GRF. The LRF has a balance of zero at closing and will be funded through principal receipts as a senior item in the waterfall to its amortizing target – 1.5% of the outstanding balance of the Class A and Class B notes. Any use, including prior to its complete funding, will be replenished from revenue. The excess amounts following amortization of the notes will form part of available principal. Principal can be used to cure any shortfalls of senior fees or unpaid interest payments on the most-senior class of the Class A to Class D notes outstanding after using revenue funds and both reserves. Any use will be recorded as a debit in the principal deficiency ledger (PDL). The PDL comprises five subledgers that will track the principal used to pay interest, as well as realized losses, in a reverse sequential order that begins with the Class Z1 subledger. On the interest payment date in August 2025, the coupon due on the notes will step up and the notes may be optionally called. The notes must be redeemed for an amount sufficient to fully repay them, at par, plus pay any accrued interest. As of 30 June 2021, the portfolio consisted of 1,133 loans with an aggregate principal balance of GBP 224.0 million. Approximately 79.3% of the loans by outstanding balance were BTL mortgages. As is common in the UK mortgage market, the loans were largely scheduled to pay interest-only on a monthly basis, with principal repayment concentrated in the form of a bullet payment at the maturity date of the mortgage (79.4% of the loans in the pool are interest-only). A significant part of the BTL loans was granted to portfolio landlords: 50.1% of the loans by total loan balance were granted to landlords with at least one other BTL property, and 17.9% have at least eight other BTL properties. The mortgages are high-yielding, with a weighted-average coupon of 4.3% and a weighted-average reversionary margin of 4.7% over either the Vida Variable Rate (VVR) or the Bank of England Base Rate (BBR). The weighted-average seasoning of the pool is relatively low at 2.8 years. The weighted-average original loan-to-value (LTV) is 70.2% and the weighted-average indexed current LTV of the portfolio as calculated by DBRS Morningstar is 69.1%, with only 8.7% of the loans having an indexed current LTV above 80%. Furthermore, 41.1% of the loans were granted to self-employed borrowers and 2.6% of the loans were granted under the Help-to-Buy scheme. Moreover, 7.5% of the mortgage portfolio by loan balance have prior county court judgements (CCJ) relating to the primary borrower with only 4.1% of the primary borrowers having a CCJ recorded during the past six years. As of the cut-off date, loans between one and three months in arrears represent 1.1% of the outstanding principal balance of the portfolio; loans more than three months in arrears were 0.3%. The majority of loans in the portfolio (85.0%) will revert to floating rates after the initial fixed-rate period, with 53.8% of the floating-rate loans reverting to the BBR and 31.2% to the VVR in the next one to five years; the remaining 15.0% of the portfolio is currently paying a floating rate linked to either the BBR or the VVR. Almost all loans linked to BBR as of the date of this report were previously linked to three-month Libor and have transitioned to a new rate as of June 21, 2021, the Libor replacement rate which is set quarterly as BBR plus an adjustment spread. The Libor replacement rate is subject to a floor at 25 bps and is always rounded up to the next 5 bps. The customer's previous margin over Libor has then be applied as the margin over the Libor Replacement Rate. The interest on the notes is calculated based on the daily-compounded Sterling Overnight Index Average (Sonia), which gives rise to interest rate risk. The basis risk exposure is partially mitigated through a minimum VVR covenant, which will provide that the variable rate is not set below Sonia plus 1.5%. DBRS Morningstar considered the basis risk between the variable rate mortgages linked to the BBR or VVR and the notes in its cash flow analysis. The Issuer has entered into a fixed-floating swap with Banco Santander S.A. (Santander) to mitigate the fixed interest rate risk from the mortgage loans and Sonia payable on the notes. Based on the DBRS Morningstar ratings of Santander, which has a long-term issuer rating of A (high) and a Long Term Critical Obligations Rating of AA (low), the downgrade provisions outlined in the documents, and the transaction structural mitigants, DBRS Morningstar considers the risk arising from the exposure to Santander to be consistent with the ratings assigned to the notes as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. Monthly mortgage receipts are deposited into the collections account at Barclays Bank PLC (Barclays) and held in accordance with the collection account declaration of trust. DBRS Morningstar has assigned a long-term issuer rating of "A" and a Long Term Critical Obligations Rating of AA (low) to Barclays. The funds credited to the collection account are swept daily to the Issuer's account for direct debit payments and within three business days for other payment formats. The collection account declaration of trust provides that interest in the collection account is in favor of the Issuer over the seller. Commingling risk is considered mitigated by the collection account declaration of trust and the regular sweep of funds. If the collection account provider is downgraded below BBB (low), the collection account bank will be replaced by an appropriately rated bank within 60 calendar days. Citibank N.A., London Branch (Citibank) is the account bank in the transaction and holds the Issuer's transaction account, the GRF, the LRF, the prefunding reserves, and the swap collateral account. The transaction documents stipulate in the event of a breach of the DBRS Morningstar rating level of "A", the account bank will be replaced by, or obtain a guarantee from, an appropriately rated institution within 30 calendar days. Based on the DBRS Morningstar rating of Citibank at AA (low) (long-term issuer rating), replacement provisions, and investment criteria, DBRS Morningstar considers the risk arising from the exposure to Citibank to be consistent with the ratings assigned to the rated notes as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. DBRS Morningstar based its ratings on a review of the following analytical considerations: -- The transaction's capital structure and form and sufficiency of available credit enhancement. -- The credit quality of the mortgage portfolio and the ability of the servicer to perform collection and resolution activities. DBRS Morningstar calculated the probability of default (PD), loss given default (LGD), and expected loss outputs on the mortgage portfolio, which are used as inputs into the cash flow tool. The mortgage portfolio was analyzed in accordance with DBRS Morningstar's "European RMBS Insight: UK Addendum". -- The ability of the transaction to withstand stressed cash flow assumptions and repay the Class A, Class B, Class C, Class D, and Class X notes according to the terms of the transaction documents. -- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as a downgrade, and replacement language in the transaction documents. -- DBRS Morningstar's sovereign rating on the United Kingdom of Great Britain and Northern Ireland at AA (high) with a Stable trend as of the date of this press release. -- The consistency of the transaction's legal structure with DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology and presence of legal opinions addressing the assignment of the assets to the Issuer. The transaction structure was analyzed using Intex DealMaker, considering the default rates at which the rated notes did not return all specified cash flows. The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading in some cases to increases in unemployment rates and income reductions for borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many structured finance transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar incorporated an increase in probability of default for certain borrower characteristics, and conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolio. Notes: All figures are in British pound sterling unless otherwise noted. TOWER BRIDGE 2021-2: S&P Assigns B(sf) Rating on Class X Notes -------------------------------------------------------------- S&P Global Ratings has assigned credit ratings to Tower Bridge Funding 2021-2 PLC's class A to X-Dfrd notes. At closing, the issuer also issued unrated class Z1 and Z2 notes, and RC1 and RC2 certificates. S&P's 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 all the other rated notes. Its ratings also address timely receipt of interest on the class B–Dfrd to X-Dfrd notes when they become the most senior outstanding. The loans in the pool were originated between 2017 and 2021 by Belmont Green Finance Ltd. (BGFL), a nonbank specialist lender, via their specialist mortgage lending brand, Vida Homeloans. The collateral comprises complex income borrowers with limited credit impairments, and there is a high exposure to self-employed, contractors, and first-time buyers. Approximately 79.31% of the pool comprises BTL loans and the remaining 20.69% are owner-occupier loans. The transaction includes an approximately 25.3% prefunded amount where the issuer can purchase additional loans until the first interest payment date, subject to the prefunding eligibility criteria outlined in the transaction documentation. In addition to this, product switches and further advances are also permitted under the transaction documentation subject to certain conditions. Product switches are permitted up to a limit of 15.0% of the aggregate amount of the current balance of the portfolio as of the issue date and the balance of additional loans purchased under the prefunding mechanism. Further advances are permitted up to a limit of 2.5% of the aggregate amount of the current balance of the portfolio as of the issue date and the balance of additional loans purchased under the prefunding mechanism. Both product switches and further advances are only permitted subject to compliance with the respective eligibility criteria. Of the pool, 0.58% of the mortgage loans by current balance have an active payment holiday due to the COVID-19 pandemic. Of the pool, 33.4% has had a historical payment holiday that has expired, 97% of these borrowers are now current. The transaction benefits from a fully funded general reserve fund, which is used to provide credit support to the class A to class D-Dfrd notes. A liquidity reserve fund present in the transaction, funded initially via the principal waterfall, to provide liquidity support to the class A and B-Dfrd notes. Principal can be used to pay senior fees and interest on the rated notes subject to conditions. The transaction incorporates a swap to hedge the mismatch between the notes, which pay a coupon based on the compounded daily Sterling Overnight Index Average Rate (SONIA), and certain loans, which pay fixed-rate interest before reversion. At closing, the issuer used the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer grants security over all of its assets in favor of the security trustee. 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. BGFL is the mortgage administrator in the transaction, with servicing delegated to Homeloan Management Ltd. (HML). S&P said, "Our credit and cash flow analysis and related assumptions consider the transaction's ability to withstand the potential repercussions of the COVID-19 outbreak, namely, higher defaults, longer recovery timing, and additional liquidity stresses. Considering these factors, we believe that the available credit enhancement is commensurate with the ratings assigned. As the situation evolves, we will update our assumptions and estimates accordingly." Ratings List CLASS RATING AMOUNT (MIL. GBP) A AAA (sf) 258.00 B-Dfrd AA+ (sf) 13.20 C-Dfrd AA (sf) 12.00 D-Dfrd A- (sf) 9.30 X-Dfrd B (sf) 9.00 Z1 NR 7.50 Z2 NR 7.50 RC1 Certs NR N/A RC2 Certs NR N/A NR--Not rated. N/A--Not applicable. TOWER BRIDGE 4: DBRS Confirms BB Rating on Class F Notes -------------------------------------------------------- DBRS Ratings Limited confirmed the following ratings on the notes issued by Tower Bridge Funding No. 4 PLC (the Issuer): -- Class A at AAA (sf) -- Class B at AA (high) (sf) -- Class C at A (sf) -- Class D at BBB (high) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) The ratings on the Class A and Class B notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in December 2062. The ratings on the Class C, Class D, Class E, and Class F notes address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and timely payment of interest while the senior-most class outstanding. The rating actions follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults, and losses. -- Portfolio default rate (PD), loss given default (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. The Issuer is a securitization of mortgage loans originated by Belmont Green Finance Limited (BGFL), a specialist UK mortgage lender that offers a full suite of mortgage products including owner-occupied, buy-to-let, adverse-credit-history, and interest-only loans. The securitized mortgage portfolio comprises first-lien home loans originated by BGFL through its Vida Homeloans brand. BGFL is the named mortgage portfolio servicer but delegates its day-to-day servicing activities to Homeloan Management Limited. PORTFOLIO PERFORMANCE As of June 2021, loans two to three months in arrears represented 0.2% of the outstanding portfolio balance and the 90+ delinquency ratio was 1.2%. The cumulative loss ratio was zero. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 8.5% and 23.2%, respectively. CREDIT ENHANCEMENT As of the June 2021 payment date, credit enhancement to the Class A, Class B, Class C, Class D, Class E, and Class F notes was 22.4%, 15.9%, 10.8%, 7.6%, 5.7%, and 4.1%, respectively, up from 19.1%, 13.6%, 9.2%, 6.4%, 4.8%, and 3.4% 12 months prior, respectively. Credit enhancement is provided by subordination of junior classes and the general reserve fund. The transaction benefits from a reserve fund of GBP 12.5 million and a liquidity reserve fund of GBP 6.0 million. The liquidity reserve fund covers senior fees and interest on the Class A and Class B notes, while the general reserve fund covers senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes. BNP Paribas Securities Services SCA, London Branch acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BNP Paribas Securities Services SCA, London Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. NatWest Markets Plc acts as the swap counterparty for the transaction. DBRS Morningstar's public Long-Term Critical Obligations Rating of NatWest Markets Plc at "A" is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. DBRS Morningstar analyzed the transaction structure in Intex DealMaker. The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading in some cases to increases in unemployment rates and income reductions for borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many structured finance transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. Notes: All figures are in British pound sterling unless otherwise noted. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. 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