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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                          E U R O P E

          Thursday, December 23, 2021, Vol. 22, No. 250

                           Headlines



G E O R G I A

GEORGIAN RAILWAY: Fitch Affirms 'BB-' LT IDRs, Outlook Stable


I R E L A N D

ARBOUR CLO X: Fitch Assigns B-(EXP) Rating on Class F Tranche
HENLEY CLO III: Fitch Rates Class F-R Notes Final 'B-'


U K R A I N E

FERREXPO PLC: Fitch Affirms 'BB-' LT IDR, Outlook Stable


U N I T E D   K I N G D O M

PINNACLE BIDCO: Fitch Affirms 'B-' LT IDR, Outlook Stable

                           - - - - -


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G E O R G I A
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GEORGIAN RAILWAY: Fitch Affirms 'BB-' LT IDRs, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed JSC Georgian Railway's (GR) Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-'
with Stable Outlooks.

The affirmation reflects Fitch's expectations that GR's link with
the government will remain unchanged, while its debt metrics will
commensurate with its Standalone Credit Profile (SCP) assessment at
'b+', leading to a single-notch differential of GR's IDR with
Georgia's sovereign IDR (BB/Stable).

KEY RATING DRIVERS

Status, Ownership and Control: 'Strong'

The state exercises adequate control and oversight over GR's
activities both directly and via state-owned investment fund JSC
Partnership Fund (PF), including approval of the railway company's
budgets and investments. PF acts as an arm of the state, by
approving GR's major transactions (borrowings, investment program,
etc.). GR's supervisory board is nominated and controlled by the
government, while goods and services are tendered in accordance
with public procurement law.

Support Track Record: 'Moderate'

GR receives mostly non-cash and indirect state support which lead
to a 'Moderate' assessment. Historically, support of GR's long-term
development has been via state policy incentives and asset
allocations. In addition, strategic infrastructure, such as
railroads and transmission lines, is exempt from property tax in
Georgia. GR has greater pricing power than its Fitch-rated regional
peers. GR's tariffs are fully deregulated, allowing tariffs in both
freight and passenger segments to be adjusted to market conditions.
Freight tariffs are set in US dollars, resulting in natural hedge
for a company that operates in a country with a dollarized economic
environment.

Socio-Political Implications of Default: 'Moderate'

In Fitch's view, a default of GR may lead to some service
disruptions, but not of an irreparable nature, and may not
necessarily lead to significant political and social repercussions
for Georgia's government. In this case, the company's hard assets
will likely remain operational with availability of alternative
modes of transportation. However, a default would hamper the
company's capital modernization program, as GR could continue to
rely on market borrowings to fund its future investment programs.

In light of the globalization process and due to Georgia's
location, the country's economic development is directly related to
the proper and effective functioning of the transport sector. GR
plays a critical role in enabling Georgia's transit potential and
maintaining strong economic relations between Georgia and
neighboring countries.

Financial Implications of Default: 'Strong'

Fitch considers a potential default of GR on external obligations
as potentially harmful to Georgia, as it could lead to reputational
risk for the state. Both GR and the state tap international capital
markets for debt funding, as well as loans and financial aid from
IFIs. This leads us to assume that a default of GR could negatively
influence the cost of external funds for future debt financing of
other GREs or the state itself. It could also significantly impair
the borrowing capacity of the latter due to potential reputational
damage and the small size of the domestic economy.

Standalone Credit Profile

Based on Fitch's Public Sector, Revenue-Supported Entities Rating
Criteria, GR's SCP is 'b+', which reflects a 'Weaker' assessment
for revenue defensibility, 'Midrange' assessment for operating
risk, and 'Weaker' financial profile with leverage (Fitch's net
adjusted debt to EBITDA) averaging 6x in Fitch's rating case
scenario. The SCP positioning in the high end of the 'b' category
reflect the company's positioning versus peers, particularly
stronger leverage level compared with peers.

Revenue Defensibility: 'Weaker'

The 'Weaker' revenue defensibility assessment reflects 'Weaker'
demand and 'Midrange' pricing assessments. Demand for GR's services
remains exposed to commodity market, geopolitical and
foreign-exchange risks, associated with the key trading partners in
macro-region (ie Azerbaijan, Russia, Kazakhstan and Turkmenistan).
Occasional materialization of those risks is affecting fluctuations
in freight operations, which is the prime revenue driver for GR.
GR's pricing model is supported by a favorable unregulated tariff
system, allowing tariff adjustments to market conditions in both
freight and passenger segments.

Operating Risk: 'Midrange'

The 'Midrange' operating risk assessment reflects GR's fairly
well-defined costs with predictable expected changes. GR's cost
structure is stable and dominated by staff costs averaging at 58%
of operating spending (excluding non-cash items) in 2018-2020,
followed by goods and services at 21%. Despite planned downsizing
and reduction of the headcount, staff costs will remain the major
spending item.

Most of GR's operating expenses are fixed. Variable expenses that
depend on the volume of transportation include: freight car rental,
most of the electricity, fuel expenses, some materials and expenses
for repairs and maintenance. More than 80% of expenses are
denominated in lari. Since the company has flexibility in tariff
setting, Fitch expects that supply cost increases could be
recoverable, with timing lags, through tariff adjustments.

Financial Profile: 'Weaker'

Combination of 'Weaker'/'Midrange' assessment of Revenue
defensibility/Operating risk and leverage around 6x according to
Fitch rating case resulted in 'Weaker' financial profile
assessment.

The primary metric of debt sustainability - net adjusted
debt/Fitch-calculated EBITDA - deteriorated in 2020 to 6.6x (2019:
5.9x), but it remains in line with the historical average despite
revenue stagnation due to the pandemic. Fitch expects the leverage
metric will gradually improve to 4x-4.5x during 2021-2025 according
to Fitch's base case. Fitch's rating case, which is stressed to
test the resilience of debt sustainability against a reasonable
downturn, envisages weaker net adjusted debt/EBITDA averaged to 6x.
This scenario assumes a moderate pace of operating revenue recovery
after disruptions caused by the coronavirus pandemic and higher
pressure on operating expenditure due to accelerated inflation.

Derivation Summary

Fitch classifies GR as an entity ultimately linked to Georgia under
its GRE Rating Criteria and assesses the GRE support score at 22.5,
reflecting a combination of following assessment of Key Risk
Factors: a 'Strong' assessment for status, ownership and control
and financial implications of default, and a 'Moderate' assessment
for support track record and socio-political implications of
default.

Based on this assessment Fitch applies a top-down approach under
its GRE Criteria, which combined with GR's SCP of 'b+' assessed
under Fitch's Public Sector, Revenue-Supported Entities Rating
Criteria, results in a single-notch differential of GR's IDRs with
Georgia's sovereign IDR.

Short-Term Ratings

GR's Short-Term IDRs are equalized with the sovereign Short-Term
IDR.

Debt Ratings

All senior debt instrument ratings are aligned with GR's Long-Term
IDRs.

KEY ASSUMPTIONS

Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2016-2020 figures and 2021-2025 projected
ratios. Fitch's key assumptions for the ratings case are:

-- Operating revenue growth on average 4.4% in 2021-2025;

-- Operating expenditures growth on average 5.6% in 2021-2025;

-- Capital expenditures accounted on average GEL 115 million in
    2021-2025.

Liquidity and Debt Structure

According to interim reports, GR's total debt at 1 September 2021
had reduced to GEL1,645 million (2020: GEL1,777 million). Its debt
stock is US dollar-denominated, which is mitigated by a material
part of GR's revenue also being US dollar-denominated (86% of total
revenue in 2020). Of its debt, 96% consists of USD500 million
Eurobonds due in 2028, with the remainder a USD22.5 million secured
loan that was obtained for the sole purpose of the acquisition of
passenger trains. The secured loan is collateralized by the
underlying passenger trains.

The company maintains an adequate liquidity buffer, with a cash
position of GEL248 million at end-September 2021 in line with
historical level. GR's liquidity position at end-2020 was GEL323
million cash and liquid deposits.

Issuer Profile

GR is Georgia's railway group, 100%-owned via national key assets
manager - JSC Partnership Fund, with core business in freight
transit operations.

RATING SENSITIVITIES

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

-- A downgrade of Georgia's sovereign rating.

-- Dilution of linkage with the sovereign, resulting in the
    ratings being further notched down from the sovereigns.

-- Downward reassessment of the company's SCP, resulting from
    deterioration of financial profile due to material increase in
    debt or weakening of liquidity position.

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

-- An upgrade of Georgia's sovereign rating, provided there is no
    deterioration in GR's SCP and support score under Fitch's GRE
    Criteria.

-- Upward reassessment of the GRE support score, which may result
    from stronger support from the government.

-- A stronger financial profile, resulting in the SCP being on
    par with or above the sovereigns.

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.



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I R E L A N D
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ARBOUR CLO X: Fitch Assigns B-(EXP) Rating on Class F Tranche
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Arbour CLO X DAC.

DEBT                    RATING
----                    ------
Arbour CLO X DAC

A            LT AAA(EXP)sf   Expected Rating
B1           LT AA(EXP)sf    Expected Rating
B2           LT AA(EXP)sf    Expected Rating
C            LT A(EXP)sf     Expected Rating
D            LT BBB-(EXP)sf  Expected Rating
E            LT BB-(EXP)sf   Expected Rating
F            LT B-(EXP)sf    Expected Rating
Sub Notes    LT NR(EXP)sf    Expected Rating

TRANSACTION SUMMARY

Arbour CLO X DAC is a securitization of mainly senior secured
obligations (at least 90%) with a component of senior unsecured,
mezzanine, second-lien loans and high-yield bonds. Note proceeds
will be used to fund a portfolio with a target par of EUR400
million. The portfolio will be actively managed by Oaktree Capital
Management (Europe) LLP. The collateralized loan obligation (CLO)
has a 4.5-year reinvestment period and an 8.5-year weighted average
life (WAL).

KEY RATING DRIVERS

Average Portfolio Credit Quality (Neutral): Fitch Ratings places
the average credit quality of obligors in the 'B'/'B-' category.
The Fitch weighted average rating factor (WARF) of the identified
portfolio is 24.94.

High Recovery Expectations (Positive): At least 90% of the
portfolio will comprise senior secured obligations. Fitch views the
recovery prospects of these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is
62.53%.

Diversified Asset Portfolio (Positive): The top-10 obligor limit
for the transaction is 20%. The transaction will also have various
concentration limits, including the maximum exposure to the three
largest (Fitch-defined) industries in the portfolio at 40%. These
covenants ensure that the asset portfolio will not be exposed to
excessive concentration.

Portfolio Management (Neutral): The transaction has a 4.5-year
reinvestment period and includes reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed-case portfolio with the aim of testing the robustness of
the transaction structure against its covenants and portfolio
guidelines. The transaction will include a one-year Fitch test
matrix, which the manager may adopt if the aggregate collateral
balance is above reinvestment target par after one year has
passed.

Cash Flow Modelling (Neutral): The WAL used for the transaction's
stress portfolio analysis is 12 months less than the WAL covenant
at the issue date. This reduction to the risk horizon accounts for
the strict reinvestment conditions envisaged after the reinvestment
period. These include passing both the coverage tests and the Fitch
'CCC' limit post-reinvestment as well a WAL covenant that
progressively steps down over time, both before and after the end
of the reinvestment period.

When combined with loan pre-payment expectations, this ultimately
reduces the maximum possible risk horizon of the portfolio.

RATING SENSITIVITIES

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

-- An increase of the rating default rate (RDR) at all rating
    levels by 25% of the mean RDR and a 25% decrease of the
    recovery rate at all rating levels would lead to a downgrade
    of up to five notches for the rated notes.

-- Downgrades may occur if the build-up of the notes' credit
    enhancement following amortisation does not compensate for a
    larger loss expectation than initially assumed due to
    unexpectedly high levels of defaults and portfolio
    deterioration.

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

-- A reduction of the RDR at all rating levels by 25% of the mean
    RDR and a 25% increase of the recovery rate at all rating
    levels would lead to an upgrade of up to three notches for the
    rated notes, except the Class A notes, which are already rated
    at the highest rating on Fitch's scale and cannot be upgraded.

-- Upgrades could occur after the end of the reinvestment period
    if there were to be better-than-expected portfolio credit
    quality and deal performance, leading to higher credit
    enhancement and excess spread available to cover losses in the
    remaining portfolio.

BEST/WORST CASE RATING SCENARIO

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

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.

DATA ADEQUACY

Arbour CLO X DAC

The majority of the underlying assets or risk-presenting entities
have ratings or Credit Opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.

Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action

Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.

HENLEY CLO III: Fitch Rates Class F-R Notes Final 'B-'
------------------------------------------------------
Fitch Ratings has assigned Henley CLO III DAC refinancing notes
final ratings.

     DEBT                   RATING             PRIOR
     ----                   ------             -----
Henley CLO III DAC

A XS2240855671      LT PIFsf   Paid In Full    AAAsf
A-R XS2414936281    LT AAAsf   New Rating      AAA(EXP)sf
B-1 XS2240855838    LT PIFsf   Paid In Full    AAsf
B-1-R XS2414936364  LT AAsf    New Rating      AA(EXP)sf
B-2 XS2240856059    LT PIFsf   Paid In Full    AAsf
B-2-R XS2414978101  LT AAsf    New Rating      AA(EXP)sf
C XS2240856216      LT PIFsf   Paid In Full    Asf
C-R XS2414936950    LT Asf     New Rating      A(EXP)sf
D XS2240856489      LT PIFsf   Paid In Full    BBB-sf
D-R XS2414936794    LT BBB-sf  New Rating      BBB-(EXP)sf
E XS2240856729      LT PIFsf   Paid In Full    BB-sf
E-R XS2414936877    LT BB-sf   New Rating      BB-(EXP)sf
F XS2240856992      LT PIFsf   Paid In Full    B-sf
F-R XS2414937339    LT B-sf    New Rating      B-(EXP)sf

TRANSACTION SUMMARY

Henley CLO III DAC is a securitisation of mainly senior secured
obligations (at least 90%) with a component of senior unsecured,
mezzanine, second-lien loans, first-lien, last-out loans and
high-yield bonds. The transaction originally closed in September
2020, and its secured notes are being refinanced in whole on 15
December 2021 (the first refinancing date) from proceeds of the new
secured notes. The portfolio is actively managed by Napier Park
Global Capital Ltd. The transaction has a five-year reinvestment
period and a nine-year weighted average life (WAL).

KEY RATING DRIVERS

Average Portfolio Credit Quality (Neutral): Fitch s assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch-weighted
average rating factor (WARF) of the identified portfolio is 26.68.

High Recovery Expectations (Positive): At least 90% of the
portfolio will comprise senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch-weighted
average recovery rate (WARR) of the identified portfolio is
61.12%.

Diversified Portfolio (Positive): The transaction includes three
Fitch matrices: one effective at closing corresponding to a top-10
obligor concentration limit at 20% and a fixed-rate asset limit of
15%; and a second one that can be selected by the manager at any
time from one year after closing as long as the portfolio balance
(including defaulted obligations at their Fitch collateral value)
is above target par and subject to the same limits as the previous
matrix. A third matrix can be selected by the manager at any time
from two years after closing as long as the portfolio balance
(including defaulted obligations at their Fitch collateral value)
is above target par and subject to the same limits as the previous
matrices.

The transaction also includes various concentration limits,
including a maximum exposure to the three- largest Fitch-defined
industries in the portfolio at 40%. These covenants ensure that the
asset portfolio will not be exposed to excessive concentration.

Portfolio Management (Neutral): The transaction has an
approximately five-year reinvestment period and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.

Cash Flow Modelling (Positive): The WAL used for the transaction's
stressed-case portfolio analysis is 12 months less than the WAL
covenant at the issue date. This reduction to the risk horizon
accounts for the strict reinvestment conditions envisaged by the
transaction after its reinvestment period. These include, among
others, passing the coverage tests, the Fitch 'CCC' bucket
limitation test and the Fitch WARF test as well a 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.

RATING SENSITIVITIES

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

-- A 25% increase of the mean default rate (RDR) across all
    ratings and a 25% decrease of the recovery rate (RRR) across
    all ratings would result in downgrades of up to four notches
    across the structure.

-- Downgrades may occur if the build-up of the notes' credit
    enhancement following amortisation does not compensate for a
    large loss expectation than initially assumed, due to
    unexpected high levels of defaults and portfolio
    deterioration.

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

-- A 25% reduction of the mean RDR across all ratings and a 25%
    increase in the RRR across all ratings would result in
    upgrades of no more than four notches across the structure,
    apart from the class A-R notes, which are already at the
    highest rating on Fitch's scale and cannot be upgraded.

-- After the end of the reinvestment period, upgrades may occur
    on better-than-expected portfolio credit quality and deal
    performance, leading to higher credit enhancement and excess
    spread available to cover losses in the remaining portfolio.

BEST/WORST CASE RATING SCENARIO

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

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.

DATA ADEQUACY

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.



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U K R A I N E
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FERREXPO PLC: Fitch Affirms 'BB-' LT IDR, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed Ukraine-based Ferrexpo plc's Long-Term
Issuer Default Rating (IDR) at 'BB-'. The Outlook is Stable.

The rating reflects Ferrexpo's robust business profile as a
supplier of high-grade pellets, smaller scale, good operational
performance and strong cash flow generation in 2021. The rating
also considers the group's conservative financial profile after
prepayment of its pre-export finance (PXF) facility in 1H21 and the
absence of outstanding term debt.

The company's credit quality also reflects the Ukraine operating
environment and limitations linked to company-specific corporate
governance practices observed in recent years.

KEY RATING DRIVERS

Iron Ore Market Normalising: Australia and Brazil should deliver
incremental iron ore volumes in the coming years and Fitch expects
the market to become more balanced, with a clearly smaller deficit
in 2022. Fitch forecasts GDP growth in China to slow to below 5% in
2022 but does not see any triggers for the government to ease
environmental policies or production cuts for the steel sector.
Iron-ore prices should show less volatility and trade closer to
supply-demand fundamentals. Fitch's price assumptions for 62% fines
delivered to China are USD160 per tonne (t) in 2021, USD90 in 2022
and USD85 in 2023.

Carbon Policies Favour Pellets/Scrap: Higher pellet and scrap rates
in blast furnace operations reduce the amount of met coal required,
potentially cutting carbon emissions by up to 20%. Longer-term
carbon price schemes and emission reduction targets will provide
for a sustainable and robust commercial rationale for pellet
consumption. Fitch's rating case assumes realised prices for
Ferrexpo at a USD38/t premium above 62% for 2021, USD25 for 2022
and USD23 for 2023 (free on board).

Negligible Gross Leverage Forecast: Following the full repayment of
its PXF facility in 1H21 Ferrexpo only has minimal leasing
obligations (which Fitch does not treat as debt in line with its
criteria for IFRS16 lease accounting) and may use trade finance
from time to time to manage working capital and/or counterparty
risks. Fitch expects some external funding for the electrification
and replacement of the truck fleet in the medium term. Funds from
operations (FFO) gross leverage in the rating case is forecast at
close to 0x (negative net leverage).

Robust Cash Flow Generation: The rating case indicates around
USD1.4 billion of EBITDA for 2021, linked to exceptionally strong
iron ore markets in 2021, before declining to a mid-cycle level of
at or slightly below USD500 million. The group is spending on
average USD340 million of capex annually over 2021-2024 to upgrade
production capacity to 13 million tonnes (by 2025). If the iron-ore
market remains supportive Ferrexpo may decide to increase
production capacity further, which may lead to some long-term debt
being incurred. No final investment decision has been reached.

New Dividend Policy Agreed: Ferrexpo recently announced a
base-dividend target of 30% of free cash flow (FCF) before
dividends, payable in respect of the group's financial performance
in a financial year. The board will continue to evaluate additional
shareholder returns, in the form of special dividends, at times of
strong financial and operational performance. Given that the group
is presently debt free, Fitch's rating case assumes that the group
will aim to maintain a cash buffer of around USD130 million-USD150
million and distribute all excess cash that is generated.

Rating Above Country Ceiling: Ferrexpo is rated two notches above
Ukraine's Country Ceiling of 'B'. The group may raise term debt for
its truck replacement programme or capacity expansion, but Fitch
would expect it to maintain hard-currency external debt service
cover at or above 1.5x on an 18-months rolling basis, as it has
done in the past. As and when Ferrexpo decides to raise new debt,
Fitch will assess the terms and conditions to validate the rating
notching above the Country Ceiling.

Stable Customer Base: Ferrexpo has a number of long-term contracts
with steel producers in Europe and Asia (with index-based pricing).
Those customers represent more than two thirds of sales volumes in
most years, limiting spot sales to changing counterparties. Some of
the long-term customers are served by Ferrexpo's own fleet of
vessels along the Rhine and Danube waterways.

Negative ESG Influences: In 2020 Ferrexpo's auditors reported on
use of funds to sponsor the local football club in the Poltava
region linked to an USD17 million loan to Collaton Limited,
controlled by the majority shareholder of Ferrexpo, in connection
with the construction and renovation of club facilities of FC
Vorskla Ukraine. A year earlier charitable donations to Blooming
Land had come under scrutiny.

The group has put in place more stringent oversight of
related-party transactions, including more detailed reporting
requirements for beneficiaries of sponsorship funds and donations,
and strengthened the board by appointing a number of independent
non-executive directors. Nonetheless, Fitch maintains the ESG
Relevance Scores for Group Structure and Group Governance at '4',
which, in combination with other factors, are incorporated into the
rating. Improvements to corporate governance, among other factors,
would be key to potential positive rating action.

Fitch will consider the audit opinion and disclosures in the 2021
annual report and accounts to reassess the current ESG.RS of '4'.

DERIVATION SUMMARY

Ferrexpo is one of the top five pellet exporters globally with 11.2
million tonnes in 2020. Only LKAB of Sweden had higher volumes at
19 million tonnes and Vale S.A. (BBB/Stable) at 15 million tonnes.
Ferrexpo is significantly smaller in scale than major global peer
Vale. Its main market is Europe compared with Vale's more global
customer base.

AO Holding Company METALLOINVEST (BBB-/Stable) from Russia is an
integrated steel producer that also sells pellets in the market,
but has margins comparable to that of Ferrexpo. The company is one
of the lowest-cost steel producers for long products, has bigger
scale and benefits from diversification across the mining and steel
value chain. Its FFO net leverage is forecast at around 1.5x over
the medium term.

Ferrexpo's ratings take into consideration the higher-than-average
systemic risks associated with the business and jurisdictional
environment in Ukraine and corporate-governance issues.

KEY ASSUMPTIONS

-- Average realised pellet price of USD198/tonne in 2021, falling
    to USD115/tonne in 2022 and USD108/tonne in 2023 (quoted on a
    free-on-board basis, as China is not the natural market for
    Ferrexpo);

-- Pellet production of 11.3 million tonnes in 2021, followed by
    at or above 12 million tonnes to 2024;

-- Capex of USD370 million in 2021, USD356 million in 2022 and
    dropping below USD300 million by 2024;

-- Dividends of USD622 million in 2021 on the back of strong cash
    generation (already declared and paid) falling to on average
    USD75 million per annum thereafter (based on Fitch's
    conservative price and rating case assumptions), in order for
    the group to maintain a cash balance at USD130 million-USD150
    million.

RATING SENSITIVITIES

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

-- Upgrade of Ukraine's Country Ceiling, coupled with a neutral
    assessment of corporate governance and maintaining FFO gross
    leverage below 1.0x on a sustained basis.

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

-- Treasury policies or refinancing activity leading to hard
    currency external debt-service cover falling below 1.5x on an
    18-month rolling basis;

-- FFO gross leverage above 2.0x on a sustained basis;

-- Downgrade of Ukraine's Country Ceiling;

-- More aggressive financial policies that allow for debt-funded
    shareholder distributions.

BEST/WORST CASE RATING SCENARIO

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

LIQUIDITY AND DEBT STRUCTURE

Satisfactory Liquidity: At end-June 2021, Ferrexpo had available
cash and cash equivalents of USD235 million (around 80% of cash is
generally held offshore; remainder with a domestic bank in Ukraine
to fund ongoing opex and capex). The group presently has only
minimal interest-bearing financial obligations linked to leases and
potentially trade finance from time to time.

Operations are managed on a day-to-day basis with operating cash
flow and existing cash balances. Fitch expects the group to
maintain a minimum cash buffer of USD80 million plus USD50
million-USD70 million operational cash on an ongoing basis. It has
no committed, standby banking facilities in place.

ISSUER PROFILE

Ferrexpo is one of the top five pellet exporters globally.

SUMMARY OF FINANCIAL ADJUSTMENTS

For December 2020:

-- USD9.1 million of leases were excluded from the debt quantum.
    EBITDA was reduced by USD4.4 million of right-of-use assets
    depreciation and USD0.4 million interest linked to leases.

-- Working capital only includes movement in current assets, ie
    reduction of "lean and weathered ore" of USD41.3 million in
    2020 is reflected in "other items before FFO" in Fitch's
    presentation of the cash flow statement.

ESG CONSIDERATIONS

Ferrexpo has an ESG Relevance Score of '4' for Group Structure and
Group Governance for related-party transactions, which has a
negative impact on the credit profile, and is relevant to the
rating 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.



===========================
U N I T E D   K I N G D O M
===========================

PINNACLE BIDCO: Fitch Affirms 'B-' LT IDR, Outlook Stable
---------------------------------------------------------
Fitch Ratings has affirmed Pinnacle Bidco's plc (Pure Gym)
Long-Term Issuer Default Rating (IDR) at 'B-' with a Stable
Outlook, following the announced GBP300 million capital raise.
Fitch has also affirmed the group's super senior secured instrument
rating at 'BB-' with a Recovery Rating of 'RR1' and senior secured
instrument rating at 'B-'/'RR4'.

Fitch treats the capital raise as equity in line with its criteria.
Equity-funded accelerated growth of the business is positive for
the credit profile, as it will increase its earnings and drive
deleveraging, but the increased expansion plan carries execution
risk and will only improve credit metrics from 2023.

The 'B-' IDR reflects Pure Gym's high leverage, weak fixed-charge
cover ratios, and negative free cash flows (post capex), which are
partly offset by materially improved liquidity following the
capital raise along with a cash injection from shareholders during
pandemic, an increased revolving credit facility (RCF) and the tap
issue. This is balanced by its solid market position as the
second-largest fitness and gym operator in Europe, and improved
geographic diversification after its acquisition of Fitness World.

The Stable Outlook reflects continued recovery of the business,
comfortable liquidity position, and Fitch's expectations for
leverage and fixed charge cover metrics to be firmly anchored at
levels consistent with the 'B-' rating by 2022. Further material
restrictions or gym closures are considered event risk and are not
built into Fitch's rating case.

KEY RATING DRIVERS

Capital Raise Credit-Positive: Equity-funded accelerated growth is
expected to lead to faster-than-expected deleveraging. Fitch
assumes that majority of around 185 incremental gym openings will
take place in 2023-2025, leading to a more material reduction in
gross leverage against the previous rating case from 2024 onwards.
Fitch forecasts funds from operations (FFO) gross adjusted leverage
to approach 7.0x by 2023 and trend towards 6.0x by 2025. Fitch does
not expect any reduction in debt from this capital raise.

Execution Risk on Expansion: Under Fitch's rating case, Fitch
consider that there is some execution risk associated with opening
over 300 gyms over 2022-2025 in the UK. The post-pandemic
environment, with a focus on health and wellbeing is favourable for
the opening of new gyms, but there is potential for over-expansion
if other gym operators follow suit. Weakened competition and Pure
Gym's record of opening and ramping up new sites somewhat mitigate
this risk. Fitch assumes gradual opening of new sites.

Recovery Continuing: Fitch expects like-for-like (lfl) memberships
marginally below 90% of 2019 levels by end-2021; revenue supported
by membership growth from the new gyms that opened in 2020-2021 and
higher average revenue per member (ARPM). Fitch expects overall
memberships to return to near 2019 levels by end-2021, and to
benefit from a full recovery in 2022 and newly opened maturing
sites thereafter. Fitch's rating case does not incorporate
pandemic-related restrictions over the winter, which is event
risk.

Visibility over revenue has improved as Pure Gym reported 88% lfl
and 95% total memberships of 2019 levels as of 30 September 2021.
3Q21 revenue was slightly above 2019 levels with 8% higher ARPM
more than offsetting slightly lower membership levels.

High Leverage: Fitch expects FFO adjusted gross leverage to be
below 8.0x in 2022, and trend towards 7.0x in 2023 with the
addition of new gyms and absent further pandemic disruption.
Fitch's forecast incorporates full settlement of deferred payments
(GBP30 million) across 2021 to 2023. Leverage will exceed levels
consistent with the rating in 2021, due to the pandemic's impact on
performance, although Fitch is confident that absent new government
restrictions or other considerations the group should achieve
leverage that is fully aligned with the rating from 2022.

Capital Allocation Key to Rating: Capital-allocation decisions will
determine Pure Gym's rating trajectory. This additional capital
raise will lead to around GBP200 million additional expansionary
capex between 2022-2025 under Fitch's rating case. FFO adjusted
gross leverage below 7.0x, with a reduction coming from earnings
growth, would be more consistent with a 'B' rating. Pure Gym's
appetite for expansion under its private equity ownership, has been
a key driver of its high leverage, which was exacerbated by the
pandemic, but its underlying business is cash-generative and
permits deleveraging.

Value Business Model: Fitch expects Pure Gym's value business model
to perform better in a recessionary environment than traditional
peers. This is because its monthly fees are typically 50% lower
than for traditional private operators and Pure Gym has no
membership contracts with notice periods. Fitch believes this
provides Pure Gym with a competitive advantage as consumers seek
lower-cost propositions during a recession. The business model is
strengthened by Pure Gym's variable pricing model, which allows
flexibility for margin preservation while competing with local
peers.

Return to Profitability: Fitch expects the combined group's FFO
margin to return to above 15% in 2024, having been negative in
2020-2021. Fitch expects the profitability of the Pure Gym/Fitness
World combination to be lower than Pure Gym's standalone historical
profile, because Fitness World (acquired in 2020) has a higher
share of staff costs and is less digitally driven than Pure Gym.
Fitch does not view its exit from Poland as negative as it was not
a material contributor to earnings.

Growing Value-Gym Market: The rating reflects Pure Gym's position
in the fastest-growing gym market segment. The European fitness
market grew 3% in 2019, according to the European Health and
Fitness Market Report. The growth was primarily driven by the value
segment, and to a lesser extent, the premium segment. The value
segment in the UK is expected to grow post-pandemic and Pure Gym is
well-positioned to benefit from these trends.

DERIVATION SUMMARY

Pure Gym operates on higher EBITDAR margins than the median for
Fitch-rated gym operators, including those within its Credit
Opinion food, non-food retail and leisure portfolios, due to its
scale and a value/low-cost business model. Pure Gym has been taking
market share mainly from its mid-market peers, due to the
competitive nature of its pricing structure.

Fitch expects its FFO gross lease-adjusted leverage to recover to
7.7x by end-2022 following pandemic-related disruptions, which
Fitch views as high but in line with that of similar leisure
credits in the low 'B' rating category. Historically, the group's
development programme has involved significant capex that reduces
free cash flow (FCF) available for deleveraging, constraining the
rating. However, Pure Gym's cash flow conversion and subsequent
deleveraging capability is structurally better than for high-street
retailers, now further enhanced by equity-funded capex.

Pure Gym is rated one notch below its closest Fitch-rated peer,
Deuce Midco Limited (David Lloyd Leisure, DLL; B/Stable), the
premium lifestyle club operator. Pure Gym has a more aggressive
expansion strategy, which carries higher execution risk than for
DLL, resulting in expected weaker FCF generation and higher
FFO-adjusted gross leverage. Following the accelerated expansion to
be funded by the current equity injection, Fitch expects Pure Gym's
leverage to trend to 7.0x by 2023, a year later than DLL is
expected to achieve this level under its new capital structure.

Pure Gym has stronger profitability than DLL with around 48%-50%
EBITDA margin due to a low-cost business model, versus around 40%
at DLL.

KEY ASSUMPTIONS

Fitch's key assumptions within its rating case for the issuer
include:

-- Total memberships at end-2021 around 5% below December 2019
    levels, and to fully recover at the beginning of 2022;

-- No new government-mandated pandemic-related restrictions in UK
    or other key countries where Pure Gym operates;

-- In 2021, 24 new gym openings, followed by a total of 385 new
    gyms in 2022-2025 (+185 additional gyms vs. Fitch's previous
    rating case);

-- Average members per gym post-2022 gradually declining to
    reflect the ramp-up of new gym openings and small format boxes
    with lower capacities;

-- ARPM at around GBP23 in 2021-2025;

-- EBITDAR margin recovering to around 49% by 2022, gradually
    increasing to slightly above 50% by 2025, supported by the
    maturation of new gyms, margin improvement efforts in Denmark
    and contribution from franchise sites;

-- Fitch-derived EBITDA includes a GBP35 million negative impact
    from of Fitch's lease treatment against cash lease cost (lease
    costs calculated as the sum of right-of-use asset depreciation
    and P&L interest cost; the difference has been maintained for
    the 2021-2025 forecast period);

-- Capex at around GBP57 million in 2021 and progressively
    increasing afterwards with aggregate GBP560 million spend over
    2022-2025 to fund new site openings and refurbishment projects
    (+GBP200 million vs. Fitch's previous rating case); and

-- No dividends and no acquisitions to 2025.

Key Recovery Rating Assumptions:

The recovery analysis assumes that Pure Gym would be reorganised as
a going-concern (GC) in bankruptcy rather than liquidated. Fitch
has assumed a 10% administrative claim.

The GC EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganisation EBITDA level upon which Fitch bases the
valuation of the group.

Pure Gym's GC EBITDA of GBP110 million (previously GBP106 million)
reflects profits from the Fitness World acquisition, a small
portion of the group's accelerated expansion by end-2023, and
corrective measures taken in the reorganisation following the
default.

The current Fitch-distressed enterprise value (EV)/EBITDA multiples
for other gym operators in the 'B' rating category have been around
5x-6x. Fitch recognises that Pure Gym has a leading share in the
growing value gym market, which justifies a 5.5x multiple, although
Pure Gym currently does not have any unique characteristics that
would allow for a higher multiple, such as a significant unique
brand, or undervalued real-estate assets.

The GBP145 million RCF, which ranks super-senior to the senior
secured notes, is assumed to be fully drawn upon default.

After deducting 10% for administrative claims, Fitch's principal
waterfall analysis generates a ranked recovery for the senior
secured debt, in the 'RR4' category, leading to a 'B-' rating for
senior secured bonds. The waterfall analysis output percentage
based on current metrics and assumptions is 46% (previously 43%).

RATING SENSITIVITIES

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

-- Continued recovery from pandemic with membership numbers and
    revenue rising above 2019 levels from mature sites and
    maturing new sites, while maintaining good profitability with
    the FFO margin trending towards 15%;

-- FFO fixed-charge coverage sustained above 1.5x;

-- FFO adjusted gross leverage trending towards 7.0x.

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

-- Diminished financial flexibility, reflected, for example, in
    weaker liquidity due to the continued impact of the pandemic
    or a deeper-than-expected recession, combined with FFO fixed
    charge coverage remaining below 1.2x;

-- Loss of revenue and decline in profitability due to economic
    weakness, increased competition, slower recovery in membership
    base and pressure on pricing leading to the FFO margin
    consistently below 12%;

-- Use of preferred equity for purposes not supporting EBITDA
    growth or deleveraging;

-- FFO adjusted gross leverage remaining above 8.0x beyond 2021.

BEST/WORST CASE RATING SCENARIO

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

LIQUIDITY AND DEBT STRUCTURE

Comfortable Liquidity: Following the GBP300 million equity
injection Fitch views Pure Gym's liquidity as comfortable,
supported by GBP361 million pro-forma cash on balance sheet at
end-September and full availability under the GBP145 million RCF.
Fitch expects that cash on hand including the proceeds from the
equity injection together with internally generated cash flows will
by more than sufficient to fund Pure Gym's accelerated expansion
strategy without the need to draw on the RCF. Fitch projects FCF to
turn positive only in 2025, driven by higher capex needs related to
the higher number of gym openings, and supported by EBITDA
expansion on new gym openings and the maturation of newly-opened
gyms.

The group has no refinancing needs in the near term. Its GBP145
million RCF is due in 2024 and both existing GBP430 million and
EUR490 million senior secured notes mature in 2025.

ISSUER PROFILE

Pure Gym is the leading low-cost gym operator in Europe. It has
around 500 sites across the UK, Denmark and Switzerland.

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.


                           *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.

Copyright 2021.  All rights reserved.  ISSN 1529-2754.

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