/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/211215.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, December 15, 2021, Vol. 22, No. 244 Headlines G E R M A N Y SAFARI BETEILIGUNGS: Moody's Lowers CFR to Caa3, Outlook Negative I R E L A N D OAK HILL V: Moody's Assigns B3 Rating to EUR12MM Class F Notes L U X E M B O U R G 4FINANCE HOLDING: Moody's Affirms B2 CFR, Alters Outlook to Stable SK INVICTUS II: Fitch Lowers LongTerm IDR to 'B', Outlook Stable M O N T E N E G R O KAP: EPCG Says Gov't Has Responsibility for Decision on Smelter N E T H E R L A N D S BME GROUP: Moody's Hikes CFR & First Lien Credit Facilities to 'B2' INTERTRUST NV: Moody's Puts Ba2 CFR Under Review for Downgrade N O R W A Y B2HOLDING ASA: Moody's Affirms 'Ba3' CFR, Outlook Remains Stable R U S S I A NIZHNIY NOVGOROD: Moody's Upgrades Long Term Issuer Rating to Ba2 VOLGOGRAD CITY: Moody's Upgrades Long Term Issuer Rating to B1 S W I T Z E R L A N D HERENS MIDCO: Moody's Affirms 'B3' CFR, Alters Outlook to Stable U N I T E D K I N G D O M COLLIS BIRD: Business, Assets Up for Auction Until December 17 EDINBURGH WOOLLEN: EFL Mum on Proposed Takeover FORTHPLUS PENSIONS: iPensions Group Acquires Business Assets VIRGIN ATLANTIC: Receives GBP400MM New Funding from Shareholders - - - - - ============= G E R M A N Y ============= SAFARI BETEILIGUNGS: Moody's Lowers CFR to Caa3, Outlook Negative ----------------------------------------------------------------- Moody's Investors Service has downgraded Safari Beteiligungs GmbH's ("Lowen Play" or "the company") corporate family rating to Caa3 from Caa1 and probability of default rating to Ca-PD from Caa1-PD. Concurrently, Moody's has downgraded Lowen Play's instrument rating on the EUR350 million backed senior secured notes due 2022, issued by Safari Holding Verwaltungs GmbH, to Caa3 from Caa1. The outlook on all entities remains negative. RATINGS RATIONALE The downgrades of the PDR and CFR reflect Moody's view that Lowen Play's probability of default, including the potential for a distressed exchange-type of restructuring, is very high over the near term following the company's disclosure that it had approached major holders of the EUR350 million backed senior secured notes with a restructuring proposal to extend and address upcoming maturities. The proposals of the company's restructuring plan include the reinstatement of around one third of the outstanding notes as Holdco PIK notes outside the restricted group, which Moody's considers could in time lead to a loss for current creditors. Leverage for the restricted group, with EBITDA growing above EUR70 million, a relatively optimistic Moody's case if COVID-related restrictions persist well into 2022, would remain high at around 6.0x in 2022 (based on Moody's adjusted gross debt/EBITDA), while free cash flow generation would be neutral at best. In Moody's view therefore, the full refinancing of the PIK notes could prove challenging. The company's Caa3 rating and negative outlook also reflect the continued uncertainty surrounding the lasting impact of new regulation. The rating is also constrained by the geographical and product concentration with Germany representing most of the revenue and EBITDA (the contribution of the Netherlands is still low), and the company's weak liquidity. While not currently incorporated in Moody's forecasts, the company's operating performance could be affected by further COVID-related lockdowns in light of the Omicron variant, which are an increasing possibility in the company's key markets. The company's Caa3 CFR is supported by its leading market position as the second largest arcade operator in the fragmented German gaming arcade market and its ongoing diversification into online gaming in several European countries. The company runs an asset-light business model which supports strong cash flow generation during normal operating conditions. Social and governance were considered key rating drivers in line with Moody's ESG framework. Regulatory risk is considered a social risk, given the company's exposure to the newly implemented restrictions on Amusement with Prizes (AWP) machines in Germany which are designed to reduce the risk of problem gambling. Additionally the company continues to be impacted by the coronavirus pandemic which Moody's regards as a social risk given the substantial implications for public health and safety. Moody's considers financial strategy and risk management a key rating driver because of the company's failure to address upcoming debt maturities in a timely manner. LIQUIDITY Moody's considers Lowen Play's liquidity to be weak. The company reported EUR86 million of cash and cash equivalents as of September 2021, however this includes the fully drawn EUR40 million revolving credit facility (RCF) which matures in October 2022. The company's weak liquidity position also reflects the upcoming maturity of the EUR350 million backed senior secured notes on November 30, 2022 and the importance for liquidity of the proposed restructuring. Under the loan documentation, the super senior RCF is subject to a springing maximum leverage covenant, set at 4.67x, to be tested when the RCF is drawn by more than 40%. Moody's calculates that the company breached this covenant in December 2020, triggering a drawstop event (but not an event of default). Moody's expects the company to remain in breach until October 2022, in the absence of any refinancing. STRUCTURAL CONSIDERATIONS Lowen Play's Ca-PD PDR reflects Moody's view that a default is highly likely given the proposed restructuring, and the likelihood this would be considered a distressed exchange and that without a restructuring the company will be unable to repay the debt maturities in September and November 2022. The Caa3 rating on the 2022 backed senior secured notes is in line with the CFR. These are secured by pledges over shares and receivables and guaranteed operating subsidiaries. The notes rank pari passu with the super senior RCF because they share substantially similar security and guarantees, though they are subordinated upon enforcement under the provisions of the intercreditor agreement. The company also has a EUR184 million shareholder loan, which is treated as equity. OUTLOOK RATIONALE The negative outlook reflects the continued uncertainty of regulatory impact on earnings, the potential for covid-related restrictions to weigh on earnings and the company's proposed restructuring plans which could result in a default under Moody's definitions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be downgraded if estimated recovery values are expected to be lower than those assumed in the Caa3 CFR and Caa3 instrument rating. In view of today's action and the negative outlook, Moody's does not anticipate upward rating pressure in the near term. However, it could occur if the recovery is higher than that implied by the Caa3 rating. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Gaming published in June 2021. COMPANY PROFILE Lowen Play is the second largest gaming arcade operator in Germany. The company has also eight gaming arcades in the Netherlands, and an online gaming platform in Germany. In 2020, Lowen Play was heavily impacted by coronavirus and reported revenues of EUR183 million and EBITDA of EUR55 million. ============= I R E L A N D ============= OAK HILL V: Moody's Assigns B3 Rating to EUR12MM Class F Notes -------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to refinancing notes issued by Oak Hill European Credit Partners V Designated Activity Company (the "Issuer"): EUR500,000 Class X Senior Secured Floating Rate Notes due 2035, Definitive Rating Assigned Aaa (sf) EUR244,000,000 Class A Senior Secured Floating Rate Notes due 2035, Definitive Rating Assigned Aaa (sf) EUR44,000,000 Class B Senior Secured Floating Rate Notes due 2035, Definitive Rating Assigned Aa2 (sf) EUR25,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2035, Definitive Rating Assigned A2 (sf) EUR27,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2035, Definitive Rating Assigned Baa3 (sf) EUR20,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2035, Definitive Rating Assigned Ba3 (sf) EUR12,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2035, 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. Interest and principal amortisation amounts due to the Class X Notes are paid pro rata with payments to the Class A Notes. The class X Notes amortise by 25% over the first 4 payment dates starting on the first payment date. As part of this refinancing, the Issuer has extended the reinvestment period by 4.5 years and the weighted average life to 8.5 years. It has also amended certain concentration limits, definitions including the definition of "Adjusted Weighted Average Rating Factor" and minor features. The issuer has included the ability to hold workout obligations. In addition, the Issuer has amended 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 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 underlying portfolio is expected to be 90% ramped as of the closing date. Oak Hill Advisors (Europe), LLP ("Oak Hill") will continue to manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's 4.5 year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations and credit improved obligations. 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 million Diversity Score(*): 51 Weighted Average Rating Factor (WARF): 2975 Weighted Average Spread (WAS): 3.55% Weighted Average Coupon (WAC): 3.75% Weighted Average Recovery Rate (WARR): 44.1% Weighted Average Life (WAL): 8.5 years =================== L U X E M B O U R G =================== 4FINANCE HOLDING: Moody's Affirms B2 CFR, Alters Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service has affirmed 4Finance Holding S.A.'s long-term corporate family and long-term issuer ratings of B2, together with the B2 long-term backed senior unsecured debt ratings of 4Finance, S.A., the group's Luxemburg-based debt issuing company. The outlook on both entities has been changed to stable from negative. RATINGS RATIONALE RATIONALE FOR THE CORPORATE FAMILY RATING The affirmation of the B2 corporate family rating (CFR) reflects that, while the company was not immune to the subdued market-wide demand for unsecured credit as a result of the coronavirus outbreak, with the decrease in both the average balance of receivables and average interest yields leading to negative profitability in 2020, it has since started to recover. The company benefitted from the growth in income from its continuing products since Q2 2020, and from the decrease in the cost of risk (8% in the first nine months of 2021 compared to 15.2% in the first nine months of 2020) and posted a net income of EUR28.1 million in the first three quarters of 2021, compared to a loss of EUR15.5 million in the first nine months of 2020. The rating agency expects that, despite the higher provisioning needs and regulatory caps on interest rates imposed as a response to the coronavirus weighing on profitability, 4Finance's strategic refocusing on its core markets and expected market-wide demand for credit should lead to a further recovery in 2022. While the 2016 acquisition of TBI Bank EAD, a unique affiliation compared with peers, supports the company's strategy to diversify its products and clients base, and also its funding profile, Moody's cautions that 4Finance's gradual shift to higher volumes of near-prime loans from short-term loans increases the need for sound liquidity management, and that 4Finance's ability to fund its lending through customer deposits has been limited thus far. Additionally, Moody's considers the nonperforming part of the loan book as illiquid, which constrains the issuer's flexibility to repay outstanding debt by means of reducing lending only. Finally, despite a reinforced funding position after the recent completion of the bond refinancing, Moody's still considers 4Finance's liquidity management as a weakness, leading to a one-notch negative adjustment. This reflects the absence of backup credit lines relative to the firm's financing needs, signaling a lack of preparedness for stress events or unexpected circumstances. RATIONALE FOR THE STABLE OUTLOOK The change of outlook to stable from negative nonetheless reflects 4Finance's strengthened funding position following the completion of the bond refinancing process in October, leading to the issuance of a 5-year EUR175 million bond redeeming the remaining $200 million bond. Moody's still cautions that the need to resort to the bond extension in 2020 on the initial EUR150 million bond highlighted the limited options to access additional sources of liquidity in the event of a shock. However, the company has now balanced its medium-term capital structure, with two Euro bond issues of similar sizes maturing in February 2025 and October 2026, while maintaining a sound liquidity position, with EUR85.3 million of cash in the online business at the end of September 2021. RATIONALE FOR THE ISSUER AND DEBT RATINGS The affirmation of the B2 ratings of 4Finance, S.A.'s backed senior unsecured notes are based on the CFR and reflect the results from Moody's "Loss Given Default for Speculative-Grade Companies" methodology published in December 2015 and their positioning within the group's funding structure and the amount outstanding relative to total debt. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Over the longer-term, the CFR could be upgraded if 4Finance maintains a strong recurring profitability and high capitalization while containing asset quality volatility. Upward rating pressure could also materialize if the integration of TBI Bank EAD translates into a successful further expansion of the group's consumer lending business. An upgrade in 4Finance's CFR would likely result in a corresponding upgrade to its issuer and debt ratings. 4Finance's CFR could be downgraded if (1) asset quality were to deteriorate substantially; (2) the company's recurring return on assets were to decline; or (3) the company's capitalization would continue deteriorating or (4) the company targets a leaner liquidity coverage, resulting in lower volumes of liquid reserves to meet upcoming funding maturities. Unfavorable progress in the integration of TBI Bank EAD could also translate into downward rating pressure. A downgrade in 4Finance's CFR would likely result in a corresponding downgrade to its issuer ratings and 4Finance, S.A.'s debt ratings. Further, Moody's could downgrade these ratings due to adverse changes to their debt capital structure that would lower the recovery rate for senior unsecured debt classes. LIST OF AFFECTED RATINGS Issuer: 4Finance Holding S.A. Affirmations: Long-term Issuer Ratings, Affirmed B2 Long-term Corporate Family Rating, Affirmed B2 Outlook Action: Outlook, Changed To Stable From Negative Issuer: 4Finance, S.A. Affirmations: Backed Senior Unsecured Regular Bond/Debenture, Affirmed B2 Outlook Action: Outlook, Changed To Stable From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. SK INVICTUS II: Fitch Lowers LongTerm IDR to 'B', Outlook Stable ---------------------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Rating (IDR) of SK Invictus Intermediate II S.a.r.l. to 'B' from 'B+' and assigned an IDR of 'B' to Perimeter Solutions, SA (Perimeter) following the closing of the company's acquisition by EverArc Holdings Limited. The Rating Outlooks are Stable. Fitch has also assigned Long-Term issue ratings of 'BB-'/'RR2' to the new first lien senior secured revolver and first lien senior secured notes. The downgrade reflects the new company's capital structure exhibiting higher pro forma gross leverage of around 5.4x compared to the pre-transaction capital structure, after giving 0% equity credit to the company's new preferred shares. Fitch believes the lack of pre-payable debt within the new capital structure, coupled with an added potential for partially or fully debt-funded acquisitions, supports Fitch's view that Perimeter's total debt with equity credit/operating EBITDA will remain sustained above 5.0x and consistent with 'B' rating tolerances through the ratings horizon. The Stable Outlook reflects Fitch's expectations for continued strength in fire activity and further rebounds in vehicle miles driven to drive solid earnings performance for Perimeter, which Fitch forecasts will lead to total debt with equity credit/operating EBITDA remaining between 5.0x-5.5x over the forecast horizon. The 'B' rating reflects the company's leading market positions, solid liquidity position, and demonstrated financial resiliency during periods of weak fire seasons, as evidenced with its 2019-2020 performance. Fitch notes that uncertainty remains around the new company's appetite towards M&A, share repurchases and dividends in the longer term. Fitch has withdrawn its existing Long-Term issue ratings of the original first lien senior secured revolver, first-lien senior secured term loan, and second lien senior secured term loan, all of which were repaid and terminated at close of the EverArc acquisition. Fitch has also withdrawn its IDR of SK Invictus Intermediate S.a.r.l., which was a Guarantor Rating. KEY RATING DRIVERS EverArc Acquisition: On Nov. 9, 2021, SK Invictus Holdings S.a.r.l., the ultimate parent of SK Invictus Intermediate II S.a.r.l., consummated its previously announced business combination in which the company was acquired and taken public under a newly formed company, Perimeter Solutions, SA (NYSE: PRM), by EverArc Holdings, Limited, a publicly-listed acquisition company, in a transaction valued at about $2 billion. The transaction was financed by approximately $400 million in EverArc equity, $1.15 billion in proceeds from a private placement equity issuance, $675 million in senior secured notes and $100 million in preferred equity. The current management team will continue to lead the company. Capital Deployment Considerations: After giving 0% equity credit to the company's $100 million in new preferred shares, Perimeter's pro forma capital structure with around 5.4x Fitch-estimated gross leverage is more levered compared to the company's pre-transaction capital structure. While Fitch expects Perimeter to adopt more conservative financial policies as a public company, uncertainty remains around the company's appetite towards share repurchases and dividends in the longer term. Perimeter has historically been an active acquirer of smaller companies in the fire safety industry, with two bolt-on acquisitions completed in 2021. Fitch expects the company to continue to be an active acquirer going forward, with an added potential for expansion outside of fire safety. While Fitch would view increased end market diversification as favorable toward Perimeter's business profile, Fitch expects that any leveraging transaction would be immediately followed up with debt repayment such that total debt with equity credit/ operating EBITDA remains around 5.0x-5.5x. Robust 2021 U.S. Fire Season: Perimeter's fire safety business generated solid sales and EBITDA growth of approximately 3% and 16%, y/y respectively through YTD 1H21, supported by a robust U.S. fire season, partially offset by lower fire activity in Australia. Fitch projects the company's fire safety segment to continue to generate solid earnings growth throughout the forecast period, with additional upside potential stemming from diversification into new regions, U.S. Forest Services (USFS) initiatives to increase tanker capacity and pre-treatment measures taken by utilities and homeowners. Furthermore, Fitch believes that favorable structural shifts within forest firefighting tactics towards more aerial based approaches provides additional upside for the company. Leading Market Positions: Perimeter holds the #1 market position in both fire safety retardants, where it sells fire retardants for use in fighting forest fires and fire suppressant foam, and in its Oil Additives segment, where Perimeter supplies P2S5 for use in lubricant additives. Both segments are highly consolidated and have considerable barriers to entry. Perimeter is the sole supplier of fire retardants to the U.S. government and primarily sells to governmental and municipal entities such as USFS. Potential competitors would have to go through rigorous approval processes due to the mission-critical characteristics of the products. Likewise, the P2S5 Perimeter sells is hazardous in nature and requires specialized storage facilities to safely transport. Perimeter is the only competitor within the P2S5 market to have production capacity in both North America and Europe. Oil Additives Stability: Perimeter's position in the lubricant additives market has historically enabled it to post consistent EBITDA generation, with strong forecast FCF due in part to the segment's minimal capex requirements. While 2020 represented a challenging year for travel and fuel demand, the company was able to improve segment EBITDA within oil additives y/y by approximately 32% versus 2019. Through YTD 1H21, the segment's earnings have continued to rebound in line with improving miles driven, leading to higher revenues and EBITDA of 20% and 32%, y/y respectively. Fitch projects that EBITDA generation within oil additives improves sequentially in 2H21 and 2022 towards 2018 levels and around GDP thereafter, supported by continued rebounds in vehicle miles driven. This is consistent with Fitch's views that lubricant additive producers have historically enjoyed very consistent earnings even in times of rising raw material costs due to the stable demand profile of the industry. Substantial FCF Generation: Fitch projects Perimeter will generate around $50 million-$70 million on average of positive FCF throughout the forecast due to the anticipation for more normalized fire seasons and a continued return to historical demand levels within the oil additives segment. The company benefits from high consolidated EBITDA margins and minimal capex requirements that have traditionally resulted in substantial FCF generation that is notably above the metrics of other 'B' peers. Perimeter's products are highly specialized and account for only a small portion of its customers' overall costs, which has enabled it to consistently pass on any increases in the price of its underlying raw materials helping support margin and cash flow resiliency. Equity Credit: For purposes of calculating leverage, Fitch currently assigns 0% equity credit for the $100 million in SK Invictus Holdings 6.5% cumulative preferred stock based on the structural features of the instrument as analyzed under Fitch's "Corporate Hybrids Treatment and Notching Criteria." DERIVATION SUMMARY Perimeter is relatively small and generally more highly levered when compared to chemical peers such as Kronos Worldwide (B+/Stable), Ingevity Corp. (BB/Stable) and SK Mohawk Holdings, SARL (B/Negative). Perimeter's main differentiating factors from its peer group are its highly specialized products and leading market positions within each of its segments that typically lead to higher EBITDA margins and strong FCF generation far above the average for most peers. As such, Perimeter is able to support a higher debt load than a peer such as Kronos, which sells more commoditized products and has less of a leadership position in its industry. SK Blue Holdings is projected to have a similar mid-cycle leverage profile to Perimeter, but has less growth opportunities in its end-markets and its margin expansion opportunities are more cost-linked. Perimeter's typically substantial FCF generation compares with Ingevity given leading positions within Perimeter's fire safety and Ingevity's Performance Chemicals segments. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Robust fire season in 2021-2022 with annual growth thereafter in the low-mid single digits; -- Oil Additives demonstrates solid growth in 2021 and thereafter, supported by continued improvements in miles driven and fuel demand; -- Capex between 2%-3% of sales annually; -- Bolt-on acquisitions totaling $35 million annually on average; -- No dividends or share repurchases projected. Key Recovery Rating Assumptions: The recovery analysis assumes that Perimeter would be reorganized as a going-concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Fitch's recovery analysis considered the high barriers to entry, leading market positions and specialized product portfolio of Perimeter's two businesses as well as the considerable FCF generation ability of each. Fitch's $90 million going concern EBITDA assumption is made up of an assumed $25 million from the Oil Additives business and $65 million from the Fire Safety business. In Oil Additives, Fitch believes customer production issues like the one seen in 2019 and coronavirus-related impacts have largely subsided. The company is the market leader in a specialized product that only accounts for a small percentage of its customers' total costs. The Zinc Dialkyldithiophosphate (ZDDP) Perimeter provides has no readily available substitute and requires specialized equipment to safely transport. Fitch believes the generally stable demand profile of the lubricant additives industry would allow the segment to generate around $25 million in EBITDA out of a distressed period. In Fire Safety, Perimeter is the unquestioned leader, with substantial market share. The company's products are essentially the only products certified to be used by its customers, which are governmental agencies which require years of approval procedures before a new product can be used. Perimeter's products are also mission-critical, further limiting new entrants. Demand has benefited from a structural shift towards greater use of fire retardants as well as longer fire seasons. However, should firefighting preferences or tactics change, or should fire activity dramatically decrease, the company would be vulnerable to declines in its earnings as exhibited in 2019. As such, Fitch believes a going concern EBITDA for this segment of around $65 million appropriately reflects emergence from a stressed scenario and reflects an amount between the earnings generated during years considered 'normal' fire seasons and 'weaker' fire seasons. Fitch has assigned a 7.0x recovery multiple, which is consistent with highly specialized and highly value-add specialty chemical producers such as Perimeter. The highly consolidated industries in which it operates, with high barriers to entry and the significant growth potential of the Fire Safety segment further support a higher multiple and the resulting enterprise value. With the revolver fully drawn, the first-lien debt recovers at a 'BB-'/'RR2' rating. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Total debt with equity credit/operating EBITDA sustained below 5.0x; -- Increase in overall geographic exposure and end-market diversification that further reduces variability risk in fire safety; -- Demonstrated ability to maintain sufficient liquidity to withstand multiple periods of distress; -- FCF margin sustained around current levels. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Total debt with equity credit/operating EBITDA sustained above 5.75x; -- Operating pressure within the Fire Safety segment resulting in weakened EBITDA generation and FCF margin trending towards the mid-single digits; -- More aggressive than anticipated M&A activity, including transformative, credit-unfriendly acquisitions, or a shareholder return strategy that suggests a deviation in financial policy; -- Expectations of FFO fixed-charge coverage sustained at or below 1.75x. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Solid Liquidity: The company's new $100 million senior secured revolver maturing in 2026 is forecasted to stay mostly undrawn, with any drawdowns likely to be repaid relatively quickly, and Fitch currently expects the company to continue to keep a moderate amount of cash on hand. Together with the revolver and around $50 million-$70 million on average of positive FCF throughout the forecast, Perimeter should have a comfortable liquidity buffer. 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. ISSUER PROFILE Perimeter Solutions, SA (NYSE: PRM) is a chemical company with two business segments: Fire Safety and Oil Additives. In Fire Safety, Perimeter's aerial retardants are used by forest service agencies to fight and contain forest fires. In Oil Additives, Perimeter is the market leader in ZDDP. =================== M O N T E N E G R O =================== KAP: EPCG Says Gov't Has Responsibility for Decision on Smelter --------------------------------------------------------------- Radomir Ralev at SeeNews reports that Montenegro's majority state-owned power utility Elektroprivreda Crne Gore's (EPCG) said the government has the responsibility of deciding whether the company should take over the production of primary aluminium at KAP smelter owned by Montenegro's Uniprom. EPCG is not registered for aluminium production, so a decision whether to accept the proposal of Uniprom should be made by the majority shareholder, the power utility said in a statement on Dec. 13, SeeNews relates. Uniprom proposed on Dec. 11 to EPCG to take over the production of primary aluminium at the smelter free of charge for a year starting January 1, 2022 in order to avoid the plant's closure due to an unfavourable electricity price that EPCG has offered to come into force at the beginning of next year, SeeNews discloses. Last week, Uniprom owner and CEO Veselin Pejovic said the company decided to close KAP due to the high energy costs that the company will incur after the expiry of its power supply contract with EPCG on Jan. 1, SeeNews recounts. KAP has so far been paying a price of 45 euro per MWh, while EPCG first offered a price of 120 euro per MWh, and then proposed an even higher price, of 127 euro per MWh, Mr. Pejovic said back then, SeeNews notes. According to SeeNews, Mr. Pejovic said on Dec. 11 if EPCG rejects the proposal, Uniprom will proceed to the gradual closure of KAP as of Dec. 15, due to the unfavourable price of electricity proposed to come into force from the beginning of 2022. KAP entered bankruptcy proceedings in 2013 and was sold by Montenegro's government to Uniprom in 2014, SeeNews recounts. ===================== N E T H E R L A N D S ===================== BME GROUP: Moody's Hikes CFR & First Lien Credit Facilities to 'B2' ------------------------------------------------------------------- Moody's Investors Service has upgraded the corporate family rating of BME Group Holding B.V. to B2 from B3 and the probability of default rating to B2-PD from B3-PD. Concurrently Moody's upgraded the ratings instruments to B2 from B3 of the backed senior secured first lien credit facilities, consisting of the outstanding EUR180 million backed senior secured first lien term loan (TL) due 2025, EUR1,470 million the backed senior secured first lien term loan B (TLB) due 2026 and the EUR195 million backed senior secured first lien revolving credit facility (RCF) due 2025. The outlook remains stable. "The upgrade of the CFR to B2 reflects BME' strong performance in 2021, which resulted in a faster pace of deleveraging compared to our expectations with Moody's adjusted gross debt/EBITDA of 5.8x in the last-twelve-months (LTM) ending September 2021, pro-forma acquisitions. The upgrade also reflects BME's track record in executing its strategy and growing earnings demonstrated since the outbreak of the coronavirus pandemic as well as our expectations that the company will maintain gross leverage around 6.0x over the next 12-18 months." says Marcell Pavesi, lead analyst for BME. RATINGS RATIONALE The rating upgrade reflects BME's stronger than expected performance in the first nine months of 2021 that resulted in a faster pace of improvement in credit metrics compared to Moody's previous expectations. In the LTM ending September 2021 Moody's adjusted gross leverage, pro-forma acquisitions, declined to 5.8x after increasing to 6.8x as of LTM March 2021 (6.4x 2020) due to debt funded shareholders' distribution and acquisitions. The reduction in leverage compares with Moody's previous expectation for a B3 rating of leverage moving to around 6.2x by year-end 2022. The strong operating results have been supported by solid demand in the construction and renovation market in Europe, higher contribution from acquisitions as well as by the company's ability to deliver operating efficiencies and pass-through rising costs to customers. As a result, in the first nine months of 2021 BME's revenue grew by 13.5% (5.4% organically) and its reported normalised EBITDA margin (pre-IFRS 16) increased to 6.3% from 5% in the same period of 2020, supporting the reduction in leverage below 6.0x in 2021 and ahead of Moody's forecasts. Moody's expects BME's performance will remain strong over the next 12-18 months on the back of continued solid demand from the residential renovation market, particularly for products such as insulation, roof and façades that will benefit from local subsidies allocated to energy renovation activities, as well as realisation of operating efficiencies which will help to mitigate rising labour and energy costs. Moody's also believes that BME will manage potential disruptions that could be caused by lockdown measures in Europe as demonstrated during the outbreak of the coronavirus pandemic. This will be supported by BME's geographic and product diversification as well as resilient demand from the renovation market. As a result, Moody's forecasts that BME's revenue will grow organically in the low single digit range in percentage term in 2022 and 2023 and Moody's adjusted EBITDA margin will be above 7%. These will underpin gross leverage around 6.0x and EBITA/Interest of around 3.0x in the next 12-18 months, which are in line with Moody's expectations for a B2 rating. The upgrade to B2 also reflects Moody's expectations that there will not be additional debt funded shareholder distributions over the next 12-18 months and that the company will remain acquisitive. In this respect, the rating agency expects that increases in leverage following further debt funded acquisitions will be rapidly reversed, reflected in a debt/EBITDA reduction towards 6.0x within the next 12-18 months after closing. The rating action further reflects the expectation of a supportive sponsor, in particular in a scenario of more sizable transactions. The B2 rating is further supported by the company's proven track record in executing its strategy and growing earnings in a challenging operating environment demonstrated since the outbreak of the pandemic; its leading position in the building materials distribution market in Europe, with diversification across European markets; its significant exposure (60%) to the relatively stable renovation, maintenance and improvement (RMI) market; its flexible cost base and the inherent countercyclical nature of working capital in the distribution industry; its good liquidity; and its significant portfolio of owned real estate assets. At the same time, the rating is constrained by low albeit improving Moody's-adjusted EBITDA margin of around 7.0% as of LTM September 2021 due to the highly fragmented and competitive distributor market in Europe; history of sensitivity to new construction activity, although mitigated by its exposure to the RMI market, which is likely to be more stable; and the track record of aggressive financial policy, including shareholder distributions and debt-financed acquisitions. LIQUIDITY Moody's expects BME to have a good liquidity over the next 12-18 months. This reflects EUR144 million cash balance as of September 2021 and EUR195 million available backed senior secured first lien Revolving Credit Facility (RCF). The rating agency projects that the company will generate consistently positive FCF, which is likely to be used to fund bolt-on acquisitions. Liquidity is also supported by around EUR600 million portfolio of owned real estate assets. The RCF contains a springing maintenance covenant of 8.4x leverage calculated on a first-lien senior secured net debt basis, which is tested when the facility drawings net of cash exceed 45% of total commitments. Moody's forecasts the capacity under the covenant to be ample in the next 12-18 months. The company does not have any significant maturities until 2025. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Moody's considers the impact of ESG factors when assessing companies' credit quality. Environmental and social risks are not material in case of BME. In terms of governance, the company is owned by the private equity firm Blackstone and has demonstrated a tolerance for high leverage by making a distribution to shareholders this year. As a result, the rating agency expects BME's financial policy to favour shareholders over creditors. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's expectations that BME will continue to benefit from positive dynamics in the residential renovation market in Europe. These will support low single digit organic revenue growth and adjusted EBITDA margin above 7.0% over the next 12-18 moths, resulting in Moody's-adjusted debt/EBITDA around 6.0x, EBITA/Interest around 3.0x and continued positive FCF, with FCF/debt in the mid-single digits in percentage terms. The stable outlook also assumes no additional debt funded shareholder distribution over the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure requires a sustained improvement in credit metrics, with (1) debt / EBITDA ratio below 5.0x (2) Moody's-adjusted operating margin towards 5.0%, (3) FCF / debt towards high single digit figures, (4) RCF/Net debt improving above 15%, (5) EBITA / Interest above 3.0x and (6) evidence of a balanced financial policy. Conversely, negative rating pressure could arise if (1) Moody's adjusted gross debt/EBITDA is sustainably above 6.25x; (2) Moody's-adjusted operating margin deteriorates; (3) FCF/ debt reduces below 2%, (4) RCF/Net debt reduces below 10% or (5) liquidity profile deteriorates. STRUCTURAL CONSIDERATIONS BME's backed senior secured first-lien term facilities comprising the senior secured term loan B (maturing in October 2026), term loan (maturing in October 2025) and the RCF (maturing in October 2025), share the same security and are guaranteed by certain subsidiaries of the group accounting for at least 80% of consolidated EBITDA. As a consequence, the loans and RCF are rated B2, in line with the CFR. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Distribution & Supply Chain Services Industry published in June 2018. INTERTRUST NV: Moody's Puts Ba2 CFR Under Review for Downgrade -------------------------------------------------------------- Moody's Investors Service placed all the ratings of Intertrust N.V.'s on review for downgrade. Intertrust's ratings comprise Ba2 Corporate Family Rating, Ba2-PD Probability of default rating, and the Ba2 backed senior unsecured ratings of its fully-owned subsidiary Intertrust Group B.V. The outlook on both entities has changed to ratings under review from negative. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS RATIONALE FOR THE REVIEW FOR DOWNGRADE The review for downgrade follows the announcement on 6 December that Intertrust's management board and supervisory board had recommended an offer to sell 100% of the share capital of the company to Corporation Service Company (CSC, unrated), a privately owned US-based provider of business services, for a cash consideration of EUR20 per share or a total EUR1.8 billion excluding debt. CSC has arranged underwritten financing of approximately EUR3.0 billion to finance the acquisition of shares of Intertrust and to refinance the company's existing debt. Subject to regulatory approvals and acceptance by Intertrust's shareholders, the company expects the proposed transaction to close in the second half of 2022. Full details of the proposed transaction have not been made public, but the announcement indicates the acquisition will be debt-financed. The commitment to a net debt position of the combined group at a maximum of 6.0x EBITDA indicates a tolerance for leverage that is unlikely to result in upward pressure on the Ba2 rating of Intertrust. Should the net leverage of the combined group be close to 6.0x EBITDA, which compares to the current net debt/EBITDA target of around 3.0x at Intertrust standalone, a downgrade might be considered, notwithstanding the potential benefits of the combination in terms of increased scale and diversification. The review of Intertrust's ratings will focus on (i) the successful completion of the agreed offer and (ii) the business risk and the financial policy implications for the combined entity. Upon closing of the transaction, Moody's will withdraw Intertrust's CFR. LIQUIDITY Moody's considers Intertrust's liquidity good, based on the rating agency's expectation that Free Cash Flow generation will remain positive, its cash balance of around EUR131 million as of September 2021, and its RCF of EUR150 million, with a leverage covenant and a reasonable headroom. Moody's expects full repayment of USD term loan B maturity in 2022 from available liquidity sources. LIST OF AFFECTED RATINGS: Issuer: Intertrust Group B.V. Placed On Review for Downgrade: BACKED Senior Unsecured Regular Bond/Debenture, currently Ba2 Outlook Actions: Outlook, Changed To Ratings Under Review From Negative Issuer: Intertrust N.V. Placed On Review for Downgrade: LT Corporate Family Rating, currently Ba2 Probability of Default Rating, currently Ba2-PD Outlook Actions: Outlook, Changed To Ratings Under Review From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. CORPORATE PROFILE Intertrust is the Netherlands based global provider of corporate, fund, capital market and private wealth services. The company has around 4,000 employees in more than 30 jurisdictions in Europe, the Americas, Asia and the Middle East. In 2020, Intertrust generated revenue and company-adjusted EBITA of EUR564 million and EUR185 million, respectively. It is listed on the Amsterdam Stock Exchange and had a market capitalisation of EUR1.8 billion as of December 8, 2021. =========== N O R W A Y =========== B2HOLDING ASA: Moody's Affirms 'Ba3' CFR, Outlook Remains Stable ---------------------------------------------------------------- Moody's Investors Service affirmed the Ba3 corporate family rating and B1 senior unsecured rating of B2Holding ASA. The issuer outlook remains stable. The rating action followed B2Holding's update that the company decided to postpone a potential EUR senior unsecured transaction. RATINGS RATIONALE B2Holding's Ba3 CFR continues to reflect the company's strong capitalisation, interest coverage, and leverage metrics compared with those of its peers; and well diversified portfolio, comprising purchased debt across 22 countries and spread between secured and unsecured debt, a strength despite a high proportion being in countries that have less-mature nonperforming loan (NPL) markets. These strengths are balanced against risks related to the company's rapid historical growth, which Moody's expect to continue, although at a slower pace, and its evolving funding and liquidity profile with strong reliance on its secured credit facility. The B1 senior unsecured debt ratings reflects the application of Moody's Loss Given Default for Speculative-Grade Companies methodology (published in December 2015), B2Holding's capital structure and particularly the priorities of claims and asset coverage in the company's pro-forma liability structure. The size of B2Holding's secured revolving credit facility (RCF) indicates higher loss-given default for senior unsecured creditors, leading to a senior unsecured debt rating one notch below the company's Ba3 CFR. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects that Moody's considers B2Holding's current liquidity position to be adequate, despite the postponement of the EUR300 million note issuance. The stable outlook also reflects Moody's expectation that B2Holding will still be able to refinance its upcoming maturities in the first or second quarter of 2022, despite the current postponement, and to maintain its credit profile commensurate with that of a Ba3 CFR during the 12-18 month outlook period while continuing to ensure sufficient liquidity to seize purchasing opportunities, subject to the maintenance of sufficient covenant headroom. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS B2Holding's CFR could be upgraded if the company improves its cash flows, while maintaining low leverage and high interest coverage, and demonstrates solid liquidity management, proactively refinancing upcoming debt maturities and renewing credit lines well in advance of their maturities. The CFR could also be upgraded if Moody's comes to believe that B2Holding has reduced its operational and execution risks related to its rapid expansion in the years prior to the COVID-19 pandemic. An upgrade of B2Holding's CFR would likely result in an upgrade of the senior unsecured debt rating. B2Holding's senior unsecured rating could also be upgraded because of a positive change in its debt capital structure that would increase the recovery rate for senior unsecured debt classes. B2Holding's CFR could be downgraded if the company's liquidity position materially weakens, for example in case of repeatedly postponed refinancing or for other unexpected reasons. Negative rating pressure could develop if the company fails to refinance the senior unsecured notes due in November 2022 well in advance of their maturity. The CFR could also be downgraded if the company's capitalization falls significantly; and/or profitability and leverage metrics meaningfully deteriorate. A downgrade of B2Holding's CFR would likely result in a downgrade of the senior unsecured debt rating. B2Holding's long-term ratings could also be downgraded if the company were to significantly increase its RCF, which is senior to the company's senior unsecured liabilities. LIST OF AFFECTED RATINGS Issuer: B2Holding ASA Affirmations: Long-term Corporate Family Rating, affirmed Ba3 Senior Unsecured Regular Bond/Debenture, affirmed B1 Outlook Action: Outlook remains Stable PRINCPIAL METHODOLOGY The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. =========== R U S S I A =========== NIZHNIY NOVGOROD: Moody's Upgrades Long Term Issuer Rating to Ba2 ----------------------------------------------------------------- Moody's Investors Service has upgraded the long-term issuer rating of Nizhniy Novgorod, Oblast to Ba2 from Ba3 and the outlook was changed to stable from positive. The rating upgrade of Nizhniy Novgorod's rating reflects Moody's expectations that the region's good budgetary management will enable it to maintain its solid budgetary metrics, moderate debt burden and low refinancing risks. RATINGS RATIONALE RATIONALE FOR THE RATING UPGRADE The rating upgrade reflects Moody's expectations that the region will continue to pursue its prudent budgetary policy and as a result, its operating performance will improve as its economy recovers and its debt burden will resume its gradual decline over the next few years. Moody's also expects the region to maintain low refinancing risks. Despite pressure on tax revenues from the effects of the pandemic, the region maintained a moderate deficit of 6% of total revenues while its debt burden remained relatively stable in 2020, supported by strong federal government transfers and a strong control over operating and capital spending. In 2020, tax revenues declined by 1% while the region experienced upward pressure from coronavirus related expenses. Nevertheless, Nizhniy Novgorod was able to record a slim operating surplus, with gross operating balance to operating revenue ratio at 0.2% in 2020. This is projected to strengthen above 7% in 2021 and 2022 on the back of the current economic recovery. While the debt burden is projected to increase in 2021, it will remain moderate at 48% of operating revenues in 2021 and is then expected to resume its decline to around 40% in 2023. The increase in debt in 2021 will also be accompanied by growth in liquidity (estimated at 10% of operating revenues). Moody's expects the region will maintain its improved debt structure following the repayment of a significant part of market debt with new long-term budget loans in 2021 as part of a Russian federal government program. Annual debt repayments are expected not to exceed 5% of operating revenues from end-2021, compared to 15% a year before. Nizhniy Novgorod's Baseline Credit Assessment was also upgraded to ba2 from ba3. The final issuer rating of Ba2 incorporates a low likelihood of support from the Government of Russia (Baa3 stable). RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's view that the region will continue its prudent budgetary management resulting in good operating performance and a moderate debt burden while refinancing risks will remain low over the next 12-18 months. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS Nizhniy Novgorod's ESG Credit Impact Score is moderately negative (CIS-3), reflecting moderate exposure to environmental and social risks and a moderately negative governance issuer profile score. Moody's assesses Nizhniy Novgorod's exposure to environmental risks as moderately negative (E-3 issuer profile score), reflecting moderately negative exposure to carbon transition risk, water management and physical climate risk. Exposure to social risks is moderately negative (S-3 issuer profile score), driven by unfavourable demographic trends, which limit growth potential. Close proximity to larger economic centres of the country and comparatively lower labour income puts additional pressure on migration flows of the region. As most other Russian regions, Nizhniy Novgorod also faces moderate social risks from relatively low income growth and uneven access to basic services and education. The influence of Governance on Nizhniy Novgorod's credit profile is moderately negative (G-3 issuer profile), in line with assessment of Governance in Russia, reflecting the risks that are mainly related to weaknesses in the rule of law, property rights and control of corruption, as indicated in relatively low scores on international surveys. The specific economic indicators, as required by UK regulation, are not available for Nizhniy Novgorod, Oblast. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Russia, Government of GDP per capita (PPP basis, US$): 28,053 (2020 Actual) (also known as Per Capita Income) Real GDP growth (% change): -3% (2020 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 4.9% (2020 Actual) Gen. Gov. Financial Balance/GDP: -4% (2020 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 2.4% (2020 Actual) (also known as External Balance) External debt/GDP: 31.5% (2020 Actual) Economic resiliency: ba1 Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. SUMMARY OF MINUTES FROM RATING COMMITTEE On December 7, 2021, a rating committee was called to discuss the ratings of Nizhniy Novgorod, Oblast. The main points raised during the discussion were: the issuer's governance and/or management, have materially increased. The issuer's fiscal or financial strength, including its debt profile, has materially increased. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The stable outlook on Nizhniy Novgorod indicates that a change in the rating is unlikely in the near term. Over time, positive pressure on the rating could emerge from a more rapid and pronounced debt reduction than Moody's currently expects, accompanied by stronger budgetary performance than the rating agency's baseline. At the same time, markedly weaker fiscal and debt metrics for this sub-sovereign than Moody's currently expects, could put downward pressure on its rating or point to a negative outlook. An upgrade or a downgrade of the sovereign rating could also exert upward or downward credit pressure on the regional government's ratings. The principal methodology used in this rating was Regional and Local Governments published in January 2018. VOLGOGRAD CITY: Moody's Upgrades Long Term Issuer Rating to B1 -------------------------------------------------------------- Moody's Investors Service has upgraded the long-term issuer ratings of Volgograd, City of to B1 from B2. The outlook remains stable. The upgrade reflects Moody's expectations that the city will continue its prudent budgetary policy resulting in good budgetary performance and a moderate debt burden. RATINGS RATIONALE RATIONALE FOR THE RATING UPGRADE The rating upgrade reflects Moody's expectations that the city will continue to carefully manage its budget. As a result, the city will maintain its debt reduction trend and demonstrate a balanced performance while refinancing risks will not grow despite the currently challenging operating environment as a result of the effects of the pandemic. Over the last few years, the city has improved its policy predictability. Its budgetary and debt management as well as strong ongoing support from the higher tier government (Volgograd Oblast) has enabled it to reduce its net direct and indirect debt to operating revenue ratio to 57% in 2020 from 70% in 2019. Moody's expects that the current policy to constrain the nominal debt will lead to a reduction of this ratio to around 50% by end-2022. The city aims to maintain a balanced performance over the next few years, in line with the historic trend. As a result of new budget loans that Volgograd city received through the higher tier government from the federal government under the wider program to refinance some market debt, refinancing pressures have abated considerably. The city now has to refinance only 26% of financial debt by end-2023 compared to 100% before it received new budget loans in 2021. Volgograd city's Baseline Credit Assessment was upgraded to b2 from b3. The final issuer rating of B1 incorporates a moderate likelihood of support from Volgograd Oblast. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's view that the city will keep a balanced budgetary performance and continue to reduce its debt burden while refinancing risks will not grow over the next 12-18 months. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS Volgograd city's ESG Credit Impact Score is moderately negative (CIS-3), reflecting moderately negative exposure to environmental and social risks and a moderately negative governance issuer profile score. Moody's assesses Volgograd city's exposure to environmental risks as moderately negative (E-3 issuer profile score), reflecting moderate physical climate, water and waste and pollution risks. Exposure to social risks is moderately negative (S-3 issuer profile score), mainly driven by unfavourable demographic trends, which limit growth potential, labour and income and access to basic services risks. The influence of Governance on Volgograd city's credit profile is moderately negative (G-3 issuer profile score) in line with assessment of Governance in Russia, reflecting the risks that are mainly related to weaknesses in the rule of law, property rights and control of corruption, as indicated in relatively low scores on international surveys. The specific economic indicators, as required by UK regulation, are not available for Volgograd, City of. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Russia, Government of GDP per capita (PPP basis, US$): 28,053 (2020 Actual) (also known as Per Capita Income) Real GDP growth (% change): -3% (2020 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 4.9% (2020 Actual) Gen. Gov. Financial Balance/GDP: -4% (2020 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 2.4% (2020 Actual) (also known as External Balance) External debt/GDP: 31.5% (2020 Actual) Economic resiliency: ba1 Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. SUMMARY OF MINUTES FROM RATING COMMITTEE On December 7, 2021, a rating committee was called to discuss the rating of the Volgograd, City of. The main points raised during the discussion were: the issuer's governance and/or management, have materially increased. The issuer's fiscal or financial strength, including its debt profile, has materially increased. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook on Volgograd city indicates that a change in the ratings is unlikely in the near term. Over time, adherence to a debt reduction trend and strong ongoing support from Volgograd Oblast above Moody's expectations would put upward pressure on the ratings of Volgograd city. An upgrade of the sovereign rating could also exert upward credit pressure on the ratings. Albeit not expected, an increase in debt appetite and looser budgetary management which could potentially lead to a higher debt burden and renewed dependency on debt markets for refinancing could put downward pressure on the ratings. The principal methodology used in these ratings was Regional and Local Governments published in January 2018. ===================== S W I T Z E R L A N D ===================== HERENS MIDCO: Moody's Affirms 'B3' CFR, Alters Outlook to Stable ---------------------------------------------------------------- Moody's Investors Service has affirmed the B3 corporate family rating and B3-PD probability of default rating of Herens Midco S.a.r.l. (Herens), the parent company of Arxada AG (Arxada). Concurrently, Moody's affirmed the Caa2 rating of Herens' EUR460 million (equivalent CHF513 million) senior unsecured notes as well as the B2 ratings of Herens HoldCo S.a.r.l.'s EUR350 million guaranteed senior secured notes due 2028, EUR750 million and USD1095 million senior secured term loan B due 2028 with a total notional of equivalent CHF2,152 million and the EUR375 million revolving credit facility due 2027 (RCF). The outlook on all ratings was changed to stable from positive. RATINGS RATIONALE Moody's has changed the outlook to stable from positive because the rating agency downward adjusted its base case projections for the company. The downward adjustment was based on the company's Q3 2021 financial performance, which was mildly below the rating agency's previous expectations, higher than initially forecasted drawdown of the RCF, and the recently announced acquisition of Troy Corporation (Troy, unrated). While Moody's revision to the base case expectation are relatively small, the previous positive outlook was predicated upon swift deleveraging with Moody's adjusted debt/EBITDA falling towards 7.0x by the end of 2022. The rating agency now expects that Arxada's Moody's adjusted leverage will fall to around 8.0x by the end of 2022 and below 7.0x only by year-end 2023. Nevertheless, Moody's continues to expect relatively swift deleveraging although from a higher starting level of around 9.4x in 2021 pro forma the initial transaction as well as the acquisition of Troy. The rating agency estimated the 2021 pro-forma leverage at 8.7x at the assignment of the ratings in April 2021. Arxada's Q3 2021 financial results were slightly below Moody's previous expectations with a company-reported normalized adjusted EBITDA of CHF364 million as of the last twelve months (LTM) to September 2021. The rating agency estimates the Moody's adjusted EBITDA at around CHF318 million as it does not classify a number of adjustments as exceptional. While Arxada's Specialty Products Solutions (SPS) division performed well, the performance of the larger Microbial Control Solutions (MCS) division was affected by de-stocking effects a the Hygiene sub-segment. Moody's believes that Arxada's Hygiene sales will recover but this could take another two to three quarters to materialize. Accordingly, the rating agency has adjusted its EBITDA forecast for the company for pro forma 2021 (excluding Troy) downwards slightly to CHF322 million in terms of Moody's adjusted EBITDA from CHF331 million previously. In addition, Arxada also reported that it had at the end of September drawn CHF126 million under the EUR375 million RCF and Moody's believes that the RCF is also likely to be drawn at more than CHF100 million at the end of 2021. This compares to Moody's previous forecast of CHF50 million drawdown at year-end 2021. On November 03, 2021, Arxada announced that it has agreed to combine with Troy, a global leader in microbial control solutions and performance additives. Arxada stated that, as part of the deal structure, Troy's owners will invest in the combined company. While the financial details of the transaction have not yet been disclosed, Arxada recently stated that Troy's FY2021 adjusted EBITDA amounts to $54 million. However, Moody's believe that Troy's Moody's adjusted EBITDA is somewhat lower as it could include some adjustments which the rating agency wouldn't treat as exceptional. The rating agency continues to believe that the acquisition of Troy is positive for Arxada's business profile but Moody's also considers the transaction, which has been announced only four months after the closing of the leverage buyout from Lonza AG, a sign of aggressive financial policy. In Moody's view, the integration of Troy adds further complexity to the initial carve out process from Lonza AG and has the potential to delay the implementation of a number of margin improvement measures to increase the group's operating profitability. The B3 CFR continues to reflect Arxada's strong business profile, underpinned by (i) a high degree of product and endmarket diversification; (ii) a leading position in the microbial control solutions market, supported by certain barriers to entry, because of its regulatory expertise and broad intellectual property portfolio; (iii) strong reputation with customers, which benefits from the focus on quality and technical competence and results in high retention rates; and (iv) resilient historic operating profitability and cash flow generation, which is likely to be improved by the efficiency measures identified by the new owners. At the same time, the CFR reflects (i) Arxada's highly leveraged capital structure; (ii) the execution risk related to the carve-out process and the acquisition of Troy, which may result in a delayed implementation of margin improvements; (iii) the company's relatively small size in the context of the European and global chemical companies that Moody's rates, including some of Arxada's closest competitors; and (iv) the potential for shareholder-friendly financial policies and further M&A activity. ESG CONSIDERATIONS The governance considerations incorporated into the rating agency's credit analysis of Arxada are predominantly related to its private-equity ownership. Private equity sponsors tend to have high tolerance for leverage and shareholder-friendly financial policies, such as dividend recapitalisation and the pursuit of acquisitive growth. Financial disclosures are often not as timely or comprehensive for sponsor-owned firms as for publicly owned companies. Arxada intends to reduce its net leverage to 3.0x by 2025, which partially mitigates the high tolerance for financial leverage. LIQUIDITY Moody's considers that Arxada has adequate liquidity based on the reported cash level of CHF78 million at the end of September 2021 and CHF280 million of undrawn capacity under the EUR375 million RCF. In addition, Moody's liquidity assessment is supported by (i) the rating agency's expectation that Arxada will be able to generate positive FCF close to CHF100 million in the first full year after closing; (ii) Moody's projection that the company will benefit from working capital inflow over the next three years; and (iii) because Arxada has no debt maturities before 2027, with the exception of a 1% annual amortisation of the US dollar tranche of the Term Loan B. Arxada's 6.5-year EUR375 million RCF has a springing net leverage covenant that has a 40% headroom and will be tested when the RCF is at or above 40% of utilisation. In 2022-23, improving FCF should allow the company to fully repay the drawn amount. STRUCTURAL CONSIDERATIONS Moody's assume a group recovery rate of 50%, resulting in a B3-PD PDR, in line with the CFR, as is typical of capital structures consisting of a mix of secured and unsecured debt. The B2 rating on the CHF2,152 million secured debt instruments, one notch above the CFR, reflects the CHF513 million of senior unsecured debt, rated Caa2, ranking below the senior secured debt instruments in the capital structure. The senior secured debt instruments are guaranteed by a substantial number of subsidiaries of the group and secured on a first priority basis by a significant amount of assets owned by the group. The guarantees from operating entities shall represent more than 80% of group-wide EBITDA. The Caa2 rating on the senior unsecured notes, two notches below the CFR, reflects the substantial amount of secured debt in the structure as well as the senior subordinated nature of the guarantees by the same group of subsidiaries that guarantee the secured term loan on a first priority basis. RATING OUTLOOK Arxada's stable rating outlook reflects the rating agency's expectation that the company's Moody's-adjusted leverage will not reduce below 7.0x before year-end 2023 as EBITDA improvement driven by end markets growth and cost savings will likely be slower than initially expected. However, the outlook also reflects Moody's expectation that the Company will deliver strong free cash flow generation. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Arxada's (i) Moody's adjusted debt/EBITDA falls below 7.0x; (ii) retained cash flow/debt increases sustainably towards high single digits in percentage terms; (iii) Moody's adjusted EBITDA margins increase above 20%, all on a sustained basis; and (iv) liquidity position remains adequate. Conversely, the ratings could be downgraded if (i) the company Moody's-adjusted debt/EBITDA remains above 8.0x; (ii) Arxada does not generate positive Free Cash Flow over the next 12-18 months; and (iii) the company liquidity position deteriorates significantly. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Chemical Industry published in March 2019. Headquartered in Switzerland, Herens is a leading global specialty chemicals business serving a variety of end markets. Herens has a global manufacturing footprint with 18 sites across six continents and offers over 670 products and services. In 2020, it generated sales of CHF1.7 billion and Moody's adjusted EBITDA of CHF328 million. In July 2021, Bain and Cinven completed the acquisition of Herens from the Lonza Group (not rated) for an enterprise value of CHF4.2 billion. =========================== U N I T E D K I N G D O M =========================== COLLIS BIRD: Business, Assets Up for Auction Until December 17 -------------------------------------------------------------- Jo Francis at Printweek reports that the business and assets of a London bookbinding business -- including various items of specialist equipment -- will go under the hammer at auction later this month. Collis Bird & Withey was based in north London near Arsenal's Emirates stadium. The firm specialised in thesis, bespoke and general binding. According to Printweek, in a statement on its website, the CB&W team said: "Sadly we have gone into administration and will be shutting the bindery and shop for good. We appreciate all our customers over the years but in today's changing climate we were unable to carry on." The firm's business, assets and customer list are being auctioned by Marriott & Co through an online tender, Printweek discloses. Lots include the option to buy all the firm's tangible assets, its intangible assets including goodwill and customer database, and various pieces of specialist book binding equipment and materials, Printweek states. The auction closes on Dec. 17, Printweek notes. EDINBURGH WOOLLEN: EFL Mum on Proposed Takeover ----------------------------------------------- Jon Colman at The News & Star reports that the EFL has declined to comment on why a proposed Edinburgh Woollen Mill takeover at Carlisle United hit the buffers. According to The News & Star, it was revealed by club bosses and the supporters' trust last week that a proposed deal in 2019 stalled because of the requirements asked of Philip Day's firm by the League. Fans' trust CUOSC said assurances sought by the EFL "were not acceptable to EWM and they would not sign it off", The News & Star relates. Further attempts to revive a deal were ended last week when United announced a potential takeover was off, The News & Star notes. The News & Star invited the EFL to comment on the specific claim that their requirements had not been to EWM's liking in order for a takeover to go through. The League, though, replied to say that they would not be giving such details, The News & Star discloses. "The League does not comment on individual matters of clubs relating to changes of control," The News & Star quotes a spokesperson as saying. Neither EWM nor wealthy businessman Day have so far commented on the mater, The News & Star notes. The future of the Blues was cast into fresh uncertainty on Friday when the board of CUFC Holdings released a lengthy statement explaining why "succession" talks had ended, The News & Star recounts. According to The News & Star, United's owners said that, in mid-2019, a "majority of the existing shreholders" had proposed to transfer their shares, in a deal which also included a dulution of CUOSC's voting rights. The trust said they agreed to the deal subject to a full change of control at the top of the club, The News & Star relays. United's statement said this required "normal EFL approval before it could progress" and that "detailed discussions" were held with the league in an attempt to find a way forward, The News & Star notes. They then said a revised deal that would "eventually have led to a change of control at some time in the future" was tabled, but CUOSC said a deal without change of control "for the foreseeable future" was not acceptable, according to The News & Star. United borrowed a seven-figure amount from EWM since 2017, with the debt now owed to Purepay Retail Limited as a result of the EWM retail's firm's fall into administration and subsequent sale, The News & Star discloses. The club's owners say they are in discussions with Purepay over the repayment of the loan, and they are now seeking fresh investment, according to The News & Star. FORTHPLUS PENSIONS: iPensions Group Acquires Business Assets ------------------------------------------------------------ International Adviser reports that iPensions Group has acquired the business assets of Forthplus Pensions for an undisclosed sum. The deal will provide certainty to Forthplus's clients as the company is currently in administration, International Adviser notes. According to International Adviser, the acquisition brings in GBP500 million (US$661 million, EUR585 million) in assets under management to iPensions who will take on Forthplus' customers, including UK expats. Edinburgh-based Forthplus went into administration in October 2021, after it was forced to shut down its international Sipp a month earlier as it was unable to renew or secure professional indemnity cover, International Adviser recounts. The firm also had to cancel all the pension transfers it was working on at the time, International Adviser states. Manchester-headquartered iPension will retain the Scottish operations after the acquisition as well as Forthplus' administration staff, International Adviser discloses. VIRGIN ATLANTIC: Receives GBP400MM New Funding from Shareholders ---------------------------------------------------------------- The Associated Press reports that Virgin Atlantic has received GBP400 million (US$530 million) of new funding from its shareholders to help the airline ride out the coronavirus pandemic. In a statement on Dec. 13, the company said its shareholders, Richard Branson's Virgin Group and Atlanta-based Delta Air Lines, will provide the money in line with their stakes, The Associated Press relates. Virgin Group owns 51% of the airline, while Delta owns the rest. According to The Associated Press, like the whole industry, the pandemic has hit the airline hard, and it had to raise money on several occasions. Growing hopes that the rollout of vaccines and the lifting of restrictions and travel bans would aid the recovery have been dented recently by the emergence of the more transmissible omicron variant of the virus, The Associated Press states. Still, the airline said it anticipates a return to sustainable profitability from 2023, driven by a recovery in air travel demand and already delivered cost savings, The Associated Press notes. It said it has fully financed new aircraft deliveries through 2024 and is committed to sustainable air travel, The Associated Press relays. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. 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