/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220121.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, January 21, 2022, Vol. 23, No. 10 Headlines F R A N C E TSG SOLUTIONS: S&P Assigns Preliminary 'B' ICR, Outlook Stable G E R M A N Y PACCOR HOLDINGS: S&P Puts 'B-' ICR on CreditWatch Positive WIRECARD AG: Bafin Not Liable to Pay Compensation to Investors I R E L A N D PEMBROKE PROPERTY 2: S&P Assigns Prelim. B Rating on F Notes I T A L Y ATLANTIA SPA: S&P Affirms 'BB' Issuer Credit Rating, Outlook Pos. BFF BANK: Moody's Gives 'B2(hyb)' Rating to Tier 1 Securities L U X E M B O U R G JBS USA: S&P Assigns 'BB+' Rating on New Sr. Unsecured Notes R O M A N I A ROMELECTRO: Files for Bankruptcy Following Financial Woes R U S S I A NK BANK: Moody's Affirms B3 Deposit Ratings, Outlook Remains Stable S W I T Z E R L A N D COVIS FINCO: S&P Gives (P)B Rating on New $850MM Secured Notes U N I T E D K I N G D O M BAKELITE UK: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable BOOMF: Bought Out of Administration by Estonian Businessman BULB ENERGY: Owed Customers GBP254MM From Prepaid Bills CLEARLYSO: Enters Administration, Owes GBP3MM+ to Creditors POLARIS PLC 2022-1: S&P Assigns (P)B Rating on X1 Notes VOYAGE BIDCO: Planned Sr. Secured Notes No Impact Moody's B2 CFR [*] UK: Corporate Insolvencies Expected to Spike in 2022 X X X X X X X X [*] BOOK REVIEW: Hospitals, Health and People - - - - - =========== F R A N C E =========== TSG SOLUTIONS: S&P Assigns Preliminary 'B' ICR, Outlook Stable -------------------------------------------------------------- S&P Global Ratings assigned its preliminary 'B' long-term issuer credit rating to France-based TSG Solutions Group SAS (TSG) and its preliminary 'B' issue rating and preliminary '3' recovery rating to the group's proposed EUR320 million term loan B (TLB). The stable outlook reflects S&P's expectation that TSG's leading market position in multi technical services for service stations in Europe, as well as the rapidly growing Electric Vehicles Charging Stations (EVCS) business, will support revenue growth of 8.0%-9.0% and S&P Global Ratings-adjusted EBITDA margins of 9.0%-9.2% in 2023, and improve adjusted leverage to below 5.5x. TSG's business risk profile is supported by the group's leading position in the niche market of multi technical services to service stations in Europe and its unique business model. The group's competitive advantage stems from scale and a unique one-stop-shop offering. TSG is the undisputable market leader, being 3.3x times larger than its closest competitor. It usually competes with family-owned companies with a narrower geographical focus and specialized in only one activity. TSG boasts a wider scope that enables it to work with multi-energy sources (fuels and biofuels, low-carbon gas, electricity, hydrogen) and service a diverse range of equipment, from fuel dispensers and car washing equipment to forecourt equipment to outdoor and indoor payment terminals. This allows TSG to charge clients with services initially not included in the perimeter of the original contract and that are identified by its technicians while working at the sites. Its scale is also a key differentiator in large tender offers, for example for the installation of thousands of EVCS across several countries for a single client, a service that very few other companies can offer. S&P said, "TSG's niche market is characterized by higher barriers to entry than what we traditionally see for multi technical services. Seventy percent of TSG's services are provided to service stations, a potentially dangerous environment given the presence of explosive substances, such as fuel and gas. Operators at such sites therefore need to be accredited from national state regulators, a costly and complex process that markedly limits competition. As such, TSG must comply with approximately 400 regulations. Moreover, in each European country, there are typically only four to five operators that benefit from the required accreditations. Given the lower competition, the market is more concentrated than the traditional multi technical services arena and provides TSG with a higher pricing power, which is reflected in margins above other peers we rate in the same sector. As a result, in fiscal 2021, TSG's EBITDA margin, as adjusted by S&P Global Ratings, reached 8.9% compared with 6.3% for Spie SA and 7.2% for Assemblin Financing AB." TSG provides essential services, also required by regulation, resulting in strong resilience of the revenue base over the years. Seventy-five percent of TSG's sales relate to existing facilities, which need to be maintained in operating conditions by its operator, driving demand for TSG's services. Additionally, governments consider service stations among the essential services given their pivotal role supplying logistics trucks with fuel so that they can continue to accommodate society's needs during the pandemic. This means that COVID-19-related impacts on the group have been limited. At its lowest point, TSG's revenue fell about 5% from prepandemic levels before quickly recovering. The group's projects business took the biggest hit since clients' decisions to scale down capex caused delays in the installation of cisterns in newly built stations, for example. S&P also notes that clients need to comply with numerous safety regulations and therefore face the obligation to have companies such as TSG check their facilities. TSG displays a highly cash generative model, further supported by a flexible cost base. The group has low capex requirements of around 2%-3% of sales, which mainly consists of the technicians' and engineers' service vans. Working capital requirements have historically been negative since TSG is usually paid in advance for the maintenance services. The group also benefits from favorable payment terms with its suppliers. All in all, it drives comfortable free operating cash flow (FOCF) of more than EUR20 million each year. The cost base is largely flexible as 60%-75% of the cost base is considered variable. About one-third of the cost base is materials and two-thirds are labor costs, which also captures subcontracting, providing additional flexibility in case of a downturn. S&P said, "We see the green transition to low and carbon free energies for vehicles as a positive for TSG. Despite the increasingly high proportion of electric and LNG propelled vehicles in Europe, we expect the decline of demand related to TSG's services provided to traditional energies (mainly gasoline and diesel) to be very slow over coming years as there remains a fleet of about 300 million automobiles with a thermic or hybrid engines in Europe. Moreover, TSG is not directly exposed to the traffic at service stations or volumes of fuels sold but rather to the number of service stations opened. Because there has already been a significant reduction in service stations in recent years in Europe, with main owners rationalizing their network, we expect numbers will stay stable over coming years. Moreover, with the higher number of electric and gas propelled vehicles on the road, the need for charging infrastructure is urgent, since the autonomy of EV vehicles is likely to remain lower than that of thermic engines cars. This need will drive very strong demand for TSG's installation of EVCS services in coming years. We expect this market to boom at about a 28% annual growth rate until 2030. "Our assessment of TSG's business risk profile is constrained by its niche player positioning.With revenue of EUR662 million and S&P Global Ratings-adjusted EBITDA of EUR59 million in fiscal 2021, TSG is among the smallest issuers we rate in business services. It generates 96% of its revenue in Europe, although there is some geographical diversification across Europe, with France and Germany, plus Benelux, contributing 26% and 24% of revenue, respectively. Additionally, 38% of revenue stem from the top 10 clients, even though this is mitigated by TSG's several independent contracts with its largest clients. In terms of end-market exposure, we note that about 70% of revenue relate to service stations. This industry is undergoing major changes due to the green transition and increasingly stringent European regulation, and TSG could suffer if any potential adverse regulation was to negatively impact demand for its services related to traditional energies while struggling to increase its market share in the highly competitive and fragmented EVCS installation market. We also note the latter is a relatively recent market and that competition for talent is high, which could result in inflationary wage pressure in the near term. "Our financial risk profile assessment incorporates high leverage at the end of fiscal 2022.We expect adjusted debt of approximately EUR385 million. In addition to EUR320 million of the proposed TLB issuance, we adjust for operating leases liabilities (EUR38 million), pension obligations (EUR17 million), factoring liabilities (EUR6 million) and earnouts (EUR2.5 million). We do not net EUR71 million of cash available at the close of the transaction from our debt calculations given the financial sponsor ownership. As a result, we forecast adjusted debt to EBITDA at about 5.8x-6.3x by end-2021, decreasing to below 5.5x by the end of fiscal 2023 driven by the EBITDA increase. Also supporting the preliminary rating is the funds from operations (FFO) cash interest coverage which remains resilient and strong, in our view, exceeding 3.0x in fiscal 2022 and 4.0x in fiscal 2023. Given the low capital intensity of the business with capex around 2%-3% of sales and tight working capital management with low single-digit outflows, we forecast FOCF will comfortably remain positive in fiscals 2022 and 2023, at EUR23 million-EUR28 million, which further supports the group's credit quality. "The preliminary ratings are constrained by TSG's financial-sponsor ownership. We assess HLD as a financial sponsor, meaning that it typically tolerates high leverage and implements aggressive shareholder returns policies, even though we note management owns a significant 44.14% of economic and voting rights. We nevertheless consider as positive that the sponsor does not intend to take any dividends in the short term and will likely remain invested in the business for a longer period than the typical five-year lifecycle for private equity. We also understand from our conversations with the financial sponsor that any major merger or acquisition is unlikely in the coming years. If a deal were to occur, funding would likely come from equity contributions and internally generated cash flow, which we would view as credit positive. "The final ratings will depend on the successful completion of the proposed transaction and receipt and satisfactory review of all final transaction documentation. Accordingly, the preliminary rating should not be construed as evidence of final ratings. If we do not receive final documentation within a reasonable time frame, or if final documentation departs from the material reviewed, we reserve the right to withdraw or revise the ratings. Potential changes include, but are not limited to, use of loan proceeds, maturity, size, and conditions of the loans, financial and other covenants, security, and ranking. "The stable outlook reflects our view that TSG's revenue will increase 8%-9% in 2023 driven by a favorable macroeconomic environment, positive industry fundamentals with a high project activity following COVID-19-related delays. Furthermore, S&P Global Ratings-adjusted EBITDA margins will expand slightly past 9%, driven by a better absorption of fixed costs and efficiency gains. We expect this solid operational performance will underpin an improvement in adjusted debt to EBITDA to below 5.5x in 2023, while sustaining FOCF comfortably above EUR25 million and FFO cash interest coverage above 4x. "We could take a positive rating action if TSG's credit metrics improved beyond our expectations, with adjusted leverage decreasing to below 5x, along with sustainably positive FOCF. This could result from a faster-than-expected transition to electricity and gas as a fuel for vehicles yielding higher demand for TSG's services. We would also need a commitment from the financial sponsor to maintain leverage below this level. "We could take a negative rating action if the group faces a significant revenue and EBITDA contraction due to unexpected adverse operating developments. In this scenario, credit metric deterioration would include FOCF turning negative, with no prospects for returning into positive territory. This could, for example, stem from an accelerated decline of fossil fuel consumption in Europe coupled with service stations closure, which would not be fully compensated by a slower-than-expected ramp-up of carbon free fuels such as gas or electricity. We could also lower the rating if FFO cash interest fell below 2.0x on a sustained basis." Finally, a negative rating action could result from debt-financed acquisitions or higher-than-expected cash returns to shareholders. ============= G E R M A N Y ============= PACCOR HOLDINGS: S&P Puts 'B-' ICR on CreditWatch Positive ---------------------------------------------------------- S&P Global Ratings placed its 'B-' long-term issuer credit rating on PACCOR Holdings GmbH (PACCOR), Germany-based rigid packaging producer, on CreditWatch with positive implications. S&P also puts on CreditWatch positive its 'B-' issue rating on PACCOR's senior secured facility and 'CCC' issue rating on the group's second-lien facility. PACCOR Holdings announced that private-equity owner Lindsay Goldberg had agreed to sell the company to Faerch Group, which is owned by A.P Moller Holding. PACCOR's credit metrics are likely to strengthen once the group is acquired by Faerch Group. Faerch is owned by A.P. Moller Holding, a privately held investment company based in Denmark. S&P said, "Although the details of the potential transaction have not been disclosed, we believe that Faerch, through A.P. Moller, may pursue a less aggressive financial strategy than private-equity firm Lindsay Goldberg. This could have a positive impact on PACCOR's credit metrics. Furthermore, we believe the incoming owners have a stronger credit quality than the current owner. We anticipate that Lindsay Goldberg will not sell PACCOR's U.K. business. The transaction is subject to customary closing conditions and regulatory approvals, and we believe the deal will close in second-quarter 2022." CreditWatch S&P said, "In resolving the CreditWatch, we will evaluate the transaction's benefits for PACCOR's credit profile and financial policy. We expect to resolve the CreditWatch upon completion of the transaction. "We could raise our long-term issuer credit rating on PACCOR if we believe there to be a material improvement in the company's credit profile after its acquisition by Faerch." WIRECARD AG: Bafin Not Liable to Pay Compensation to Investors -------------------------------------------------------------- Karin Matussek at Bloomberg News reports that investors who lost money from investing in Wirecard AG shares can't make Germany's financial regulator Bafin compensate them, a Frankfurt court ruled. According to Bloomberg, the tribunal on Jan. 19 threw out four suits by shareholders who claimed they lost between EUR3,000 (US$3,404) and EUR60,000 after the former payment company went bust in Germany's biggest accounting scandal. The court said in a statement Bafin isn't liable to individuals even if the regulator made blunders, so they cannot sue, Bloomberg relates. This latest rebuff is the second Wirecard shareholder case against Bafin to be rejected by the Frankfurt tribunal after an initial decision went against an investor in November, Bloomberg notes. There are roughly 60 more cases pending, Bloomberg states. Wirecard filed for bankruptcy in 2020 after acknowledging that EUR1.9 billion it had listed as assets probably didn't exist, Bloomberg recounts. ============= I R E L A N D ============= PEMBROKE PROPERTY 2: S&P Assigns Prelim. B Rating on F Notes ------------------------------------------------------------ S&P Global Ratings has assigned preliminary credit ratings to Pembroke Property Finance 2 DAC's class A, B, C, D, E, and F notes. At closing, Pembroke Property Finance 2 will also issue unrated class Z notes. In this true sale transaction, the issuer will use the issuance amount to purchase a portfolio of 151 commercial mortgage loans and to fund a committed reserve account. The portfolio comprises 151 small commercial real estate loans originated by Finance Ireland Credit Solutions DAC and Finance Ireland Property Finance DAC (FICS and FIPF; the sellers) and secured on commercial properties located throughout Ireland. This is the second Pembroke transaction following Pembroke Property Finance DAC in 2019. Around 22% of the pool currently forms part of the collateral for Pembroke Property Finance and is also included in this new securitization. S&P said, "Our preliminary ratings address Pembroke Property Finance 2's ability to meet timely interest payments and principal repayment no later than the legal final maturity on the class A notes--in June 2040--and the ultimate payment of interest and principal no later than the legal final maturity on the other rated notes, in June 2040. The issuer will pay interest according to the priority of payments. Under the transaction documents, interest payments on all classes of notes (excluding the class A notes) can be deferred even when a class of notes becomes the most senior outstanding without constituting an event of default. Any deferred interest will also accrue interest at the applicable rate due under that class of notes. "Our preliminary ratings on the notes reflect the credit support provided by the subordinate classes of notes, the issuer reserve, the underlying loans' credit, cash flow, legal characteristics, and an analysis of the transaction's counterparty and operational risks, namely the ability of the servicer, FICS, to perform its roles in this transaction." Preliminary Ratings CLASS PRELIMINARY RATING CLASS SIZE (%) A AAA (sf) 52.5 B AA (sf) 11.5 C A (sf) 11.8 D BBB (sf) 6.8 E BB+ (sf) 5.3 F B (sf) 6.5 Z NR 8.6 NR--Not rated. ========= I T A L Y ========= ATLANTIA SPA: S&P Affirms 'BB' Issuer Credit Rating, Outlook Pos. ----------------------------------------------------------------- S&P Global Ratings affirmed its 'BB' issuer and issue credit ratings on Atlantia SpA, Autostrade per l'Italia (ASPI), and their senior unsecured debt. S&P said, "The positive outlook on ASPI indicates that, once all condition precedents are met and the disposal is completed, we could raise the ratings on ASPI, depending on its individual underlying credit quality and our view of potential new shareholder involvement or support. The positive outlook on Atlantia indicates that we could take a positive rating action once the ASPI disposal is finalized, which would lift the risk of any cross defaults and debt acceleration. Ratings upside for Atlantia will also depend on our view of the company's future business strategy, financial policy, and capital structure. "The ASPI disposal is approaching completion as we expected, settling the dispute with the grantor following the collapse of the Genoa bridge on Aug. 14, 2018. Several conditions to complete the disposal have been waived or fulfilled over the past few months. Additionally, we believe the outstanding conditions do not pose any significant execution risk. In our view, the settlement agreement entered into by ASPI and the Italian Ministry of Infrastructure and Sustainable Mobility (MIMS) on Oct. 14, 2021, and the favorable opinion on the ASPI Addendum to the concession and the Economic and Financial Plan (PEF) by the Interministerial Committee for the Economic Planning and Sustainable Development (CIPESS) on Dec. 22, 2021, reflect the Italian government's support of the transaction. We anticipate that the registration of the addendum to the concession by the Italian Court of Auditors and the approval of the change of control in ASPI by the European Investment Bank (EIB) could meet the terms of the expected disposal (the long-stop date is March 31, 2022, which can be extended no later than June 30, 2022). The amount of the settlement, which will become effective after the registration by the Court of Auditors and at completion of the change of control, was confirmed at EUR3.4 billion, through a combination of tariff discounts and non-remunerated capital expenditure (capex). Despite planned tariff discounts dropping to EUR500 million from EUR1.5 billion anticipated previously, new projects agreed with local authorities in the Genoa area have made up the difference. "ASPI bondholders have already approved the change of control and release of the financial guarantees provided by Atlantia to some of ASPI's bonds (about EUR2.6 billion). This will become effective once the change of control is completed and will remove the financing ties between Atlantia and ASPI. We will continue to consolidate ASPI into Atlantia until after the separation. However, we have considered ASPI as a non-strategic subsidiary to Atlantia since June 2021, when the disposal was approved by Atlantia's shareholders. At that time, we assessed ASPI's stand-alone credit profile as 'bb'. "We could upgrade ASPI once the disposal is completed. The extent and timing of ratings upside would depend on the visibility of the future capital structure, financial policy, and governance implemented by the new shareholders. The acquisition by the consortium led by Cassa Depositi e Prestiti SpA (CDP; BBB/Positive/A-2) could lead us to regard ASPI as a government-related entity, given the close relationship between CDP and the Italian government. Nevertheless, our assessment will depend -- among other factors -- on how the members of the consortium composed by CDP Equity SpA (51%), Macquarie Infrastructure Fund (24.5%), and Blackstone Group International Partners LLP (24.5%) exercise their influence over ASPI's business plan and financial policy. Although the CDP-led consortium would acquire the entire stake owned by Atlantia (88%), existing minority shareholders (Allianz, EDF and DIF and Silk Road Fund, owning a combined 11.94% stake) could influence our assessment of ASPI's governance structure. "The successful disposal could also lead us to raise our ratings on Atlantia. All else being equal, the settlement would eliminate the risk that a termination of ASPI concession could harm Atlantia's liquidity. Nevertheless, given Atlantia's holding-company nature, the reassessment of the company's creditworthiness will depend on the quality of the assets in its portfolio as well as its investment strategy and financial policy. Access to cash flows from the subsidiaries will also be critical in our determination. At this time, the ASPI disposal increases the weight of Abertis' contribution to Atlantia's total reported EBITDA to about 70% from around 45%, despite Abertis not being fully owned by Atlantia (50% plus one share). Our current visibility of the use of proceeds from ASPI's sale (about EUR8 billion) is limited. Atlantia announced a plan to allocate EUR2 billion of total proceeds to remunerate its shareholders via a share buy-back plan and to pursue investments in transportation infrastructure, innovation and mobility. As part of this strategy, the company announced on Jan. 17, 2022 the acquisition of Yunex Traffic by Siemens for about EUR1 billion total consideration. We expect Yunex, which is a global provider of traffic management and urban mobility solutions, to provide a relatively small contribution to Atlantia's EBITDA. At present, we still consider Atlantia's business as focused on transportation infrastructure. Nevertheless, an increased exposure to non-infrastructure type of business such as mobility and innovation could influence our view of the business risk profile and the stability and predictability of its cash flow. "Even following the change of control, we cannot disregard some legacy risk from the collapse of the bridge on both ASPI and Atlantia. This is because the criminal investigations on the causes of the incident are ongoing. Although civil direct damages have been largely paid, we cannot completely rule out that additional claims or fines may arise. Hence, we may continue to factor in some legacy risk in our ratings on both entities even though we do not have indications of a significant future liability. "The ESG credit indicators on Atlantia and ASPI remain unchanged at E2-S4-G3. Social factors are a negative consideration in our credit rating analysis on Atlantia and ASPI. The collapse of Genoa bridge in August 2018 is leading Atlantia to dispose its former core subsidiary and toll road operator ASPI. Increased scrutiny over the safety of the network and higher maintenance required by the grantor directly cuts into ASPI EBITDA (EUR2.5 billion in aggregate maintenance costs over 2020-2024, representing a 60% increase from 2015-2019) and capex (about EUR14 billion by 2038). Although the settlement agreement and the completion of the acquisition by the state-owned CDP-led consortium will remove the risk of a termination of the concession, the potential fines tied to the ongoing criminal investigations mean some legacy risk persists on both entities. Governance factors are a moderately negative consideration. Actions taken following the appointment of Atlantia's new CEO in January 2020 led to increased independent oversight of the board and cancellation of dual roles with the subsidiaries. ASPI's new management, led a revision of internal risk management procedures, following a third party audit, in line with Atlantia. Nevertheless, criminal investigations continue and, while ASPI's expected disposal is positive with respect to the relationship with the grantor, it will take time to assess the effectiveness of internal governance changes. "The positive outlook on Atlantia and ASPI indicates that we could upgrade both companies once the ASPI disposal is finalized. For Atlantia, the disposal would signal the removal of liquidity risks associated with the possible termination of the ASPI concession. For ASPI, in addition to settling the dispute with the grantor, the effectiveness of the new economic and financial plan would provide visibility over the company's capex plans while improving its operating and regulatory environment." The timing and extent of the rating actions on Atlantia and ASPI may differ and will depend on their individual underlying credit merits. S&P said, "We could take a positive rating action on ASPI once the disposal is completed, while assuming FFO to debt to be solidly above 9%. The extent of the rating action would depend on ASPI new capital structure, financial policy and our potential view of shareholder involvement and or support. "We could take a positive rating action on Atlantia once the ASPI disposal is finalized, which would lift the risk of any cross defaults and debt acceleration. The extent of the rating action would depend on having visibility on the use of ASPI proceeds and, in particular, on the combination of potential asset acquisitions and ability to access subsidiaries' cash flow. "We could revise the outlook on ASPI to stable, even if the disposal is completed, if we believe that its liquidity would remain less than adequate, for example due to some facilities that may be accelerated while the rating on ASPI remains lower than 'BBB-'. We could also revise the outlook to stable if we have concerns regarding legacy risks, regulatory framework, or the future credit metrics of the company. "We could revise the outlook to stable on Atlantia, even if the disposal is completed, if uncertainty remains as to Atlantia's future investment strategy, financial policy, and credit metrics." BFF BANK: Moody's Gives 'B2(hyb)' Rating to Tier 1 Securities -------------------------------------------------------------- Moody's Investors Service assigned a B2(hyb) rating to the EUR150 million Additional Tier 1 non-viability contingent capital instruments issued by BFF Bank S.p.A. (BFF, Baa2 Stable/Ba2 Stable, ba2). The B2(hyb) rating assigned to the notes is based on (1) the standalone creditworthiness of BFF as expressed by the bank's ba2 Baseline Credit Assessment (BCA); (2) the high loss-given-failure under Moody's Advanced Loss Given Failure (LGF) analysis, resulting in one notch downward adjustment from the BCA; and (3) the higher payment risk associated with the non-cumulative coupon skip mechanism, resulting in a further two notches of downward adjustment. The LGF analysis takes into consideration the principal write-down feature, in combination with the Tier 1 notes' deeply subordinated status in liquidation. RATINGS RATIONALE According to Moody's framework for rating banks' non-viability securities, the agency typically positions Additional Tier 1 securities three notches below the bank's Adjusted BCA. One notch reflects the high loss-given-failure that these securities are likely to face in a resolution scenario, due to their deep subordination, small volume and limited protection from any residual equity. Moody's also incorporates two additional negative notches to reflect the higher risk associated with the non-cumulative coupon skip mechanism, which could materialize before the bank reaches the point of non-viability. The notes are unsecured, perpetual and subordinated to senior and subordinated unsecured obligations of BFF. The notes have a non-cumulative full-discretionary coupon-suspension mechanism. There is a principal write-down if the bank's or the group's transitional Common Equity Tier 1 capital ratio drops below 5.125%, which Moody's views as close to the point of non-viability. The principal can be written up at the issuer's discretion. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The rating of the notes is mainly driven by BFF's ba2 standalone BCA, and reflects the bank's sound asset quality, strong profitability, modest capitalisation, and ample liquidity. Any changes in the bank's BCA would likely result in changes to the B2(hyb) rating assigned to these securities. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks Methodology published in July 2021. =================== L U X E M B O U R G =================== JBS USA: S&P Assigns 'BB+' Rating on New Sr. Unsecured Notes ------------------------------------------------------------ S&P Global Ratings assigned its 'BB+' issue-level rating to JBS USA Lux S.A., JBS USA Finance Inc., and JBS USA Food Co.'s proposed senior unsecured notes due 2029 and 2052. S&P also assigned a '3' recovery rating to the proposed notes, which indicates average recovery expectation of 50%-70% in the event of default. The parent company, JBS S.A. (JBS; BB+/Positive/--), will fully and unconditionally guarantee the notes. Therefore, recovery expectations for the proposed notes are in line with all of JBS USA's other senior unsecured notes. JBS will use the proceeds for debt refinancing and to strengthen cash position, lowering the cost of debt. The use of the proposed issuance is the same as those of recent issuances. The company could use part of the cash to call the 5.75% 2028 bonds, or for general corporate purposes. Issue Ratings - Recovery Analysis Key analytical factors -- S&P's simulated default scenario assumes a default in the first half of 2026 amid a combination of high grain and cattle prices and a weak global demand, pressuring margins and raising working capital, resulting in EBITDA and cash flow deterioration that leads to a payment default. -- S&P's approach is to perform separate valuations and default scenarios for JBS and JBS USA, due to the different jurisdictions the companies are subject to. -- S&P has valued both companies using a 6x multiple applied to emergence EBITDA. The multiple is in line with that it uses for other U.S.-based protein processing issuers. -- JBS USA's senior unsecured creditors benefit from a higher recovery than JBS's senior unsecured creditors, given that they would have a claim against JBS (guarantor of the debts) as well. Simulated default assumptions -- Simulated year of default: 2026 -- Emergence EBITDA: R$2.5 billion for JBS and $1.7 billion for JBS USA -- Multiple: 6x -- Estimated gross enterprise value at emergence: R$15.2 billion for JBS and $10.5 billion for JBS USA Simplified waterfall JBS USA -- Net value available to creditors (after 5% administrative costs): $9.9 billion -- Senior secured debt: $3.6 billion (including the company's term loan and revolving credit facilities) -- Senior unsecured debt: $9.6 billion (including all of the company's senior notes) -- Recovery expectations for secured debt: 95% -- Recovery expectations for unsecured debt guaranteed by JBS: 66% JBS S.A. -- Net value available to creditors (after 5% administrative costs): R$14.4 billion -- Senior secured debt: R$48 million (FINAME and FINEP lines) -- Senior unsecured debt: R$30.9 billion (including the deficiency claims from JBS USA debt that's guaranteed by JBS) -- Recovery expectation for unsecured debt: 46% ============= R O M A N I A ============= ROMELECTRO: Files for Bankruptcy Following Financial Woes --------------------------------------------------------- Andrei Chirileasa at Romania-Insider.com reports that Romelectro, the company that designed a large part of Romania's energy system during the communist regime and carried out projects abroad, mostly in the Middle East, is asking for insolvency. According to Romania-Insider.com, the company filed for bankruptcy on Jan. 14, as the failure to complete the Iernut power plant for Romgaz reportedly deteriorated its financial position. The request was registered at the Bucharest Tribunal on Jan. 14, Romania-Insider.com discloses. The company ended 2020 with a turnover of about RON200 million (EUR41 million) and a loss of RON8 million, Romania-Insider.com relays, citing the latest available financial information. =========== R U S S I A =========== NK BANK: Moody's Affirms B3 Deposit Ratings, Outlook Remains Stable ------------------------------------------------------------------- Moody's Investors Service has affirmed the B3/Not Prime long-term and short-term local and foreign currency deposit ratings of NK Bank, the outlook on the long-term ratings remains stable. Concurrently, Moody's affirmed the bank's b3 Baseline Credit Assessment (BCA) and Adjusted BCA. Moody's also affirmed NK Bank's B2(cr)/Not Prime(cr) long-term and short-term Counterparty Risk Assessment (CR Assessment) and its B2/Not Prime long-term and short-term local and foreign currency Counterparty Risk Ratings. RATINGS RATIONALE AFFIRMATION OF BCA AND DEPOSIT RATINGS The affirmation of NK Bank's BCA and deposit ratings reflects the bank's good asset quality, as well as its solid capital and liquidity buffers, that are counterbalanced by the volatile profitability, concentrated loans and deposits, and limited franchise. As of June 30, 2021, NK Bank's problem loans were 4.9% of its total gross loans down from 5.4% as of year-end 2020, which is below the sector average of about 7%. Meanwhile the coverage of problem lending by loan loss reserves remained strong at 147% as of June 30, 2021 up from 141% at the end of 2020. The single-borrower credit concentration remains high with the twenty largest credit exposures accounting for 82% of the bank's gross loan book or 240% of the bank's Tier 1 capital as of September 30, 2021. Concurrently, net loan book accounted for only 38% of total assets as of June 30, 2021, while about 55% of assets were liquid assets, largely in the form of interbank deposits placed via the Moscow Exchange, at the Central Bank of Russia and foreign banks. As of June 30, 2021, NK Bank's ratio of tangible common equity to risk-weighted assets was 19.4%, and Moody's forecasts it to decline steadily amid moderate loan book expansion, but will not fall below 17% by the end of 2022 in the base case scenario. The bank's earning generation is supported by its sustainable net interest margin and solid fee-and-commission income. The rating agency expects that the bank's return on tangible assets will be marginally positive in the next 12-18 months. The pre-provision revenue will be sufficient to absorb credit losses which Moody's expects to hover at around 0.5%-1% of the average gross loans. NK Bank heavily relies on customer accounts (together with issued promissory notes) for its funding, but has a high dependence on individual depositors, with the twenty largest customers together accounting for 65% of the total customer funding base as of September 30, 2021. These structural weaknesses are outweighed by NK Bank's liquidity buffer which exceeded 60% of its total assets and covered more than 70% of its customer deposits (together with issued promissory notes) as of December 1, 2021. RATING OUTLOOK The stable outlook on NK Bank's long-term deposit ratings reflects Moody's view that the bank's credit profile will remain broadly unchanged over the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS NK Bank's BCA and long-term bank deposit ratings could be upgraded over the next 12-18 months if the bank's risk appetite were to reduce significantly in terms of single-name concentrations, and its profitability were to grow above Moody's expectations. NK Bank's BCA and long-term deposit ratings could be downgraded or the outlook on its long-term bank deposit ratings could be revised to negative from stable should the bank record material net losses or there be a significant deterioration in its asset-quality metrics, not compensated by the sufficient coverage of problem loans by reserves or capital. LIST OF AFFECTED RATINGS Issuer: NK Bank Affirmations: Adjusted Baseline Credit Assessment, Affirmed b3 Baseline Credit Assessment, Affirmed b3 Long-term Counterparty Risk Assessment, Affirmed B2(cr) Short-term Counterparty Risk Assessment, Affirmed NP(cr) Long-term Counterparty Risk Ratings, Affirmed B2 Short-term Counterparty Risk Ratings, Affirmed NP Long-term Bank Deposit Ratings, Affirmed B3, Outlook Remains Stable Short-term Bank Deposit Ratings, Affirmed NP Outlook Action: Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in July 2021. ===================== S W I T Z E R L A N D ===================== COVIS FINCO: S&P Gives (P)B Rating on New $850MM Secured Notes -------------------------------------------------------------- S&P Global Ratings assigned its 'B' preliminary issue rating to the proposed $850 million senior secured notes that branded pharmaceutical company Covis Pharma intends to issue through its financing vehicles, Covis Finco S.a r.l (B/Stable/--) and Covis US Finco LLC. This transaction follows the $350 million term loan B issuance launched Jan. 10, 2022, to finance the acquisition of two respiratory products from AstraZeneca and refinance the group's capital structure. S&P said, "The recovery rating on the proposed notes is '3', reflecting our expectation of meaningful recovery prospects (50%-70%; rounded estimate: 60%) in a default scenario. This is supported by our valuation of the business as a going concern and our expectation that there will be no priority ranking debt at default. Our assessment is constrained by the large amount of debt assumed outstanding at default." Covis Finco is the holding company of Covis Pharma, pharmaceutical company that focuses on branded medicines in the respiratory and the hospital and critical care areas. Covis reported revenues of $240 million in 2020. ISSUE RATINGS - RECOVERY ANALYSIS Key analytical factors -- The proposed senior secured debt to be issued by Covis Pharma, which includes the proposed $350 million term loan B and $850 million senior secured notes, have a preliminary issue rating of 'B' and preliminary recovery rating of '3'. This indicated recovery prospects in the 50%-70% range (rounded estimate: 60%) in a default scenario. -- S&P's rating is constrained by the large amount of senior secured debt assumed outstanding at default, and is supported by its valuation of the business as a going concern and its expectation that there will be no priority-ranking debt at default. -- S&P's hypothetical default scenario assumes increasing generic competition driving price and volume pressure, combined with material setbacks in the integration of a recent acquisition. -- S&P values Covis Pharma as a going concern, given its portfolio of niche established medicines and owned commercial capabilities. Simulated default assumptions -- Year of default: 2025 -- Jurisdiction: Switzerland Simplified waterfall -- Emergence EBITDA: $144 million -- EBITDA multiple: 6x --Capex is assumed to be 0.5% of revenue --Operational adjustment of 15% reflecting the relatively low leverage and capex-light business model -- Gross recovery value: $867 million -- Net recovery value for waterfall after 5% for administrative expenses: $824 million -- Estimated first lien debt claim: $1.33 billion --Recovery range: 50%-70% (rounded estimate: 60%) --Recovery rating: 3(prelim) All debt amounts include six months of accrued interest that S&P assumes will be owed at default. S&P assumes an 85% drawdown under the RCF at default. =========================== U N I T E D K I N G D O M =========================== BAKELITE UK: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings assigned its 'B' issuer credit rating to phenolic specialty resins and thermoset molding compounds producer Bakelite UK Holding Ltd. and 'BB-' rating on the secured debt issues. All ratings are based on proposed terms and conditions. The stable outlook reflects S&P's view that economic conditions, operational execution, and financial policies will allow the company to maintain appropriate credit measures for the ratings, with S&P Global Ratings-adjusted debt to EBITDA that is no greater than 6.5x on a run-rate basis. Despite low debt leverage at the outset, Bakelite's financial policy discipline still needs to be proven. Black Diamond and Investindustrial are capitalizing the business in the following manner: a $100 million asset-based revolving facility due 2027 (not rated); a $485 million senior secured term loan due 2028; and $138 million in new common equity. Though the equity contribution is considerable and results in a manageable level of debt leverage in the 3x area, S&P is uncertain as to the longevity of the owners' commitment to prudent financial policy. Typically, financial sponsors have finite holding periods and it is common for them to maximize shareholder returns via debt-increasing dividend recapitalization transactions. In this situation, the company's financial decisions are controlled by two equal partners instead of one sole owner, which adds uncertainty. Until the financial sponsors' control of the company is lowered to less than 40% consistently, or S&P becomes certain that interim dividend distributions and the exit of the Bakelite investment would not see the company's debt leverage exceed 5x, then the company's financial risk profile may continue to be designated as highly leveraged despite its relatively strong credit measures. Black Diamond and Investindustrial were also involved in another recent chemicals sector investment and recapitalization in late 2021 when Black Diamond agreed to acquire Investindustrial's stake in SCIL IV LLC, the parent company of composites and coatings technology producer Polynt Group. Leverage on that transaction is relatively benign, in the 4x area. If the sponsors repeat that precedent and demonstrate a record of conservative financial policies in the Bakelite investment, then we could reassess. Profit margins are on the low side of the average range for specialty chemicals companies. S&P said, "We expect the company's adjusted EBITDA margins to average 12%-13% during the next two years, which is low relative to other specialty chemicals producers. Bakelite's profitability may be more analogous to its key competitor Hexion's, but falls a bit short of those of other composites and coatings companies like Polynt (14%-16%) and AOC (more than 20%). The company expects to realize $29 million of synergies within the next 12-24 months, but will need additional operational improvement to enhance profitability more meaningfully. Synergies will largely consist of 1) better procurement on key raw materials such as methanol, phenol, and urea, which accounted for over 80% of GP Chemicals' raw material spending and was previously provided to it by its former parent; and 2) headcount reductions. There may be opportunity to further develop the GP Chemicals business, as it may have been a stranded asset within the Georgia-Pacific portfolio. The former parent company has divested a series of noncore assets and we expect it to concentrate on its wood panels and consumer tissue businesses. Getting the GP Chemicals part of the business on Bakelite's enterprise resource planning system could yield greater productivity." Effective raw material spending is key. Roughly 75% of Bakelite's cost of sales is allocated to raw materials. It and the other leading producers have price pass-throughs built into their contracted volumes, and have been successful so far in managing inflation. Bakelite's contracts tend to last two to three years and management believes over 85% of its volumes are protected by raw material price formulas where the company has been able to pass on raw material inflation within 30 days. In mid-2020 the company maintained its material margins despite the reduction in volumes in its industrial and transportation segments. Regional growth rates and cyclicality are weaknesses. The makeup of Bakelite's profitability changes with the transaction, as now Bakelite can expect to derive roughly 70% of its pro forma EBITDA from North America compared to having generated roughly 50% of its EBITDA from Europe as a stand-alone entity. But both regions are relatively mature and slower growing. Bakelite's enhanced exposure to North American wood resins and formaldehyde improves growth prospects somewhat and lessens the concentration in the slower-growth industrial applications segment, but the gap in growth rates between the two markets is not significant at roughly 4% for the former and 2.5% for the latter. There is some dependence on cyclical housing starts, which accounted for almost a quarter of GP Chemicals' business. The merger significantly enhances Bakelite's operational scale and geographic diversity. The acquisition of GP Chemicals and its building products resins portfolio fortifies Bakelite's market share and enhances its customer reach. Pro forma for the transaction, management estimates that the company will hold a 25% market share in building products resins, an industry-leading 28% market share in phenolic specialty resins, and a 26% market share in total formaldehyde-based resins across the U.S. and Europe. Bakelite's pro forma market share in the U.S. and Europe (27% and 25%, respectively) positions it as the No. 2 and No. 1 producer in each of those respective regions. In North America, Hexion Inc. (36%) and New Arclin U.S. Holding Corp. aka Arclin (23%) also wield significant market presence. In Europe, Prefere Resins Holding GmbH (20%) is the only other competitor that is near to Bakelite's share. These solid market positions promote rationality vis-à-vis industry pricing. The increase in the number of geographic locations helps its customer reach, as Bakelite's products contain high water content and have a short shelf life, which emphasizes the preference for short shipping distances. Customer concentration is somewhat high, with the top 10 customers accounting for almost 70% of sales. However Bakelite has long-term relationships (more than 20 years) with most of its top 10 customers and churn rates are low. S&P said, "The stable outlook on Bakelite reflects our belief that despite the increase in debt from the acquisition, the company's adjusted debt to EBITDA ratio will be healthy enough to provide ample cushion relative to the 5x-6.5x range we see as appropriate for the current ratings. Under our base-case scenario, we see the company's adjusted leverage ratio being roughly 3x this year, absent any other debt-funded transformative acquisitions or shareholder rewards. Stable economic conditions, good operational execution, procurement synergies, and rational competitive industry dynamics should offset raw material inflation. The outlook recognizes that the company may opt to engage in tuck-in acquisitions, but does not envision the financial sponsors taking actions that are deleterious to credit quality over the next year, such as a large dividend recapitalization transaction." Upside scenario Rating upside over the next 12 months is constrained by the majority private equity ownership, which S&P views as potentially aggressive. However, S&P could consider an upgrade if: -- Black Diamond's and Investindustrial's (or any financial sponsor's) control of the company falls to, and remains below, less than 40%; -- The company exhibits a record of abiding by conservative financial policies with a low risk of releveraging; -- S&P believes there is a strong explicit commitment from management and shareholders that adjusted leverage will be sustainably maintained below 5x at all times; and -- The company reduces the potential for volatility in earnings and cash flows. S&P views a negative rating action in the next 12 months, driven by a deterioration of Bakelite's operating performance, as unlikely given the material rating headroom under its current base case. However, S&P may lower its ratings over the next 12 months if: -- Business conditions in the building materials, construction, and industrial markets deteriorate greatly, reducing demand for Bakelite's resins such that EBITDA declines by more than 10%, causing adjusted debt leverage to exceed 6.5x or EBITDA interest coverage to drop to 1.5x; -- The company experiences unexpected delays or large adverse changes in input costs without being able to realize sufficient pricing gains on the sales side, which compresses margins and diminishes credit metrics; -- Unforeseen integration-related risks associated with the Georgia-Pacific chemicals transaction meaningfully depress Bakelite's profitability and/or cash flow generation causing credit measures to become inappropriate for the current rating; -- It undertakes more aggressive financial policies (e.g., additional dividend payouts or engaging in an unexpectedly large debt-financed acquisition), which sustains adjusted leverage above 6.5x with no clear prospects of recovery; or -- Any combination of the above or other factors result in the company's liquidity becoming constrained. BOOMF: Bought Out of Administration by Estonian Businessman ----------------------------------------------------------- Bridie Pearson-Jones, writing for MailOnline, reports that James Middleton has sold his ailing greeting card business for GBP300,000 just months after it ran out of cash. Kate Middleton's brother, 34, put Boomf, which sold personalised marshmallow and greeting cards, into administration in December, MailOnline recounts. But now the company has been bought by British-Estonian businessman Stepan Galaev, 35, as part of his recently established company called Otkrytka Limited, MailOnline discloses. According to MailOnline, the administrators report said: "The company had exhausted its available cash resources and its cash constraints were impacting on its ability to continue trading and no further funding was available from the company's shareholders or third parties." It's not clear why the businessman has bought into the failing company. He has not taken on the debts which means some creditors will be left out of pocket, MailOnline states. Boomf owes almost GBP800,000 to creditors including GBP146,305.88 to HMRC, but has assets of GBP561,054, meaning there is a shortfall of GBP236,310.88, MailOnline discloses. The report said 28 companies showed an interest in buying the firm but Otkrytka Limited, which was only set up in November, offered the most and also paid immediately, MailOnline relates. James and his advisors have also negotiated that they will get 2% of the company revenue for the next 12 months plus 5p from every sale from a returning customer over the same period, according to MailOnline. Administrators said that turnover was expected to be GBP1.5 million in 2022 and there would be an estimated 400,000 repeat customers, which would be worth GBP20,000, MailOnline relates. BULB ENERGY: Owed Customers GBP254MM From Prepaid Bills ------------------------------------------------------- Nathalie Thomas and Michael O'Dwyer at The Financial Times report that Bulb Energy owed GBP254 million to customers who had paid for their electricity and gas in advance when it had to be bailed out with a GBP1.7 billion UK taxpayer loan last year, according to administrators. The British energy supplier was rescued on behalf of the UK government via a "special administration" process in November after regulators considered it was too big to be dealt with via the normal industry process for failed electricity and gas companies, the FT recounts. Bulb was Britain's seventh-biggest energy supplier with 1.5m customers, the FT notes. Its demise, because of soaring wholesale gas prices and inadequate hedging, triggered the biggest UK taxpayer bailout since the rescue of Royal Bank of Scotland during the 2008-09 financial crisis, the FT states. On October 31, just weeks before it admitted to British energy regulator Ofgem that it could no longer survive the wholesale market volatility, Bulb had GBP640 million of liabilities, of which GBP254 million were "credit balances" paid in advance by customers, according to a report by special administrators at Teneo the FT discloses. Customers whose accounts were in credit will not lose out but the cost of honouring the balances could ultimately be met by taxpayers or energy bill payers under the funding deal struck with the UK government, the FT says. During the seven months to October 31, Bulb racked up an operating loss of GBP35 million, according to unaudited accounts contained in the administrators' report, although they point out this figure benefited from a one-off exceptional item "without which the operating loss for the period would have been GBP116 million", according to the FT. Bulb had GBP119 million of cash with its bank but, separately to the credit balances, it was also owed GBP193 million by customers for the supply of gas and power, including for unbilled amounts, the report details, the FT states. Bulb, the FT says, will remain in special administration until it can be rescued or sold. "This might not be possible until spring 2022," the report states, although industry experts believe that date might be optimistic given the current state of the energy retail market. Suppliers face losing a total of GBP110 million owed to them by Bulb when it went into administration, the FT discloses. That is because it is "unlikely" there will be assets left over for distribution to repay unsecured creditors, the FT relays, citing the administrators. CLEARLYSO: Enters Administration, Owes GBP3MM+ to Creditors ----------------------------------------------------------- Laura Joffre at Pioneers Post reports that an organisation that described itself as "Europe's leading impact investment bank" has been forced to close its doors. UK impact investment firm ClearlySo, which was one of the first organisations to receive funding from UK social investment wholesaler Big Society Capital (BSC), went into administration at the end of December 2021, Pioneers Post recounts. According to Pioneers Post, accounts published on the Companies House website show that ClearlySo has 29 creditors that between them are owed just over GBP3 million. An additional GBP6.87 million in equity investments brings its total liabilities to just over GBP10 million, Pioneers Post discloses. ClearlySo's activities consisted of capital raising and advisory services for enterprises and funds, Pioneers Post states. It facilitated deals between investors -- private and institutional -- and purpose-driven enterprises, Pioneers Post notes. ClearlySo founder Rod Schwarz told Pioneers Post that the markets had "changed tremendously" over the past 20 years and suggested that the role of a "niche" impact investment firm -- such as ClearlySo -- was "open to question". According to the statement of affairs as of December 10, 2021, ClearlySo will be able to repay just over GBP71,000, which will cover employees' arrears, holiday pay and pension schemes, and part of the GBP300,000 it owes UK tax authority HMRC, Pioneers Post discloses. Among the creditors is Esmee Fairbairn Foundation -- one of the UK's largest independent grant making foundations, which also makes social investments -- which confirmed to Pioneers Post that it was owed GBP35,000, Pioneers Post says. There are also a number of individual investors who are creditors, according to Pioneers Post. POLARIS PLC 2022-1: S&P Assigns (P)B Rating on X1 Notes ------------------------------------------------------- S&P Global Ratings assigned preliminary ratings to Polaris 2022-1 PLC's class A to X1-Dfrd notes. At closing, the issuer will also issue unrated class X2 and RC1 and RC2 certificates. Polaris 2022-1 is an RMBS transaction that securitizes a portfolio of owner-occupied and buy-to-let (BTL) mortgage loans that are secured over properties in the U.K. This is the fourth RMBS transaction originated by Pepper group in the U.K. that S&P has rated. The first one was Polaris 2019-1 PLC. The loans in the pool were originated in 2021 by Pepper Money Ltd., a nonbank specialist lender. The collateral comprises complex income borrowers, borrowers with immature credit profiles, and borrowers with credit impairments, and there is a high exposure to self-employed borrowers and first-time buyers. Approximately 31.6% of the pool comprises BTL loans and the remaining 68.4% are owner-occupier loans. The transaction includes a prefunded amount where the issuer can purchase additional loans until the first interest payment date, subject to the eligibility criteria outlined in the transaction documentation. The transaction benefits from a fully funded liquidity reserve fund, which will be used to provide liquidity support to the class A notes and to pay senior fees and expenses and senior swap payments. After the step-up date, the liquidity reserve will amortize in line with the class A notes' outstanding balance and the excess above the required amount will be released to the principal waterfall. Principal can be used to pay senior fees and interest on some classes of the rated notes subject to conditions. The transaction incorporates a swap to hedge the mismatch between the notes, which pay a coupon based on the compounded daily Sterling overnight index average rate (SONIA), and loans, which pay fixed-rate interest before reversion. At closing, the issuer will use the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer grants security over all of its assets in favor of the security trustee. There are no rating constraints in the transaction under S&P's counterparty, operational risk, or structured finance sovereign risk criteria. S&P considers the issuer to be bankruptcy remote. Pepper (UK) Ltd. is the servicer in this transaction. S&P said, "Our credit and cash flow analysis and related assumptions consider the transaction's ability to withstand the potential repercussions of the COVID-19 outbreak, namely higher defaults and longer recovery timing. Considering these factors, we believe that the available credit enhancement is commensurate with the preliminary ratings assigned." Preliminary Ratings CLASS PRELIMINARY RATING* CLASS SIZE (%) A AAA (sf) 85.50 B-Dfrd AA (sf) 5.50 C-Dfrd A+ (sf) 3.50 D-Dfrd A (sf) 2.50 E-Dfrd BB+ (sf) 2.00 Z-Dfrd B (sf) 1.00 X1-Dfrd B (sf) 2.50 X2 NR 1.50 RC1 residual certs NR N/A RC2 residual certs NR N/A *S&P's preliminary ratings address timely receipt of interest and ultimate repayment of principal on the class A notes, and the ultimate payment of interest and principal on all the other rated notes. NR--Not rated. N/A-Not applicable. VOYAGE BIDCO: Planned Sr. Secured Notes No Impact Moody's B2 CFR ---------------------------------------------------------------- Moody's Investors Service has said that UK behavioural care provider Voyage Bidco Limited's (Voyage or the company) B2 corporate family rating and B2-PD probability of default rating and Voyage Care BondCo PLC's existing debt ratings are unaffected by the B2 rating assignment of the planned GBP250 million backed senior secured notes issuance by Voyage Care BondCo PLC that will refinance all the company's existing debt. The outlook on the ratings is stable. Moody's will withdraw the ratings of the existing debt once the refinancing closes. The refinancing follows the acquisition of the company on January 14, 2022 by Wren House Infrastructure Management Limited, an asset manager owned by the Kuwait Investment Authority (KIA), Kuwait's sovereign wealth fund. RATINGS RATIONALE The refinancing is leverage neutral with proceeds from the planned backed senior secured notes used to repay the existing GBP215 million of backed senior secured notes rated B2 and the GBP35 million backed senior subordinated second lien notes rated Caa1. The rating agency expects adjusted gross debt / EBITDA following the refinancing to remain at the September 30, 2021 level of 6x, and for that leverage ratio to improve slowly over the next 12 to 18 months. Moody's expects the company to continue its track record of disciplined growth and stable performance that has been largely unaffected by the coronavirus pandemic. Voyage's GBP250 million planned backed senior secured notes due 2027 are rated B2, in line with the CFR and are issued by Voyage Care BondCo PLC. The planned backed senior secured notes benefit from (1) guarantees by the parent company and certain subsidiaries that must represent at least 80% of the restricted group's EBITDA and assets; and (2) security over the share capital and substantially all assets of the issuer and the guarantors, including most of Voyage's freehold and certain long leasehold properties which were valued by Christie & Co at GBP436 million in June 2021. The planned backed senior secured notes share the same collateral package but will rank behind the new GBP50 million super senior revolving credit facility (RCF) borrowed by Voyage Bidco Limited under the terms of an intercreditor agreement. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS The main social risks that Moody's considers in Voyage's credit profile are (1) tariff regulation given that the group derives nearly all its revenue from work commissioned by public payers, and (2) tight labour supply maintaining inflationary pressure on the cost base. The main governance considerations Moody's considers relate to Voyage's financial policies, notably the high leverage and some use of debt historically for acquisition purposes. RATIONALE FOR STABLE OUTLOOK The stable outlook incorporates Moody's expectation that Voyage will sustain its solid operating performance while growing EBITDA and maintaining profitability and excellent Care Quality Commission (CQC) ratings. It also assumes that the company will maintain adequate liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Voyage's rating could be upgraded if the company were to (1) increase scale and generate substantial Moody's-adjusted free cash flow (FCF) such that the ratio of FCF/Debt is in the high single digits and (2) maintain conservative financial policies that would reduce Moody's adjusted leverage below 5.5x on a sustainable basis. Negative rating pressure could develop if (1) trading performance were to deteriorate significantly or (2) Moody's-adjusted leverage increased sustainably well above 6.5x, or (3) FCF turned negative on a sustained basis. Furthermore, any major debt-funded capital spending, acquisition or shareholder return could lead to a negative rating action. LIQUIDITY Moody's expects Voyage's liquidity to remain adequate over the next 12-18 months. Pro forma for the refinancing Moody's expect unrestricted cash of around GBP20 million and full drawing capacity under the new GBP50 million super senior RCF that will replace the previous GBP45 million RCF. Moody's expects that bolt-on acquisitions will generally absorb free cash flow. The new RCF contains one springing financial covenant tested at 40% utilisation, net of cash and cash equivalents held by the company. The test level is a minimum EBITDA of GBP26 million, for which Moody's expects headroom to remain strong. The company will have no short-term debt maturities (apart from limited lease obligations) following the refinancing with the first upcoming long-term debt maturity due in 2026. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Business and Consumer Services published in November 2021. PROFILE Headquartered in Lichfield, UK, Voyage Bidco Limited is a behavioural care provider for people with complex needs, notably learning disabilities and autism, as well as physical disabilities and acquired brain injuries. Voyage cares for around 3,500 people in the UK, the large majority of which have lifelong conditions and high acuity needs and are assessed as critical or substantial by local authorities and the NHS (National Health Service). For the fiscal year ending March 31, 2021, Voyage generated revenue of GBP274.2 million and EBITDA of GBP44.8 million. [*] UK: Corporate Insolvencies Expected to Spike in 2022 -------------------------------------------------------- Business Sale reports that new figures from the Government Insolvency Service have shown that corporate insolvencies increased towards the end of 2021, a trend that is forecast to continue in 2022 with businesses being warned of a challenging year. According to Business Sale, there were 1,486 corporate insolvencies in December 2021, a 20% increase on December 2020's figure of 1,237 and 33 per cent higher than the 1,120 insolvencies recorded in December 2019, prior to the onset of the COVID-19 pandemic. December 2021 also saw 1,365 Creditors' Voluntary Liquidations (CVLs), a 37% increase on December 2020 and up 73% compared to December 2019, Business Sale discloses. Despite this, compulsory liquidations and other types of insolvencies remain lower than their pre-pandemic levels, Business Sale notes. There are numerous factors being cited for the increases in corporate insolvencies and CVLs, the most immediate issue at the end of last year arguably being the introduction of Plan B COVID-19 measures in response to the emergence of the Omicron variant, Business Sale states. This hit sales for many businesses over what would normally be their busiest period in the run up to Christmas, according to Business Sale. Other contributors to increasing CVLS and insolvencies have been the need for companies to begin paying deferred tax bills and repaying government-backed loans issued under the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS), Business Sale relays. The government's ending of temporary insolvency measures in October 2021 is also being cited as a major contributor to the rise in CVLs, with business owners opting to put their company into insolvency rather than face enforcement action from creditors, according to Business Sale. As 2021 ends, business owners will continue to face the pressures of COVID-19-related disruption, unsustainable debt and the threat of creditor action, Business Sale states. As a result of this, insolvencies and CVLs are being forecast to continue rising during 2022, Business Sale discloses. Other pressures impacting businesses at the start of the new year include supply chain issues, staff shortages and the rising costs of raw materials post-Brexit, issues that have hit sectors such as construction and haulage particularly hard, Business Sale discloses. For smaller, high growth-potential businesses, meanwhile, rising debts and increasing costs are being exacerbated by a lack of investment, threatening their prospects for growth, Business Sale states. =============== X X X X X X X X =============== [*] BOOK REVIEW: Hospitals, Health and People --------------------------------------------- Author: Albert W. Snoke, M.D. Publisher: Beard Books Softcover: 232 pages List Price: $34.95 Order your personal copy today at http://www.beardbooks.com/beardbooks/hospitals_health_and_people.html Hospitals, Health and People is an interesting and very readable account of the career of a hospital administrator and physician from the 1930's through the 1980's, the formative years of today's health care system. Although much has changed in hospital administration and health care since the book was first published in 1987, Dr. Snoke's discussion of the evolution of the modern hospital provides a unique and very valuable perspective for readers who wish to better understand the forces at work in our current health care system. The first half of Hospitals, Health and People is devoted to the functional parts of the hospital system, as observed by Dr. Snoke between the late 1930's through 1969, when he served first as assistant director of the Strong Memorial Hospital in Rochester, New York, and then as the director of the Grace-New Haven Hospital in Connecticut. In these first chapters, Dr. Snoke examines the evolution and institutionalization of a number of aspects of the hospital system, including the financial and community responsibilities of the hospital administrator, education and training in hospital administration, the role of the governing board of a hospital, the dynamics between the hospital administrator and the medical staff, and the unique role of the teaching hospital. The importance of Hospitals, Health and People for today's readers is due in large part to the author's pivotal role in creating the modern-day hospital. Dr. Snoke and others in similar positions played a large part in advocating or forcing change in our hospital system, particularly in recognizing the importance of the nursing profession and the contributions of non-physician professionals, such as psychologists, hearing and speech specialists, and social workers, to the overall care of the patient. Throughout the first chapters, there are also many observations on the factors that are contributing to today's cost of care. Malpractice is just one example. According to Dr. Snoke, "malpractice premiums were negligible in the 1950's and 1960's. In 1970, Yale-New Haven's annual malpractice premiums had mounted to about $150,000." By the time of the first publication of the book, the hospital's premiums were costing about $10 million a year. In the second half of Hospitals, Health and People, Dr. Snoke addresses the national health care system as we've come to know it, including insurance and cost containment; the role of the government in health care; health care for the elderly; home health care; and the changing role of ethics in health care. It is particularly interesting to note the role that Senator Wilbur Mills from Arkansas played in the allocation of costs of hospital-based specialty components under Part B rather than Part A of the Medicare bill. Dr. Snoke comments: "This was considered a great victory by the hospital-based specialists. I was disappointed because I knew it would cause confusion in working relationships between hospitals and specialists and among patients covered by Medicare. I was also concerned about potential cost increases. My fears were realized. Not only have health costs increased in certain areas more than anticipated, but confusion is rampant among the elderly patients and their families, as well as in hospital business offices and among physicians' secretaries." This aspect of Medicare caused such confusion that Congress amended Medicare in 1967 to provide that the professional components of radiological and pathological in-hospital services be reimbursed as if they were hospital services under Part A rather than part of the co-payment provisions of Part B. At the start of his book, Dr. Snoke refers to a small statue, Discharged Cured, which was given to him in the late 1940's by a fellow physician, Dr. Jack Masur. Dr. Snoke explains the significance the statue held for him throughout his professional career by quoting from an article by Dr. Masur: "The whole question of the responsibility of the physician, of the hospital, of the health agency, brings vividly to mind a small statue which I saw a great many years ago.it is a pathetic little figure of a man, coat collar turned up and shoulders hunched against the chill winds, clutching his belongings in a paper bag-shaking, tremulous, discouraged. He's clearly unfit for work-no employer would dare to take a chance on hiring him. You know that he will need much more help before he can face the world with shoulders back and confidence in himself. The statuette epitomizes the task of medical rehabilitation: to bridge the gap between the sick and a job." It is clear that Dr. Snoke devoted his life to exactly that purpose. Although there is much to criticize in our current healthcare system, the wellness concept that we expect and accept today as part of our medical care was almost nonexistent when Dr. Snoke began his career in the 1930's. Throughout his 50 years in hospital administration, Dr. Snoke frequently had to focus on the big picture and the bottom line. He never forgot the importance of Discharged Cured, however, and his book provides us with a great appreciation of how compassionate administrators such as Dr. Snoke have contributed to the state of patient care today. Albert Waldo Snoke was director of the Grace-New Haven Hospital in New Haven, Connecticut from 1946 until 1969. In New Haven, Dr. Snoke also taught hospital administration at Yale University and oversaw the development of the Yale-New Haven Hospital, serving as its executive director from 1965-1968. From 1969-1973, Dr. Snoke worked in Illinois as coordinator of health services in the Office of the Governor and later as acting executive director of the Illinois Comprehensive State Health Planning Agency. Dr. Snoke died in April 1988. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- 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 2022. 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. 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