/raid1/www/Hosts/bankrupt/TCREUR_Public/211203.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
Friday, December 3, 2021, Vol. 22, No. 236
Headlines
G E R M A N Y
WEPA HYGIENEPRODUKTE: S&P Lowers LT ICR to 'B+', Outlook Stable
I R E L A N D
AVOCA CLO XXV: Moody's Assigns B3 Rating to EUR12MM Class F Notes
CARLYLE EURO 2021-3: S&P Assigns B- (sf) Rating to Cl. E Notes
CVC CORDATUS III: Fitch Raises Class F-R Notes Rating to 'B+'
FAIR OAKS IV: Fitch Rates Class F Notes 'B-(EXP)'
HARVEST CLO XXVII: Moody's Assigns B3 Rating to EUR11MM F Notes
PENTA CLO 10: Moody's Assigns B3 Rating to EUR12MM Class F Notes
PENTA CLO 8: Moody's Assigns (P)B3 Rating to EUR11.4MM Cl. F Notes
SOUND POINT III: Fitch Puts B- Rating on F Notes on Watch Positive
SUTTON PARK: Fitch Raises Class E Notes Rating to 'B+'
I T A L Y
MONTE DEI PASCHI: Fitch Affirms 'B' LT IDR, Outlook Evolving
MONTE DEI PASCHI: Italy In Talks to Extend Privatization Deadline
L U X E M B O U R G
FAGE INTERNATIONAL: Moody's Ups CFR & Senior Unsecured Notes to B1
R U S S I A
ABSOLUT BANK: Moody's Affirms 'B2' Long Term Deposit Ratings
AKTIV BANK: Declared Insolvent by Mordovia Arbitration Court
PLATINA LTD: Bank of Russia Terminates Provisional Administration
RUSNANO: In Debt Restructuring Talks with Creditors, Shareholders
S P A I N
IM CAJAMAR 4: Fitch Affirms Class E Notes Rating at 'CCC'
LUNA III: S&P Assigns 'BB-' Long-Term ICR, Outlook Stable
U K R A I N E
KERNEL HOLDING: S&P Affirms 'B+' LT ICR on Strong Credit Metrics
U N I T E D K I N G D O M
ARCADIA: 86% of Shop Sites Remain Vacant Since Administration
BOPARAN HOLDINGS: S&P Alters Outlook to Neg., Affirms 'B-' ICR
CASHEURONET: QuickQuid, Pounds to Pocket Borrowers to Get Refunds
LONDON WALL 2021-02: Moody's Gives Ba3 Rating to GBP10.3MM X Notes
[*] UK: Energy Regulator May Impose Stricter Capital Requirements
X X X X X X X X
[*] BOOK REVIEW: Hospitals, Health and People
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G E R M A N Y
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WEPA HYGIENEPRODUKTE: S&P Lowers LT ICR to 'B+', Outlook Stable
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S&P Global Ratings lowered to 'B+' from 'BB-' its long-term issuer
credit rating on Germany-based tissue manufacturer Wepa
Hygieneprodukte GmbH and its issue rating on the company's EUR200
million floating and EUR400 million fixed rate notes due 2026 and
2027 respectively.
S&P said, "The stable outlook reflects our view that Wepa will
successfully increase sales prices to improve profitability from
2022, meaning that the company should be able to reduce leverage to
the 5x-6x range over 2022-2023 after the 7.5x-8.0x peak expected in
2021.
"Our downgrade of Wepa reflects credit metrics deterioration due to
persisting high cost inflation. We estimate Wepa's adjusted
leverage will increase to the range of 7.5x-8.0x at the end of
2021, from about 4x last year, and remain in the 5.0x-6.0x range in
2022, a level which we deem is not commensurate with a 'BB-'
rating. This is a material deviation compared with our previous
estimate of leverage ranging between 5.5x and 6.0x in 2021. The
higher-than-expected leverage primarily reflects margin
deterioration resulting from continued inflationary pressures. Our
adjusted debt calculation for 2021 includes EUR600 million of fixed
and floating rate notes, EUR130 million-EUR140 million utilization
of its asset-backed security (ABS) receivables securitization
facility program, about EUR25 million operating lease liability,
and roughly EUR20 million-EUR30 million of cash available on the
balance sheet.
"We estimate Wepa's S&P Global Ratings-adjusted EBITDA will likely
decline 40%-45% this year compared with 2020. This will result in
an S&P Global Ratings-adjusted EBITDA margin of about 8%, a 560
basis-point decline compared with 13% the previous year. The solid
global pulp demand resulted in a continuing increase of pulp prices
above our previous estimates. According to data provided by RISI,
bleached hardwood kraft pulp (BHKP) and northern bleached softwood
kraft (NBSK) prices increased by roughly 68% and 47%, respectively,
at end-October 2021, compared with December 2020. In addition, high
freight costs as well as an exceptional increase in energy prices
further eroded Wepa's profitability. Furthermore, we acknowledge
Wepa faces a time lag to pass on higher costs to its customers,
primarily in Germany (its core market, accounting for about 40% of
total sales). While gradually ramping up, sales prices increased
only 3% on average. Wepa's large hedging position, the pulp stock
availability, and its cost savings initiatives mitigated the
unusual volatilities of all input cost factors, but were not
sufficient to offset profitability deterioration.
"The exceptional market volatility increases uncertainties on
material profit improvement next year. We believe the company's
ability to restore profits would depend on successful negotiations
of sales price increases in the coming months. Wepa's private label
offering, accounting for roughly 80% of sales, doesn't allow
immediate price actions, which are typically taken with some time
delay compared with global branded players such as P&G
(AA-/Stable/A-1+), Kimberly Clark (A/Negative/A-1), and Essity
(BBB+/Stable/A-2). The magnitude of negotiations with retailers
would also depend on the evolution of raw material prices. As an
example, RISI estimates pulp prices could fall 5%-10% in 2022
versus 2021 on average. Overall, we estimate inflationary headwinds
could persist into the second half of 2022. We acknowledge that the
exceptional market volatility together with rising COVID-19 cases
in Europe and new variants of the virus intensify uncertainties on
the evolution of performance in 2022. For 2022, we forecast an
adjusted EBITDA margin expansion to 10%, primarily supported by its
sales price initiatives. Our view is supported by Wepa's proven
track record of adapting sales prices thanks to its established
relationship with retailers in the competitive European private
label market where it holds a No.1 position with about a 24% market
share."
Wepa has limited flexibility under its expansionary investment
plan. Wepa has revised its guidance on capital expenditure
(capex) for 2021, which will now amount to about EUR130 million
compared with EUR160 million previously communicated, while
confirming the guidance of about EUR90 million-EUR100 million in
2022. This will allow a EUR30 million cash saving in 2021 which
will be achieved through postponement of some expansionary capex
into 2022 and delaying some maintenance investments until 2023 and
after. Therefore, Wepa will continue its investments in the
construction of more energy efficient and sustainable tissue paper
machines in Poland and U.K., with the latter starting up in
second-quarter 2022 and delivering a positive impact on EBITDA of
EUR10 million-EUR15 million thanks to lower external purchases and
logistics expenses.
S&P said, "Our rating assessment factors in our expectation that
Wepa's adjusted debt to EBITDA will fall to 5.0x-6.0x over the next
18-24 months. In our view, Wepa has good deleveraging potential
thanks to an unchanged supportive financial policy and a track
record of S&P Global Ratings-adjusted debt to EBITDA close to 5.0x
on average over 2017-2020, despite increasing raw material price
volatility. According to our forecasts, Wepa should continue to
post adjusted leverage of 5x-6x over 2022-2023, after the 7.5x-8.0x
peak expected in 2021."
Outlook
S&P said, "The stable outlook reflects our view that Wepa will be
able to reduce its adjusted debt to EBITDA to the 5.0-6.0x range
from 2022, compared with the 7.5x-8.0x peak expected in 2021. In
our view, this will be achieved through a partial recovery of
profitability starting from the second quarter 2022, primarily
thanks to ongoing sales price increases, leading to the adjusted
EBITDA margin expanding at least 200 basis points, to close to 10%
in 2022."
Downside scenario
S&P said, "We could lower the rating if we believed that Wepa's
debt to EBITDA would remain permanently above 6.0x, as adjusted by
S&P Global Ratings, with no evidence of improvement below this
level. This could happen if the EBITDA margin remains depressed due
to intensified competition in the consumer tissue business or if
Wepa experienced severe volume losses due to the sales price
increases. We would also consider a downgrade if expansionary
growth plans require additional significant investments or if Wepa
pursues large-debt funded acquisitions, translating into a
deviation from the current financial policy."
Upside scenario
S&P said, "We could take a positive rating action if Wepa
successfully manages industry volatility, ensuring S&P Global
Ratings-adjusted debt to EBITDA comfortably in the 4.0x-4.5x range
on a sustained basis. In our view, this would be consistent with an
adjusted EBITDA margin stabilizing at least at 12% and a prudent
approach to discretionary spending. This scenario could stem for
example from a track record of organic revenue growth, improved
price and mix, and implementation of cost savings initiatives. In
addition, we believe a positive rating action would also depend on
the group's ability to sustain solid positive free operating cash
flow generation."
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I R E L A N D
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AVOCA CLO XXV: Moody's Assigns B3 Rating to EUR12MM Class F Notes
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Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Avoca CLO XXV
Designated Activity Company (the "Issuer"):
EUR248,000,000 Class A Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aaa (sf)
EUR30,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aa2 (sf)
EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
EUR24,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2034, Definitive Rating Assigned A2 (sf)
EUR29,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2034, Definitive Rating Assigned Baa3 (sf)
EUR20,000,000 Class E Deferrable Junior Floating Rate Notes due
2034, Definitive Rating Assigned Ba3 (sf)
EUR12,000,000 Class F Deferrable Junior Floating Rate Notes due
2034, Definitive Rating Assigned 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 fully ramped up as of the closing date and comprises
predominantly corporate loans to obligors domiciled in Western
Europe.
The effective date determination requirements of this transaction
are weaker than those for other European CLOs because the
transaction does not have to comply with the maximum concentration
limit for Caa-rated assets as of the effective date. Moody's
believes that this carve-out can introduce additional credit risk
to noteholders since the risks associated with a barbelled
portfolio resulting from a higher exposure to Caa-rated assets will
not be taken into account. Hence the CLO notes' outstanding ratings
could be negatively affected around the effective date, despite
satisfaction of the transaction's effective date determination
requirements. However, Moody's has considered the fully ramp up
status of the portfolio and its attributes relative to the
concentration limits and collateral quality tests as mitigating
factors.
KKR Credit Advisors (Ireland) Unlimited Company 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
4.4-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 or credit improved obligations.
In addition to the seven classes of notes rated by Moody's, the
Issuer has issued EUR35.6M of Subordinated Notes 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: EUR400,000,000
Diversity Score: 48
Weighted Average Rating Factor (WARF): 3056
Weighted Average Spread (WAS): 3.70%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 44.5%
Weighted Average Life (WAL): 8.5 years
CARLYLE EURO 2021-3: S&P Assigns B- (sf) Rating to Cl. E Notes
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S&P Global Ratings assigned preliminary credit ratings to the class
A-1 to E European cash flow CLO notes issued by Carlyle Euro CLO
2021-3 DAC. At closing, the issuer will issue unrated subordinated
notes.
The preliminary ratings 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.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
-- Under the transaction documents, the rated notes will pay
quarterly interest unless a frequency switch event occurs.
Following this, the notes will permanently switch to semi-annual
payments.
-- The portfolio's reinvestment period will end approximately five
years after closing and the non-call period will end two years
after closing.
S&P said, "We understand that at closing, the portfolio will be
well-diversified, primarily comprising broadly syndicated
speculative-grade senior secured term loans and senior secured
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (3.70%), the
reference weighted-average coupon (4.50%), and the covenanted
weighted-average recovery rate (WARR). We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"Our credit and cash flow analysis show that the class A-2A, A-2B,
B, C, and D notes benefit from break-even default rate (BDR) and
scenario default rate cushions that we would typically consider to
be in line with higher ratings than those 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 preliminary ratings on the notes. The class A-1 and E notes
could withstand stresses commensurate with the currently assigned
rating. In our view the portfolio is granular in nature, and
well-diversified across obligors, industries, and assets.
"Under our structured finance ratings above the sovereign criteria,
we consider that the transaction's exposure to country risk is
sufficiently mitigated at the assigned preliminary rating levels."
Until the end of the reinvestment period on Jan. 1, 2027, the
collateral manager is allowed to substitute assets in the portfolio
for so long as S&P's CDO Monitor test is maintained or improved in
relation to the initial ratings on the notes. This test looks at
the total amount of losses that the transaction can sustain as
established by the initial cash flows for each rating, and compares
that with the default potential of the current portfolio plus par
losses to date. As a result, until the end of the reinvestment
period, the collateral manager can, through trading, deteriorate
the transaction's current risk profile, as long as the initial
ratings are maintained.
S&P said, "At closing, we expect that the transaction's documented
counterparty replacement and remedy mechanisms will adequately
mitigate its exposure to counterparty risk under our current
counterparty criteria.
"We expect the transaction's legal structure to be bankruptcy
remote, in line with our legal criteria.
"Taking into account the above-mentioned factors and 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 each class of notes."
The transaction securitizes a portfolio of primarily senior secured
leveraged loans and bonds, and will be managed by CELF Advisors
LLP, a wholly owned subsidiary of Carlyle Investment Management
LLC, which is a Delaware limited liability company, indirectly
owned by The Carlyle Group L.P.
Environmental, social, and governance (ESG) 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:
production or marketing of controversial weapons, tobacco or
tobacco-related products, nuclear weapons, thermal coal production,
speculative extraction of oil and gas, pornography or prostitution,
illegal drugs, physical casinos and online gambling, endangered
wildlife, palm oil, oil and gas extraction, oil exploration, opioid
manufacturing and distribution, coal, transportation of tar sands,
private prisons, soft commodities, adversely affecting animal
welfare, predatory lending, and controversial practices in land
use. 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.
"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 D 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.
"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 E notes."
Ratings List
CLASS PRELIM. PRELIM. INTEREST RATE* CREDIT
RATING AMOUNT ENHANCEMENT
(MIL. EUR) (%)
A-1 AAA (sf) 244.00 Three-month EURIBOR 39.00
plus 0.95%
A-2A AA (sf) 36.00 Three-month EURIBOR 27.50
plus 1.70%
A-2B AA (sf) 10.00 2.10% 27.50
B A (sf) 25.20 Three-month EURIBOR 21.20
plus 2.15%
C BBB- (sf) 26.80 Three-month EURIBOR 14.50
plus 3.50%
D BB- (sf) 19.20 Three-month EURIBOR 9.70
plus 6.46%
E B- (sf) 11.60 Three-month EURIBOR 6.80
plus 9.13%
Sub notes NR 35.80 N/A N/A
*The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
CVC CORDATUS III: Fitch Raises Class F-R Notes Rating to 'B+'
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Fitch Ratings has upgraded CVC Cordatus Loan Fund III DAC's class
B-1-RR to F-R notes, removed them from Under Criteria Observation
(UCO) and affirmed the class A notes.
DEBT RATING PRIOR
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CVC Cordatus Loan Fund III DAC
A-1-RR XS1823354284 LT AAAsf Affirmed AAAsf
A-2-RR XS1823355091 LT AAAsf Affirmed AAAsf
B-1-RR XS1823355687 LT AA+sf Upgrade AAsf
B-2-RR XS1823356222 LT AA+sf Upgrade AAsf
C-RR XS1823356909 LT A+sf Upgrade Asf
D-R XS1823357899 LT BBB+sf Upgrade BBB-sf
E-R XS1823358608 LT BB+sf Upgrade BBsf
F-R XS1823358434 LT B+sf Upgrade B-sf
TRANSACTION SUMMARY
CVC Cordatus Loan Fund III DAC is a cash flow CLO mostly comprising
senior secured obligations. The transaction is actively managed by
CVC Credit Partners Group Limited and will exit its reinvestment
period in November 2022.
KEY RATING DRIVERS
CLO Criteria Update: The rating actions mainly reflect the impact
of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria
and the shorter risk horizon incorporated in Fitch's stressed
portfolio analysis. The analysis considered modelling results for
the current and stressed portfolios. The stressed portfolio
analysis is based on Fitch's collateral quality matrix specified in
the transaction documentation and underpins the model-implied
ratings in this review.
The transaction has two matrices, but Fitch analysed one matrix
specifying the top 10 limit of 26.5%, which is the more
conservative of the two matrices. When analysing the matrix, Fitch
applied a haircut of 1.5% to the weighted average recovery rate
(WARR) as the calculation in the transaction documentation reflects
a previous version of the CLO criteria. This analysis supports
model-implied ratings of approximately one to two notches above the
current ratings under the updated criteria.
As a result, the class B-1-RR to F-R notes have been upgraded and
the class A notes have been affirmed in line with the model-implied
ratings, reflecting the criteria update, stable transaction
performance and a shorter risk horizon incorporated into Fitch's
stressed portfolio analysis.
Stable Asset Performance: The transaction's metrics indicate stable
asset performance. As of the 2 November 2021 trustee report, the
aggregate portfolio amount when adjusted for trustee-reported
recoveries on defaulted assets, is currently 0.72% under the
original target par amount. Collateral quality tests, coverage
tests and portfolio profile tests are all in compliance, and
exposure to assets with a Fitch-derived rating of 'CCC+' and below
(excluding non-rated assets) is 3.26% as calculated by Fitch.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the transaction's underlying obligors at the 'B'/'B-' level. The
weighted average rating factor (WARF) as calculated by the trustee
was 33.06, which is below the maximum covenant of 37.00. Fitch
calculates the WARF as 24.57 under the updated criteria.
High Recovery Expectations: Senior secured obligations comprise
99.20% 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 16.93%, and no obligor represents more than 2.22%
of the portfolio balance as calculated by Fitch.
Cash Flow Modelling: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par value and interest coverage
tests.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase of the default rate (RDR) at all rating levels by
25% of the mean RDR and a decrease of the recovery rate (RRR)
by 25% at all rating levels in the stressed portfolio would
result in downgrades of up to five notches, depending on the
notes.
-- Downgrades may occur if the build-up of the notes' credit
enhancement (CE) following amortisation does not compensate
for a larger loss expectation than initially assumed, due to
unexpectedly high levels of defaults and portfolio
deterioration.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A reduction of the RDR at all rating levels by 25% of the mean
RDR and an increase in the RRR by 25% at all rating levels in
the stressed portfolio would result in upgrades of up to three
notches, depending on the notes.
-- Except for the tranches already at the highest 'AAAsf' rating,
which cannot be upgraded, upgrades may occur in case of
better-than-expected portfolio credit quality and deal
performance, and continued amortisation that leads to higher
CE and excess spread available to cover losses in the
remaining portfolio.
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
CVC Cordatus Loan Fund III 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.
FAIR OAKS IV: Fitch Rates Class F Notes 'B-(EXP)'
-------------------------------------------------
Fitch Ratings has assigned Fair Oaks Loan Funding IV DAC's notes
expected ratings.
The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.
DEBT RATING
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Fair Oaks Loan Funding IV DAC
Class A LT AAA(EXP)sf Expected Rating
Class B LT AA(EXP)sf Expected Rating
Class C LT A(EXP)sf Expected Rating
Class D LT BBB-(EXP)sf Expected Rating
Class E LT BB-(EXP)sf Expected Rating
Class F LT B-(EXP)sf Expected Rating
Class X LT AAA(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fair Oaks Loan Funding IV Designated Activity Company 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. The portfolio has a target par of EUR400
million.
The portfolio is actively managed by Fair Oaks Capital Limited. The
collateralised loan obligation (CLO) has a 4.5-year reinvestment
period and an 8.5-year weighted average life (WAL).
KEY RATING DRIVERS
Above-Average Portfolio Credit Quality (Positive): Fitch considers
the average credit quality of obligors to be in the 'B' category.
The Fitch weighted average rating factor (WARF) of the identified
portfolio is 23.4.
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 64.4%.
Diversified Asset Portfolio (Positive): The transaction has a
concentration limit for the 10 largest obligors of 21%. 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 the
asset portfolio will not be exposed to excessive concentration.
Portfolio Management (Neutral): 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.
Cash-flow Analysis (Positive): Fitch's analysis of the matrix in
effect on the closing date is based on a stressed-case portfolio
with a 7.5-year WAL. Under the agency's CLOs and Corporate CDOs
Rating Criteria, the WAL used for the transaction stress portfolio
was 12 months less than the WAL covenant to account for structural
and reinvestment conditions after the reinvestment period,
including the overcollateralisation tests, and Fitch 'CCC'
limitation passing after reinvestment. This ultimately reduces the
maximum possible risk horizon of the portfolio when combined with
loan pre-payment expectations.
Forward Matrix (Neutral): The transaction includes two Fitch
matrices: (i) one effective at closing and (ii) another that will
be used by the manager at any time one year after closing as long
as the aggregate collateral balance (including defaulted
obligations at their Fitch collateral value) is above target par.
Both have a top-10 obligor concentration limit at 21.0% and
fixed-rate asset limit at 7.5%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A 25% increase of the mean default rate (RDR) across all
ratings and a 25% decrease of the recovery rate (RRR) across
all ratings would result in downgrades of up to five notches
cross the structure.
-- Downgrades may occur if the 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.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings would result in
upgrades of no more than three notches across the structure,
apart from the class A notes, which are already at the highest
rating on Fitch's scale and cannot be upgraded.
-- After the end of the reinvestment period, upgrades may occur
on better-than-expected portfolio credit quality and deal
performance, leading to higher credit enhancement and excess
spread available to cover losses in the remaining portfolio.
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
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.
HARVEST CLO XXVII: Moody's Assigns B3 Rating to EUR11MM F Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Harvest CLO XXVII
Designated Activity Company (the "Issuer"):
EUR246,000,000 Class A Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aaa (sf)
EUR28,100,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aa2 (sf)
EUR12,500,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
EUR26,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned A2 (sf)
EUR26,400,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned Baa3 (sf)
EUR23,000,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned Ba3 (sf)
EUR11,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned 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 secured senior loans or senior secured
bonds and up to 10% of the portfolio may consist of unsecured
senior loans, second-lien loans, high yield bonds and mezzanine
loans. The portfolio is expected to be 80% ramped up 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 months ramp-up period in
compliance with the portfolio guidelines.
Investcorp Credit Management EU Limited ("Investcorp") 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
four-and-a-half-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 and credit improved obligations.
In addition to the seven classes of notes rated by Moody's, the
Issuer will issue EUR250,000 of Class Z Notes due 2034 and
EUR36,050,000 of Subordinated Notes due 2034 which are not rated.
The Class Z Notes accrue interest in an amount equivalent to a
certain proportion of the subordinated management fees and its
notes' payment is pari passu with the payment of the subordinated
management fee.
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:
Target Par Amount: EUR400,000,000
Diversity Score: 48
Weighted Average Rating Factor (WARF): 3106
Weighted Average Spread (WAS): 3.70%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 44.5%
Weighted Average Life (WAL): 8.5 years
PENTA CLO 10: Moody's Assigns B3 Rating to EUR12MM Class F Notes
----------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following provisional ratings to notes issued by Penta CLO 10
Designated Activity Company (the "Issuer"):
EUR252,000,000 Class A Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aaa (sf)
EUR27,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aa2 (sf)
EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
EUR24,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned A2 (sf)
EUR27,500,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned Baa3 (sf)
EUR20,500,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned Ba3 (sf)
EUR12,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned 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 fully ramped as of the closing date and
to comprise of predominantly corporate loans to obligors domiciled
in Western Europe.
The effective date determination requirements of this transaction
are weaker than those for other European CLOs: 1) full par value is
given to defaulted obligations when assessing if the transaction
has reached the expected target par amount as of the effective
date. Moody's believes that such treatment of defaulted obligations
can introduce additional credit risk to noteholders since the
potential par loss stemming from recoveries being lower than a
defaulted obligation's par amount will not be taken into account;
2) the Caa test is not included in the effective date requirements,
potentially allowing the pool to become effective despite the
inclusion of a larger proportion of such higher risk assets than
allowed by the transaction's portfolio constraints; 3) cash
proceeds are included in the determination of whether target par
has been met, thereby removing the requirement that the pool is
fully ramped up at closing. Hence the CLO notes' outstanding
ratings could be negatively affected around the effective date,
despite satisfaction of the transaction's effective date
determination requirements. As a mitigant to these concerns,
Moody's took into account the fully ramped up status of the
portfolio, and its attributes relative to collateral quality
criteria.
Partners Group (UK) Management Ltd ("Partners Group") 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
five-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 or credit improved obligations.
In addition to the seven classes of notes rated by Moody's, the
Issuer will issue EUR32.9M of Subordinated Notes 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: EUR400M
Diversity Score: 46
Weighted Average Rating Factor (WARF): 2965
Weighted Average Spread (WAS): 3.6%
Weighted Average Coupon (WAC): 4.0%
Weighted Average Recovery Rate (WARR): 44.25%
Weighted Average Life (WAL): 9.0 years
PENTA CLO 8: Moody's Assigns (P)B3 Rating to EUR11.4MM Cl. F Notes
------------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following provisional ratings to notes to be issued by Penta CLO 8
Designated Activity Company (the "Issuer"):
EUR215,250,000 Class A Senior Secured Floating Rate Notes due
2034, Assigned (P)Aaa (sf)
EUR24,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Assigned (P)Aa2 (sf)
EUR11,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Assigned (P)Aa2 (sf)
EUR21,850,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned (P)A2 (sf)
EUR24,500,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned (P)Baa3 (sf)
EUR17,500,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned (P)Ba3 (sf)
EUR11,400,000 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.
As part of this reset, the Issuer will amend the base matrix and
modifiers that Moody's has taken into account for the assignment of
the definitive ratings.
The Issuer is a managed cash flow CLO. At least 92.5% of the
portfolio must consist of senior secured obligations and at least
70% of the portfolio must consist of senior secured loans.
Therefore, up to 7.5% of the portfolio may consist of senior
unsecured obligations, second-lien loans, mezzanine obligations and
high yield bonds. The portfolio is fully ramped as of the closing
date.
Partners Group (UK) Management Ltd ("Partners Group") 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
two-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 or credit improved obligations.
In addition to the seven classes of notes rated by Moody's, the
Issuer had issued EUR32,700,000 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: EUR350,000,000
Diversity Score: 40
Weighted Average Rating Factor (WARF): 3150
Weighted Average Spread (WAS): 3.65%
Weighted Average Coupon (WAC): 5.5%
Weighted Average Recovery Rate (WARR): 45.9%
Weighted Average Life (WAL): 8.0 years
SOUND POINT III: Fitch Puts B- Rating on F Notes on Watch Positive
------------------------------------------------------------------
Fitch Ratings has placed Sound Point Euro CLO III Funding DAC's
class B-1 to F notes on Rating Watch Positive, removed them from
UCO (Under Criteria Observation) and affirmed the class A and X
notes with Stable Outlooks.
DEBT RATING PRIOR
---- ------ -----
Sound Point Euro CLO III Funding DAC
A XS2113702380 LT AAAsf Affirmed AAAsf
B-1 XS2113702893 LT AAsf Rating Watch On AAsf
B-2 XS2113703511 LT AAsf Rating Watch On AAsf
C XS2113704089 LT Asf Rating Watch On Asf
D XS2113704758 LT BBB-sf Rating Watch On BBB-sf
E XS2113705565 LT BBsf Rating Watch On BBsf
F XS2113705219 LT B-sf Rating Watch On B-sf
X XS2113702034 LT AAAsf Affirmed AAAsf
TRANSACTION SUMMARY
Sound Point Euro CLO III Funding DAC is a cash flow CLO mostly
comprising senior secured obligations. The transaction is in its
reinvestment period and the asset manager is actively managing the
portfolio.
KEY RATING DRIVERS
Potential Matrix Update: The manager has informed Fitch of its
intention to update the Fitch test matrix. If there is no
refinancing or reset of the transaction or matrix update, Fitch
expects to upgrade the ratings within six months. The analysis was
based on both current and stressed portfolios.
Stress Portfolio Analysis: The rating actions mainly reflect the
impact of Fitch's recently updated CLOs and Corporate CDOs Rating
Criteria (reflecting, among others, a change in the underlying
default assumptions). The stressed portfolio analysis is based on
Fitch's collateral quality matrix specified in the transaction
documentation and underpins the model-implied ratings in this
review.
When analysing the matrix, Fitch applied a haircut of 1.5% to the
weighted average recovery rate, as the calculation in the
transaction documentation reflects a previous version of the CLO
criteria. The transaction has four matrices but Fitch analysed the
two matrices with the top 10 obligor limit of 18%, as the deal
currently has a top 10 obligor exposure of 11.11%, which is highly
unlikely to increase beyond 18% during the remainder of the
reinvestment period. This analysis supports model-implied ratings
of approximately one to two notches above the current ratings under
the updated criteria.
Stable Asset Performance: The transaction's metrics indicate stable
asset performance. The transaction is currently 0.11% above par.
Collateral quality tests, coverage tests and portfolio profile
tests are all in compliance. Exposure to assets with a
Fitch-derived rating (FDR) of 'CCC+' and below is 0.50%.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the transaction's underlying obligors in the 'B'/'B-' category. The
weighted average rating factor (WARF) as calculated by the trustee
was 32.20, which is below the maximum covenant of 34. Fitch
calculates the WARF as 24.3 under the updated criteria.
High Recovery Expectations: Senior secured obligations comprise
99.38% 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 11.11%, and no obligor represents more than 1.34%
of the portfolio balance.
Cash Flow Modelling: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par value and interest coverage
tests.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A 25% increase of the mean default rate (RDR) across all
ratings and a 25% decrease of the recovery rate (RRR) across
all ratings would result in downgrades of up to three notches
across the structure.
-- 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. Fitch will update the sensitivity scenarios in
line with the view of its leveraged finance team.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR across all ratings would result in an
upgrade of no more than four notches across the structure,
apart from the class A notes, which are already at the highest
rating on Fitch's scale and cannot be upgraded.
-- After the end of the reinvestment period, upgrades may occur
in the event of better-than-expected portfolio credit quality
and deal performance, leading to higher credit enhancement and
excess spread available to cover for losses in the remaining
portfolio.
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
Sound Point Euro CLO III Funding 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.
SUTTON PARK: Fitch Raises Class E Notes Rating to 'B+'
------------------------------------------------------
Fitch Ratings has upgraded class A-2 to E notes issued by Sutton
Park CLO DAC, removed them from Under Criteria Observation (UCO)
and affirmed the class A-1.
DEBT RATING PRIOR
---- ------ -----
Sutton Park CLO DAC
A1-A XS1875399278 LT AAAsf Affirmed AAAsf
A1-B XS1879555990 LT AAAsf Affirmed AAAsf
A2-A XS1875401603 LT AA+sf Upgrade AAsf
A2-B XS1875401942 LT AA+sf Upgrade AAsf
B XS1875402247 LT A+sf Upgrade Asf
C XS1875402676 LT BBB+sf Upgrade BBB-sf
D XS1875403054 LT BB+sf Upgrade BBsf
E XS1875402916 LT B+sf Upgrade B-sf
TRANSACTION SUMMARY
Sutton Park CLO DAC is a cash flow CLO mostly comprising senior
secured obligations. The transaction is in its reinvestment period
and the portfolio is actively managed by the asset manager.
KEY RATING DRIVERS
CLO Criteria Update: The rating actions mainly reflect the impact
of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria
and the shorter risk horizon incorporated in Fitch's stressed
portfolio analysis. The analysis considered modelling results for
the current and stressed portfolios.
The rating actions are line with the model-implied ratings produced
from Fitch's updated stressed portfolio analysis, which applied the
agency's collateral quality matrix specified in the transaction
documentation. Fitch also applied a haircut of 2.5% to the weighted
average recovery rate (WARR) as the calculation of the WARR in
transaction documentation reflects a previous version of the CLO
criteria, and the RR of senior secured bonds is assumed to be 70%,
instead of 60% as per Fitch's latest CLO criteria.
The upgrade of the class A-2 to E notes and the affirmation of the
class A-1 notes are in line with the model-implied ratings. The
Stable Outlooks reflect the transaction's stable performance.
Stable Asset Performance: The transaction metrics indicate stable
asset performance. The transaction is currently about 0.7% above
par. All the reported collateral quality tests, portfolio profile
tests and coverage tests are passing. Exposure to assets with a
Fitch-derived rating (FDR) of 'CCC+' and below is around 6%
(excluding 1.5% unrated assets) and there are no defaults.
'B'/'B-' Credit Quality: Fitch assesses the average credit quality
of the transaction's underlying obligors in the 'B'/'B-' category.
The Fitch weighted average rating factor (WARF) per the latest
criteria is 24.9. The WARF as calculated by the trustee was 33.5,
which is below the maximum covenant of 34.0.
High Recovery Expectation: Senior secured obligations comprise
close to 99% of the portfolio. Fitch views the recovery prospects
for these assets as more favourable than for second-lien, unsecured
and mezzanine assets. The Fitch WARR reported by the trustee was
66.3%, against the covenant at 63.8%.
Diversified Portfolio: The portfolio is well-diversified across
obligors, countries and industries. The top 10 obligor
concentration and the largest obligor represent no more than 13.0%
and 1.5% of the portfolio balance, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades may occur if build-up of the notes' credit
enhancement following amortisation does not compensate for a
larger loss expectation than initially assumed due to
unexpectedly high levels of defaults and portfolio
deterioration. Fitch will update the sensitivity scenarios in
line with the view of its leveraged finance team.
-- A 25% increase of the mean default rate (RDR) across all
ratings and a 25% decrease in the recovery rate (RRR) across
all ratings would result in a downgrade of up to three notches
across the structure, apart from the class A-1 notes, which
would not be affected.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- After the end of the reinvestment period, upgrades may occur
in the event of better-than-expected portfolio credit quality
and deal performance, leading to higher credit enhancement and
excess spread available to cover for losses in the remaining
portfolio.
-- A 25% decrease of the mean RDR across all ratings and a 25%
increase of the recovery rate (RRR) across all ratings would
result in upgrades of up to four notches across the structure,
except for the class A-1 notes, which are already at the
highest rating on Fitch's scale and cannot be upgraded.
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
Sutton Park CLO 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.
=========
I T A L Y
=========
MONTE DEI PASCHI: Fitch Affirms 'B' LT IDR, Outlook Evolving
------------------------------------------------------------
Fitch Ratings has affirmed Banca Monte dei Paschi di Siena S.p.A.'s
(MPS) Long-Term Issuer Default Rating (IDR) at 'B' and Viability
Rating (VR) at 'b' and removed them from Rating Watch Negative
(RWN). Fitch has also removed MPS's long-term debt ratings from
RWN. The Outlook on the Long-Term IDR is Evolving.
The affirmation reflects Fitch's view that risks to MPS's
capitalisation have eased as the bank returned to positive
profitability in 2021, implemented actions to strengthen its
regulatory capital ratios and actively reduced its exposure to
legal risks. As a result, the expected capital shortfall relative
to the bank's Supervisory Review and Evaluation Process (SREP)
requirements has shrunk in magnitude compared with previous
expectations, and its emergence has been postponed to 2023. MPS
plans to remediate the shortfall by completing a capital increase
in 2022, in which Italy's Ministry of Finance, MPS's largest
shareholder with a 64% stake, will be a contributor.
The Evolving Outlook reflects the significant remaining uncertainty
for MPS's creditors. If the capital increase is completed promptly
without triggering state-aid rules under EU legislation, creditors
would be protected from losses and the risk of default for
bondholders would reduce due to stronger capitalisation and better
profitability prospects. If the capital increase is delayed
significantly or the amount of capital injected is restricted by
state-aid considerations, MPS's credit profile could suffer from an
inability to successfully restructure and reputational damage. In
the remote event that the capital increase triggers state-aid
rules, losses could be imposed on MPS's creditors.
Fitch has withdrawn MPS's Support Rating of '5' and Support Rating
Floor of 'No Floor' as they are no longer relevant to the agency's
coverage following the publication of its updated Bank Rating
Criteria on 12 November 2021. In line with the updated criteria,
Fitch has assigned MPS a Government Support Rating (GSR) of 'No
Support' (ns).
KEY RATING DRIVERS
IDRs and VR
MPS's IDRs are driven by its standalone credit profile, as
reflected in the VR. The ratings continue to reflect MPS's weak
capitalisation, which is constraining the bank's commercial
relaunch, further restructuring and ultimately its ability to
improve its weak profitability to more sustainable levels. MPS's
asset quality and risk profile are relative rating strengths
following years of successful de-risking. Funding is less stable
and market access less certain than higher-rated peers, but this is
mitigated by the bank's adequate liquidity position. MPS's VR is
one notch below the 'b+' implied rating due to the weakest link
adjustment, reflecting Fitch's 'b' assessment of the capitalisation
and leverage key rating driver.
MPS capital ratios strengthened in 9M21, but buffers on SREP
requirements remain tight (just 200bp on the Tier 1 SREP
requirement) and are expected to be eroded further due to the
phase-in of the IFRS9 transitional arrangement and risk-weighted
assets (RWA) inflation from internal risk model updates. As a
result, a EUR500 million shortfall on the Tier 1 SREP requirement
should materialise from 1 January 2023, assuming that MPS does not
implement any additional capital management action. Fitch's
assessment of capitalisation depends on MPS's ability to avoid the
shortfall, or swiftly remediate it, through the planned capital
strengthening, the details of which will be announced as part of a
broader review of the bank's strategy.
Capital remains exposed to above-average legal risks, Italian
sovereign exposure (representing 250% of common equity Tier 1
(CET1) capital at end-9M21) and unreserved impaired loans (30% of
CET1 capital at end-9M21). Legal risks decreased materially after
MPS settled a EUR3.8 billion threatened litigation claim from its
former majority shareholder, Fondazione Monte dei Paschi di Siena,
for a cash payment of EUR150 million, which was already fully
provisioned for. Legal risks that MPS deems probable are now more
manageable at EUR3.4 billion, which reduce to EUR2.4 billion or 40%
of CET1 capital when considering EUR1 billion of provisions already
set aside. Legal risks are now less relevant for Fitch's ratings,
and Fitch has therefore revised the ESG Relevance Score for
Governance Structure to '3' from '4'. Unreserved impaired loans and
Italian-sovereign exposure in relation to capital also reduced from
disproportionate peak levels.
MPS's operating profitability returned positive in 9M21, as the
bank benefited from satisfactory commercial momentum, lower cost of
funding and lower loan impairment charges relative to 2020 and
previous expectations. However, Fitch believes that MPS's
profitability continues to suffer from structural issues, like weak
ability to generate revenue due to low interest rates, capital
constraints on business growth, limited competitive advantages and
high costs. Fitch expects the new strategic plan to include
decisive actions to cut costs and invest in technology and
commercial capabilities to strengthen revenue generation, although
benefits will take time to materialise.
MPS's impaired loan ratio of 5.2% at end-September 2021 (pro-forma
for a large unlikely-to-pay exposure that returned to performing in
October 2021) is slightly below the domestic industry average and
significantly lower than its historical peak, but remains high by
international comparison. MPS has not suffered from any visible
asset quality deterioration from the pandemic to date, and Fitch
expects its impaired loan ratio to remain broadly stable in coming
years. This is because improved economic prospects in Italy and
government guarantees should limit new impaired loan formation,
while improved internal workout capabilities and opportunistic
sales should continue to reduce the existing impaired loan stock.
MPS took advantage of years of market-wide deposit growth to
strengthen its deposit base and more recently, reduce reliance on
the more expensive portion of large corporate and retail time
deposits. MPS's access to the institutional debt market has been
intermittent in recent years, and in 2021 the bank postponed
planned issuances.
As a result, in 2022 MPS expects to breach the Combined Buffer
Requirement on Minimum Requirements for own Funds and Eligible
Labilities (MREL), as well as the leveraged-based MREL
subordination requirement. These breaches would be solved by the
completion of the capital increase, after which MPS also plans to
resume regular MREL issuances. ECB utilisation is material but not
dissimilar to other domestic banks. MPS re-deposits a large portion
of these funds at the ECB, resulting in adequate liquidity
buffers.
MPS's Short-Term IDR of 'B' is in line with the 'B' Long-Term IDR
under Fitch's rating correspondence table.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The ratings could be downgraded if the planned capital
strengthening is not executed in a way that prevents or
swiftly remedies the bank's regulatory capital shortfall, or
if it is subject to conditions that impose losses or increase
risks for creditors. The ratings could also be downgraded if
the size or conditions of the capital strengthening are deemed
insufficient to support the bank's successful restructuring
and relaunch.
-- The VR could also be downgraded if the Italian state completes
a capital injection or provides support to MPS in other forms
that Fitch might view as extraordinary support necessary to
restore the bank's viability.
-- Irrespective of the capital increase and strategy revision,
downside risks could arise if in the meantime sustained asset
quality deterioration emerges, revenues weaken or unexpected
cost items materialise. The ratings remain sensitive to
deterioration of the bank's funding and liquidity profile if,
for example, MPS is subject to idiosyncratic stress and
experiences deposit outflows.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The Outlook on the Long-Term IDR could be revised to Stable or
Positive if Fitch believes that MPS's planned capital
strengthening has a high probability of being executed without
negatively affecting creditors, and if Fitch does not view the
capital-strengthening actions as a provision of extraordinary
support required to restore the bank's viability.
-- Rating upside would be contingent on the capital increase
being promptly executed without detriment to creditors and
without conditions that could damage MPS's franchise or
competitiveness. The size of the capital increase would also
need to be appropriate for the bank's restructuring and
relaunch.
-- Rating upside would also require a clear and credible strategy
to restore the bank's profitability to more sustainable
levels, and evidence that asset quality and funding stability
are not under pressure.
-- Rating upside would also be contingent on the operating
environment in Italy remaining stable, as per Fitch's central
expectations.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SENIOR PREFERRED (SP) DEBT
SP obligations are rated in line with the bank's Long-Term IDR to
reflect that the likelihood of default on any given SP obligation
is the same as that of the bank. The Recovery Rating of 'RR4'
reflects Fitch's expectations of average recovery prospects, as
Fitch views an intermediate restructuring ahead of resolution,
which would narrow losses for senior bondholders, as the most
likely scenario as opposed to outright resolution.
Buffers of SP liabilities are moderate and Fitch expects them to
increase as the bank builds its MREL buffer. In conjunction with
existing subordinated debt and adequate capital buffers, this would
allow distribution of potential losses in a resolution across a
reasonable amount of principal.
SENIOR NON-PREFERRED (SNP) DEBT
MPS's SNP debt is rated one notch below the bank's Long-Term IDR to
reflect the risk of below-average recovery prospects, which
correspond to a Recovery Rating of 'RR5'. Below-average recovery
prospects arise from the use of more senior debt to meet resolution
buffer requirements and from the combined buffer of Additional Tier
1, Tier 2 and SNP debt being unlikely to exceed 10% of RWA.
DEPOSIT RATINGS
Long-term deposits are rated one notch above the Long-Term IDR
because Fitch expects MPS to comply with its MREL requirements over
the medium term and that deposits will therefore benefit from the
protection offered by junior bank resolution debt and equity
resulting in a lower probability of default.
The short-term deposit rating of 'B' is in line with the bank's
'B+' long-term deposit rating under Fitch's rating correspondence
table.
SUBORDINATED DEBT
MPS's subordinated debt is rated two notches below the VR for loss
severity to reflect poor recovery prospects in resolution. No
notching is applied for incremental non-performance risk because
write-down of the notes will only occur once the point of
non-viability is reached and there is no coupon flexibility before
non-viability. Poor recoveries for subordinated bondholders in a
resolution are also reflected in the notes' 'RR6' Recovery Rating.
GSR
Fitch has assigned MPS a GSR of 'ns', which reflects its view that
although external extraordinary sovereign support is possible it
cannot be relied upon. Senior creditors can no longer expect to
receive full extraordinary support from the sovereign in the event
that the bank becomes non-viable.
The EU's Bank Recovery and Resolution Directive (BRRD) and the
Single Resolution Mechanism (SRM) for eurozone banks provide a
framework for resolving banks that requires senior creditors
participating in losses, if necessary, instead of or ahead of a
bank receiving sovereign support.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The SP, SNP, long-term deposit and subordinated debt ratings
could be downgraded if the bank's Long-Term IDR and VR were
downgraded.
-- The SP and SNP debt ratings, and the associated Recovery
Ratings, could be downgraded if Fitch believes that the bank
is at risk of being resolved without an intermediate
restructuring that could partially protect senior bondholders.
-- The subordinated debt is also sensitive to a change in the
notes' notching, which could arise if Fitch changes its
assessment of their non-performance relative to the risk
captured in the VR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The SP, SNP, long-term deposit and subordinated debt ratings
could be upgraded if the bank's Long-Term IDR and VR were
upgraded.
-- The SP, SNP and long-term deposit ratings could also be
upgraded if the bank is expected to meet its resolution buffer
requirements exclusively with SNP debt and junior instruments
or if SNP and more junior resolution debt buffers exceed 10%
of RWAs on a sustained basis, both of which Fitch considers
unlikely.
-- An upward revision of the GSR would be contingent on a
positive change in the sovereign's propensity to support the
bank. In Fitch's view, this is highly unlikely, although not
impossible.
VR ADJUSTMENTS
The Operating Environment score of 'bbb-' is in line with the 'bbb'
category implied score but Fitch applies the following adjustment
reason to signal the Operating Environment score is currently
constrained by Italy's sovereign rating: Sovereign Rating
(negative).
The Business Profile score of 'b+' has been assigned above the
'bbb' category implied score due to the following adjustment
reason: Business Model (negative), Strategy and Execution
(negative).
The Asset Quality score of 'bb-' has been assigned above the 'b &
below' category implied score due to the following adjustment
reasons: Historical and Future Metrics (positive).
The Capitalisation & Leverage score of 'b' has been assigned below
the 'bb' category implied score due to the following adjustment
reasons: Internal Capital Generation and Growth (negative),
Regulatory Capitalisation (negative).
The Funding & Liquidity score of 'b+' has been assigned below the
'bbb' category implied score due to the following adjustment
reason: Non-Deposit Funding (negative), Liquidity Access and
Ordinary Support (negative).
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Following the settlement with Fondazione Monte dei Paschi di Siena,
MPS's exposure to legal risks has been greatly reduced and its
relevance to Fitch's ratings consequently reduced. Fitch has
therefore revised Fitch's ESG Relevance Score for Governance
Structure to the standard score of '3' from the previous '4'.
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.
MONTE DEI PASCHI: Italy In Talks to Extend Privatization Deadline
-----------------------------------------------------------------
Giuseppe Fonte at Reuters reports that Italy's Treasury is
discussing with European Union authorities the possibility of
extending by more than two years a 2021 deadline to cut Rome's 64%
stake in ailing bank Monte dei Paschi di Siena (MPS).
According to Reuters, under the terms of a EUR5.4 billion (US$6.12
billion) state bailout agreed with Brussels in 2017, Italy was
supposed to have a deal in place by the end of this year to
re-privatize MPS, but this has not proved possible.
Talks to sell the Tuscan lender to the country's No. 2 bank
UniCredit collapsed in October, leaving the Treasury chasing
alternative options, Reuters notes.
Rome expects to win Brussels' approval for a lengthy extension of
the deadline to return MPS to private hands, Reuters states. This
will give the government time to boost the bank's profitability and
attract new investors, two sources, as cited by Reuters, said,
asking not to be named because of the sensitivity of the matter.
The extension being sought will be "more than two years," Reuters
quotes one of the sources as saying. This was confirmed by a
second source familiar with the matter.
Both sources said the Treasury would make every effort to keep the
new deadline confidential, in order to avoid the risk that
potential buyers wait until it is looming to table an offer when
the government is under pressure, Reuters relates.
However, the extension will largely cover the timeline of MPS' new
industrial plan ending in 2025, provided the EU competition
authorities authorize it, Reuters discloses.
The Treasury firstly needs to address the bank's capital
requirements, which MPS has put at EUR2.5 billion, according to
Reuters.
Reuters reported in October that the cash call could total 3.5
billion -- to cover layoff costs and other expenses -- or more than
3.5 times the bank's current market value.
The sources said Rome will also implement some of the measures that
were offered to UniCredit as part of a stand-alone solution for
MPS, Reuters notes.
The plan will clear the bank of its residual problem debts, which
will go to state-owned bad loan manager AMCO, while state agency
Fintecna will take on risks from MPS' pending lawsuits, Reuters
states.
===================
L U X E M B O U R G
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FAGE INTERNATIONAL: Moody's Ups CFR & Senior Unsecured Notes to B1
------------------------------------------------------------------
Moody's Investors Service has upgraded FAGE International S.A.
(FAGE) Corporate Family Rating to B1 from B2 and its Probability of
Default Rating to B1-PD from B2-PD. Concurrently, the agency has
upgraded to B1 from B2 the rating of the backed senior unsecured
notes due 2026, jointly issued by FAGE International S.A. and Fage
USA Dairy Industry, Inc. (FAGE USA), a subsidiary of FAGE. The
outlook on the ratings remains stable.
"The rating upgrade reflects the material leverage reduction
following the announced early redemption of $100 million backed
senior unsecured notes, to be completed in December 2021. FAGE's
operating performance will continue to be challenged by persisting
difficult market conditions and increasing raw material costs.
However, Moody's expects that FAGE's leverage will remain at around
3.0x through 2022, following the debt repayment, which comfortably
positions the rating at the B1 level" said Lorenzo Re, a Moody's
senior analyst and lead analyst for FAGE.
RATINGS RATIONALE
The rating upgrade reflects FAGE's decision to redeem $100 million
of its $420 million backed senior unsecured notes maturing in 2026
in December 2021, using part of its significant cash availability
of $214 million as of September 2021. The early redemption adds to
the buyback and cancellation of approx. $32 million bonds completed
between 2020 and the first half of 2021. As a result, following the
redemption, the total amount of outstanding financial debt will
reduce to $288 million, representing a reduction of approximately
30%. As a result, Moody's expects that FAGE's leverage will improve
to close to 3.0x in 2021, notwithstanding the expected decline in
EBITDA.
Following positive operating performance in 2020, boosted by demand
recovery in all FAGE's major markets, the operating environment in
2021 became again challenging as higher milk prices and other input
costs are adding pressure to operating margins. In the first nine
months of 2021, FAGE's sales improved by 3.6%, as result of a 4.8%
volume increase, a 2.7% positive impact from currency exchanges and
a 3.9% decline in average selling price. However, the company's
reported EBITDA reduced to $69.6 million from $86.6 million in the
nine months to September 2020.
Moody's expects that trading condition will remain difficult for
the next 12-18 months, owing to the slowdown of volume growth in
some markets, especially the US. However, FAGE is implementing a
number of actions to restore profitability, including price
increases and the change of some product formats, which should ease
margin pressure next year. Moody's therefore forecasts that the
company's Moody's-adjusted EBITDA will hover around $92 million-$95
million in both 2021 and 2022 from $123 million in 2020. As a
result, FAGE's leverage will remain at around 3.1x in the next 18
months, which comfortably positions the rating at the B1 level.
FAGE's cash flow generation remains solid, despite the EBITDA
reduction, with approximately $42 million of Funds from Operations
in the nine months to September 2021, which should allow for
positive free cash flow over the next 18 months based on Moody's
expectations. However, Moody's also expects that free cash flow
will turn negative for approximately $25 million in 2023 as soon as
the investment for the new production plant in Europe resumes. This
investment, which has been delayed several times, should imply
additional capex for some $170 million (EUR150 million) through
2025, that Moody's expects will be financed with the available cash
and cash generated from the operating activities without the need
of raising new debt.
The rating also factors in FAGE's small size, its modest product
and geographical diversification and high brand concentration; as
well as its vulnerability to fluctuations in milk prices and
foreign currency movements. More positively, the rating is
supported by FAGE's solid positioning in some core market segments,
underpinned by the strength of its brand and premium positioning.
LIQUIDITY ANALYSIS
FAGE has adequate liquidity over the next 12 months. As of
September 2021, the company had $114 million in cash and cash
equivalents, pro-forma for the early redemption of $100 million
backed senior unsecured notes. In addition, FAGE has a $35 million
fully available committed ABL facility maturing in 2026. FAGE has
no debt maturities until 2026, when the outstanding $288 million
backed senior unsecured notes become due. Moody's expects the
company will generate positive FCF in 2021 and 2022. However, the
company will have to demonstrate its ability to maintain adequate
liquidity during its capital spending plan from 2023, when the
investment on the new production plant resumes, as free cash flow
will turn negative.
STRUCTURAL CONSIDERATIONS
Following the early redemption and the buyback of part of the
backed senior unsecured notes, FAGE's debt capital structure will
include $288 million of backed senior unsecured notes due 2026,
jointly issued by FAGE and FAGE USA, a subsidiary of FAGE. The
senior unsecured notes are guaranteed by FAGE Greece Dairy Industry
Single Member S.A. (FAGE Greece). The backed senior unsecured notes
are rated B1, in line with the company's CFR, given the absence of
material secured debt in FAGE's capital structure. The backed
senior unsecured notes rank pari passu with other unsecured debt
and are structurally subordinated to the liabilities of
non-guarantor subsidiaries. However, there are no material
liabilities at non-guarantors, offering substantial protection from
a subordination to noteholders. In 2020, the issuers and guarantors
represented around 90% of FAGE's sales and more than 98% of its
total assets.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectation that, despite
challenging trading conditions, FAGE's credit metrics will remain
relatively stable over the next 12-18 months, with leverage
remaining around 3.0x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade is unlikely, as the company's modest size and
highly concentrated business constrain the rating at the current
level. However, positive rating pressure could develop in case FAGE
1) improves its scale and geographical diversification, 2)
successfully executes its production expansion plan, and 3)
maintains a track record of solid operating performance with
Moody's adjusted EBIT margin improving to above 15% and leverage
remaining below 3.0x both on a sustainable basis and through the
milk price cycle basis.
Negative pressure on the ratings could occur in case on continued
deterioration in the operating performance, leading to Moody's
adjusted gross debt/EBITDA increasing towards 4.0x and underlying
free cash flow turns negative leading to liquidity concerns.
LIST OF AFFECTED RATINGS
Upgrades:
Issuer: FAGE International S.A.
Probability of Default Rating, Upgraded to B1-PD from B2-PD
LT Corporate Family Rating, Upgraded to B1 from B2
BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to B1
from B2
Outlook Actions:
Issuer: FAGE International S.A.
Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Consumer
Packaged Goods Methodology published in February 2020.
COMPANY PROFILE
FAGE is an international, family owned business, whose main
activities are the manufacturing and marketing of Greek yogurt. The
company's sales are concentrated in the US and Europe (mainly
Greece, UK and Italy), accounting for 56% and 43% of 2020 total
sales respectively. In 2020 FAGE generated revenues and EBITDA
(Moody's adjusted) of $521 million and $123 million respectively.
===========
R U S S I A
===========
ABSOLUT BANK: Moody's Affirms 'B2' Long Term Deposit Ratings
------------------------------------------------------------
Moody's Investors Service upgraded the Baseline Credit Assessment
(BCA) of Absolut Bank (PAO) to b3 from caa1. Concurrently, the
rating agency affirmed the bank's b3 Adjusted BCA, its B2 long-term
local and foreign currency deposit ratings, its long-term
Counterparty Risk (CR) Assessment of B1(cr), its long-term
Counterparty Risk Ratings (CRRs) of B1, its Not Prime short-term
deposit ratings and CRRs and its Not Prime(cr) short-term CR
Assessment. Absolut's issuer outlook, as well as the outlook on its
long-term deposit ratings, were changed to stable from negative.
Absolut is the parent bank of a group, which includes subsidiary
Baltinvestbank (BIB), a bank under regulatory financial
rehabilitation since 2015. Moody's analysis and assessments are
based on the group's consolidated financials, and all the financial
indicators mentioned in this press release refer to the group,
unless otherwise specified. Absolut is ultimately controlled by the
Non-State Pension Fund Blagosostoyanie (Blagosostoyanie Fund).
RATINGS RATIONALE
Moody's upgrade of Absolut's BCA and the change of outlook
primarily reflect the strengthening of the group's capital
position, following the Central Bank of Russia (CBR) modifying the
terms of BIB's financial rehabilitation plan on September 30, 2021.
This modification resulted in a substantial accounting gain for the
group, which will be booked in year-end financials. Moody's
estimates that the group's ratio of tangible common equity to
risk-weighted assets (TCE/RWA ratio) will exceed 7% by the end of
2021, up from 4.4% as of Q3 2021.
Also underpinning the BCA upgrade were the recent improvements in
Absolut's asset quality and recurring profitability. The group's
net profit has been positive since 2020, with a return on average
assets of 1.7% in 2020 and 2.0% (annualized) in January-September
2021. The quality of its earnings improved in January-September
2021 compared to 2020, but still, the bottom-line result benefitted
from recoveries of loan loss provisions; credit costs of around 1%
of gross loans would have brought ROAA below 0.5%. Absolut's
ability to sustain and further improve its financial results will
be subject to (1) further improvements in asset quality and
consistently lower need for provisions, and (2) sufficiency of the
revenues from the growing lines of business, to sustainably cover
operating costs and loan loss provisions. The bank's focus is
currently on mortgages, guarantees and servicing the Russian
Railways group, its affiliates and counterparts.
Absolut's stock of problem loans has declined notably over the past
18-24 months, on the back of recoveries, write-offs and sales of
legacy problem loans. Although it remains high at almost 20% of the
gross loan portfolio, there is room for its further reduction, with
more legacy problem loans to be written off or worked out. The
coverage of problem loans with loan loss reserves is solid, at 87%
as of Q3 2021.
MODERATE AFFILIATE SUPPORT
Absolut's Adjusted BCA of b3 is at the same level as its BCA,
although it incorporates Moody's assessment of a moderate
probability of affiliate support from Russian Railways Joint Stock
Company (Russian Railways; Baa2 stable), which owns a 25% stake in
the bank's 100% shareholder, Blagosostyanie Fund. This assessment
reflects Moody's expectations that Absolut can potentially benefit
from Russian Railways' funding or capital support, given the
strengthening business links between the bank and the companies of
the Russian Railways group. However, Moody's assessment also takes
into account the fact that capital support has recently arrived
from another source, i.e. the Deposit Insurance Agency.
MODERATE GOVERNMENT SUPPORT
Additional one notch of uplift within Absolut's B2 long-term
deposit ratings above its b3 Adjusted BCA results from Moody's view
of a moderate probability of support from the Government of Russia
(Baa3 stable), which reflects (1) the government of Russia being
Absolut's indirect ultimate owner via Blagosostoyanie Fund and its
shareholders, and (2) Absolut's significant subsidiary
Baltinvestbank being a recipient of government support in the form
of a financial rehabilitation package funded by the Deposit
Insurance Agency and the Central Bank of Russia, of which the terms
were recently revised, resulting in a gain for the group. Moody's
does not currently expect BIB' financial rehabilitation package to
be expanded any further, but indirect government ownership will
continue to imply a moderate probability of government support in
case of need.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Absolut's ratings can be upgraded, if its asset quality and capital
position continue to improve and solid profitability is sustained
on a recurring basis.
Absolut's ratings can be downgraded, if the bank's financial
fundamentals deteriorate, or if Moody's reassesses the probability
of affiliate or government support to the bank.
LIST OF AFFECTED RATINGS
Issuer: Absolut Bank (PAO)
Upgrades:
Baseline Credit Assessment, Upgraded to b3 from caa1
Affirmations:
Adjusted Baseline Credit Assessment, Affirmed b3
Long-term Counterparty Risk Assessment, Affirmed B1(cr)
Short-term Counterparty Risk Assessment, Affirmed NP(cr)
Long term Counterparty Risk Ratings, Affirmed B1
Short-term Counterparty Risk Ratings, Affirmed NP
Long-term Bank Deposit Ratings, Affirmed B2, Outlook Changed to
Stable From Negative
Short-term Bank Deposit Ratings, Affirmed NP
Outlook Action:
Outlook, Changed To Stable From Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks
Methodology published in July 2021.
AKTIV BANK: Declared Insolvent by Mordovia Arbitration Court
------------------------------------------------------------
The provisional administration to manage JSC AKTIV BANK
(hereinafter, the Bank) carried out an inspection at the Bank and
established signs of asset withdrawal through lending to borrowers
of dubious solvency or knowingly unable to fulfil their
obligations, which caused damage amounting to RUR1.6 billion.
According to the assessment by the provisional administration, the
value of the Bank's assets is insufficient to fulfil its
obligations to creditors.
On September 28, 2021, the Arbitration Court of the Republic of
Mordovia recognized the Bank as insolvent (bankrupt).
As the Bank of Russia has grounds to believe that the Bank's
officials and owners conducted transactions having signs of
criminal acts, the Bank of Russia has submitted the information to
the Prosecutor General's Office of the Russian Federation and the
Investigative Department 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 on June 25, 2021, by virtue of Bank of Russia Order No.
OD-1268, dated June 25, 2021.
PLATINA LTD: Bank of Russia Terminates Provisional Administration
-----------------------------------------------------------------
On December 1, 2021, the Bank of Russia terminated the activity of
the provisional administration appointed to manage the credit
institution Commercial Bank PLATINA LTD (hereinafter, the Bank).
The provisional administration completed its inspection and
revealed no signs of insolvency (bankruptcy) of the credit
institution.
On November 18, 2021, the Arbitration Court of the City of Moscow
issued a ruling on the forced liquidation of the Bank. The State
Corporation Deposit Insurance Agency was appointed as the
liquidator.
RUSNANO: In Debt Restructuring Talks with Creditors, Shareholders
-----------------------------------------------------------------
Anya Andrianova at Bloomberg News reports that Russia's state-run
JSC Rusnano held meeting with creditors and major shareholders at
which they discussed financial results and possible scenarios for
debt restructuring to benefit creditors, the company said on Nov.
19.
According to Bloomberg, the company plans to continue "the open and
constructive" talk with all interested parties.
The Moscow Exchange said in a statement it renewed trading of
Rusnano bonds on Nov. 22, Bloomberg relays.
On Nov. 19, the bourse halted trading at the central bank's
request, Bloomberg recounts.
The exchange is asking Rusnano about its plans on debt servicing
and, after analyzing information on the issuer, the bourse will
decide on the listings, Bloomberg states.
=========
S P A I N
=========
IM CAJAMAR 4: Fitch Affirms Class E Notes Rating at 'CCC'
---------------------------------------------------------
Fitch Ratings has upgraded IM Cajamar 4, FTA's class B notes and
revised the Outlook on IM Cajamar 3, FTA's class D notes to Stable
from Negative and removed two tranches from Under Criteria
Observation (UCO).
DEBT RATING PRIOR
---- ------ -----
IM Cajamar 4, FTA
A ES0349044000 LT AA+sf Affirmed AA+sf
B ES0349044018 LT AA-sf Upgrade A+sf
C ES0349044026 LT Asf Affirmed Asf
D ES0349044034 LT BBB+sf Affirmed BBB+sf
E ES0349044042 LT CCCsf Affirmed CCCsf
IM Cajamar 3, FTA
Series A ES0347783005 LT AAAsf Affirmed AAAsf
Series B ES0347783013 LT AA+sf Affirmed AA+sf
Series C ES0347783021 LT A+sf Affirmed A+sf
Series D ES0347783039 LT A+sf Affirmed A+sf
TRANSACTION SUMMARY
The transactions comprise fully amortising residential mortgages
that are serviced by Cajamar Caja Rural, Sociedad Cooperativa de
Credito (not rated)
KEY RATING DRIVERS
Performance Outlook and Removal of UCO: The rating actions reflect
the broadly stable asset performance, driven by no exposure to
payment holidays, a low share of loans in arrears over 90 days
(less than 0.2% for both transactions as of the latest reporting
date) and the improved macro-economic outlook for Spain, as
described in Fitch's latest Global Economic Outlook dated September
2021.
The rating analysis reflects the changes in Fitch's Structured
Finance and Covered Bonds Interest Rate Stresses Rating Criteria
(see "Fitch Places 13 EMEA RMBS Ratings UCO; Maintains 3 Ratings
UCO").
Credit Enhancement Trends: The affirmations and upgrade reflect
Fitch's view that the notes are sufficiently protected by credit
enhancement (CE) to absorb the projected losses commensurate with
prevailing rating scenarios.
Fitch expects IM Cajamar 3 and 4's CE to remain broadly stable in
the short to medium term due to prevailing pro-rata amortisation of
the notes. Once the portfolio balances fall below 10.0% of the
initial amounts (currently 16.2% and 20.6% for IM Cajamar 3 and 4,
respectively), the transaction will switch to sequential
amortisation and CE will increase.
Excessive Counterparty Exposure Caps Rating: IM Cajamar 3's class C
and D notes' ratings are currently capped at the transaction
account bank provider's rating (BNP Paribas Securities Services;
A+/Stable/F1), due to excessive counterparty exposure. The class C
notes were previously not capped. However, Fitch now considers
their exposure excessive and its rating and Outlook reflect that of
the transaction account bank. Fitch has revised the Outlook on the
class D notes to Stable from Negative to mirror the revision of the
Outlook on the transaction account bank since the last review.
The reserve fund held with the transaction account bank is the main
source of structural CE for these rated notes. The sudden loss of
these amounts would imply a downgrade of 10 or more notches of the
notes. Consequently, in accordance with Fitch's counterparty
criteria, Fitch classifies the transaction's exposure to the
account bank as excessive.
Regional Concentration Risk: IM Cajamar 3 and 4's portfolios are
exposed to geographical concentration in the regions of Murcia
(35.4% and 30.3%, respectively) and Andalucia (44.1% and 47.0%,
respectively). In line with Fitch's European RMBS rating criteria,
higher rating multiples are applied to the base foreclosure
frequency assumption to the portion of the portfolios that exceeds
two and a half times the population share of these regions relative
to the national count.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- For IM Cajamar 3's class A notes, a downgrade of Spain's Long-
Term Issuer Default Rating (IDR) that could decrease the
maximum achievable rating for Spanish structured finance
transactions. This is because these notes are rated at the
maximum achievable rating, six notches above the sovereign
IDR.
-- Long-term asset performance deterioration such as increased
delinquencies or larger defaults, which could be driven by
changes to macroeconomic conditions, interest rate increases
or borrower behaviour. Fitch has assessed this scenario
assuming a 15% increase in weighted average foreclosure
frequency (WAFF) and decrease in the weighted average recovery
rate (WARR) that would lead to downgrades of between one and
five notches for all classes of IM Cajamar 3 and 4.
-- For IM Cajamar 3's class C and D notes, a downgrade of BNP
Paribas Securities Services' Long-Term IDR as the notes'
rating is capped at the transaction account bank's rating due
to excessive counterparty exposure.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- IM Cajamar 3's class A notes are rated at the highest level on
Fitch's scale and cannot be upgraded.
-- CE ratios increase as the transactions deleverage able to
fully compensate the credit losses and cash flow stresses
commensurate with higher rating scenarios.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
IM Cajamar 3, FTA, IM Cajamar 4, FTA
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 transaction's IM Cajamar 3,
FTA, IM Cajamar 4, FTA initial closing. The subsequent performance
of the transactions over the years is consistent with the agency's
expectations given the operating environment and Fitch is therefore
satisfied that the asset pool information relied upon for its
initial rating 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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
IM Cajamar 3 class C and D notes' rating are capped at the issuer
account bank provider's rating as it is exposed to an excessive
counterparty dependency.
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.
LUNA III: S&P Assigns 'BB-' Long-Term ICR, Outlook Stable
---------------------------------------------------------
S&P Global Ratings assigned its 'BB-' long-term issuer credit
rating to Urbaser's Spain-based parent company, Luna III S.a.r.l.
S&P also assigned its 'BB-' issue rating and '3' recovery ratings
to the EUR1.25 billion TLB due in 2028.
The stable outlook reflects S&P's expectation that revenue will
grow by nearly 10% in 2021, thanks to new contract wins, and
profitability will begin to improve in 2022 as the sponsor
implements operational improvement initiatives, such that S&P
Global Ratings-adjusted debt to EBITDA remains below 5x.
Private equity firm Platinum Equity acquired Urbaser S.A.U. from
China Tianying for an enterprise value of EUR3.5 billion.
The transaction closed at the end of October 2021 and was primarily
financed with a EUR1.25 billion term loan B (TLB) and EUR1.11
billion in equity from financial sponsor Platinum Equity.
S&P said, "We expect modest leverage reduction over the next 12-18
months. Although Luna is owned by financial sponsor Platinum
Equity, at the end of 2021 we expect Luna will have an adjusted
debt to EBITDA just above 5x, which is at the low end of what we
typically see for sponsor-owned companies, dropping below 5x by
year-end 2022. Over the next 12-18 months, we expect the company to
experience continued growth in revenue, operating margins, and free
operating cash flow (FOCF), thanks to new contract wins and
moderate cost inflation, favorable industry tailwinds increasing
demand for sustainable specialty waste services, and the
realization of various process-improvement and cost-reduction
initiatives currently underway. We also expect the company will
continue to actively integrate bolt-on acquisitions to expand its
service offerings and geographic footprint, but we do not think
this would materially affect its credit metrics on a sustained
basis."
Luna's high barriers to entry and leading market share help drive
profitability and cash flow. The waste management services portion
of the business enjoys high barriers to entry and high switching
costs for customers, since the large capital outlays required at
the start or renewal of a contract are embedded into the pricing.
High renewal rates for contracts of almost 90% lead to high revenue
visibility. Specifically, the top 20 customers by revenue have
contracted with the company for an average of about 17 years, with
about nine years to contract expiry on average. The company also
maintains a leading market share in waste treatment and the No.2
market share in waste collection in Spain. Luna operates the
fifth-largest waste management company in Europe. These strengths
benefit Luna's profitability, since the company has maintained
adjusted EBITDA margins at the high end of the average range for
environmental services firms. Some unevenness in capital spending
(capex) may increase the variability of cash flow periodically, but
Luna still maintains decent cash flow conversion. The high barriers
to entry and leading market shares, combined with the sponsor's
focus on operating improvement opportunities, should help the
company maintain its margins above its competitors'.
Secular industry tailwinds will support growth. S&P expects
population growth and increased focus on circular economy will
support increased demand for sustainable waste collection, urban
cleaning services, and waste treatment services. The waste
treatment industry is shifting away from landfill use and Luna is
well positioned to support this trend because the company is
underexposed to landfills compared with its competitors. This
should support steady growth of the company's EUR12 billion
backlog, resulting in healthy growth of about 1%-3%, excluding new
contract wins for 2021.
Since Luna provides a critical and nondiscretionary service for its
customers' daily business activities, the pandemic did not
significantly harm the company's performance. Total EBITDA for 2020
reduced by about 7%, primarily within the waste treatment segment,
because industrial and manufacturing activity, as well as tourism,
declined in large cities. Lower oil prices and an increase in
personal protective equipment expenses also factored into lower
earnings. S&P expects Luna to recapture a portion of the lost
EBITDA in 2021 and thereafter as industrial and manufacturing
activities and tourism recover, especially in the second half of
2021.
S&P said, "Based on the documentation, we view the preferred equity
as equity under our criteria. We consider that the preferred shares
held by Platinum Equity qualify for equity treatment. This includes
the expected preferred coupon rate, equity-stapling clause, and the
preferred shares' highly subordinated and default-free features. In
addition, redemption of the preferred shares can only occur 30 days
after the maturity of debt.
"The stable outlook reflects our expectation that the company's
recurring revenue stream and favorable industry tailwinds should
allow it to generate appropriate credit measures for the rating
over the next 12-18 months. We expect the company to deliver
adjusted debt to EBITDA at 5x by the end of 2022 supported by
stable demand and expected operating improvement initiatives."
S&P may lower its rating on Luna over the next 12-18 months if:
-- Adjusted debt to EBITDA remains above 5x on a sustained basis
with no clear prospects for improvement;
-- The company pursues an aggressive financial policy, resulting,
for example, in debt-funded acquisitions or shareholder
distributions that increase adjusted debt to EBITDA above the
aforementioned level;
-- Adjusted funds from operations (FFO) to debt decline below 12%
on an ongoing basis; or
-- FOCF turns negative.
Although unlikely, S&P may raise its rating on Luna over the next
12 months if:
-- Adjusted debt to EBITDA remains below 4x on a sustained basis;
-- The sponsor commits to maintaining leverage below the
aforementioned level, inclusive of any shareholder rewards or
debt-funded acquisitions;
-- FFO to debt improves above 20% on an ongoing basis; and
-- FOCF to debt improves above 10% on an ongoing basis.
=============
U K R A I N E
=============
KERNEL HOLDING: S&P Affirms 'B+' LT ICR on Strong Credit Metrics
----------------------------------------------------------------
S&P Global Ratings affirmed its 'B+' long-term issuer credit
ratings on Kernel Holding S.A. (Kernel) and 'B+' rating on its
existing senior unsecured notes.
S&P said, "The stable outlook reflects our view that the stronger
harvesting campaign in Ukraine and still buoyant demand from
Kernel's main products should support cash flows in FY2022 as
capital expenditure (capex) should recede.
"We consider Kernel's financial performance in FY2021 to be
exceptional, but forecast credit metrics to remain strong for the
'B+' rating over the next 12 months. Kernel's credit indicators
with FOCF of $278 million and S&P Global Ratings-adjusted debt to
EBITDA of 1.7x reflected the exceptional $385 million EBITDA
contribution from its grain trading unit, Avere. This more than
offset lower sunflower seeds and grains supply from unfavorable
weather conditions in 2020 that also led to EBITDA contraction in
the oilseeds processing division. Avere's results benefited
strongly from the sudden spike in global commodity prices, as
various governments rushed to secure food supplies following the
COVID-19 pandemic outbreak, and favorable trading positions.
"For FY2022, we project our credit metrics to remain strong for the
'B+' rating level. We anticipate strong overall revenue growth of
potentially close to 30%, supported by wider crop availability and
still-buoyant commodity prices. Ukraine anticipates about a 26%
increase (to close to 100 million tons) in total crop harvest
(including sunflower seeds) in the current marketing year
(2021-2022). This should support Kernel's aspiration to process 3.8
million tons of sunflower seeds (up by 16% versus FY2021) and
export 11 million tons of grains outside Ukraine (up by 38%). The
EBITDA margin will likely normalize to 8.5%-9.5% from the
exceptional circumstances in FY2021. Taking into account the final
stage of Kernel's multiyear capital investment program to culminate
with $265 million in capex (both maintenance and capex), we project
more modest but positive FOCF and adjusted (gross) debt to EBITDA
of close to 2.0x. Kernel's first quarter (Q1) results were very
strong, with adjusted EBITDA of about $231 million as still-high
prices dwarfed the effect from low volumes. However, we note that
volumes in this quarter were due to the lower supply from the
previous harvesting campaign, when unfavorable weather in summer
and autumn 2020 for grains and sunflower seeds, respectively,
impacted supply. The effect of the new harvesting campaign should
start crystalizing from Q2 onwards."
The upcoming completion of the multiyear capital investment program
and long-term debt reduction should mitigate potential profit and
cash flow volatility from FY2022. Kernel is on track to launch its
new sunflower seeds crushing plant in Western Ukraine in spring
2022, which is the last piece of its previous Strategy 2021. The
plant will be its largest in Ukraine, with a crushing capacity of
one million tons per year. The company does not appear to have
further greenfield capex investment projects in the recently
announced Strategy 2026, as indicated by its decision to launch a
$250 million share buyback program over the next two years. S&P
also considers the decision to repay upcoming debt maturities,
notably the approximately $213 million notes (out of $500 million
original commitment) due January 2022, with available cash balances
as positive because it reduces the long-term debt in the capital
structure. Kernel does not face major refinancing needs until
October 2024 when its $300 million 6.5% fixed-rate coupon notes are
due.
The lack of near-term meaningful debt maturities and marked
reduction in capex to our forecast levels of $70 million-$80
million per annum from FY2023 onwards should provide some cushion
for potential profit and cash flow volatility beyond FY2022. Such
volatility could arise from potential stabilization of the global
soft commodity prices towards the five-year average pre-pandemic
levels, or potential weaker harvesting conditions in Ukraine. In
our view, these are the main risks that Kernel is exposed to on an
ongoing basis.
S&P said, "Strategy 2026 targets demonstrate further appetite for
expansion, but this will come from acquisitions or tolling/leasing
agreements, which we think could occur from FY2023 onwards. The
company aspires to further grow its capacity in Ukraine in terms of
sunflower seeds crushing (by 1.5 million tons), grain exports (five
million tons) and farm landbank (0.2 million hectares), to solidify
its position as a leader in sunflower oil production and exports
globally and the leading Ukrainian grains exporter (18% share in
FY2021, 14% in FY2020). We expect such expansion to come through
mergers and acquisitions and tolling agreements. For the farm
landbank expansion, we think it will likely come from new leases
given the existing restrictions for corporations to buy land in
Ukraine until 2024, and that for foreign entities, such as Kernel
(legally incorporated in Luxembourg), a nationwide referendum is
required to open up the market. In our base case, we assumed no
acquisitions in FY2022-FY2023 given the timing and valuation
uncertainty linked to acquisitions, in particular. During this
period, we think that the company will most likely focus on its
existing asset base and balance sheet management in a volatile
operating environment, which should provide additional cushion
against a potential increase in volatility from global commodity
prices.
"The rating on Kernel is constrained by its geographical asset
concentration. Our 'B+' rating on Kernel encompasses our view that
the group successfully passes our sovereign stress test, enabling
us to rate it one notch above the 'B' long-term sovereign foreign
currency rating on Ukraine. This is based on our analysis of the
group under our sovereign default stress test, which includes both
economic stress and potential currency devaluation.
"Kernel passes our stress test successfully because of its
export-oriented business (about 97% of total revenues),
corresponding a very large share of earnings in hard-currency, and
sizable cash holdings in offshore accounts. We also note the
group's historical track record of unhindered operations and
performance, and that it did not require restructuring during the
most recent Ukrainian sovereign default in 2015. Our rating on
Kernel is capped at one notch above the transfer and convertibility
assessment on Ukraine ('B') due to its profile as an exporter with
virtually all of the group's physical assets located in the
country, and because its operations can be significantly affected
by decisions beyond its control (for example, government-imposed
export restrictions or other country-specific risks).
"The stable outlook reflects our view that Kernel's operating
performance should continue to exhibit resilience in the context of
the ongoing COVID-19 global pandemic, thanks to consistent demand
in key export markets, and the nondiscretionary nature of the
global consumer foods industry. A strong harvesting campaign in
Ukraine with record crop availability, strong global demand for
Kernel's main products, and still-high global grain and sunflower
oil prices, should enable the company to maintain adjusted debt to
EBITDA comfortably at 2x-3x and EBITDA interest coverage of well
over 3x over the next 12-18 months, as it works toward the
completion of its expansionary capex program.
"We would lower the ratings on Kernel if we took the same action on
the foreign currency sovereign rating on Ukraine. Although the
group has passed our stress test on a foreign currency sovereign
default, the long-term issuer credit rating on the group is capped
at one notch above the foreign currency sovereign credit rating on
Ukraine (B/Stable).
"We could also lower the rating on Kernel if, all else being equal,
we observed a marked deterioration in its operating performance on
a stand-alone basis, such that adjusted debt to EBITDA exceeded
4.0x and EBITDA interest coverage fell to around 3.0x, with no
prospects for rapid improvement. This could occur if we observe
sharp reversal of global grain and sunflower oil prices back
towards the five-year pre-pandemic average levels, or if the
Ukrainian authorities introduced export restrictions on key
crops."
S&P could upgrade Kernel under the following two conditions:
-- S&P raised its foreign currency sovereign credit rating on
Ukraine to 'B+'; and
-- On a stand-alone basis, the group maintained adjusted debt to
EBITDA comfortably at 2x-3x and FFO to debt comfortably at
30%-45%.
The second prerequisite for a rating upgrade will most likely
materialize if the current global grain price levels are sustained
for longer than we currently anticipate, with no further large
growth investment projects. S&P would also likely see lower
volatility of profitability stemming from enlarged size, supported
by cost savings from the vertical integration of the business and
value accretive green energy investments.
===========================
U N I T E D K I N G D O M
===========================
ARCADIA: 86% of Shop Sites Remain Vacant Since Administration
-------------------------------------------------------------
Sahar Nazir at Retail Gazette reports that new research has found
that around 86% of Arcadia's shop sites remain vacant since the
group fell into administration last year.
According to Retail Gazette, the group, which owned Topshop,
Topman, Burton and Dorothy Perkins stores, has had just 13% of its
stores reoccupied, according to data from the Local Data Company
(LDC).
Arcadia fell into administration at the end of November last year,
which meant its 444 UK stores and 22 overseas locations were forced
to shutter, Retail Gazette relates.
The brands were acquired in two separate deals by online retail
giants Asos and Boohoo, but no stores were saved as part of the
move, Retail Gazette discloses.
LDC also revealed that landlords in the North East have
particularly struggled to find new occupants for the stores amid a
differing picture regionally, Retail Gazette relays.
All former Arcadia sites in North East remain empty, while 97% in
the South West are also still vacant, Retail Gazette notes.
However, properties in Wales and the South East have seen better
occupancy rates, with 24% and 21% of these finding new occupiers
over the past year, Retail Gazette states.
BOPARAN HOLDINGS: S&P Alters Outlook to Neg., Affirms 'B-' ICR
--------------------------------------------------------------
S&P Global Ratings revised its outlook on Boparan Holdings to
negative from stable and affirmed its long-term 'B-' issuer credit
rating on the group. S&P also affirmed its 'B-' issue rating, with
a recovery rating of '3' (50%), on the senior notes.
The negative outlook reflects rising downside risks to S&P's base
case that adjusted debt leverage could remain at or above 8x in the
next 12 months if Boparan cannot pass on price increases and
stabilize capacity utilization in its U.K. poultry operations.
Boparan's large U.K. poultry business is suffering from weak
profitability due to high raw material cost inflation, labor
shortages, and supply chain disruptions. S&P thinks these
difficulties will remain over the coming months but the group
should be able to offset some of these costs through price
increases.
Boparan's credit metrics have weakened significantly compared to
our previous base case. S&P said, "We think Boparan is likely to
generate much lower EBITDA in FY2022 than we previously expected
due to significantly higher operating expenses. Most of these are
due to external factors common in the U.K. meat processing
industry, but some are due to what we consider to be recurring
internal operational efficiency problems. We now forecast adjusted
EBITDA of about GBP100 million in FY2022 versus GBP128 million in
our previous base case. We see a very weak first half of FY2022 in
the group's U.K. poultry business followed by a gradual recovery in
profitability thanks to price increases. The group's EU poultry and
meals and bakery segments should continue to perform in line."
S&P said, "In addition, with the group taking on an addition GBP60
million of new debt to shore up its liquidity position, adjusted
debt has now risen above GBP800 million, higher than we previously
expected. We forecast a higher adjusted debt to EBITDA of about 8x
in FY2022 versus our previous base case of 6.0x-6.5x. We think this
weakens the group's capital structure, notably restricting its
ability to access public capital markets. In FY2023, we think the
group could reduce adjusted debt to EBITDA toward 7.0x-8.0x
supported by adjusted EBITDA rising to GBP110 million-GBP120
million. However, this assumes not only price increases but also an
increase in the capacity utilization in its U.K. poultry
operations, which is currently low."
The weak profitability of the U.K. poultry segment is weighing
heavily on the group's operations. U.K. poultry
operations--estimated to account for 45% of the group's
revenue--should continue to suffer heavily from external factors
such as high raw material (notably feed) and energy costs, labor
shortages, and supply chain disruptions. This has led the group to
run its U.K. poultry operations at a low capacity utilization rate,
thereby harming its profitability, since poultry operations are
generally relatively low margin with high operating leverage. The
recent large drop in profitability--with EBITDA dropping by 79% in
Q4 FY2021 for the poultry operations on a like-for-like (LFL)
basis--has highlighted the group's sensitivity to these external
conditions and productivity matters.
S&P said, "Since Boparan is the leading producer by far in the U.K.
poultry segment, we think the group should be in a good position to
raise prices despite the high retail concentration in the U.K.,
although the level of these price increases remains uncertain. We
also note that the group has reorganized its operations to maintain
the timeliness and quality of its production despite reduced levels
of staff. Boparan ceded two loss-making factories to its
shareholder, enabling the group to strengthen its profitability.
That said, the timing and magnitude of price increases to be made
are still uncertain and the ability to invest in automation is
currently constrained, so we do not expect problems with labor
shortage to dissipate quickly. This contrasts with the overall good
performance of the EU poultry operations in the Netherlands and
Poland, which have seen a rebound in revenue after some difficult
years thanks to higher sales prices in the market, changes in the
product mix, and a rebound in demand from the food-service channel.
We also note the solid recovery in LFL sales in the group's meals
and bakery business following weak demand in out-of-home meals in
FY2021 due to lockdowns." The stable LFL EBITDA margin of about 11%
also indicates the stronger pricing power of Boparan in the ready
meals segment compared to the poultry segment.
The new debt issuance and covenant relaxation strengthen the
group's liquidity position, which was under stress. Faced with weak
EBITDA generation, working capital and capital expenditure (capex)
needs, the group has addressed its short-term liquidity pressures.
S&P said, "However, we think the high debt leverage hampers access
to public capital markets and bank financing. We understand the
group has raised new senior notes totaling GBP50 million and a
GBP10 million committed term loan, both though private placements.
We also note that Boparan's core banks continue to support the
group with a temporary relaxation on the financial covenant tests
for its GBP80 million RCF. There was a risk of an immediate
covenant breach when the group's last 12 months EBITDA reached
GBP76 million for FY2021, very close to the minimum covenant test
of GBP75 million. Lenders agreed to lower the covenant test to
GBP50 million in Q1 and Q2 FY2022. By end-Q2 FY2022, we think
Boparan will have started to pass on price increases and its EBITDA
should start rising again. We also think the group would be able to
secure a new relaxation in Q3 if needed, unless there were major
pricing issues with its retail clients. We also note that Boparan
does not face large refinancing risks over the next two years,
having fully refinanced."
S&P said, "The negative outlook reflects our view that high cost
inflation on raw materials, energy, labor shortages and supply
chain disruptions this year are likely to continue severely
affecting Boparan's large U.K. operations and are yet to be fully
offset by significant price increases. We therefore see downside
risks to our new base case projections, in which we forecast
adjusted debt leverage stabilizing at about 8x in FY2022.
"We could lower the rating on Boparan if the group deviated
materially from our base case and was unable to restore
profitability in its U.K. poultry operations in the second half of
FY2022. This would entail adjusted debt to EBITDA remaining
elevated on a sustained basis, translating into an unsustainable
capital structure with limited ability to access capital markets.
We would also consider a downgrade if the group continued to incur
large negative free operating cash flow (FOCF) generation in the
next 12 months, which would again threaten its ability to
adequately fund its day-to-day operations.
"We could revise the outlook back to stable if we thought the group
could reduce its adjusted debt to EBITDA sustainably close to 7x
and below with EBITDA interest coverage comfortably above 2x in the
next 12 months. This would occur if the group stabilized primary
operations, addressed labor shortages with automation benefits, and
recovered inflation through price increases."
CASHEURONET: QuickQuid, Pounds to Pocket Borrowers to Get Refunds
-----------------------------------------------------------------
Emily White at MoneySavingExpert reports that around 78,500
QuickQuid and Pounds to Pocket borrowers, who were mis-sold loans
they couldn't afford, are expected to receive refunds of some of
the interest and fees they were charged.
But they'll only get back up to half of what they paid -- and some
will receive less than a third, MoneySavingExpert states.
According to MoneySavingExpert, in its latest progress report,
joint administrators at Grant Thornton have revealed that affected
borrowers are likely to receive a pay out of between 30p and 50p
per GBP1 of interest, fees and charges paid on their mis-sold loans
(plus 8% interest on top). These refunds are expected to be paid
by the end of March 2022, MoneySavingExpert discloses.
The update comes after CashEuroNet, which payday lenders QuickQuid
and Onstride.co.uk, formerly known as Pounds to Pocket, were part
of, went into administration in 2019 and stopped lending,
MoneySavingExpert notes.
LONDON WALL 2021-02: Moody's Gives Ba3 Rating to GBP10.3MM X Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to Notes
issued by London Wall Mortgage Capital plc: Series Fleet 2021-02:
GBP223.0M Class A Mortgage Backed Floating Rate Notes due May
2052, Definitive Rating Assigned Aaa (sf)
GBP17.2M Class B Mortgage Backed Floating Rate Notes due May 2052,
Definitive Rating Assigned Aa2 (sf)
GBP8.3M Class C Mortgage Backed Floating Rate Notes due May 2052,
Definitive Rating Assigned Aa3 (sf)
GBP3.8M Class D Mortgage Backed Floating Rate Notes due May 2052,
Definitive Rating Assigned A1 (sf)
GBP2.5M Class E Mortgage Backed Floating Rate Notes due May 2052,
Definitive Rating Assigned A2 (sf)
GBP10.3M Class X Floating Rate Notes due May 2052, Definitive
Rating Assigned Ba3 (sf)
GBP2.5M Class S Floating Rate Notes due May 2052, Definitive
Rating Assigned Caa3 (sf)
Moody's has not assigned a rating to the GBP2.5M Class Z Fixed Rate
Notes.
RATINGS RATIONALE
The Notes are backed by a pool of UK buy-to-let ("BTL") mortgage
loans originated by Fleet Mortgages Limited ("Fleet", NR).
The portfolio of assets amounts to approximately GBP254.8 million
as of November 1, 2021 pool cutoff date. The amortising Reserve
Fund is funded at closing to 1% of the pool balance at closing.
The ratings are primarily based on the credit quality of the
portfolio, the structural features of the transaction and its legal
integrity.
According to Moody's, the transaction benefits from various credit
strengths such as a granular portfolio, an amortising reserve fund
sized at 1% of the pool balance and relatively high portfolio
yield. However, Moody's notes that the transaction features some
credit weaknesses such as an unrated servicer and some vintages
concentration. Various mitigants have been included in the
transaction structure such as a back-up servicer facilitator, as
well as a principal to pay interest mechanism available to the most
senior class of notes outstanding.
Moody's determined the portfolio lifetime expected loss of 1.25%
and Aaa MILAN credit enhancement ("MILAN CE") of 12.0% related to
borrower receivables. The expected loss captures Moody's
expectations of performance considering the current economic
outlook, while the MILAN CE captures the loss Moody's expect the
portfolio to suffer in the event of a severe recession scenario.
Expected defaults and MILAN CE are parameters used by Moody's to
calibrate its lognormal portfolio loss distribution curve and to
associate a probability with each potential future loss scenario in
the ABSROM cash flow model to rate RMBS.
Portfolio expected loss of 1.25%: This is lower than the recent UK
BTL RMBS sector average and is based on Moody's assessment of the
lifetime loss expectation for the pool taking into account: (i) the
collateral performance of Fleet originated loans to date, with
cumulative losses of 0% during the past 5 years; (ii) the
performance of previously securitised portfolios, with cumulative
losses of 0% to date; (iii) the current macroeconomic environment
in the UK and the impact of future interest rate rises on the
performance of the mortgage loans; and (iv) benchmarking with other
UK BTL transactions.
MILAN CE for this pool is 12.0%, which is in line with other UK BTL
RMBS transactions, owing to: (i) the WA current LTV for the pool of
70.3%; (ii) top 20 borrowers constituting 6.6% of the pool; (iii)
static nature of the pool; (iv) the fact that 95.1% of the pool are
interest-only loans; (v) the share of self-employed borrowers of
42.6%, and legal entities of 42.5%; (vi) the presence of 19.9% of
HMO and MUB loans in the pool; and (vii) benchmarking with similar
UK BTL transactions.
Operational Risk Analysis: Fleet is the servicer in the transaction
whilst Citibank N.A., London Branch, is acting as the cash manager.
In order to mitigate the operational risk, Law Debenture Corporate
Services Limited (NR) acts as back-up servicer facilitator. To
ensure payment continuity over the transaction's lifetime, the
transaction documentation incorporates estimation language whereby
the cash manager can use the three most recent servicer reports
available to determine the cash allocation in case no servicer
report is available. The transaction also benefits from approx. 4
months of liquidity for Class A based on Moody's calculations and
the availability of the reserve fund since closing, however the
junior notes do not benefit from it.
There is principal to pay interest as an additional source of
liquidity for the Classes A to E (if the relevant tranche is the
most senior class of notes outstanding). Ratings of the Class B
notes is constrained at closing by operational risk at the Aa2 (sf)
level.
Interest Rate Risk Analysis: 70.81% of the loans in the pool are
fixed rate loans reverting to three month LIBOR with the remaining
portion linked to BoE. The Notes are floating rate securities with
reference to daily SONIA. To mitigate the fixed-floating mismatch
between fixed-rate assets and floating liabilities, there is a
scheduled notional fixed-floating interest rate swap provided by
BNP Paribas (Aa3(cr)/P-1(cr)).
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
December 2020.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
FACTORS THAT WOULD LEAD AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Significantly different actual losses compared with Moody's
expectations at close due to either a change in economic conditions
from Moody's central scenario forecast or idiosyncratic performance
factors would lead to rating actions. For instance, should economic
conditions be worse than forecast, the higher defaults and loss
severities resulting from a greater unemployment, worsening
household affordability and a weaker housing market could result in
a downgrade of the ratings. Deleveraging of the capital structure
or conversely a deterioration in the Notes available credit
enhancement could result in an upgrade or a downgrade of the
ratings, respectively.
[*] UK: Energy Regulator May Impose Stricter Capital Requirements
-----------------------------------------------------------------
Rachel Morison at Bloomberg News reports that the U.K.'s energy
regulator said it may impose stricter capital requirements for gas
and power suppliers after almost two dozen companies collapsed
since August in the wake of soaring prices.
The surge in wholesale rates to levels almost four times higher
than usual for this time of year has wreaked havoc on the energy
retail sector, Bloomberg discloses. Many of those going out of
business were partially or totally unhedged, leaving them
vulnerable when prices increased dramatically, Bloomberg notes.
According to Bloomberg, Ofgem Chief Executive Officer Jonathan
Brearley said the retail market needs to adapt to high prices on a
long-term basis, though "clear and sharp" rules are needed on how
companies buy energy in advance to supply customers.
The government insists that the tools they have to manage the
disruption caused by so many bankruptcies are working, Bloomberg
notes. But the number of companies collapsing is mounting and some
industry bosses expect just a handful of suppliers to be left by
April, Bloomberg states. Questions are also being raised as to
whether companies should be allowed to be so unhedged, according to
Bloomberg.
"Your commercial strategy is your own -- how much you want to hedge
and how much risk you want to take," Bloomberg quotes Mr. Brearley
as saying. "If you take that risk you will need to have the
capital available to underpin a wide range of scenarios."
In a House of Lords committee on Nov. 30, U.K. Energy and Climate
Change Minister Greg Hands showed little sympathy for suppliers
that hadn't hedged enough to survive the wholesale price spikes,
Bloomberg recount. Ofgem's price cap limits how much suppliers can
charge households on variable tariffs, Bloomberg states.
The costs associated with the collapse of 23 suppliers stand at
about GBP3.2 billion (US$4.3 billion), Bloomberg relays, citing
analysis by Investec Bank Plc. Consumers will have to foot the
bill which equates to about 120 pounds a household, on top of the
increase in wholesale natural gas and power prices that will be
passed on as well, Bloomberg discloses.
===============
X X X X X X X X
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[*] BOOK REVIEW: Hospitals, Health and People
---------------------------------------------
Author: Albert W. Snoke, M.D.
Publisher: Beard Books
Softcover: 232 pages
List Price: $34.95
Order your personal copy today at
http://www.beardbooks.com/beardbooks/hospitals_health_and_people.html
Hospitals, Health and People is an interesting and very readable
account of the career of a hospital administrator and physician
from the 1930's through the 1980's, the formative years of today's
health care system. Although much has changed in hospital
administration and health care since the book was first published
in 1987, Dr. Snoke's discussion of the evolution of the modern
hospital provides a unique and very valuable perspective for
readers who wish to better understand the forces at work in our
current health care system.
The first half of Hospitals, Health and People is devoted to the
functional parts of the hospital system, as observed by Dr. Snoke
between the late 1930's through 1969, when he served first as
assistant director of the Strong Memorial Hospital in Rochester,
New York, and then as the director of the Grace-New Haven Hospital
in Connecticut. In these first chapters, Dr. Snoke examines the
evolution and institutionalization of a number of aspects of the
hospital system, including the financial and community
responsibilities of the hospital administrator, education and
training in hospital administration, the role of the governing
board of a hospital, the dynamics between the hospital
administrator and the medical staff, and the unique role of the
teaching hospital.
The importance of Hospitals, Health and People for today's readers
is due in large part to the author's pivotal role in creating the
modern-day hospital. Dr. Snoke and others in similar positions
played a large part in advocating or forcing change in our hospital
system, particularly in recognizing the importance of the nursing
profession and the contributions of non-physician professionals,
such as psychologists, hearing and speech specialists, and social
workers, to the overall care of the patient. Throughout the first
chapters, there are also many observations on the factors that are
contributing to today's cost of care. Malpractice is just one
example. According to Dr. Snoke, "malpractice premiums were
negligible in the 1950's and 1960's. In 1970, Yale-New Haven's
annual malpractice premiums had mounted to about $150,000." By the
time of the first publication of the book, the hospital's premiums
were costing about $10 million a year.
In the second half of Hospitals, Health and People, Dr. Snoke
addresses the national health care system as we've come to know it,
including insurance and cost containment; the role of the
government in health care; health care for the elderly; home health
care; and the changing role of ethics in health care. It is
particularly interesting to note the role that Senator Wilbur Mills
from Arkansas played in the allocation of costs of hospital-based
specialty components under Part B rather than Part A of the
Medicare bill. Dr. Snoke comments: "This was considered a great
victory by the hospital-based specialists. I was disappointed
because I knew it would cause confusion in working relationships
between hospitals and specialists and among patients covered by
Medicare. I was also concerned about potential cost increases. My
fears were realized. Not only have health costs increased in
certain areas more than anticipated, but confusion is rampant among
the elderly patients and their families, as well as in hospital
business offices and among physicians' secretaries." This aspect of
Medicare caused such confusion that Congress amended Medicare in
1967 to provide that the professional components of radiological
and pathological in-hospital services be reimbursed as if they were
hospital services under Part A rather than part of the co-payment
provisions of Part B.
At the start of his book, Dr. Snoke refers to a small statue,
Discharged Cured, which was given to him in the late 1940's by a
fellow physician, Dr. Jack Masur. Dr. Snoke explains the
significance the statue held for him throughout his professional
career by quoting from an article by Dr. Masur: "The whole question
of the responsibility of the physician, of the hospital, of the
health agency, brings vividly to mind a small statue which I saw a
great many years ago.it is a pathetic little figure of a man, coat
collar turned up and shoulders hunched against the chill winds,
clutching his belongings in a paper bag-shaking, tremulous,
discouraged. He's clearly unfit for work-no employer would dare to
take a chance on hiring him. You know that he will need much more
help before he can face the world with shoulders back and
confidence in himself. The statuette epitomizes the task of medical
rehabilitation: to bridge the gap between the sick and a job."
It is clear that Dr. Snoke devoted his life to exactly that
purpose. Although there is much to criticize in our current
healthcare system, the wellness concept that we expect and accept
today as part of our medical care was almost nonexistent when Dr.
Snoke began his career in the 1930's. Throughout his 50 years in
hospital administration, Dr. Snoke frequently had to focus on the
big picture and the bottom line. He never forgot the importance of
Discharged Cured, however, and his book provides us with a great
appreciation of how compassionate administrators such as Dr. Snoke
have contributed to the state of patient care today.
Albert Waldo Snoke was director of the Grace-New Haven Hospital in
New Haven, Connecticut from 1946 until 1969. In New Haven, Dr.
Snoke also taught hospital administration at Yale University and
oversaw the development of the Yale-New Haven Hospital, serving as
its executive director from 1965-1968. From 1969-1973, Dr. Snoke
worked in Illinois as coordinator of health services in the Office
of the Governor and later as acting executive director of the
Illinois Comprehensive State Health Planning Agency. Dr. Snoke died
in April 1988.
*********
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-
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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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