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       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

          Thursday, August 12, 2021, Vol. 22, No. 155

                           Headlines



G E R M A N Y

[*] GERMANY: To Provide EUR58BB in Aid to Flood-Affected Regions


I T A L Y

COMDATA SPA: S&P Upgrades ICR to 'CCC+' After Debt Restructuring
COMWAY SPV 130: S&P Raises Repack Law 130 Notes Rating to 'CCC+'


R U S S I A

CB GEOBANK: Declared Insolvent; Provisional Administration Ends
NEFTEPROMBANK: Declared Insolvent; Provisional Administration Ends


S P A I N

HIPOCAT 11 FTA: Fitch Affirms C Rating on Class D Tranche


U N I T E D   K I N G D O M

BESTWAY RETAIL: Christie & Co Tapped to Sell Unwanted Stores
BRITISH AIRWAYS: S&P Affirms 'BB' Long-Term ICR
LV DISTRIBUTIONS: Shut Down Due to Covid Support Fraud
NMC HEALTH: Creditors Set to Vote on Deeds of Company Arrangement
VERY GROUP: Fitch Rates New GBP575MM Sr. Sec. Notes Final 'B-'


                           - - - - -


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G E R M A N Y
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[*] GERMANY: To Provide EUR58BB in Aid to Flood-Affected Regions
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The Associated Press reports that the German government agreed on
Aug. 10 to provide EUR58 billion (US$68 billion) to help rebuild
regions hit by devastating floods last month.

According to the AP, Chancellor Angela Merkel and the heads of
Germany's 16 states approved the state flood aid package, which
still needs parliament's endorsement.

More than 180 people died in Germany and hundreds more were injured
in the July 14-15 floods, which also claimed lives in neighboring
Belgium, the AP recounts.  Heavy rainfall turned small streams into
raging torrents, sweeping away houses, bridges and cars, the AP
relates.

The cost of the German aid package -- agreed just weeks before the
country's national election on Sept. 26 -- will be shared evenly by
the federal government and states, with the latter's payments
spread over 30 years, the AP discloses.




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I T A L Y
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COMDATA SPA: S&P Upgrades ICR to 'CCC+' After Debt Restructuring
----------------------------------------------------------------
S&P Global Ratings raised its long-term issuer credit rating on
Italy-based customer management outsourcer Comdata SpA to 'CCC+'
from 'SD' (selective default). S&P has also assigned its 'CCC+'
issue and '4' recovery ratings to the residual senior secured
debt.

The positive outlook reflects a one-in-three chance of an upgrade
should Comdata execute its business plan successfully in the coming
years, particularly with regard to it recovering EBITDA in line
with management's expectations, while limiting exceptional costs,
generating positive free operating cash flow (FOCF), and
maintaining stable liquidity.

The financial restructuring that Comdata has undertaken improves
its liquidity and extends its debt maturity profile, but the debt
burden remains considerable. After this restructuring, Comdata has
reduced its senior secured debt facilities to EUR375 million from
EUR595 million, and converted the residual EUR220 million of these
facilities into quasi-equity instruments. S&P said, "We treat these
instruments as equity-like, as we believe that the common-equity
and noncommon-equity financing are sufficiently aligned. An
amalgamation of the revolving credit facility (RCF) and the term
loan B effectively supported an extension of RCF's maturity date by
around a year to June 2024. The company also raised EUR25 million
of super senior new money in the refinancing, which boosts its
liquidity profile and results in a post-refinancing cash balance of
above EUR70 million. In calculating Comdata's S&P Global
Ratings-adjusted debt metrics, we include the EUR400 million of
super senior and senior secured facilities post the restructuring;
the remaining short-term bilateral facilities and local facilities
totaling around EUR25 million; and the nonrecourse factoring,
international guarantees, and lease liabilities, which together
total around EUR250 million. Given the company's continued
financial-sponsor ownership, we do not net cash from adjusted debt.
As such, we expect Comdata's leverage for 2021 to be below 9x on an
S&P Global Ratings-adjusted debt to EBITDA basis, supporting our
view that the capital structure remains unstainable absent an
improvement in business, financial, and economic conditions. The
restructured debt of EUR375 million includes around EUR250 million
of Law 130 notes held within the special-purpose vehicle Comway SPV
S.r.l. The Law 130 notes continue to be bound by the existing
senior facilities agreement."

S&P said, "We expect Comdata's cash generation to remain
constrained in 2021, but to improve in the coming years. We expect
exceptional costs to remain relatively high in 2021, as a result of
the cost of the recent financial restructuring and a number of
operational-efficiency programs that Comdata has implemented in
prior years. In addition, a working capital outflow stemming from
the repayment, largely in the first half of the year, of payments
that Comdata deferred during the pandemic reduced its cash flow. As
such, we expect that cash generation will be negative in 2021, but
with financial covenants capping capital expenditures (capex) and
nonrecurring costs, as well as the agreed deferral in 2021 and 2022
of 50% of interest on the restated senior secured debt, we expect
that cash generation will improve in subsequent years. In addition,
we expect that Comdata's ongoing operational improvement
initiatives, which include several site closures and site
consolidation, as well as the creation of a shared service center,
will support margin growth in the coming years. This will help
improve the credit metrics such that S&P Global Ratings-adjusted
leverage falls below 7x by 2023 and cash generation turns positive
in 2022.

"Our rating incorporates the fragmented business process
outsourcing (BPO) marketplace in which Comdata operates and
competes against larger peers, such as Teleperformance and Webhelp,
and its limited diversification across industries and countries.
While Comdata has operations across Italy, France, Spain, and Latin
America, it generated about 70% of its 2020 revenue in Italy and
France. The company continues to rely on the telecoms industry,
with six of its top 10 customers representing around 30% of its
revenue in the first half of 2021. However, Comdata has won several
new contracts in the past few months to support continued
diversification, with clients across the retail, financial
services, and the public sectors. The company generates around 84%
of its revenue from onshore activities, which remain more
competitive in terms of margins, and, as such, generate lower
margins than the offshore or near-shore activities of most of its
peers in the BPO industry. Given the competitive markets in which
Comdata operates and a greater reliance on onshore services, as
well as the exceptional costs it continues to incur, Comdata's
margin profile remains below that of its peers.

"The positive outlook reflects our view that Comdata's negative
cash generation during 2021 will be counterbalanced by its improved
liquidity position and reduced cash interest burden. We consider
the company's high post-restructuring leverage of around 10x to be
unsustainable absent favorable business, financial, and economic
conditions, but forecast improvements in leverage and cash flow in
the coming years. These could lead to a more sustainable capital
structure and improved refinancing prospects."

The positive outlook reflects an increased likelihood of an upgrade
should Comdata execute its business plan successfully in the coming
years, particularly with regard to recovering EBITDA in line with
management's expectations, while limiting exceptional costs,
generating positive FOCF, and maintaining stable liquidity. In
addition, an upgrade depends on Comdata deleveraging to make the
capital structure more sustainable, and thus improving its
refinancing prospects.

S&P said, "We could raise the ratings if Comdata generates material
FOCF in 2022 and we expect it to sustain this to support a stable
liquidity assessment. In addition, an upgrade would necessitate
continued deleveraging by Comdata to minimize refinancing risks in
the coming years. This could happen if management sustains organic
growth and improves operational performance while reducing
restructuring costs.

"We could lower the ratings if Comdata's operating performance
weakened further, resulting in a decline in the EBITDA margin and
sustained negative FOCF, which in turn, would put pressure on
liquidity and increase the likelihood of a default or distressed
exchange. This could happen if exceptional costs remain higher than
we anticipate, leading to lower cash generation or a potential
breach of the nonrecurring-costs covenant."


COMWAY SPV 130: S&P Raises Repack Law 130 Notes Rating to 'CCC+'
----------------------------------------------------------------
S&P Global Ratings raised to 'CCC+' from 'D' its rating on Comway
SPV S.r.l.'s repack law 130 notes.

The rating action follows S&P's Aug. 10, 2021, rating action on
Comdata SpA.

Following the restructuring on Comdata SpA, the outstanding balance
of Comway SPV's law 130 notes is now EUR250,206,815, down from
EUR396,994,815 before the restructuring (up from EUR356,794,815
when the notes were issued at closing).

In accordance with S&P's "Global Methodology For Rating Repackaged
Securities" criteria, published on Oct. 16, 2012, it has
weak-linked its rating on the repack notes to the lower of:

-- S&P's issue credit rating on the restated debt agreement issued
by Comdata SpA;

-- S&P's issuer credit rating (ICR) on Comdata SpA as fee payer;
and

-- S&P's ICR on BNP Paribas Securities Services (Milan Branch) as
bank account provider and custodian.

Therefore, S&P has weak-linked to its 'CCC+' issue credit rating on
Comdata SpA and have raised to 'CCC+' its rating on Comway SPV's
repack law 130 notes.




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R U S S I A
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CB GEOBANK: Declared Insolvent; Provisional Administration Ends
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On August 10, 2021, the Bank of Russia terminated the activity of
the provisional administration appointed to manage credit
institution CB Geobank (LLC) (hereinafter, the Bank).

According to the assessment of the provisional administration, the
value of the Bank's assets is insufficient to fulfil its
obligations to creditors.

On July 27, 2021, the Court of Arbitration of the City of Moscow
ruled to recognize the Bank as insolvent (bankrupt) and initiate
bankruptcy proceedings. The State Corporation Deposit Insurance
Agency was appointed as a receiver.

Further information on the results of the provisional
administration's activity is available on the Bank of Russia
website.

Settlements with the Bank's creditors will be made in the course of
the bankruptcy proceeding as the Bank's assets are sold (enforced).
The quality of these assets is the responsibility of the Bank's
former management and owners.

The provisional administration was appointed by virtue of Bank of
Russia Order No. OD-535, dated April 2, 2021, due to the revocation
of the banking license from the Bank.


NEFTEPROMBANK: Declared Insolvent; Provisional Administration Ends
-------------------------------------------------------------------
The provisional administration to manage the credit institution
Joint Stock Oil-Industrial Investment Commercial Bank, or
Nefteprombank (hereinafter, the Bank) in the course of its
inspection of the credit institution established the existence of
signs suggestive of the Bank's operations to divert assets through
lending to borrowers with dubious solvency or knowingly unable to
fulfil their obligations, according to the Bank of Russia's Press
Service.

According to the assessment by the provisional administration, the
value of the Bank's assets is insufficient to fulfil its
obligations to creditors.

On June 30, 2021, the Arbitration Court of the City of Moscow
recognized the Bank as insolvent (bankrupt).

As the Bank of Russia reasonably presumes that the Bank's officials
were engaged in financial operations suggestive of criminal
offence, the Bank of Russia submitted relevant information to the
Prosecutor General's Office of the Russian Federation and the
Investigative Committee of the Ministry of Internal Affairs of the
Russian Federation for consideration and procedural
decision-making.

The provisional administration to manage the credit institution was
appointed by virtue of Bank of Russia Order No. OD-619, dated April
9, 2021, from April 9, 2021.




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S P A I N
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HIPOCAT 11 FTA: Fitch Affirms C Rating on Class D Tranche
---------------------------------------------------------
Fitch Ratings has taken multiple rating actions on three Hipocat
RMBS in Spain, including the removal from Rating Watch Positive
(RWP) of one tranche and the upgrades of three tranches.

       DEBT                     RATING          PRIOR
       ----                     ------          -----
Hipocat 11, FTA

Class A2 ES0345672010    LT  A-sf   Upgrade     BBB+sf
Class B ES0345672036     LT  CCsf   Affirmed    CCsf
Class C ES0345672044     LT  CCsf   Affirmed    CCsf
Class D ES0345672051     LT  Csf    Affirmed    Csf

Hipocat 9, FTA

Class A2a ES0345721015   LT  A+sf   Affirmed    A+sf
Class A2b ES0345721023   LT  A+sf   Affirmed    A+sf
Class B ES0345721031     LT  A+sf   Affirmed    A+sf
Class C ES0345721049     LT  A+sf   Upgrade     Asf
Class D ES0345721056     LT  BBsf   Upgrade     B-sf
Class E ES0345721064     LT  Csf    Affirmed    Csf

Hipocat 10, FTA

Class A2 ES0345671012    LT  A+sf   Affirmed    A+sf
Class B ES0345671046     LT  BB+sf  Affirmed    BB+sf
Class C ES0345671053     LT  CCsf   Affirmed    CCsf
Class D ES0345671061     LT  Csf    Affirmed    Csf

TRANSACTION SUMMARY

The transactions consist of mortgages originated in Spain by
Catalunya Banc S.A. (now part of Banco Bilbao Vizcaya Argentaria,
S.A., BBVA; BBB+/Stable/F2). The loans are serviced by BBVA.

KEY RATING DRIVERS

Stable Performance; Additional Stresses Removed

The rating upgrades, resolution of the RWP and assignment of the
Stable Outlook reflect the broadly stable asset performance outlook
driven by a low share of loans in payment holiday schemes, a low
share of loans in arrears over 90 days (less than 1% of the current
portfolio balance) and the improved macro-economic outlook for
Spain as described in Fitch's latest Global Economic Outlook dated
June 2021.

The rating analysis reflects the removal of the additional stresses
in relation to the coronavirus outbreak and legal developments in
Catalonia as announced on 22 July 2021.

Credit Enhancement (CE) Trends

The affirmations and upgrades reflect Fitch's view that the notes
are sufficiently protected by credit enhancement (CE) to absorb the
projected losses commensurate with prevailing and higher rating
scenarios.

Fitch expects CE for all transactions to continue increasing due to
the prevailing sequential amortisation of the notes that becomes
mandatory after the portfolio balance is less than 10% of its
initial balance (now at around 14% across the three transactions).
The negative CE ratios on Hipocat 10 class C and D, and Hipocat 11
class B to D notes are reflected in the deep sub-investment grade
ratings of the notes.

Payment Interruption Risk

Fitch views the three transactions as being exposed to payment
interruption risk in the event of a servicer disruption, as in
scenarios of economic stress Fitch expects the available reserve
funds (partially funded for Hipocat 9 and fully depleted for
Hipocat 10 and Hipocat 11) to be insufficient to cover senior fees,
net swap payments and senior notes' interest during a period of
time needed to implement alternative servicing arrangements. The
notes' maximum achievable ratings are commensurate with the 'Asf'
category, in line with Fitch's Structured Finance and Covered Bonds
Counterparty Rating Criteria.

Interest Deferability Caps Ratings

Consistent with the principles of Fitch's Global Structured Finance
Rating Criteria, the maximum achievable rating of Hipocat 10 and 11
class B to D notes is 'BB+sf', reflecting the non-reversible
interest deferability on the notes driven by the large volume of
gross cumulative defaults that exceeded the contractually defined
thresholds. Interest payments on these notes will only resume after
full amortisation of the senior notes.

Hipocat 9 and Hipocat 10 have an Environmental, Social and
Governance (ESG) Relevance Score of 5 for Transaction & Collateral
Structure due to unmitigated payment interruption risk.

Hipocat 11 has an ESG Relevance Score of 4 for Transaction &
Collateral Structure due to unmitigated payment interruption risk.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

-- Increase in CE as the transactions deleverage to fully
    compensate the credit losses and cash flow stresses that are
    commensurate with higher rating scenarios, all else being
    equal.

-- For Hipocat 9 and Hipocat 10 class A notes, improved liquidity
    protection against a servicer disruption event. This is
    because the ratings are capped at 'A+sf', driven by an
    unmitigated payment interruption risk.

Factor that could, individually or collectively, lead to negative
rating action/downgrade:

-- Erosion of macroeconomic fundamentals and the mortgage market
    in Spain beyond Fitch's current base case. CE cannot fully
    compensate the credit losses and cash flow stresses associated
    with the current rating scenarios, all else being equal.

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.

Fitch did not undertake a review of the information provided about
the underlying asset pools ahead of the transactions' closing. The
subsequent performance of the transactions over the years is
consistent with the agency's expectations given the operating
environment and Fitch is therefore satisfied that the asset pool
information relied upon for its initial rating analysis was
adequately reliable.

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.

Because the latest loan-by-loan portfolio data for the three
transactions sourced from European Data Warehouse did not include
information about "maximum balance" of the loans that permit
further drawdowns, Fitch assumed each loan to exercise the full
drawdown capability up to the permitted maximum equivalent to an
80% original loan-to value ratio.

ESG CONSIDERATIONS

Hipocat 9 and Hipocat 10 have an Environmental, Social and
Governance (ESG) Relevance Score of 5 for Transaction & Collateral
Structure due to unmitigated payment interruption risk, which has a
negative impact on the credit profile, and is highly relevant to
the ratings, resulting in lower ratings of at least one notch.

Hipocat 11 has an ESG Relevance Score of 4 for Transaction &
Collateral Structure due to unmitigated payment interruption risk,
which has a negative impact on the credit profile, and is highly
relevant to the rating in combination with other factors.

Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.



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U N I T E D   K I N G D O M
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BESTWAY RETAIL: Christie & Co Tapped to Sell Unwanted Stores
------------------------------------------------------------
Business Sale reports that Bestway Retail has tasked Christie & Co
with bringing 22 stores to market under the second phase of a plan
to sell unwanted stores.

According to Business Sale, the 22 stores are from a variety of
brands including Bargain Booze, Select Convenience, Central
Convenience and Wine Rack.

The stores were acquired in 2018 when Bestway Wholesale acquired
the former assets of Bargain Booze Ltd from the administrators of
Conviviality Group, Business Sale relates.  The company created
Bestway Retail at that time to manage the portfolio, Business Sale
notes.  The stores in the portfolio are available on a leasehold or
freehold basis and the deadline for bids to be submitted to
Christie & Co is Aug. 25, Business Sale states.

The tranche is the second phase in Bestway's Project Endeavour, the
first phase of which saw Christie & Co market 37 stores in August
2020, Business Sale discloses.


BRITISH AIRWAYS: S&P Affirms 'BB' Long-Term ICR
-----------------------------------------------
S&P Global Ratings affirms 'BB' long-term issuer credit rating
(ICR) on British Airways PLC's (BA).

S&P said, "The affirmation follows the correction of an error in
our application of our non-common equity criteria. In November
2020, IAG, BA's parent, provided a EUR1.645 billion floating-rate
term loan to the airline, repayable in January 2024. Previously, we
excluded the parent loan from IAG from our leverage calculations
for BA, but we have determined that this approach was incorrect. We
now include the parent loan from IAG as part of our leverage
calculations that we use to determine BA's SACP. Although our 'bb-'
SACP on BA is unchanged as a result, the addition of the parent
loan to our leverage calculations has reduced BA's headroom in the
aggressive financial risk profile category. This reduction in
headroom is partly offset by our expectation of an improvement in
BA's cash flow generation in 2022. Overall, we continue to align
our ICR and outlook on BA with our ICR and outlook on IAG due to
the airline's integral relationship with the group. The error
correction did not affect our issue ratings on BA's EETCs, as we
derive these ratings from our ICR on BA."


LV DISTRIBUTIONS: Shut Down Due to Covid Support Fraud
------------------------------------------------------
Marc Shoffman at Peer2Peer Finance News reports that two businesses
have been closed down after submitting false documents to at least
41 local authorities and the government's bounce back loan (BBL)
scheme to secure GBP230,000 worth of emergency support during the
pandemic.

According to Peer2Peer Finance News, LV Distributions and SIO
Traders were wound up in the high court during separate hearings on
July 27, 2021, following inquiries conducted by the Insolvency
Service, which proved neither company ever traded.

Councils in Wiltshire, Herefordshire and Guildford were among those
targeted, Peer2Peer Finance News discloses.

Investigators uncovered that SIO Traders registered its offices in
Whitchurch, Shropshire but provided false lease documents and
utility bills to 14 different local authorities to fraudulently
claim that it traded out of premises in their respective areas,
Peer2Peer Finance News relates.

SIO Traders claimed to supply personal protective equipment and
secured GBP95,000 worth of business grants from 10 local
authorities, Peer2Peer Finance News states.  The company also
received a GBP50,000 BBL that it was not entitled to, Peer2Peer
Finance News notes.

Separately, LV Distributions had registered offices in Redhill,
Surrey, and claimed to sell medical care products, according to
Peer2Peer Finance News.

In a 10-day period between 17 and 27 August 2020, LV Distributions
provided false lease documents and utility bills to 27 local
authorities, Peer2Peer Finance News recounts.

The company fraudulently secured GBP35,000 in business grants from
two local authorities, as well as a GBP50,000 BBL, according to
Peer2Peer Finance News.


NMC HEALTH: Creditors Set to Vote on Deeds of Company Arrangement
-----------------------------------------------------------------
Archana Narayanan at Bloomberg News reports that NMC Health Plc's
joint administrators have kicked off a plan that could help 34
companies of the scandal-hit hospital operator find their way to
exit its protective administration.

Under the deeds of company arrangement proposals, which Abu
Dhabi-based NMC said has the support of its creditors, the
unsecured debt of some of the firms will be exchanged for
equity-like interests in a new group, Bloomberg relays, citing a
statement on Aug. 11.

While shares of the companies and "substantially all" the assets
will be transferred to the new group, NMC Healthcare LTD will
remain in administration "to pursue potential litigation claims"
against itself and other firms, Bloomberg notes.

Creditors are scheduled to vote on the proposed plan on Sept. 1,
Bloomberg discloses.  Once cleared by the courts in the Abu Dhabi
Global Market, the financial center of the United Arab Emirates
capital, the transfer of assets and shares is expected to take
between three and five months, Bloomberg states.

NMC, which was once listed on the London Stock Exchange, collapsed
in 2019, revealing that it had more than US$4 billion of
undisclosed borrowings, Bloomberg recounts.  

In April, NMC completed the sale of Eugin Group, its lucrative
fertility business, to German health-care company Fresenius SE for
US$525 million, Bloomberg relates.


VERY GROUP: Fitch Rates New GBP575MM Sr. Sec. Notes Final 'B-'
--------------------------------------------------------------
Fitch Ratings has assigned The Very Group Funding plc's new GBP575
million senior secured notes due 2026 a final rating of 'B-' with a
Recovery Rating of 'RR4', in line with The Very Group Limited's
(TVG) Long-Term Issuer Default Rating (IDR) of 'B-'.

The IDR of TVG reflects the absence of a committed financial policy
in light of its under-capitalised finance subsidiary, Shop Direct
Finance Company Limited (SDFCL) that is central to future growth.
The rating also reflects TVG's solid position as a multi-category
pure online retailer in the UK, aided by SDFCL's financing offers
for consumer purchases.

The Positive Outlook on the IDR reflects Fitch's expectations that
TVG will maintain its strong pandemic trading, underpinned by
supportive secular trends and an enhanced online presence from
lockdown trading, and that management will pursue
capital-allocation policies, including shareholder remuneration,
that are consistent with steady future deleveraging.

Proceeds from the GBP575 million notes were used to redeem TVG's
existing GBP550 million senior secured notes due November 2022.
Accordingly, Fitch has withdrawn the redeemed notes' 'B-'/'RR4'
rating.

KEY RATING DRIVERS

Refinancing Leverage-Neutral: The refinancing results in a small
re-leveraging of the capital structure by GBP25 million, with a
minor impact on Fitch's forward-looking leverage metrics. TVG
should be able to maintain for its retail operations funds from
operations (FFO) adjusted gross leverage of around 7.0x. This will
be achieved through building on its FY21 (financial year-end June)
earnings over the four-year rating horizon and reduced utilisation
of its revolving credit facility (RCF).

Synergies with SDFCL: SDFCL provides consumer financing as a
complementary core offering to TVG's online general merchandise
retail operations. Around 90% of sales are made on credit. The
profitability stemming from revolving credit provided to retail
customers allows the financing unit to help pay the expenses for
operations, IT and marketing costs, supporting retail sales volume
growth in a symbiotic way.

SDFCL's Capitalisation Key: TVG's IDR remains vulnerable to
deterioration in SDFCL's capitalisation, as this may disrupt the
subsidiary's ability to continue supporting the group's retail
operations. To reflect this, Fitch adds back around GBP400 million
of debt to TVG's retail operations at FYE20, as Fitch views this
amount as a form of equity injection from TVG to help SDFCL attain
a capital structure that would require no cash calls to support its
operations over the rating horizon.

SDFCL's Weak Capitalisation May Persist: SDFCL's capitalisation has
deteriorated as the final PPI charges have been finalised. Fitch
calculated gross debt/tangible equity at 17.1x at FYE20, up from
6.4x at FYE18. While Fitch envisages modest improvements in
tangible equity over the rating horizon, planned growth in the
retail business, with credit to customers funded through the use of
further securitised notes, may keep SDFCL under-capitalised
relative to underwriting risks.

Franchise Strengthened During UK Lockdowns: TVG has strengthened
its presence during the UK lockdowns. For FY20 and preliminary
FY21, retail-only revenue grew 5.8% and 18.3%, respectively, well
above the trend of 1.5%-2% pre-pandemic. Growth continues to be
driven by the success of the Very brand, which accounts for 75% of
the group's retail sales, counteracting a managed decline under the
Littlewoods brand. It is unclear to what extent the shift away from
online consumption will be over the medium term, as non-essential
store-based retailers in the UK re-open and operate without
restrictions. Nevertheless, Fitch believes that TVG will emerge
from the pandemic with an enlarged and receptive customer base.

Operational Milestones: During the pandemic the group has
transferred its operations to its new fulfilment centre, Skygate,
in Midlands (UK). Fitch believes the new warehouse will facilitate
disciplined management of distribution and administrative costs to
service higher dispatch volumes, exploiting operational leverage.
Dual-running costs ended in FY21 with fulfilment operations being
solely run on one site. In tandem with the end of administrative
PPI-related charges, this should improve earnings quality with
lower exceptional costs from 2HFY21.

Governance and Group Structure Complexities: Fitch continues to
assign a Relevance Score of 4 for Group Structure due to the
group's complexity, and certain related-party transactions, which
may lead to some misalignment between shareholders and creditors'
interests. This includes frequent material transactions with the
parent Shop Direct Holdings Limited, with distribution companies
Yodell Delivery Network Limited and Arrow XL Limited, in addition
to sub-optimal board composition and effectiveness relative to
peers'.

DERIVATION SUMMARY

Fitch assesss TVG's rating using the Ratings Navigator for Non-Food
Retailers. Non-food retail remains one of the most disrupted
sectors, even before the pandemic, due to changing consumer
preferences, technology, digitalisation and data analytics,
accelerating brand and product obsolescence, environmental
considerations and the changing face of UK high streets.

These challenges require retailers to continuously reassess their
business strategies. The pandemic has accelerated certain trends
such as digitalisation and exposed inherent weaknesses of
retailers' business models. This will shake up the competitive
landscape as weaker retailers exit the market, while those capable
of adapting to and embracing new challenges, such as TVG, should
benefit from technology and service leadership.

TVG stands out as the UK's second-largest pure digital retailer
with a complementary consumer-finance proposition that is
commensurate with a 'BB' business profile. This is balanced by an
aggressive financial structure, although FFO adjusted gross
leverage has improved towards 7.0x and financial flexibility has
strengthened.

TVG is rated at the same level as Douglas GmbH (B-/Stable),
Europe's largest beauty retailer, which demonstrates strong online
and omni-channel capabilities. The Positive Outlook reflects
Fitch's expectation that TVG would be able to deleverage to below
7.0x in the near term whereas Fitch expects Douglas's leverage,
which shares the same upgrade sensitivity, to remain higher until
2023, at around 8.0x.

Pure online beauty retailer THG Holdings plc (B+/Positive) is rated
two notches above TVG, mainly due to its more conservative post-IPO
financial policy with FFO adjusted gross leverage projected to drop
to 4.4x in 2021 and 2.6x by 2023 as the business strengthens its
global presence with in-house online capabilities supporting online
retail volumes.

KEY ASSUMPTIONS

-- Contraction in retail-only revenue of around 3% during FY22,
    followed by a rebound of 2%-3% per annum to FY24;

-- Retail-only EBITDA margin to steadily improve towards 9.5% in
    FY23 (despite the envisaged revenue contraction) as recent
    cost-initiatives drive better utilisation of operational
    leverage;

-- Retail working-capital outflow around 2% of sales per annum to
    FY24;

-- Capex of GBP60 million per annum to FY24;

-- Year-end RCF drawings of around GBP100 million in FY22,
    reducing to GBP50 million by FY24.

KEY RECOVERY RATING ASSUMPTIONS

Fitch assumes that TVG would be considered a going-concern (GC) in
bankruptcy and that it would be reorganised rather than
liquidated.

In Fitch's bespoke GC recovery analysis, Fitch considered an
estimated post-restructuring EBITDA available to creditors of GBP71
million, derived from discounting FY21's retail-only EBITDA of
around GBP150 million by 35%, after excluding a GBP45 million
"run-rate" contribution for operating cost from SDFCL.

Fitch expects SDFCL to be restructured in a default, in tandem with
the retail operations given their strategic integration with TVG.
Therefore, Fitch assumes that SDFCL would be restructured by a
third-party/joint-venture and creditors of the restricted group
would have claim to retail operations only. Accordingly, Fitch
treats the GBP1.3 billion non-recourse securitisation financing as
outside the restricted group.

Fitch has used a distressed enterprise value/EBITDA multiple of
5.0x. This reflects TVG's exposure to rapid online sales growth and
leading position in UK, underpinned by high brand awareness.

For the debt waterfall Fitch assumes a fully drawn super senior RCF
of GBP100 million ranking ahead of TVG's of GBP575 million senior
secured notes, and a GBP50 million RCF ranking pari passu with the
bond. After deducting 10% for administrative claims, Fitch's
principal waterfall analysis generates a ranked recovery for
noteholders in the 'RR4' band, indicating a senior secured
instrument rating aligned with the IDR. This results in a waterfall
generated recovery computation output percentage of 35% based on
current metrics and assumptions.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

-- Adherence to conservative capital allocation that favours debt
    repayment and/ or permanent cash accumulation within SDFCL,
    boosting its capital position such that Fitch-calculated
    retail-only FFO adjusted gross leverage is sustained below
    7.0x (6.5x net of cash);

-- FFO fixed charge cover above 2.5x;

-- Steady retail-only profitability, and solid cash flow
    conversion, for example, reflected in a 1%-2% free cash flow
    (FCF) margin on a sustained basis.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

-- Maintenance of high leverage with retail-only FFO adjusted
    gross leverage remaining above 7.0x based on Fitch's forecasts
    for TVG's operations;

-- Subdued profitability under more challenging market conditions
    as UK store-focused peers re-open, constraining FFO margin
    below 5% and FFO fixed charge coverage below 2.5x;

-- No visible improvement in SDFCL's capital position, thus
    undermining the division's ability to continue supporting the
    group's retail activities.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.

LIQUIDITY AND DEBT STRUCTURE

Satisfactory Liquidity: Liquidity improvement has been driven by
strong retail trading since the onset of the pandemic and the
shareholders' equity injection of GBP100 million at FYE20 to cover
outstanding PPI mis-selling payments settled in FY21. TVG repaid
GBP60 million of its RCF in June 2021 although Fitch expects around
GBP100 million to be frequently utilised intra-year due to
seasonality requirements of the business. Incremental
securitisation proceeds and enhanced quality of earnings will
further support the group's liquidity position.

ISSUER PROFILE

TVG (formerly Shop Direct) is the UK's second-largest pure digital
retailer as well as one of the largest unsecured lenders in the UK
with a complementary consumer-finance offering.

ESG CONSIDERATIONS

TVG has an ESG Relevance Score of '4' for Group Structure due to
group complexities and material related-party transactions, which
has a negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.

TVG has an ESG Relevance Score of '4' for Governance Structure due
to sub-optimal board composition and effectiveness relative to
peers', which has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.

Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.


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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
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