/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/211221.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, December 21, 2021, Vol. 22, No. 248 Headlines I R E L A N D AQUEDUCT EUROPEAN 6-2021: S&P Assigns BB- (sf) Rating on E Notes CONTEGO CLO V: Fitch Raises Class F Notes to 'B+' HENLEY CLO: Fitch Affirms B- Rating on 2 Note Classes I T A L Y SIGNUM FINANCE II: Fitch Raises 2 Tranches to 'BB+' TAURUS 2018-1: Fitch Raises Class E Notes to 'BB' L U X E M B O U R G MILLICOM INT'L: Fitch Affirms 'BB+' LT IDRs, Outlook Stable R U S S I A ALFASTRAKHOVANIE: Fitch Alters Outlook on 'BB+' IFS Rating to Pos. T U R K E Y TURK TELEKOM: S&P Alters Outlook to Negative, Affirms 'BB-' ICR U N I T E D K I N G D O M BCP V MODULAR: Fitch Rates LT IDR Final 'B', Outlook Stable - - - - - ============= I R E L A N D ============= AQUEDUCT EUROPEAN 6-2021: S&P Assigns BB- (sf) Rating on E Notes ---------------------------------------------------------------- S&P Global Ratings assigned its credit ratings to Aqueduct European CLO 6-2021 DAC's class A, B-1, B-2, C, D, and E notes. At closing, the issuer will issue unrated subordinated and class Z notes. Under the transaction documents, the rated loans and notes will pay quarterly interest unless there is a frequency switch event. Following this, the loans and notes will switch to semiannual payment. The portfolio's reinvestment period will end approximately five years after closing, and the portfolio's maximum average maturity date will be nine years after closing. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which is in line with our counterparty rating framework. Portfolio Benchmarks CURRENT S&P Global Ratings weighted-average rating factor 2940.27 Default rate dispersion 437.55 Weighted-average life (years) 5.54 Obligor diversity measure 112.09 Industry diversity measure 18.54 Regional diversity measure 1.34 Transaction Key Metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 1.00 Covenanted 'AAA' weighted-average recovery (%) 34.81 Covenanted weighted-average spread (%) 3.65 Covenanted weighted-average coupon (%) 5.00 S&P said, "Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We consider that the portfolio will be well-diversified on the effective date, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations. "In our cash flow analysis, we used the EUR400 million target par amount, the actual weighted-average spread of 3.65%, the covenanted weighted-average coupon of 5.00%, the covenanted weighted-average recovery rate for the 'AAA' rating level, and the actual weighted-average recovery rate for all other rating levels. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "The transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "Following the application of our structured finance sovereign risk criteria, the transaction's exposure to country risk is limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "The transaction's legal structure and framework is bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for the class A, B-1, B-2, C, D, and E notes. Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1 and B-2 notes could withstand stresses commensurate with higher rating levels than those we have assigned. However, as the CLO will be in its reinvestment phase starting from closing, during which the transaction's credit risk profile could deteriorate, we have capped our ratings assigned to the notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E notes to five of the 10 hypothetical scenarios we looked at in our publication, "How Credit Distress Due To COVID-19 Could Affect European CLO Ratings," published on April 2, 2020." Environmental, social, and governance (ESG) factors 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: manufacturing or marketing of weapons of mass destruction, illegal drugs or narcotics, pornographic materials, payday lending, electrical utility with carbon intensity greater than 100gCO2/kWh, unregulated hazardous chemicals, ozone-depleting substances, endangered or protected wildlife, thermal coal, civilian firearms, tobacco, opioid manufacturing, non-certified palm oil, private prisons. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings List CLASS RATING AMOUNT CREDIT INTEREST RATE (MIL. EUR) ENHANCEMENT (%) A AAA (sf) 242.00 39.50 Three/six-month EURIBOR plus 0.96% B-1 AA (sf) 24.00 31.00 Three/six-month EURIBOR plus 1.75% B-2 AA (sf) 10.00 31.00 2.00% C A (sf) 42.00 20.50 Three/six-month EURIBOR plus 2.10% D BBB- (sf) 26.00 14.00 Three/six-month EURIBOR plus 3.10% E BB- (sf) 18.00 9.50 Three/six-month EURIBOR plus 6.35% Z NR 7.20 N/A N/A Subordinated NR 48.40 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. CONTEGO CLO V: Fitch Raises Class F Notes to 'B+' ------------------------------------------------- Fitch Ratings has upgraded Contego CLO V DAC's class B-1 to F notes, removed them from Under Criteria Observation (UCO), and affirmed the class A notes. DEBT RATING PRIOR ---- ------ ----- Contego CLO V DAC A XS1825533950 LT AAAsf Affirmed AAAsf B-1 XS1825534503 LT AA+sf Upgrade AAsf B-2 XS1825535146 LT AA+sf Upgrade AAsf C XS1825535815 LT A+sf Upgrade Asf D XS1825536466 LT BBB+sf Upgrade BBBsf E XS1825537191 LT BB+sf Upgrade BBsf F XS1825537274 LT B+sf Upgrade B-sf TRANSACTION SUMMARY Contego CLO V DAC is a cash flow CLO mostly comprising senior secured obligations. The transaction is actively managed by Five Arrows Managers LLP and will exit its reinvestment period in July 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 (MIRs) in this review. The transaction has one matrix, with a top-10 obligor concentration of 20% and a fixed-rate obligation limit of 7.5%. 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 MIRs of approximately one to two notches above the current ratings under the updated criteria. As a result, the class B-1 to F notes have been upgraded and the class A notes have been affirmed. This is in line with the MIRs, except for the class B notes which have been upgraded to 'AA+', one notch below their MIR, due to a small cushion at the MIR. These rating actions reflect 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 29 October 2021 trustee report, the aggregate portfolio amount when adjusted for trustee-reported recoveries on defaulted assets, was 0.31% under the original target par amount. The transaction passed all collateral-quality, coverage and portfolio-profile tests. Exposure to assets with a Fitch-derived rating of 'CCC+' and below (excluding non-rated assets) is 2.61% 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 33.54, which is below the maximum covenant of 34. Fitch calculates the WARF as 25.07 under the updated criteria. High Recovery Expectations: Senior secured obligations comprise 96.2% 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 14.77%, and no obligor represents more than 2.03% 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 three 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 rated at the highest 'AAAsf' rating, 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 Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. HENLEY CLO: Fitch Affirms B- Rating on 2 Note Classes ----------------------------------------------------- Fitch Ratings has affirmed Henley CLO I DAC and Henley CLO II DAC's notes and removed them, apart from the class A and X, from Under Criteria Observation (UCO). DEBT RATING PRIOR ---- ------ ----- Henley CLO II DAC A-R XS2339931821 LT AAAsf Affirmed AAAsf B-1-R XS2339932712 LT AAsf Affirmed AAsf B-2-R XS2339933363 LT AAsf Affirmed AAsf C-R XS2339934098 LT Asf Affirmed Asf D-R XS2339934684 LT BBB-sf Affirmed BBB-sf E-R XS2339935228 LT BB-sf Affirmed BB-sf F-R XS2339935145 LT B-sf Affirmed B-sf Henley CLO I DAC A-R XS2360085760 LT AAAsf Affirmed AAAsf B-1R XS2360086065 LT AAsf Affirmed AAsf B-2R XS2360086495 LT AAsf Affirmed AAsf C-R XS2360086578 LT Asf Affirmed Asf D-R XS2360086735 LT BBB-sf Affirmed BBB-sf E-R XS2360086909 LT BB-sf Affirmed BB-sf F-R XS2360087113 LT B-sf Affirmed B-sf X-R XS2360085687 LT AAAsf Affirmed AAAsf TRANSACTION SUMMARY The transactions are cash flow CLOs mostly comprising senior secured obligations. They are actively managed by Napier Park Global Capital and are within their reinvestment periods. KEY RATING DRIVERS CLO Criteria Update and Cash Flow Modelling (Neutral): The rating actions mainly reflect the impact of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria, a shorter risk horizon incorporated into Fitch's stressed portfolio analysis and the transactions' stable performance. The weighted average life (WAL) used for each transaction's stress portfolio analysis was up to 12 months less than the current WAL covenant of each transaction. This reduction to the risk horizon accounts for the strict reinvestment conditions in both transactions after their reinvestment periods. These include, among others, passing the coverage tests and the Fitch 'CCC' bucket limitation test as well as WAL covenant that progressively steps down over time, both before and after the end of the reinvestment period. This ultimately reduces the maximum possible risk horizon of the portfolio when combined with loan pre-payment expectations. Matrix Update (Neutral): The manager is amending the documentation of each CLO to reflect the latest Fitch-weighted average rating factor (WARF) definition and the updated collateral quality matrix. The weighted average recovery rate (WARR) values in the collateral quality tests for both CLOs are being lowered to be in line with the break-even WARR, at which the current ratings would still pass. Fitch has reflected these updated matrices in its stressed portfolio analysis that produced the model-implied ratings (MIR). The current ratings for all notes are in line with these MIRs, leading to their affirmation. The class F notes in both transactions have at least a limited margin of safety against default risk, as they are passing at least 'Bsf' under the current portfolio analysis. Diversified Portfolios (Positive): Both portfolios are well-diversified across obligors, countries and industries. The top 10 obligor concentration is no more than 17% in both CLOs, and no obligor represents more than 2% of the portfolio balance in either CLO. No transaction reports an exposure to the largest Fitch industry and the three largest Fitch industries above their respective limit of 17.5% and 40%. Stable Asset Performance (Neutral): As of the latest trustee report available, the transactions were passing all collateral quality, portfolio profile, and coverage tests. Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' and below is reported by the trustee at 2.5% and 2.7% in Henley CLO I and II, respectively, compared with the 7.5% limit. There is no exposure to defaulted assets in either portfolio. 'B'/'B-' Portfolio (Neutral): Fitch assesses the average credit quality of the obligors to be at the 'B'/'B-' rating level. The Fitch calculated WARF is 25.8 and 26.8 for Henley I and II, respectively, after applying the recently updated CLO Criteria. High Recovery Expectations (Neutral): At least 96.7% of the portfolios comprises senior secured obligations. Fitch views the recovery prospects for these assets as being more favourable than for second-lien, unsecured and mezzanine assets. The Fitch WARR of the current portfolio is reported by the trustee at 61.4 % and 61.2%, in Henley I and II, respectively. 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 will result in downgrades of no more than four notches, depending on the notes. -- Downgrades may occur if the build-up of credit enhancement following amortisation does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of 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 would result in an upgrade of up to five notches depending on the notes, except for the class A and X 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-initially 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 Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ========= I T A L Y ========= SIGNUM FINANCE II: Fitch Raises 2 Tranches to 'BB+' --------------------------------------------------- Fitch Ratings has upgraded Signum Finance II Plc BTPei GSI Inflation Linked CLN 2023 and 2041. The rating actions follow Fitch's recent upgrade of the Italian sovereign. DEBT RATING PRIOR ---- ------ ----- Signum Finance II plc BTPei GSI Inflation linked CLN 2041 BTPei GSI Inflation linked LT BB+sf Upgrade BBsf CLN 2041 XS0659372980 Signum Finance II Plc BTPei GSI Inflation Linked CLN 2023 BTPei GSI Inflation linked LT BB+sf Upgrade BBsf CLN 2023 XS0854395539 TRANSACTION SUMMARY The transactions are credit-linked notes whose ratings are directly linked to two risk-presenting entities (RPE), as well as the legal and financial structure of the issuer. The two risk-presenting entities are Italy (BBB/Stable/F2) and Goldman Sachs International (A+/Stable/F1/A+(dcr)) as swap provider. KEY RATING DRIVERS Italy is the weakest link RPE for both transactions Fitch has upgraded the transactions' ratings following the Italian sovereign's upgrade. When determining the tranches' ratings through Fitch's Two-Risk CLN Matrix, Fitch notches Italy's rating down once because an Italian debt restructuring will be an event of default for these transactions. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Italy is downgraded one notch to 'BBB-': 'BBsf' -- Goldman Sachs International is downgraded one notch to 'A': 'BB+sf' -- Italy and Goldman Sachs International are both downgraded one notch to 'BBB-' and 'A', respectively: 'BBsf' Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Italy is upgraded one notch to 'BBB+': 'BBB-sf' -- Goldman Sachs International is upgraded one notch to 'AA-': 'BBB-sf' -- Italy and Goldman Sachs International are both upgraded one notch to 'BBB+' and 'AA', respectively: 'BBBsf' BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has not conducted any checks on 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. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. TAURUS 2018-1: Fitch Raises Class E Notes to 'BB' ------------------------------------------------- Fitch Ratings has upgraded four tranches of Taurus 2018-1 IT and affirmed the class A notes. DEBT RATING PRIOR ---- ------ ----- Taurus 2018-1 IT A IT0005332488 LT A+sf Affirmed A+sf B IT0005332496 LT A+sf Upgrade A-sf C IT0005332504 LT A-sf Upgrade BBB-sf D IT0005332512 LT BB+sf Upgrade BB-sf E IT0005332520 LT BBsf Upgrade Bsf TRANSACTION SUMMARY The transaction was originally a securitisation of three commercial mortgage loans totalling EUR327.1 million to Italian borrowers sponsored by Blackstone funds (Camelot and Logo) and Partners Group (Bel Air). Currently only two loans (Camelot and Bel Air) are outstanding. The loans are interest-only, pay a floating rate, and are secured on Italian assets comprising 11 logistics assets (Camelot); and five shopping centres (Bel Air). The transaction benefits from an amortising liquidity facility of EUR9.8 million available to cover interest on the class A and B notes. The ratings are capped at 'A+sf', reflecting uncertainty about enforcement timing in some regions in Italy in which part of the collateral is located. KEY RATING DRIVERS Asset Performance: The performance of the Camelot portfolio is stable, with a high collection rate of 98.6% in 3Q21. Its 11 properties are approximately 89% occupied and generate EUR16.5 million gross passing rent, marginally up from EUR16.3 million on a like-for-like basis at the last review in February 2021. Fitch has not observed a negative impact from the pandemic on the logistics sector in Italy, given its importance in meeting supply chains. Fitch has even observed a few industrial markets posting higher rental levels year-on-year (e.g. Bologna), which is reflected in Fitch's estimate of market rent despite the lack of an updated valuation. Despite adverse footfall conditions, the five shopping centres backing Bel Air have maintained occupancy and income relatively well, with some deviation based on individual circumstances. The pandemic's negative impact on bricks-and-mortar retailers has constrained rental collection rates to between 70%-85%, very close to the performance observed at the last review. Fitch believes the worst has passed, but the sector is still transitioning in a period of high uncertainty. Fitch has therefore retained the market rent adjustment Fitch applied to the retail assets at the last review (approximately 17% below the market rent quoted in the latest valuation in November 2020). Loan Repayments: EUR87.6 million of principal proceeds from the Logo and Camelot loans were applied to the notes in 3Q21, driving the upgrades of the junior notes. The proceeds comprised funds from the full Logo repayment and the release amounts collected from the disposal of five Camelot properties (San Guiliano, Massalengo II, Liscate, Parma and Cherasco). The hefty release premium (which has now increased to 15%) has reduced Camelot's LTV to 56.8% from 65.8% at the last review. The definitions of pro rata and sequential principal for Camelot are in conflict. The calculation agent has applied the Camelot principal receipts corresponding to the release price (for disposed properties) 90% pro rata and 10% sequential. The definition of Camelot sequential principal includes principal receipts corresponding to the release price. Fitch's understanding of the intended paydown rules is that these principal amounts from Camelot should be applied fully sequentially. Because principal was applied 90% pro rata instead, the effect of the disposals is credit positive but less credit enhancing (for the all but the most junior notes) than Fitch would have expected, limiting the scale of upgrades for the class C and D notes. The Bel Air loan has also been repaid by EUR4.6 million from accumulated cash trap amounts since the last review, bringing its LTV down to 45.8% (against the most recent value quoted in November 2020). The loan breached its debt yield covenant during 1H21 when collateral income was most affected by rental discounts. As at 3Q21, the loan was reporting signs of substantial improvement with debt yield reverting to a healthier 14.8%. RATING SENSITIVITIES Factor that could, individually or collectively, lead to negative rating action/downgrade: -- Improvement in portfolio performance confirmed by a third party valuation. Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Increase in vacancy and rent declines within the portfolio. The change in model output that would apply with 0.8x cap rates is as follows: -- 'A+sf' / 'A+sf' / 'A+sf' / 'A-sf'/ 'BBBsf' The change in model output that would apply with 1.25x structural vacancy is as follows: -- 'A+sf' / 'A+sf' / 'BBB+sf' / 'BB+sf'/ 'B+sf' KEY PROPERTY ASSUMPTIONS (all by market value): -- 'Bsf' WA cap rate: 7.0% -- 'Bsf' WA structural vacancy: 14.3% -- 'Bsf' WA rental value decline: 7.7% -- 'BBsf' WA cap rate: 7.5% -- 'BBsf' WA structural vacancy: 15.8% -- 'BBsf' WA rental value decline: 12.6% -- 'BBBsf' WA cap rate: 8.0% -- 'BBBsf' WA structural vacancy: 17.8% -- 'BBBsf' WA rental value decline: 17.5% -- 'Asf' WA cap rate: 8.5% -- 'Asf' WA structural vacancy: 19.7% -- 'Asf' WA rental value decline: 22.4% -- 'AAsf' WA cap rate: 9.0% -- 'AAsf' WA structural vacancy: 22.0% -- 'AAsf' WA rental value decline: 27.4% 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 Taurus 2018-1 IT 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. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. 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. ESG CONSIDERATIONS Taurus 2018-1 IT has an ESG Relevance Score of '4' for Rule of Law, Institutional and Regulatory Quality due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =================== L U X E M B O U R G =================== MILLICOM INT'L: Fitch Affirms 'BB+' LT IDRs, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Millicom International Cellular, S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+' with a Stable Rating Outlook. In addition, Fitch has affirmed Millicom's senior unsecured debt at 'BB+'. Millicom's ratings reflect geographic diversification, strong brand recognition and network quality, all of which contribute to leading positions in key markets, a strong subscriber base, and solid operating cash flow generation. The rapid uptake in subscriber data usage and Millicom's ongoing expansion into the underpenetrated fixed-line services bode well for medium to long-term revenue growth. Millicom's ratings are tempered, despite the company's diversification benefits, by the issuer's presence in countries in Latin America and Africa with low sovereign ratings and low GDP per capita. Millicom's ratings are currently constrained by the operating environments and country ceilings of operations that contribute to significant dividend flow, mainly Guatemala and Paraguay. KEY RATING DRIVERS Dividends and Country Ceilings: Millicom receives a majority of upstream cash from operations in Guatemala and Paraguay. Paraguay, which has the highest Country Ceiling of the two, acts as Millicom's applicable Country Ceiling. In the future, if the company bought the stake in UNE EPM Telecomunicaciones S.A. (UNE EPM) owned by EPM, Colombia would likely become the Country Ceiling (BBB-). The legal agreement between EPM and Millicom gives EPM the ability to limit extraordinary dividends. Strong Market Positions: Millicom holds the number one or number two position in most of the markets where it operates. Fitch expects Millicom's strong market position to remain intact, supported by network quality and coverage, and growing fixed-line home operations. These qualities, exhibited across Latin America should enable the company to continue to support stable cash flow generation and growth opportunities in underpenetrated data and cable segments. Profitability and Cash Flow Generation: Millicom's strong market position supports EBITDA margins in the low-mid 30% range and FFO margins around 20%, consistent with an investment-grade operator. Fitch does not expect significant FCF generation, with capex of around 15%-20%. Increased competition in markets such as Colombia could pressure the company's profitability, but is unlikely to lead to a downgrade due to Millicom's diversification and profitability in other markets. Moderate Deleveraging Expected: Millicom's debt-funded acquisitions over the past year have added pressure on the company's financial position, with net debt to EBITDA above 3.0x. The ratings incorporate Fitch's expectation that the company will reduce net leverage below 3.0x in the short to medium term, backed by solid FCF generation. DERIVATION SUMMARY Millicom's ratings are well positioned relative to regional telecom peers in the 'BB' rating category based on a solid financial profile, operational scale and diversification, as well as strong positions in key markets. These strengths are offset by high concentration in countries with low sovereign ratings in Latin America and Africa, which tend to have more volatile economic environments. Millicom boasts a much stronger financial profile, compared with diversified integrated telecom operators in the region such as Cable & Wireless Communications Limited (BB-/Stable) and Digicel Limited (B-/Rating Watch Positive), supporting a higher, multi-notch rating differential. Millicom's leverage is moderately higher than Empresa de Telecomunicaciones de Bogota, S.A. E.S.P. (ETB; BB+/Stable) but benefits from a stronger business profile that has leading market positions in multiple markets. Millicom also has a stronger capital structure and business profile than Axtel S.A.B. de C.V. (BB/Stable), a Mexican fixed-line operator. When compared with operators at the lowest rung of investment grade, such as Empresa Nacional de Telecomunicaciones (BBB-/Stable) Telefonica del Peru (BBB-/Negative) and Colombia Telecomunicaciones, S.A. E.S.P. (BBB-/Stable), an integrated telecom operator, Millicom has stronger profitability and similar leverage profiles. Millicom is rated below these operators due to its operating environments and the sources of its dividends. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for the issuer include: -- Mid-single digit annual revenue growth in 2021, due to impact of closures and adverse FX impact; low-single-digit revenue growth from 2022-2023; -- Stable EBITDA margins in the 35% range, 50 basis point higher than in 2020; -- Average capex/sales of 15%-16% over the medium term; -- No material shareholder distributions in the short term. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Material and consistent dividends from Millicom's subsidiaries in Colombia and Panama; -- An acquisition of EPM's ownership position in UNE EPM; -- Total adjusted net debt/EBITDAR of 2.5x or below over the rating horizon; -- An upgrade of Paraguay's Country Ceiling. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Consolidated total adjusted net debt/EBITDAR at or above 3.5x; -- Holding company debt/upstream dividends received consistently above 4.5x; -- A downgrade to Paraguay's Country Ceiling. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity Profile: Millicom benefits from a good liquidity position, given the company's large cash position that fully covers short-term debt. As of Sept. 30, 2021, the consolidated group's readily available cash was USD980 million, which covers its short-term reported debt obligations of USD283 million. Fitch does not foresee any liquidity problem for both the operating companies and the holding company given the operating companies' stable cash generation and consistent cash upstreaming to the holding company. Millicom has a good track record in terms of access to capital markets when in need of external financing, further supporting its liquidity management. ISSUER PROFILE Millicom is a diversified cable and mobile services operator with operations in nine countries in Latin America and two in Africa under the Tigo brand. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========== R U S S I A =========== ALFASTRAKHOVANIE: Fitch Alters Outlook on 'BB+' IFS Rating to Pos. ------------------------------------------------------------------ Fitch Ratings has revised the Outlook on Russia-based AlfaStrakhovanie PLC's Insurer Financial Strength (IFS) Rating to Positive from Stable and affirmed the IFS Rating at 'BB+'. KEY RATING DRIVERS The revision of AlfaStrakhovanie's Outlook reflects Fitch's expectation that the insurer will continue to strengthen its capitalisation and maintain strong profitability. The rating also reflects the insurer's favourable business profile, its better-than-peers quality of investments and relatively prudent reserving. Fitch's assessment of AlfaStrakhovanie's capital is primarily driven by its 'Somewhat Weak' Fitch's Prism Factor-Based Capital Model (Prism FBM) score. Fitch believes underlying capital strength has improved notably in the two years to 2020, despite the Prism Score remaining in line with that of 2018. This improvement was supported by substantial FX gains of RUB7.8 billion in 2020, but largely offset by refinements to Fitch's classification of the company's life reserves and asset charges. Fitch expects that AlfaStrakhovanie will be able to maintain a capital score of at least 'Somewhat Weak' level in 2021, based on improved retained profit, a recovery of the non-life net premiums growth and a slowdown in the life reserves growth seen in 9M21. AlfaStrakhovanie reported a standalone regulatory solvency ratio at 1.07x at end-9M21 based on the new formula in effect from July 2021. However, the company expects to achieve a more comfortable level in 4Q21 as FX losses reduce. The insurer's substantial surplus of hard-currency-denominated assets over hard-currency-denominated liabilities at 1.34x of the shareholders' funds at a consolidated basis at end-2020 is the key source of volatility for the regulatory solvency ratio. AlfaStrakhovanie's life subsidiary has a notable cushion, with a regulatory solvency margin of 1.48x at end-9M21. AlfaStrakhovanie reported a net profit of RUB5.5 billion in 9M21 based on standalone regulatory accounts, a notable weakening from RUB15.3 billion in 9M20. This was fully driven by a RUB0.8 billion FX loss, compared with a RUB10.6 billion FX gain in 9M20. The company's pre-tax income before the FX gains or losses was RUB7.6 billion in 9M21, slightly below the reported RUB8.3 billion in 9M20. AlfaStrakhovanie's combined ratio remained strong at 94% in 9M21, in line with 93% in 9M20. Fitch assesses AlfaStrakhovanie's business profile as 'Favourable' compared with that of other Russian insurers. This is due to its strong competitive position, lower business-risk profile, and fairly diversified business mix and distribution. Fitch views the company's reserving as supportive of the rating. An in-house run-off analysis of AlfaStrakhovanie's reserves at end-9M21 indicated that the insurer had minor reserve deficiencies across a number of lines (less than 0.4% of equity each), but the overall portfolio run-off was positive due to the decrease in motor losses after the pandemic-related lockdown in 2020. Fitch views the credit and liquidity quality of AlfaStrakhovanie's investment portfolio as good, and stronger than that of domestic peers. However, due to a substantial exposure to non-investment-grade securities (mainly domestic bonds), its risky assets/equity ratio was high at 170% at end-2020. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- AlfaStrakhovanie's Prism FBM score remaining comfortably above the 'Somewhat Weak' threshold, combined with both a regulatory solvency margin above 1.2x on sustained basis and sound financial performance. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The Outlook could be revised to Stable if AlfaStrakhovanie fails to maintain a solvency margin above 1.2x, or the insurer's profitability weakens substantially. -- The rating could be downgraded if AlfaStrakhovanie's Prism FBM score weakens to below 'Somewhat Weak' on a sustained basis. 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 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. =========== T U R K E Y =========== TURK TELEKOM: S&P Alters Outlook to Negative, Affirms 'BB-' ICR --------------------------------------------------------------- S&P Global Ratings revised its outlooks on two Turkish telecom companies, Turkcell and Turk Telekom to negative from stable and affirmed its ratings on both. These rating actions follow the outlook revision on Turkey (unsolicited foreign currency B+/Negative/B; local currency BB-/Negative/B) earlier this month. Outlook Turk Telekom The negative outlook on Turk Telekom reflects that on Turkey. S&P's current assessment of Turk Telekom's stand-alone credit profile reflects its expectation of continued solid operational performance, with adjusted debt-to-EBITDA ratio below 1.5x in 2021-2022, and free operating cash flow (FOCF) to debt above 10%. Downside scenario: S&P said, "We could downgrade Turk Telekom if we revised down our transfer and convertibility (T&C) assessment on Turkey to 'B+', which could result if we downgrade the sovereign. We could also downgrade Turkcell if it fails to pass our hypothetical sovereign default stress test, which is less likely given meaningful headroom under the current test. The test assumes, among other factors, a 50% depreciation of the lira against hard currencies and a 15%-20% decline in organic EBITDA." Upside scenario: S&P could revise its outlook on Turk Telekom to stable if it took the same action on the sovereign and kept its T&C assessment at 'BB-'. Turkcell The negative outlook on Turkcell reflects that on Turkey. S&P's assessment of Turkcell's stand-alone credit profile reflects its expectation of continued solid operational performance, with adjusted debt-to-EBITDA ratio below to 1.5x and FOCF to debt above 10%. Downside scenario: S&P said, "We could downgrade Turkcell if we revised down our T&C assessment on Turkey to 'B+', which could result if we downgrade the sovereign. We could also downgrade Turkcell if it fails to pass our hypothetical sovereign default stress test, which is less likely given meaningful headroom under the current test. The stress-test assumes, among other factors, a 50% depreciation of the lira against hard currencies and a 15%-20% decline in organic EBITDA." Upside scenario: S&P could revise its outlook on Turkcell to stable if it took the same action on the sovereign and kept the T&C assessment at 'BB-'. Ratings List RATINGS AFFIRMED; OUTLOOK ACTION To From TURK TELEKOM Issuer Credit Rating BB-/Negative/B BB-/Stable/B Senior Unsecured BB- BB- TURKCELL ILETISIM HIZMETLERI A.S. Issuer Credit Rating BB-/Negative/-- BB-/Stable/-- Senior Unsecured BB- BB- =========================== U N I T E D K I N G D O M =========================== BCP V MODULAR: Fitch Rates LT IDR Final 'B', Outlook Stable ----------------------------------------------------------- Fitch Ratings has assigned BCP V Modular Services Holdings III Limited (BCP III) a final Long-Term Issuer Default Rating (IDR) of 'B' with a Stable Outlook. Fitch has also assigned final long-term ratings of 'B+'/RR3 to BCP V Modular Services Finance II PLC's (BCP Finance II) EUR750million and GBP250 million senior secured notes, a final Long-Term Rating of 'B+'/RR3 to BCP V Modular Services Holdings IV Limited's (BCP IV) EUR1,260 million term loan B and a final Long-Term Rating of 'CCC+'/RR6 to BCP V Modular Services Finance PLC's (BCP Finance) EUR435 million senior unsecured notes. The final ratings are in line with the expected ratings assigned on 28 September 2021. At the same time, Fitch has affirmed and simultaneously withdrawn Modulaire Investments 2 S.a.r.l's (Modulaire) Long-Term IDR at 'B'/Outlook Stable, senior secured notes issued by Modulaire Global Finance Plc (Modulaire Finance) at 'B+'/RR3 and senior unsecured notes issued by Modulaire Global Finance 2 Plc (Modulaire Finance 2) at 'CCC+'/RR6. Fitch has withdrawn the issue ratings associated with Modulaire because the instruments have been fully redeemed. The issuer rating for Modulaire has been withdrawn for commercial reasons. KEY RATING DRIVERS The rating actions follow the closing of BCP III's acquisition of Modulaire on 15 December 2021. Proceeds from the debt issued by BCP Finance, BCP Finance II and BCP IV have principally been used to redeem Modulaire Finance's and Modulaire Finance 2's outstanding debt in full with early redemption on 15 December 2021. LONG-TERM IDR - BCP III Fitch has assigned the Long-Term IDR at the level of BCP III because it is the main consolidating entity within the restricted group, set up as part of the acquisition of Modulaire, a leading European modular space leasing company. BCP III's ultimate shareholder is a private equity fund (Brookfield Capital Partners Fund V) managed by Brookfield Capital Partners. The acquisition was part-funded by a considerable contribution in common equity by the new shareholder. As Modulaire is the sole cash flow generating entity of the newly-established group, earnings generation and ultimately debt serviceability of the structure hinge on the operational performance of this business. The debt ratings assigned to the issuances that form part of the BCP III/Modulaire transaction all have BCP III as their anchor rating (with debt investors benefiting from guarantees from at least 80% of the security group's EBITDA). BCP III's credit profile is supported by the company's established position in the modular leasing sector (via Modulaire), benefiting from good market entrenchment in key markets, notably across Europe but also in the APAC region. While scale in absolute terms is moderate compared with other specialised equipment lessors, franchise value has been notably enhanced in recent years through a number of accretive bolt-on acquisitions, including Wexus in Norway, Advante and Carter in the UK, and most recently, Tecnifor in Italy and Procomm in the UK, among others. Following recent acquisitions, Fitch expects a period of consolidation. In 9M21, Modulaire continued to perform well with revenue (including from acquisitions) increasing by 20% yoy to EUR1,040 (up by 9% to EUR839 million if acquisitions are excluded). Underlying EBITDA increased by 32% yoy to EUR333 million (up 18% yoy to EUR265 million excluding acquisitions) supported by improving utilisation rates (87% in 3Q21 compared to 84% in 3Q20). Pre-transaction Modulaire's leverage ratio (end-3Q21 gross debt/9M21 annualised underlying EBITDA including acquisitions and IFRS impact) stood at around 5.2x at end-3Q21 (compared with around 5.9x at end-2020). Our business model assessment of BCP III recognises the monoline nature of its offering, while the often-cyclical demand dynamics associated with the industries the company services imply some degree of business risk. This is somewhat mitigated by the broad (and consistently) increasing scope of use for modular units, their flexible build structure and good sustainability benefits. While pricing power is typically limited in the homogenous modular market, dedicated efforts by the company to focus on value-added products and services (VAPS; such as furnishings and systems installations) may support improved pricing power. Utilisation rates have historically been sound (at around 80%) and continue to be supported by the critical nature of the modular offering (often serving as a critical infrastructure component) as well as a high disincentive for temporary withdrawal, given the associated costs and logistical relocation requirements. While the core modular units benefit from an extended economic life, asset risk for VAPS is somewhat higher (albeit well managed to date), given their more specialised nature and shorter economic life. Delinquencies have historically been well contained, driven by the critical nature of the asset and aided by adequate risk controls. BCP III benefits from good revenue visibility, supported by good contract length (on average around 21 months including out of term leasing), stable utilisation patterns and extended lead times for delivery and installation (typically three to four months). The company's EBITDA margin has historically been adequate (three-year historical average: 29%) and Fitch forecasts it to improve moderately post-acquisition (five-year forward-looking average: 33.4%), supported in particular by improved VAPS penetration and the realisation of procurement cost efficiencies. Bottom line profitability will likely remain weighed down by high (albeit somewhat reduced) interest expenses. Fitch views earnings predictability as sound, supported by good contract visibility and a high degree of capex discretion. Despite a significant projected EBITDA improvement, Fitch expects post-closing cash flow leverage (gross debt/EBITDA; excluding the impact of IFRS 16) to remain elevated at around 6.7x in 2021 (6.2x including the IFRS 16 impact). Leverage at closing under Fitch's rating case is notably higher, at around 7.5x excluding the impact of IFRS 16, but Fitch considers the company's deleveraging potential as sound. Fitch views the significant equity injection by the new shareholders positively in terms of business commitment, but note that tangible equity remains negative post-acquisition. Interest coverage has historically been weak and remains modest post-closing, albeit with an improving trend (five-year forward-looking EBITDA/interest expense ratio as per Fitch's rating case: 3.8x). Fitch notes positively that the transaction has extended the debt maturity profile (with the nearest upcoming maturity the Term Loan B and senior secured debt in 2028). Fitch projects liquidity to be sound, supported by sound operating cash flow generation and a EUR350 million multi-currency revolving credit facility (not rated by Fitch), which is committed for 6.5 years. SENIOR SECURED AND UNSECURED DEBT - BCP FINANCE, BCP FINANCE II AND BCP IV Fitch estimates recoveries for senior secured debtholders to stand at 60%, resulting in a long-term rating of 'B+'/'RR3', one notch above BCP III's Long-Term IDR. Estimated recoveries for senior unsecured debt are zero (RR6), resulting in a rating two notches below BCP III's Long-Term IDR, at 'CCC+'. LONG-TERM IDR - MODULAIRE As Modulaire is BCP III's only cash-generating asset, Modulaire's key rating drivers are largely identical with BCP III's (see 'Fitch Revises Modulaire's Outlook to Stable; Affirms IDR at 'B'' published on 19 April 2021 on www.fitchratings.com for a full list of applicable key rating drivers) with the exception of leverage, which was lower under Modulaire's pre-transaction liability structure (around 5.2x vs. around 6.2x post refinancing- both incl. IFRS 16 impact). SENIOR SECURED AND UNSECURED DEBT - MODULAIRE FINANCE AND MODULAIRE FINANCE 2 Prior to the acquisition of Modulaire by BCP, Modulaire's ABL facility had a first lien on assets under certain jurisdictions (Australia, New Zealand and the UK) and a second lien on assets in the rest of the world. Fitch assumed the assets under ABL jurisdiction were able to cover the EUR93 million outstanding ABL amount at end-2020 and therefore viewed the instrument as super senior to the senior secured notes. Recoveries for senior secured noteholders stood at an estimated 60%, resulting in a long-term rating of 'B+' with 'RR3', one notch above Modulaire's Long-Term IDR. Recoveries for senior unsecured notes were zero (RR6), resulting in a rating two notches below Modulaire's Long-Term IDR, at 'CCC+'. RATING SENSITIVITIES RATING SENSITIVITIES MODULAIRE, MODULAIRE FINANCE AND MODULAIRE FINANCE 2 Not applicable as the ratings have been withdrawn. RATING SENSITIVITIES - BCP III, BCP FINANCE, BCP FINANCE II AND BCP IV Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A sustained reduction in gross cash flow leverage (gross debt/ EBITDA excluding IFRS 16) in line with the business plan approaching 5x; and/or a demonstrated improvement in the interest cover ratio approaching 4x. -- Demonstrated company profile strength, manifested in particular by greater franchise entrenchment, larger business scale and enhanced business model diversification within the broader modular space sector. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Sustained elevated cash flow leverage (gross debt/ EBITDA excluding IFRS 16) in excess of 7x; -- Sustained weak pre-tax profitability, thereby undermining debt serviceability and limiting capital accumulation; -- Sustained weakening in franchise strength, in particular if accompanied by a sustained weakening in rental rates or a protracted weakening in asset-utilisation metrics. -- Weakening of the corporate governance framework or a dilution in risk control protocols post-acquisition, leading to a weakening of Fitch's risk appetite assessment. The ratings of the senior secured and senior unsecured debt are primarily sensitive to a change in BCP III's Long-Term IDR. Changes leading to a material reassessment of potential recovery prospects, for instance, changes in equipment valuation or the competitive environment could trigger a change in the rating. In the case of BCP III's senior secured debt, a material increase in its revolving credit facility or the introduction of other more senior debt instruments could lead to a downgrade of the debt ratings. 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 Modulaire Investments 2 S.a r.l has an ESG Relevance Score of '4' for Management Strategy due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ********* 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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *