/raid1/www/Hosts/bankrupt/TCREUR_Public/220208.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, February 8, 2022, Vol. 23, No. 22
Headlines
B O S N I A A N D H E R Z E G O V I N A
MOFAS: Istocno Sarajevo City Acquires 51% Stake for BAM2MM
D E N M A R K
DFDS A/S: Egan-Jones Lowers Senior Unsecured Ratings to B+
F R A N C E
AIR FRANCE-KLM: Under Pressure to Repay Pandemic State Aid
CHROME HOLDCO: Moody's Affirms B2 CFR & Rates EUR650MM Add-on B1
G E O R G I A
GEORGIA: Fitch Affirms 'BB' Foreign-Currency IDR, Outlook Stable
G E R M A N Y
HAPAG-LLOYD AG: S&P Upgrades ICR to 'BB+', Outlook Stable
I R E L A N D
BILBAO CLO IV: S&P Assigned Prelim B- (sf) Rating to Cl. E Notes
CVC CORDATUS X: Moody's Affirms B2 Rating on EUR12MM Class F Notes
OAK HILL IV: Moody's Affirms B2 Rating on EUR12MM Class F-R Notes
OCP EURO 2022-5: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes
PALMER SQUARE 2022-1: Moody's Gives (P)B1 Rating to EUR5MM F Notes
ST. PAUL'S VIII: Moody's Affirms B2 Rating on EUR12MM Cl. F Notes
I T A L Y
SAIPEM SPA: S&P Downgrades ICR to 'BB-', On CreditWatch Negative
L U X E M B O U R G
ALTISOURCE PORTFOLIO: Egan-Jones Keeps CCC+ Sr. Unsecured Ratings
R O M A N I A
DIGI COMMUNICATIONS: Moody's Upgrades CFR to Ba3, Outlook Stable
S P A I N
EDREAMS ODIGEO: Fitch Assigns Final 'B' LT IDR, Outlook Stable
S W I T Z E R L A N D
COVIS FINCO: Moody's Rates New $300MM Second Lien Term Loan 'Caa1'
U K R A I N E
UKRAINE: Fitch Affirms 'B' LT FC IDR, Alters Outlook to Stable
U N I T E D K I N G D O M
ATLANTICA SUSTAINABLE: Egan-Jones Keeps B- Sr. Unsecured Ratings
BULB ENERGY: Administrators May Tap Lazard to Handle Sale
CARILLION PLC: Liquidators Sue KPMG for GBP1.3 Bil. Over Audit
DERBY COUNTY FOOTBALL: EFL Rejects Insolvency Laws to Settle Debts
HARBEN FINANCE 2017-1: Fitch Rates 2 Note Classes 'B-(EXP)'
HARBEN FINANCE 2017-1: S&P Assigns Prelim B-(sf) Rating to X Notes
INTERNATIONAL GAME: Egan-Jones Keeps CCC+ Senior Unsecured Ratings
ONE LEGAL: Administration Process Extended Until January 2023
OWL FINANCE: Moody's Lowers CFR to Ca, Outlook Negative
VODAFONE GROUP: Egan-Jones Keeps BB+ Senior Unsecured Ratings
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B O S N I A A N D H E R Z E G O V I N A
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MOFAS: Istocno Sarajevo City Acquires 51% Stake for BAM2MM
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Dragana Petrushevska at SeeNews reports that Bosnia's Istocno
Sarajevo city said it has signed a contract for the purchase of a
51% stake in troubled metal products maker Mofas for BAM2 million
(US$1.17 million/EUR1 million).
According to SeeNews, the contract published on Istocno Sarajevo
website on Feb. 4 shows the city, located in Bosnia's Serb Republic
entity, will buy the stake from three Mofas shareholders, including
German auto parts manufacturer Paul Bernhardt.
The government of the Serb Republic allocated BAM2 million to
Istocno Sarajevo for the purchase of the majority stake in Mofas
last year in order to avoid the company's bankruptcy, city
authorities said earlier, SeeNews notes.
Mofas was formed in 2015 when local automotive parts manufacturer
Famos launched a restructuring process to avoid bankruptcy, SeeNews
discloses. Famos was transformed into a joint company with the
participation of Paul Bernhardt and local export-import company In
Time, SeeNews relates. Famos held a 49% stake in Mofas after the
restructuring, SeeNews states.
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D E N M A R K
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DFDS A/S: Egan-Jones Lowers Senior Unsecured Ratings to B+
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Egan-Jones Ratings Company on January 18, 2022, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by Dfds A/S to B+ from BB-.
Headquartered in Copenhagen, Denmark, DFDS A/S operates focused
transport corridors combining ferry infrastructure, including port
terminals and rail connections, and logistics solutions including
door-door full/part loads for dry goods and cold chain as well as
contract logistics for select industries.
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F R A N C E
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AIR FRANCE-KLM: Under Pressure to Repay Pandemic State Aid
----------------------------------------------------------
Sarah White at The Financial Times reports that Air France-KLM is
coming under growing pressure to repay its pandemic state-aid
packages quickly, as rivals including Lufthansa pounce on potential
acquisitions in the aviation industry that the Franco-Dutch group
will otherwise be barred from.
The French state, which recapitalised the airline group last year
in a deal that constrains it from making purchases, is "looking
closely" at financial options along with the company, said
Jean-Baptiste Djebbari, France's junior minister for transport, the
FT relates.
"The issue [for the company] is whether it will manage,
financially, to untie its hands quickly enough so that it can
respond to market opportunities," the FT quotes Mr. Djebbari as
saying on Jan. 31. The group needed to be "one of the major
players" in a post-crisis world and in a possible wave of
consolidation, he added, allowing it to compete with Lufthansa and
other rivals such as International Airlines Group, the owner of
British Airways and Iberia.
Germany's Lufthansa, which has repaid its own state aid, and
Swiss-Italian shipping conglomerate MSC expressed an interest in
buying a majority stake in Italy's state-owned ITA Airways, the
successor to bankrupt Alitalia and part of the SkyTeam airline
alliance along with Air France-KLM and Delta, the FT discloses.
The Franco-Dutch group has no liquidity problems and would have
been a natural suitor but was constrained by its bailouts, the FT
relays, citing two people familiar with the matter.
Air France-KLM received just over EUR10 billion in state guaranteed
loans and direct help from the French and Dutch governments when
the pandemic struck in 2020, the FT discloses.
A EUR4 billion recapitalisation by the French state last year,
through a mix of new shares and hybrid debt, constrains the group
from taking more than a 10% stake in any competitor until
three-quarters of that aid is repaid, the FT states.
The appearance of the rapidly spreading Omicron coronavirus variant
at the end of 2021 derailed plans for an expected capital raising,
which would have whittled down the state support, the FT notes.
CHROME HOLDCO: Moody's Affirms B2 CFR & Rates EUR650MM Add-on B1
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Moody's Investors Service has affirmed Chrome HoldCo's ("Cerba") B2
Corporate Family Rating and B2-PD Probability of Default ratings as
well as the B1 instrument ratings on the senior secured term loan
B, on the senior secured notes and on the senior secured revolving
credit facility issued by Chrome BidCo. Concurrently Moody's has
assigned a new B1 rating to the proposed EUR650 million add-on to
the senior secured term loan B. The Caa1 rating on the senior
unsecured notes issued by Chrome Holdco was also affirmed. The
outlook on Chrome HoldCo and Chrome BidCo is stable.
The proceeds from the proposed EUR650 million add-on to the senior
secured term loan will be used along with cash on balance, an
equity injection from the sponsors and re-investment from
management, to acquire Labexa, a provider of routine and specialty
testing in South West of France, Viroclinics, a provider of
virology focused, lab based Contract Research Organisation ('CRO')
services and other routine testing businesses in France, for which
the names have not been disclosed yet.
RATINGS RATIONALE
The rating action balances the sound strategic rationale of the
proposed acquisitions, the material equity contribution used to
fund the purchase price and Cerba's strong current trading with the
integration risk given the large amount of acquisitions announced
over the last quarters. Including these proposed acquisitions,
Cerba will have spent around EUR2.8 billion on M&A since the
beginning of 2021, a material increase compared to around EUR120
million spent per year in 2020 and 2019.
The acquisition of Labexa and other routine testing business in
France will reinforce Cerba's market positioning in its core
market, allowing the group to extract synergies. Cerba has a good
track record of integrating routine testing business in France.
The acquisition of Viroclinics demonstrates Cerba's willingness to
grow its CRO business, which provides testing services to the
pharmaceutical industry. The CRO activities are unregulated and
entail a material higher growth potential than the routine
business. The CRO sector reported a strong growth over the last
years but it is also a more volatile activity with higher execution
risk than the routine business. The acquisition of Viroclinics will
double Cerba's existing CRO business (currently under central labs
segment) and all together will represent a bit less than 10% of the
group revenue (excluding COVID). Given that the majority of the
revenue is still generated by the regulated defensive routine
testing activities, Moody's considers that Cerba's business profile
has not materially changed as a result of this acquisition.
Cerba's current trading is very strong, supported by continuous
significant COVID-19 testing activity. Despite high uncertainty,
Moody's expects that PCR testing revenue will gradually fall from
its 2021 peak.
OUTLOOK
The stable outlook reflects Moody's expectation that Cerba will be
able to smoothly integrate the large amount of acquisitions
announced over the last quarters. The stable outlook also assumes
that the company's M&A strategy will remain measured in terms of
size, pace and acquisition multiple and that funding will not
result in a Moody's adjusted debt / EBITDA higher than 7.0x for a
prolonged period of time.
LIQUIDITY
Cerba's liquidity is good supported by EUR140 million of cash on
balance pro forma for the contemplated transaction, a EUR400
million senior secured revolving credit facility which will
increase to EUR450 million as part of this transaction, out of
which EUR150 million are drawn, positive free cash flow generation
expected for the next 12-18 months and long dated debt maturities.
STRUCTURAL CONSIDERATIONS
The B1 ratings assigned to the senior secured instruments are one
notch above the B2 CFR, reflecting the loss absorption buffer from
the EUR525 million of senior unsecured notes.
ESG CONSIDERATIONS
Cerba has an inherent exposure to social risks, given the highly
regulated nature of the healthcare industry and its sensitivity to
social pressure related to the affordability of and access to
healthcare services. Governance risks for Cerba include any
potential failure in internal control that could result in a loss
of accreditation or reputational damage and, as a result, could
harm its credit profile. Given its private equity ownership,
Moody's considers that Cerba has a relative aggressive financial
strategy characterised by a tolerance for high financial leverage
and shareholder-friendly policies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded over time if (1) the Moody's-adjusted
debt/EBITDA falls below 5.5x on a sustained basis and (2) the
Moody's-adjusted FCF/debt improves towards 10% on a sustained
basis.
Ratings could be downgraded if: (1) the leverage, as measured by
Moody's-adjusted debt/EBITDA, does not remain below 7.0x on a
sustained basis, (2) the Moody's adjusted FCF/debt does not remain
close to 5% on a sustained basis or (3) the company's liquidity
deteriorates.
PROFILE
Cerba, headquartered in Paris, France, is a provider of clinical
laboratory testing services in France, Belgium, Luxembourg, Italy
and Africa.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
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G E O R G I A
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GEORGIA: Fitch Affirms 'BB' Foreign-Currency IDR, Outlook Stable
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Fitch Ratings has affirmed Georgia's Long-Term Foreign-Currency
Issuer Default Rating (IDR) at 'BB' with a Stable Outlook.
KEY RATING DRIVERS
A credible and effective policy framework and stronger governance
indicators relative to 'BB' peers underpins Georgia's rating.
Long-standing support from official creditors have helped reduced
risks to macro stability and supported financing needs. These
credits strengths are balanced by significant exposure of public
debt to foreign-currency (FC) risk, high financial dollarisation,
and external finances that are significantly weaker than the
majority of 'BB' category rated peers.
Georgia's economy expanded robustly in 2021. Real GDP growth is
estimated to have reached 10.6% in 2021, following a contraction of
6.8% in 2020. Economic recovery has been driven by domestic demand,
strong inflows of net remittances, a partial tourism recovery, and
fiscal stimulus (e.g. subsidies and social benefits). Growth in
exports of goods also performed strongly due to the recovery of key
trading partners and higher commodity prices. For 2022 and 2023,
Fitch forecasts Georgia's economy to expand by 5.5% and 5.3%,
respectively, above potential of 4.0%-4.5%. Increased financial
inflows will support private consumption and investment. Recovery
in the tourism sector is also projected to pick up, with Fitch
forecasting tourism receipts towards 80% of 2019 levels in 2022,
after reaching 38.1% of 2019 levels in 2021.
Risks to Fitch's GDP outlook remain on the downside. Uncertainty
surrounding the pandemic remains. Georgia is currently experiencing
a significant fourth wave of Covid-19 cases, while its vaccination
rate remains low. As of 31 January, 32.8% of Georgia's population
were fully vaccinated. The majority of domestic Covid-19
restrictions lifted in late 2021. Potential re-tightening of
restrictions could impact Fitch's forecasts. Meanwhile,
developments in Turkey and Russia, both key trading partners, also
present downside risk.
Annual inflation accelerated to 13.9% in December, reflecting
higher global commodity prices, lari depreciation and a spike in
utility prices. With inflation significantly above the target of
3.0% and increased short-term price expectations, the National Bank
of Georgia (NBG) tightened monetary policy, increasing the policy
rate a cumulative 250bp, from 8.00% to 10.50%. Fitch expects the
NBG to maintain a tight policy stance for 2022. Fading out of high
base effects should start to bring down inflation from 2Q22.
However, the risk of high inflation expectations becoming
entrenched is a vulnerability. Fitch forecasts average inflation of
7.0% in 2022, after 9.6% in 2021.
Financial developments have been broadly stable. Despite the
pandemic shock, Georgian banks managed to increase their regulatory
capital buffers (the sector capital adequacy ratio (Basel III) at
19.6% in 4Q21 vs 17.6% in 4Q20). Non-performing loans (NBG
methodology), have declined to 5.2% in 4Q21 after peaking at 8.3%
in 1Q21. Credit growth is also robust (adjusted for FX effects up
16.8% in 2021), consistent with the acceleration in GDP.
Meanwhile, widened interest differentials between lari and
foreign-currency (FC) loans have seen a pick-up in FC lending.
However, as a share of total lending, FC loans declined in 2021
(50.8% in 2021 vs 55.7% in 2020). Given the vulnerabilities of
Georgia's highly dollarised economy, Fitch expects the NBG will
maintain a vigilant policy mix, as shown by recent macro-prudential
measures targeting the dollarisation exposure of bank's credit
portfolios and decreasing the maximum maturity for FX denominated
mortgage loans.
Fiscal policy remains moderately loose. However, economic growth
and the expiry of 2021 Covid-19-related expenses will more than
offset discretionary expenses in the 2022 budget; which include
increases in public sector wages for healthcare, education and
defence professions, increased pensions, and plans for higher
infrastructure spending. Aside from the impact of positive GDP
growth, government revenues will also benefit from increased taxes
after last year's tax exemptions. Fitch forecasts Georgia's 2022
general government fiscal deficit to narrow to 4.4% of GDP, after
an estimated 6.1% of GDP in 2021. This compares with the current
'BB' median fiscal deficit of 5.2% of GDP for 2021.
Georgia's pre-pandemic record of compliance with national fiscal
rules (which aim for fiscal deficits below 3.0% of GDP and
government debt below 60% of GDP) should underpin fiscal policy
over the medium term, and Fitch expects a strategy of fiscal
consolidation to resume once the pandemic shock subsides. Progress
continues in strengthening tax administration to improve revenues,
as well as improving the budget transparency of state-owned
enterprises, which might yield savings. However, medium-term
spending pressures remain high on the back of an ambitious
government infrastructure plan. After peaking at 60.2% of GDP in
2020, Fitch estimates government debt declined to 50.1% in 2021 (vs
the current 'BB' median of 57.0%).
External buffers remain adequate, with foreign reserves (by Fitch's
estimates) covering around 3.6 months of current external payments
at end-2021 (although this is below the current 'BB' median of 5.6
months end-2021). Despite a widening of the trade deficit in 2021,
a healthy inflow of net remittances, and partial recovery in both
net tourism receipts and FDI flows, supported foreign reserves. FX
interventions by the NBG were also small in 2021. Fitch estimates
Georgia's current account deficit (CAD) to have reached 10.9% of
GDP end 2021, after 12.4% in 2020. Gradual recovery in the tourism
sector will support narrowing of the CAD towards 8.2% of GDP in
2022. Against 'BB' peers, Georgia's net external debt is
considerably higher (74.3% of GDP end-2021 vs 'BB' median of
18.4%), leaving the small and highly dollarised economy vulnerable
to external shocks.
Georgia's governance indicators are well above the current medians
of 'BB' category peers (62.0 percentile vs 'BB' median 44.0
percentile. Nonetheless, political risk associated with unresolved
conflicts involving Russia in Abkhazia and South Ossetia remains
material and the evolution of relations with Russia can impact
domestic politics as well as the economy. Meanwhile, developments
in domestic politics have become increasingly polarised between
ruling party Georgian Dream and its main political opposition
United National Movement. Fitch does not expect domestic politics
to infringe on Georgia's credible policy framework and relationship
with official creditors. However, there is a risk that politics
could weigh on progress in structural reform and the business
environment. Georgia's composite governance indicator score has
been on a gradual decline in recent years.
ESG - Governance: Georgia has an ESG Relevance Score of '5'/'5[+]'
for both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption.
Theses scores reflect the high weight that the World Bank
Governance Indicators (WBGI) have in Fitch's proprietary Sovereign
Rating Model. Georgia has a medium WBGI ranking at 62.0 percentile,
reflecting moderate institutional capacity, established rule of
law, a moderate level of corruption and political risks associated
with the unresolved conflict with Russia.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Structural features: Deterioration in either the domestic or
regional political environment that affects economic policy
making and economic growth.
-- Public Finances: Government debt/GDP being placed on an upward
path over the medium term, reflecting either insufficient
fiscal adjustment or a weaker growth environment.
-- External Finances: An increase in external vulnerability, for
example, from a sustained widening of the CAD and rapid
decline in international reserves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- External Finances: A reduction in external vulnerability, for
example from a reduction in the current account deficit and/or
increase in international reserves.
-- Macroeconomics: A stronger and sustained GDP growth outlook
with a reduction in macroeconomic vulnerabilities such as the
high level of dollarisation, leading to a higher GDP per
capita level.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Georgia a score equivalent to a
rating of 'BB-' on the Long-Term Foreign-Currency (LT FC) IDR
scale.
In accordance with its rating criteria, Fitch's sovereign rating
committee decided not to adopt the score indicated by the SRM as
the starting point for its analysis because the SRM output has
migrated to 'BB-', but in Fitch's view this is potentially a
temporary deterioration. Consequently, the committee decided to
adopt 'BB' as the starting point for its analysis, unchanged from
the prior committee.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final LT FC IDR by applying its QO, relative to
SRM data and output, as follows:
-- Macro: +1 notch, to reflect Georgia's policy framework
strength and consistency, including a credible monetary policy
framework, prudent fiscal strategy. This policy mix has
delivered track record of resilience to external shocks,
including negative developments in its main trading partners,
and reduced risks to macroeconomic stability.
-- External Finances: -1 notch, to reflect that relative to its
peer group, Georgia has higher net external debt, structurally
larger CADs, and a large negative net international investment
position.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within
Fitch's criteria that are not fully quantifiable and/or not fully
reflected in the SRM.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure 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 three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Georgia has an ESG Relevance Score of '5' for Political Stability
and Rights as World Bank Governance Indicators have the highest
weight in Fitch's SRM and are therefore highly relevant to the
rating and a key rating driver with a high weight. As Georgia has a
percentile rank below 50 for the respective Governance Indicator,
this has a negative impact on the credit profile.
Georgia has an ESG Relevance Score of '5[+]' for Rule of Law,
Institutional, Regulatory Quality and Control of Corruption as
World Bank Governance Indicators have the highest weight in Fitch's
SRM and are therefore highly relevant to the rating and are a key
rating driver with a high weight. As Georgia has a percentile rank
above 50 for the respective Governance Indicators, this has a
positive impact on the credit profile.
Georgia has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
World Bank Governance Indicators is relevant to the rating and a
rating driver. As Georgia has a percentile rank below 50 for the
respective Governance Indicator, this has a negative impact on the
credit profile.
Georgia has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Georgia, as for all sovereigns. As Georgia
has a fairly recent restructuring of public debt in 2004, this has
a negative impact on the credit profile.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, 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 to the way in which they
are being managed by the entity.
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G E R M A N Y
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HAPAG-LLOYD AG: S&P Upgrades ICR to 'BB+', Outlook Stable
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S&P Global Ratings raised its issuer credit rating on German
container liner Hapag-Lloyd AG to 'BB+' from 'BB'.
S&P said, "We also raised our issue rating on the company's senior
unsecured debt and maintained the '3' recovery rating unchanged at
65% expected recovery.
"The stable outlook reflects our expectation that Hapag-Lloyd will
maintain S&P Global Ratings-adjusted funds from operations (FFO) to
debt above 35%, our threshold for a 'BB+' rating, which will be
underpinned by the company's adjusted EBITDA ultimately stabilizing
at well above the 2019 pre-pandemic level, and adherence to prudent
financial policy."
Container freight rates are edging up across most trade lanes, with
no signs of sustained moderation, contrary to our previous
expectations.
Freight rates will be kept high by robust container shipping
demand, paired with persistent supply chain bottlenecks, equipment
shortages, and marine port congestions--all exacerbated by the
pandemic. Each quarter of 2021 saw a new, record-high freight rate
level, with rates on the major trade lanes--the transpacific and
Asia-Europe--rising disproportionately high. For example, on Jan.
2, 2022, the Shanghai Containerized Freight Index (SCFI) hit the
highest mark of 5,100 points, which is above the 4x elevated
average in 2020 and 6x the pre-pandemic 2019-year average of 810
points.
Freight rates will remain extraordinarily high at least in the near
term. The spread of the omicron variant continues to challenge
global logistics and infrastructure and the supply of new vessels
still lags the global demand for tangible goods. This will delay
normalization in freight rates until late 2022 at the earliest,
provided the pandemic's impact on container shipping eases. S&P
said, "Thereafter, as overall industry capacity increases and
vessels on order are delivered from 2023, ocean tariffs might face
a further correction and ultimately stabilize at profitable levels
that are above the pre-pandemic 2019 base, according to our
base-case scenario. Still, our forecast is subject to mounting
uncertainties. Omicron's high transmissibility has resulted in
rapidly escalating cases and absenteeism from work (as employees
are out sick or in quarantine) in many countries in Europe and in
the U.S. We also believe that omicron presents a serious challenge
to mainland China's and Hong Kong's local authorities given their
zero-COVID stance. Mobility restrictions, port closures, and
lockdowns of cities in the region might protract or even aggravate
the already severely strained situation along global supply chains.
We also understand that supply chain bottlenecks led many container
liners' customers to increasingly opt for longer-term contracted
freight rates, which should mitigate the impact on liners' earnings
from declining spot rates, at least temporarily."
S&P said, "We expect global trade volumes in 2022 will largely
trail the global GDP growth rate.The movement of essential goods,
strong pickup in e-commerce, and shift in consumer spending to
tangible goods from services have supported global container volume
recovery since June 2020, with volumes recording a strong nearly 7%
growth in 2021 (likely outpacing global GDP growth). This has been
particularly fueled by flourishing transpacific trade, following a
1%-2% year-on-year contraction in 2020. In the current year, we
expect the global seaborne container trade will decelerate
somewhat, as the pandemic's effects on consumers' spending eases.
"We expect average freight rates will plunge during 2023, and
subsequently stabilize at profitable levels above the 2019 base.
The expected easing of supply chain challenges and accelerated new
containership deliveries from 2023 will exert heavy downward
pressure on the current record-high freight rates. According to
Clarkson Research, in January-November 2021, a record 4.1 million
twenty foot equivalent units (TEUs) of containership capacity was
ordered (a 300% increase as compared with the full-year 2020),
corresponding to the orderbook of 23% of the total global fleet,
with 2.3 million of TEU capacity currently scheduled to be
delivered in 2023. That said, we believe that the industry will
adhere to a similarly tight capacity discipline, as it demonstrated
closely after the pandemic's outbreak in 2020, when the significant
and abrupt decline in trade volumes was timely counterbalanced by
blank sailings (skipping certain ports in the route or cancelling
the route altogether) and other capacity containing measures. We
consider such a reactive supply management as normal in a sector
that has been through several rounds of consolidation in recent
years. The five largest container shipping companies now have a
combined market share of about 65%, up from 30% around 15 years
ago.
"Hapag-Lloyd's preliminary 2021 EBITDA of EUR10.9 billion exceeded
our March 2021 forecast by more than 2x. Hapag-Lloyd's all
time-high earnings were fueled by the steady climb to ever-higher
rates during 2021. This strength more than compensated for the
rising bunker fuel prices and non-bunker-related transport cost
inflation, as well as flat cargo volumes hindered by supply chain
disruptions and maritime port congestions. In 2022, we forecast
that supportive industry conditions will allow Hapag-Lloyd to
largely replicate the strong EBITDA achieved last year, assuming
that freight rates start normalizing from late 2022 at the
earliest.
"We do not view Hapag-Lloyd's extraordinarily high EBITDA in 2021
and expected in 2022 as sustainable. We still believe the company
will be able to turn its present EBITDA strength into sustainable
EBITDA value well above EUR2 billion, assuming the industry's
players in general maintain their stringent capacity management and
tariff-setting discipline, and Hapag-Lloyd also adheres to
consistent cost controls. We continue to see the container liner
industry tied to cyclical supply-and-demand conditions, which will
likely translate into fluctuations in Hapag-Lloyd's EBITDA
performance under normalized industry conditions. That said, we
still believe because of the industry consolidation and container
liners' more rationale behavior, the swings in freight rates will
be flatter and their peak-to-trough periods shorter than in before
the pandemic.
"The extraordinarily strong 2021 operating cash flow has translated
into a net adjusted cash position for Hapag-Lloyd. This compares
with adjusted debt of EUR4.8 billion at year-end 2020 and EUR6.7
billion at year-end 2019. Supported by the anticipated strong cash
flows in the current year, we expect Hapag-Lloyd to remain net cash
positive, even accounting for the rising fleet investment needs and
possible other discretionary spending. According to our base case,
Hapag-Lloyd's credit metrics will be commensurate with our minimal
financial risk profile category, providing an ample headroom under
the rating for the expected moderation in freight rates.
"Hapag-Lloyd lacks a track record of operating with the lower
financial leverage we forecast in our base case. We apply a
negative financial policy modifier to our 'bbb-' anchor for
Hapag-Lloyd, resulting in an overall rating of 'BB+', because we
note that the strongly improved credit ratios are a new achievement
for the company. This means that there is no track record of
Hapag-Lloyd operating at such a minimal leverage level; nor is
there currently a commitment to maintain this degree of financial
risk, which weighs on the rating. We also capture a relatively low
degree of credit ratio predictability, beyond what can be
reasonably built into our forecasts, and the risk that adjusted
leverage could be higher than our base case. Our assessment also
reflects the company's consistent leverage target of maximum 3x net
debt to EBITDA, which is well above our expected leverage level in
2022-2023.
"The stable outlook reflects our expectation that Hapag-Lloyd will
maintain adjusted FFO to debt above 35%, our threshold for a 'BB+'
rating, while freight rates start normalizing from the current
all-time highs, at the earliest from late 2022, if the pandemic's
impact on container shipping eases. We think this will be
underpinned by the company's adjusted EBITDA ultimately stabilizing
at well above the 2019 pre-pandemic level and adherence to prudent
financial policy.
"We could raise the rating if adjusted FFO to debt stays above 50%
once freight rates appear to normalize, and the company commits to
a financial policy to ensure this ratio level is sustainable.
"Although unlikely in the near term, we could lower the rating if
Hapag-Lloyd's EBITDA sustainably plunged below EUR2 billion. This
would stem from a sharp unexpected deterioration in demand for
tangible goods, coupled with severe cost inflation and
insufficiently counterbalanced by the industry's capacity
containment measures or the Hapag Lloyd's cost savings measures.
"We could also lower the rating if the company adopted a more
aggressive financial policy, resulting in credit metrics falling
short of our rating guidelines."
=============
I R E L A N D
=============
BILBAO CLO IV: S&P Assigned Prelim B- (sf) Rating to Cl. E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to
Bilbao CLO IV DAC's class A-1, A-2A, A-2B, B, C, D, and E notes. At
closing, the issuer will also issue unrated subordinated notes.
Under the transaction documents, the rated notes will pay quarterly
interest unless there is a frequency switch event. Following this,
the notes will switch to semiannual payment.
The portfolio's reinvestment period will end approximately five
years after closing, and the portfolio's maximum average maturity
date will be approximately nine years after closing.
The preliminary ratings assigned to the notes reflect S&P's
assessment of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
Portfolio Benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,935.09
Default rate dispersion 416.97
Weighted-average life (years) 5.48
Obligor diversity measure 85.15
Industry diversity measure 26.79
Regional diversity measure 1.33
Transaction Key Metrics
CURRENT
Total par amount (mil. EUR) 400
Defaulted assets (mil. EUR) 0
Number of performing obligors 90
Portfolio weighted-average rating
derived from S&P's CDO evaluator 'B'
'CCC' category rated assets (%) 3.60
Covenanted 'AAA' weighted-average recovery (%) 35.59
Covenanted weighted-average spread (%) 3.90
Covenanted weighted-average coupon (%) 4.50
S&P said, "Our preliminary ratings reflect our assessment of the
preliminary collateral portfolio's credit quality, which has a
weighted-average rating of 'B'. We consider that the portfolio will
primarily comprise broadly syndicated speculative-grade senior
secured term loans and senior secured bonds. Therefore, we
conducted our credit and cash flow analysis by applying our
criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million par amount,
the covenanted weighted-average spread of 3.90%, the covenanted
weighted-average coupon of 4.50%, and the covenanted
weighted-average recovery rates for all rating levels. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios for each liability rating category.
"We expect that the transaction's documented counterparty
replacement and remedy mechanisms will adequately mitigate its
exposure to counterparty risk under our current counterparty
criteria.
"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk to
be limited at the assigned preliminary ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria.
"At closing, we consider that the transaction's legal structure
will be bankruptcy remote, in line with our legal criteria.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class A-2A to D notes could withstand
stresses commensurate with higher rating levels than those we have
assigned. However, as the CLO is still in its reinvestment phase,
during which the transaction's credit risk profile could
deteriorate, we have capped our assigned ratings on the notes.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our preliminary
ratings are commensurate with the available credit enhancement for
the class A-1, A-2A, A-2B, B, C, D, and E notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A-1 to D notes
to five of the 10 hypothetical scenarios we looked at in our
publication.
Bilbao CLO IV is a European cash flow CLO securitization of a
revolving pool, comprising euro-denominated senior secured loans
and bonds issued mainly by sub-investment grade borrowers.
Guggenheim Partners Europe will manage the transaction.
The recent rapid spread of the Omicron variant highlights the
inherent uncertainties of the pandemic but also the importance and
benefits of vaccines. While the risk of new, more severe variants
displacing Omicron and evading existing immunity cannot be ruled
out, our current base case assumes that existing vaccines can
continue to provide significant protection against severe illness.
Furthermore, many governments, businesses and households around the
world are tailoring policies to limit the adverse economic impact
of recurring COVID-19 waves. Consequently, S&P does not expect a
repeat of the sharp global economic contraction of 2nd quarter
2020. Meanwhile, S&P continues to assess how well individual
issuers adapt to new waves in their geography or industry.
Environmental, social, and governance (ESG) factors
S&P said, "We regard the exposure to ESG credit factors in the
transaction as being broadly in line with our benchmark for the
sector. Primarily due to the diversity of the assets within CLOs,
the exposure to environmental credit factors is viewed as below
average, social credit factors are below average, and governance
credit factors are average. Accordingly, since there are no
material differences compared to our ESG benchmark for the sector,
no specific adjustments have been made in our rating analysis to
account for any ESG-related risks or opportunities."
Ratings List
CLASS PRELIM PRELIM SUB(%) INTEREST RATE*
RATING AMOUNT
(MIL. EUR)
A-1 AAA (sf) 240.00 40.00 Three/six-month EURIBOR
plus 0.92%
A-2A AA (sf) 40.00 27.50 Three/six-month EURIBOR
plus 1.75%
A-2B AA (sf) 10.00 27.50 2.20%
B A (sf) 25.40 21.15 Three/six-month EURIBOR
plus 2.20%
C BBB (sf) 26.60 14.50 Three/six-month EURIBOR
plus 3.25%
D BB- (sf) 20.20 9.45 Three/six-month EURIBOR
plus 6.21%
E B- (sf) 10.60 6.80 Three/six-month EURIBOR
plus 8.83%
Sub. Notes NR 36.30 N/A N/A
*The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A—-Not applicable.
CVC CORDATUS X: Moody's Affirms B2 Rating on EUR12MM Class F Notes
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by CVC Cordatus Loan Fund X Designated Activity
Company:
EUR45,600,000 Class B-1 Senior Secured Floating Rate Notes due
2031, Upgraded to Aa1 (sf); previously on Jul 29, 2020 Affirmed Aa2
(sf)
EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2031,
Upgraded to Aa1 (sf); previously on Jul 29, 2020 Affirmed Aa2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR206,000,000 Class A-1 Senior Secured Floating Rate Notes due
2031, Affirmed Aaa (sf); previously on Jul 29, 2020 Affirmed Aaa
(sf)
EUR30,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2031,
Affirmed Aaa (sf); previously on Jul 29, 2020 Affirmed Aaa (sf)
EUR22,800,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2031, Affirmed A2 (sf); previously on Jul 29, 2020
Affirmed A2 (sf)
EUR21,600,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2031, Affirmed Baa2 (sf); previously on Jul 29, 2020
Confirmed at Baa2 (sf)
EUR23,200,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2031, Affirmed Ba2 (sf); previously on Jul 29, 2020
Confirmed at Ba2 (sf)
EUR12,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2031, Affirmed B2 (sf); previously on Jul 29, 2020
Confirmed at B2 (sf)
CVC Cordatus Loan Fund X Designated Activity Company, issued in
January 2018, is a collateralised loan obligation (CLO) backed by a
portfolio of mostly high-yield senior secured European loans. The
portfolio is managed by CVC Credit Partners European CLO Mmgt LLP.
The transaction's reinvestment period ended in January 2022.
RATINGS RATIONALE
The upgrades on the ratings on the Class B-1 and B-2 Notes are
primarily a result of the benefit of the transaction having reached
the end of the reinvestment period in January 2022; the
affirmations to the ratings on the Class A-1, A-2, C, D, E and F
Notes are due to the benefit of the transaction having reached the
end of the reinvestment period in January 2022.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from a shorter amortisation profile than it
had assumed at the last rating action in July 2020.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR396.99m
Defaulted Securities: none
Diversity Score: 50
Weighted Average Rating Factor (WARF): 2862
Weighted Average Life (WAL): 4.56 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.51%
Weighted Average Coupon (WAC): 4.37%
Weighted Average Recovery Rate (WARR): 44.38%
Par haircut in OC tests and interest diversion test: EUR 0.49m
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in May 2021. Moody's concluded the
ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the note,
in light of uncertainty about credit conditions in the general
economy. In particular, the length and severity of the economic and
credit shock precipitated by the global coronavirus pandemic will
have a significant impact on the performance of the securities. CLO
notes' performance may also be impacted either positively or
negatively by (1) the manager's investment strategy and behaviour
and (2) divergence in the legal interpretation of CDO documentation
by different transactional parties because of embedded
ambiguities.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
OAK HILL IV: Moody's Affirms B2 Rating on EUR12MM Class F-R Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Oak Hill European Credit Partners IV Designated
Activity Company:
EUR30,550,000 Class B-1-R Senior Secured Floating Rate Notes due
2032, Upgraded to Aa1 (sf); previously on Jun 19, 2020 Affirmed Aa2
(sf)
EUR11,000,000 Class B-2-R Senior Secured Fixed Rate Notes due
2032, Upgraded to Aa1 (sf); previously on Jun 19, 2020 Affirmed Aa2
(sf)
EUR24,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2032, Upgraded to A1 (sf); previously on Jun 19, 2020
Affirmed A2 (sf)
EUR22,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2032, Upgraded to Baa1 (sf); previously on Jun 19, 2020
Confirmed at Baa2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR222,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2032, Affirmed Aaa (sf); previously on Jun 19, 2020 Affirmed Aaa
(sf)
EUR25,000,000 Class A-2-R Senior Secured Fixed Rate Notes due
2032, Affirmed Aaa (sf); previously on Jun 19, 2020 Affirmed Aaa
(sf)
EUR25,800,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2032, Affirmed Ba2 (sf); previously on Jun 19, 2020
Confirmed at Ba2 (sf)
EUR12,000,000 Class F-R Senior Secured Deferrable Floating Rate
Notes due 2032, Affirmed B2 (sf); previously on Jun 19, 2020
Confirmed at B2 (sf)
Oak Hill European Credit Partners IV Designated Activity Company,
issued in December 2015 and refinanced in January 2018, is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured European loans. The portfolio is
managed by Oak Hill Advisors (Europe), LLP. The transaction's
reinvestment period ended in January 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1-R, B-2-R, C-R and D-R Notes
are primarily a result of the benefit of the transaction having
reached the end of the reinvestment period in January 2022.
The rating affirmations on the Class A-1-R, A-2-R, E-R and F-R
Notes reflect the expected losses of the notes continuing to remain
consistent with their current ratings after taking into account the
CLO's latest portfolio, its relevant structural features and its
actual over-collateralization levels.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR394.8m
Defaulted Securities: None
Diversity Score: 59
Weighted Average Rating Factor (WARF): 2873
Weighted Average Life (WAL): 4.63 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.62%
Weighted Average Coupon (WAC): 5.12%
Weighted Average Recovery Rate (WARR): 44.85%
Par haircut in OC tests and interest diversion test: None
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in May 2021. Moody's concluded the
ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the
notes, in light of uncertainty about credit conditions in the
general economy. In particular, the length and severity of the
economic and credit shock precipitated by the global coronavirus
pandemic will have a significant impact on the performance of the
securities. CLO notes' performance may also be impacted either
positively or negatively by: (1) the manager's investment strategy
and behavior; (2) divergence in the legal interpretation of CDO
documentation by different transactional parties because of
embedded ambiguities.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
OCP EURO 2022-5: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned preliminary credit ratings to the class
A to F European cash flow CLO notes issued by OCP Euro CLO 2022-5
DAC. At closing, the issuer will issue unrated subordinated notes.
Under the transaction documents, the rated notes will pay quarterly
interest unless there is a frequency switch event. Following this,
the notes will switch to semiannual payment.
The portfolio's reinvestment period will end approximately 4.5
years after closing, and the portfolio's weighted-average life test
will be approximately 8.5 years after closing.
The preliminary ratings reflect S&P's assessment of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio Benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,924.48
Default rate dispersion 402.42
Weighted-average life (years) 5.00
Obligor diversity measure 134.75
Industry diversity measure 21.68
Regional diversity measure 1.31
Transaction Key Metrics
CURRENT
Total par amount (mil. EUR) 400.00
Defaulted assets (mil. EUR) 0
Number of performing obligors 151
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.5
'AAA' weighted-average recovery (%) 35.59
Covenanted weighted-average spread (%) 3.97
S&P said, "We understand that at closing, the portfolio will be
granular in nature, and well-diversified across obligors,
industries, and asset characteristics when compared to other CLO
transactions we have rated recently. Therefore, we have conducted
our credit and cash flow analysis by applying our criteria for
corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (3.97%), the
reference weighted-average coupon (4.50%), and the actual
weighted-average recovery rate calculated line with our CLO
criteria. We applied various cash flow stress scenarios, using four
different default patterns, in conjunction with different interest
rate stress scenarios for each liability rating category. Our
credit and cash flow analysis indicates that the available credit
enhancement for the class B to E could withstand stresses
commensurate with higher ratings than those we have assigned.
However, as the CLO will be in its reinvestment phase starting from
closing, during which the transaction's credit risk profile could
deteriorate, we have capped our preliminary ratings assigned to the
notes.
"Under our structured finance ratings above the sovereign criteria,
we consider that the transaction's exposure to country risk is
sufficiently mitigated at the assigned preliminary rating levels.
"Until the end of the reinvestment period on Oct. 20, 2026, the
collateral manager is allowed to substitute assets in the portfolio
for so long as our CDO Monitor test is maintained or improved in
relation to the initial ratings on the notes. This test looks at
the total amount of losses that the transaction can sustain as
established by the initial cash flows for each rating, and compares
that with the default potential of the current portfolio plus par
losses to date. As a result, until the end of the reinvestment
period, the collateral manager can, through trading, deteriorate
the transaction's current risk profile, as long as the initial
ratings are maintained.
"At closing, we expect that the transaction's documented
counterparty replacement and remedy mechanisms will adequately
mitigate its exposure to counterparty risk under our current
counterparty criteria.
"We expect the transaction's legal structure to be bankruptcy
remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our preliminary ratings
are commensurate with the available credit enhancement for each
class of notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
to five of the 10 hypothetical scenarios we looked at in our
publication, "How Credit Distress Due To COVID-19 Could Affect
European CLO Ratings," published on April 2, 2020. The results
shown in the chart below are based on actual weighted-average
spread, coupon, and recoveries.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance (ESG) factors
S&P said, "We regard the exposure to ESG credit factors in the
transaction as being broadly in line with our benchmark for the
sector. Primarily due to the diversity of the assets within CLOs,
the exposure to environmental credit factors is viewed as below
average, social credit factors are below average, and governance
credit factors are average. Accordingly, since there are no
material differences compared to our ESG benchmark for the sector,
no specific adjustments have been made in our rating analysis to
account for any ESG-related risks or opportunities."
Ratings List
CLASS PRELIM. PRELIM. SUB (%) INTEREST RATE*
RATING AMOUNT
(MIL. EUR)
A AAA (sf) 248.00 38.00 Three/six-month EURIBOR
plus 0.92%
B-1 AA (sf) 32.50 28.00 Three/six-month EURIBOR
plus 1.75%
B-2 AA (sf) 7.50 28.00 2.20%
C A (sf) 28.00 21.00 Three/six-month EURIBOR
plus 2.35%
D BBB- (sf) 26.00 14.50 Three/six-month EURIBOR
plus 3.35%
E BB- (sf) 19.30 9.68 Three/six-month EURIBOR
plus 6.47%
F B- (sf) 11.70 6.75 Three/six-month EURIBOR
plus 8.89%
Sub notes NR 32.50 N/A N/A
*The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
PALMER SQUARE 2022-1: Moody's Gives (P)B1 Rating to EUR5MM F Notes
------------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following provisional ratings to the Notes to be issued by Palmer
Square European Loan Funding 2022-1 Designated Activity Company
(the "Issuer"):
EUR340,000,000 Class A Senior Secured Floating Rate Notes due
2031, Assigned (P)Aaa (sf)
EUR57,500,000 Class B Senior Secured Floating Rate Notes due 2031,
Assigned (P)Aa2 (sf)
EUR22,500,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned (P)A2 (sf)
EUR27,500,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned (P)Baa3 (sf)
EUR17,500,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned (P)Ba2 (sf)
EUR5,000,000 Class F Senior Secured Deferrable Floating Rate Notes
due 2031, Assigned (P)B1 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in Moody's methodology.
The Issuer is a static CLO. The issued notes will be collateralized
primarily by broadly syndicated senior secured corporate loans.
Moody's expect the portfolio to be 100% ramped as of the closing
date.
Palmer Square Europe Capital Management LLC (the "Servicer") may
sell assets on behalf of the Issuer during the life of the
transaction. Reinvestment is not permitted and all sales and
unscheduled principal proceeds received will be used to amortize
the notes in sequential order.
In addition, the Issuer will issue EUR33,700,000 of Subordinated
Note due 2031 which are not rated.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the Notes in order of seniority.
Methodology underlying the rating action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
The transaction is expected to be fully ramped at closing and no
reinvestment is allowed. Accordingly Moody's have modelled the
transaction based on the actual characteristics of the portfolio as
it has been provided to us. Any significant change in the
characteristics of the portfolio between the time of this press
release and closing may have an impact on the definitive ratings
being assigned at closing.
The rated Notes' performance is subject to uncertainty. The Notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The Servicer's investment decisions and management
of the transaction will also affect the debt's performance.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
Moody's used the following base-case modeling assumptions:
Par Amount: EUR500,000,000.00
Diversity Score: 61
Weighted Average Rating Factor (WARF): 2746
Weighted Average Spread (WAS): 3.61% (actual spread vector of the
portfolio)
Weighted Average Coupon (WAC): 3.98% (actual spread vector of the
portfolio)
Weighted Average Recovery Rate (WARR): 45.75%
Weighted Average Life (WAL): 5.36 years (actual amortization vector
of the portfolio)
ST. PAUL'S VIII: Moody's Affirms B2 Rating on EUR12MM Cl. F Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by St. Paul's CLO VIII DAC:
EUR27,000,000 Class B-1 Senior Secured Floating Rate Notes due
2030, Upgraded to Aa1 (sf); previously on Jul 29, 2020 Affirmed Aa2
(sf)
EUR20,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2030,
Upgraded to Aa1 (sf); previously on Jul 29, 2020 Affirmed Aa2 (sf)
EUR23,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2030, Upgraded to A1 (sf); previously on Jul 29, 2020
Affirmed A2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR244,000,000 Class A Senior Secured Floating Rate Notes due
2030, Affirmed Aaa (sf); previously on Jul 29, 2020 Affirmed Aaa
(sf)
EUR21,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed Baa2 (sf); previously on Jul 29, 2020
Confirmed at Baa2 (sf)
EUR25,000,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed Ba2 (sf); previously on Jul 29, 2020
Confirmed at Ba2 (sf)
EUR12,000,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed B2 (sf); previously on Jul 29, 2020
Confirmed at B2 (sf)
St. Paul's CLO VIII DAC, issued in December 2017, is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured European loans. The portfolio is
managed by Intermediate Capital Managers Limited. The transaction's
reinvestment period ended in January 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1, Class B-2 and Class C Notes
are primarily a result of the transaction reaching the end of the
reinvestment period in January 2022.
The affirmations on the ratings on the Class A, Class D, Class E
and Class F Notes are primarily a result of the expected losses on
the notes remaining consistent with their current ratings after
taking into account the CLO's latest portfolio, its relevant
structural features and its actual over-collateralization (OC)
levels.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from a shorter amortisation profile and
higher spread levels than it had assumed at the last rating action
in July 2020.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR398.7 million
Diversity Score: 54
Weighted Average Rating Factor (WARF): 2990
Weighted Average Life (WAL): 4.5 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.82%
Weighted Average Coupon (WAC): 5.05%
Weighted Average Recovery Rate (WARR): 44.31%
Par haircut in OC tests and interest diversion test: 0.09844%
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in May 2021. Moody's concluded the
ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
This transaction is subject to a high level of macroeconomic
uncertainty, which could negatively affect the ratings on the note,
in light of uncertainty about credit conditions in the general
economy. In particular, the length and severity of the economic and
credit shock precipitated by the global coronavirus pandemic will
have a significant impact on the performance of the securities. CLO
notes' performance may also be impacted either positively or
negatively by (1) the manager's investment strategy and behaviour
and (2) divergence in the legal interpretation of CDO documentation
by different transactional parties because of embedded
ambiguities.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
=========
I T A L Y
=========
SAIPEM SPA: S&P Downgrades ICR to 'BB-', On CreditWatch Negative
----------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit and issue
ratings on Italy-based engineering and construction (E&C) company
Saipem SpA and its debt to 'BB-' from 'BB', and placed them on
CreditWatch with negative implications.
S&P said, "The CreditWatch negative reflects the risk of another
downgrade in the coming weeks if further negative updates are
announced or we change our assumptions regarding shareholder and
bank support.
"Cost overruns in several key projects have cast a shadow over
Saipem's financial position and created uncertainties about its
risk-management controls. We lowered the rating on Saipem to
reflect our view that higher costs and strongly negative free
operating cash flow (FOCF) will continue to weigh on its financial
position in the short- to mid-term. We also placed the ratings on
CreditWatch with negative implications to signal potential downside
risks if the current situation escalates in the coming weeks and
months. In our view, gaining back customer confidence will take
time, even if remedies are announced and implemented.
"Saipem has announced additional cost overruns following our August
2021 downgrade to 'BB'. Our previous rating action came after
Saipem reported a cost overrun of EUR200 million at a specific
offshore E&C project in the North Sea, as well as a force majeure
event at a liquefied natural gas (LNG) project in Mozambique in
second-half 2021. Earlier this week, as part of its preliminary
2021 results preparations, the company announced additional cost
overruns at the offshore wind project and some E&C onshore
projects, totaling a further EUR1 billion. Saipem said the higher
costs were due to the sharp increase in raw material and general
cost inflation, as well as logistics problems. We note that the
company's peers reported relatively smaller increases in their
costs due to COVID-19. At this stage, the EUR3.6 billion Mozambique
LNG project, which remains in the company's EUR22.2 billion backlog
(there is an additional nonconsolidated backlog of EUR2.2 billion),
is still on hold with no clear indication of a restart. We
understand that Saipem didn't complete full due diligence on the
other projects in its backlog.
"We anticipate shareholders will provide support to restore
liquidity and strengthen the balance sheet. Although the EUR1
billion of cost overruns is going to shave off one-third of the
company's equity, the cash impact will be gradual over three years
and Saipem is not facing an immediate liquidity crunch. However,
the company will need to obtain new waivers from its lenders and
regain its customers' confidence. As a result, discussions between
key stakeholders have started." S&P's current rating assumes:
-- A material equity injection from the company's shareholders,
Eni SpA and Cassa Depositi e Prestiti Industria SpA, in the coming
months.
-- Lenders remain supportive by providing a covenant waiver, full
access to its revolving credit facility (RCF), and honoring
existing guarantees.
-- No changes in the company's portfolio.
-- No limitation on Saipem's ability to participate in undergoing
projects.
S&P said, "We continue to view Saipem's liquidity as less than
adequate, projecting that its liquidity sources will fall short of
uses in the coming 12 months, with a ratio of less than 1x. The
liquidity assessment is based on the company's cash and excludes
the RCF due to requirements not being met. Therefore, the company
has a limited cushion to absorb low probability events, in our
view. Saipem is subject to a single maintenance covenant on most of
its bank facilities, of net debt to EBITDA below 3.5x, which is
tested annually. In our base-case scenario, we calculate a breach
at year-end 2022. The EUR2.5 billion of bonds have no financial
covenant."
Although challenges could continue to impact Saipem in the short
term, its core competency and sizable backlog remain strengths. S&P
acknowledges Saipem's market leading positions in the E&C industry,
especially in deep water and remoter areas offshore and LNG plants
onshore, alongside other Tier 1 players such as TechnipFMC and
Subsea7. The current backlog split is 60% E&C onshore, 31% E&C
offshore, and the remainder drilling. To maintain its current
backlog, the company would need to secure over EUR10 billion in
2022 and 2023. In addition, Saipem recently saw some recovery in
its drilling business, which remains a core asset.
The CreditWatch negative reflects the risk of a downgrade in the
coming weeks if further negative updates are announced.
S&P said, "We could lower the rating by one or more notches if
Saipem announces additional cost overruns, leading to a material
cut in its backlog and raising uncertainties regarding its ability
to secure new contracts. A more material rating action can also be
expected under a less likely scenario in which the company's
liquidity is impaired--for example via limited access to its
facilities--or its shareholders prove less supportive than we
expect, leading us to take a multiple-notch downgrade.
"We understand that Saipem is likely to announce its steps to
contain the current situation in the coming days and weeks."
===================
L U X E M B O U R G
===================
ALTISOURCE PORTFOLIO: Egan-Jones Keeps CCC+ Sr. Unsecured Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company on January 21, 2022, maintained its
'CCC+' foreign currency and local currency senior unsecured ratings
on debt issued by Altisource Portfolio Solutions SA. EJR also
maintained its 'B' rating on commercial paper issued by the
Company.
Headquartered in Luxembourg, Altisource Portfolio Solutions S.A.
provides real estate and mortgage services.
=============
R O M A N I A
=============
DIGI COMMUNICATIONS: Moody's Upgrades CFR to Ba3, Outlook Stable
----------------------------------------------------------------
Moody's Investors Service has upgraded the corporate family rating
from B1 to Ba3 and the probability of default rating from B1-PD to
Ba3- PD of Digi Communications N.V. ("Digi", "DCS" or "the
company"), the parent company for RCS & RDS S.A. ("RCS&RDS"). At
the same time, Moody's has upgraded the rating of the EUR850
million guaranteed fixed rate senior secured notes (split into two
tranches, EUR450 million due 2025 and EUR400 million 2028) issued
by RCS&RDS from B1 to Ba3. The outlook on all ratings is stable.
"The upgrade to Ba3 reflects Digi's track record of good operating
performance and positive growth prospects, while maintaining
relatively low leverage levels on a sustained basis" says Agustin
Alberti, a Moody's Vice President-Senior Analyst and lead analyst
for Digi.
"The upgrade also reflects the corporate governance considerations
associated with Digi's decision to pursue a more conservative
financial policy, as the company has used almost half of the
proceeds of the sale of its Hungarian operations to repay debt with
gross leverage levels decreasing by approximately 0.5x to around
3.0x," adds Mr. Alberti. Financial strategy and risk management is
a governance consideration under Moody's General Principles for
Assessing Environmental, Social and Governance Risk Methodology for
assessing ESG risks.
RATINGS RATIONALE
In January 2022, Digi closed the sale of its Hungarian operations
to 4iG Plc for a total consideration of EUR625 million, equivalent
to an estimated enterprise value/EBITDA of around 20x. The company
used EUR272 million from the proceeds to repay debt. The remaining
EUR353 million will improve the liquidity profile of the company.
The lower scale and diversification resulting from the sale of this
fully invested asset, is more than offset by the high valuation
obtained, the reduction in leverage and the improved financial
flexibility.
Although the company lacks a publicly defined medium-term leverage
ratio target, leverage levels in the past have been low when
compared to the parameters required for its rating category, and
will further decrease following the decision to repay debt. The
liquidity profile of the group will also improve, given the
significant cash that will remain on its balance sheet.
In terms of Environmental, Social, and Governance (ESG)
considerations, the actions taken by the company have led the
rating agency to change its assessment of the company's Financial
Strategy and Risk Management score to 3 from 4 and to lower the
overall exposure to Governance risks (Issuer Profile Score or
"IPS") to moderately negative (G-3) from highly negative (G-4).
Digi's ESG Credit Impact Score will therefore change from highly
negative (CIS-4) to moderately negative (CIS-3).
The rating upgrade to Ba3 from B1 also reflects Digi's solid
operating performance over the last 5 years supported by revenues
growing annually on average slightly over 10%, with stable EBITDA
margins (Moody's adjusted) slightly above 30%. Moody's gross
leverage has been on a consistent basis slightly below 3.5x -- the
threshold for upwards rating pressure set for Digi's previous B1
rating. As the company has decreased its debt levels, the rating
agency projects this ratio to remain at around 3.0x in the next two
years supported by the strong operating performance and stable
outstanding debt.
Moody's expects Digi's organic revenue and EBITDA growth rates to
remain solid in the mid-single digits in future years driven by
growth in Romania, where the company still has room to benefit from
increasing broadband penetration, and from further share gains in
the mobile segment. Digi Spain should also contribute to growth as
its challenger approach is proving to be successful.
In November 2021, the company secured spectrum auction rights in
the high frequency bands in Portugal through its subsidiary
Dixarobil Telecom for EUR67 million. The rating agency expects
significant investments to be deployed to develop a mobile
proposition, as well as partnership agreements with existing
network infrastructure providers, such as Vantage Towers AG (Baa3
stable) or Cellnex. The Portuguese expansion will help to further
increase revenues, but will be cash consuming and EBITDA negative
initially, and its final success will be subject to high execution
risks, given that the market is already competitive.
Moody's projects the company's capex to be exceptionally high at
around EUR450-500 million per annum in the coming 2 years, as Digi
uses its increased financial flexibility to invest in network
related capex in its existing markets and Portugal, including the
Romanian 5G spectrum auction expected to take place in Q3 2022.
This implies that free cash flow will remain negative during the
period. However, the rating agency acknowledges that underlying FCF
excluding growth capex is positive, and the discretionary nature of
the expansion capex, which could be curtailed if needed.
LIQUIDITY
Moody's considers that Digi's current liquidity is adequate. Cash
and cash equivalents of around EUR350 million (following the sale
of Hungary and debt repayment), together with the EUR50 million
fully undrawn revolving credit facility (RCF under the SFA 2020)
maturing in December 2023, will cover its basic liquidity needs and
growth capex over the next 12-18 months. The company's SFA 2020 is
restricted by two maintenance financial covenants: less than 3.5x
net debt/EBITDA (tested quarterly) with a likely capacity of 45% as
of year-end 2020 and EBITDA/net total interest of more than 4.25x
with ample capacity. Digi Spain has also access to credit
facilities totaling EUR132 million, which are fully drawn. The
company does not face any significant debt maturities before 2025,
when the EUR450 million bond matures.
STRUCTURAL CONSIDERATIONS
Digi has been assigned a probability of default rating of Ba3-PD,
in line with the Ba3 CFR, reflecting the expected recovery rate of
50%, which Moody's typically assume for a bank and bond capital
structure.
RCS&RDS is the borrower of the EUR850 million worth of guaranteed
senior secured notes. The Ba3 rated senior secured notes and the
senior credit facilities are guaranteed on a senior secured basis
by RCS&RDS. They have been ranked highest in priority of claims to
reflect their first-ranking security interests over substantially
all present and future movable assets of RCS&RDS on a pari passu
basis. In line with Moody's methodology, Moody's rank the trade
payables pari passu with the secured debt. The lease rejection
claims have been ranked behind the secured debt.
RATIONALE FOR STABLE OUTLOOK
The stable rating outlook reflects Moody's expectation that Digi
will maintain a good operating performance in terms of moderate
revenue and EBITDA growth and credit metrics in line with the
parameters defined for the Ba3 rating. The stable outlook also
reflects Moody's assumption that Digi will maintain a conservative
financial policy.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the rating could develop if Digi (1) increases
its scale and diversification, (2) reports solid operating
performance such that its Moody's-adjusted debt/EBITDA remains well
below 2.5x; and (3) the company generates positive FCF (after
capital spending and dividends) on a sustained basis.
Conversely, downward pressure could be exerted on the rating if (1)
Digi's operating performance weakens such that its Moody's-adjusted
debt/EBITDA rises above 3.5x on a sustained basis, (2) the company
embarks in a debt financed organic or inorganic growth strategy, or
(3) the company's liquidity profile weakens (including a reduction
in headroom under financial covenants).
LIST OF AFFECTED RATINGS
Upgrades:
Issuer: Digi Communications N.V.
Probability of Default Rating, Upgraded to Ba3-PD from B1-PD
LT Corporate Family Rating, Upgraded to Ba3 from B1
Issuer: RCS & RDS S.A.
BACKED Senior Secured Regular Bond/Debenture, Upgraded to Ba3 from
B1
Outlook Actions:
Issuer: Digi Communications N.V.
Outlook, Remains Stable
Issuer: RCS & RDS S.A.
Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Pay TV
published in October 2021.
COMPANY PROFILE
Digi Communications N.V. is the parent company of RCS&RDS S.A., a
leading pay-TV and communications services provider in Romania and
Hungary. The company completed an IPO in May 2017 and is listed on
the Bucharest Stock Exchange. It generated revenues of EUR1.3
billion and reported EBITDA of EUR480 million (including IFRS16) in
2020. DCS is ultimately controlled by Romanian entrepreneur Zoltan
Teszari, president of the board and founder of the company.
=========
S P A I N
=========
EDREAMS ODIGEO: Fitch Assigns Final 'B' LT IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has assigned eDreams ODIGEO S.A. (eDreams) a final
Long-Term Issuer Default Rating (IDR) of 'B' with a Stable Outlook.
Fitch has also assigned eDreams' new EUR375 million senior secured
notes a long-term rating of 'B-' with a Recovery Rating of 'RR5'.
The assignment of final ratings follows the completion of the
group's debt refinancing in line with Fitch's expectations.
The 'B' IDR is constrained by uncertainty over post-pandemic
recovery caused by Omicron resurgence despite eDreams' strong
positioning in the European online travel agency (OTA) market with
good demand growth prospects. The group is moving from a
transaction-based model to a subscription-based one. The success of
this transition should lead to a good deleveraging pace from
post-pandemic excessive leverage.
The Stable Outlook is supported by Fitch's expectation that eDreams
will return to profitability in fiscal year ending March 2023
(FY23), as well as positive cash flows derived from a capital-light
and flexible cost structure.
KEY RATING DRIVERS
Strong Positioning in Competitive Market: The rating reflects
eDreams' solid competitive position in flight bookings in Europe.
The global OTA market is characterised by intense competition and
low switching costs. eDreams competes with bigger and more
diversified operators, metasearch sites and the direct channels of
travel participants, such as airlines and hotels. However, the
highly fragmented travel industry in Europe favours the use of
intermediators. The fully online model of eDreams with
well-developed mobile channels is also a competitive advantage.
Ambitious Transitioning Strategy: eDreams is in the process of
consolidating the first subscription model for the travel industry
and Fitch sees challenges to the ongoing migration from a
transaction model. Developments of the new model have been
successful so far since its introduction in 2017. While Fitch
recognises cross-selling opportunities from this strategy will help
fund subscriber discounts, Fitch's rating-case projections assume
more conservative sales growth relative to management's ambitious
expected market-share gains and repeat bookings from members.
Cash-Generative Business Model: eDreams operates a capex-light
business model with a flexible cost base that has proved resilient
during the pandemic. However, Fitch sees sensitivity to variable
costs and the potential for EBITDA margin to stabilise at a lower
level of around 17% once the pandemic abates with the
implementation of the subscription model. This equals to a funds
from operations (FFO) margin in the low teens, which would still be
solid for the rating. eDreams has traditionally operated with heavy
swings in working capital, which Fitch expects to be partly
mitigated by the upfront fees paid by subscribers, leading to a
stable positive free cash flow (FCF) margin and solid liquidity.
High Post-pandemic Leverage: Severe Covid-19 disruption led to
negative cash flow from operations of EUR150 million (aggregate for
FY20 and FY21), with significant working-capital outflows at FYE20.
Draws on the group's revolving credit facility (RCF), together with
still limited FFO by FY22, lead to unsustainable leverage metrics
in FY22.
The refinancing has reflected in partial debt repayment, which
alongside an equity issue of EUR75 million, the ramping-up of
business activity and a conservative financial policy, should
reduce FFO gross leverage towards around 8.0x in FY23, albeit still
weak for the IDR. The rating remains anchored around Fitch's
expectation of solid financial discipline and faster deleveraging
towards 6x-6.5x by FYE24 while maintaining an adequate liquidity
buffer.
Leisure Recovery Ahead of Industry: eDreams' absence of
corporate-traveller offering benefits the post-pandemic rebound as
leisure has swiftly recovered with the lifting of restrictions.
Fitch expects disruption in the travel industry to last through to
2024 and 2025 for both airline capacity and hotel occupancy, with
international travelling lagging domestic trips. This is reflected
in Fitch's assumption of subdued revenue per booking, yet eDreams
is well-positioned to benefit from the faster growth prospects in
leisure, while acknowledging the non-recurring impact of pent-up
demand of leisure customers.
Limited Booking Diversification: eDreams' business mix offers
certain diversification between sources (customers, fees from
stakeholders and payment providers, etc) and products (flights,
hotels, cars, insurance), but the group is mostly exposed to the
flight market. It operates in 45 markets, although its top six
regions account for 77% of revenue, led by southern Europe (France,
Italy and Spain account for 52% of revenue). Fitch expects the
subscription model will enhance diversification, given discount
incentives to repeat bookings for members in all possible
categories.
DERIVATION SUMMARY
eDreams lags the global leader Expedia Group, Inc. (BBB-/Negative),
or Booking.com in scale and global market position. Despite sharing
a similar EBITDA margin to eDreams (Expedia: 17.5% pre-pandemic),
Expedia is significantly less leveraged (FFO gross leverage
expected at 3.9x by FYE22) and benefits from solid sources of
liquidity, which is particularly important as it adapts to
post-pandemic travel-demand patterns. While eDreams' operations
concentrate in the sluggish European market, Expedia is more geared
towards the US, where domestic travel is showing a solid rebound.
Compared with hotel operators such as NH Hotel Group SA
(B-/Negative) or Sani/Ikos Group S.C.A. (B-/Stable), eDreams offers
better recovery prospects based on its pioneer subscription model
for bookings. However, hotels' business models are traditionally
more profitable while eDreams' subscription model is yet to be
fully proven. eDreams has demonstrated better resilience than
asset-light hotel operators such as Accor SA (BB+/Stable) but
transitory leverage is expected to be higher for eDreams (FFO gross
leverage at 8.1x by FYE23) compared with 5.5x for Accor.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- FY22 revenues at EUR320 million, and growing to EUR600 million
in FY25, as prime subscribers increase to 4.7 million on
average in FY25 from 1.8 million in FY22;
-- Fixed costs decreasing to 13% of revenue in FY25 from 19% in
FY22;
-- Variable costs per individual 30% lower for prime subscribers
than transactional users;
-- Capex of around EUR160 million in the next four years to
reflect business model transition;
-- No acquisitions as growth would be driven by market dynamics
and market-share gains through the subscription model;
-- Working-capital inflows from increased activity of pre-
pandemic bookings and individual deferred revenue from the
prime subscriber model;
-- No dividend distribution.
KEY RECOVERY RATING ASSUMPTIONS
-- Fitch assumes that eDreams would be considered a going concern
in bankruptcy and that it would be reorganised rather than
liquidated. Fitch has assumed a 10% administrative claim in
the recovery analysis;
-- Fitch assumes a going-concern EBITDA of EUR64 million, which
Fitch believes should be sustainable post-restructuring;
-- Fitch assumes a 5.0x distressed enterprise value (EV)/ EBITDA.
The distressed multiple reflects a weaker competitive position
than global leaders' and the disrupted industry in which
eDreams operates (compared with regular software companies);
-- The abovementioned assumptions result in a distressed EV of
about EUR320 million;
-- Based on the payment waterfall Fitch has assumed the EUR180
million RCF to be fully drawn and ranking senior to the notes,
together with eDreams' outstanding EUR15 million Instituto de
Credito Oficial (ICO) loan. Therefore, after deducting 10% for
administrative claims, Fitch's waterfall analysis generates a
ranked recovery for the newly issued senior secured debt in
the 'RR5' band, indicating a 'B-' instrument rating, or one
notch below the IDR. The waterfall analysis output percentage
on current metrics and assumptions is 25% for the newly issued
senior secured bond.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Visibility on stabilisation of travel demand, successful
resumption of bookings and signs of consolidation of the
subscription model;
-- FFO gross leverage below 6.0x or total debt with equity
credit/operating EBITDA below 6.5x;
-- FFO margin sustainably moving above 12% or EBITDA margin above
14%;
-- FFO fixed charge coverage above 3.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Secular decline or deterioration in the OTA business model
stemming from a shift to direct bookings, or less-than-
expected increase in subscriptions;
-- Inability to reduce FFO gross leverage below 7.5x on a
sustained basis or total debt with equity credit/operating
EBITDA below 8.0x;
-- Diminishing financial flexibility as a result of liquidity
erosion, for instance, reflected in no equity issue, FCF
remaining neutral or volatile, over-reliance on RCF drawings
at year-end, or FFO fixed charge coverage below 2.0x;
-- Increased volatility in profitability with FFO margin
sustainably below 10% or EBITDA margin below 12%.
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
Limited but Improving Liquidity: As of 30 September 2021, eDreams
had EUR36 million of reported cash and EUR108 million in undrawn
RCF. While this is adequate liquidity at a seasonally low point,
going forward Fitch restricts 50% of year-end cash to reflect
seasonal working-capital requirements.
The senior secured notes issue has extended the group's debt
maturity profile to 2027, while the EUR75 million equity issue will
also help rebuild the immediate cash buffer. Moreover, the
increased RCF of EUR180 million (from EUR175 million currently)
will also enhance liquidity headroom. Over the coming months, as
travel volumes continue to recover, eDreams' liquidity will benefit
from increases in booking volumes, and upfront fees as the number
of its prime subscribers increases.
ISSUER PROFILE
eDreams is one of the world's largest online travel companies and
one of the largest European e-commerce businesses (market share of
37% in Europe). They provide access to over 650 airlines and 2.1
million hotel partners for 17 million customers across 45 markets
every year (mainly focused in southern Europe). It is mainly
focused on flight tickets intermediation, although the platform
also offers hotels, cars, holiday package and ancillary travel
services.
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 W I T Z E R L A N D
=====================
COVIS FINCO: Moody's Rates New $300MM Second Lien Term Loan 'Caa1'
------------------------------------------------------------------
Moody's Investors Service has assigned a Caa1 rating to the
proposed $300 million backed senior secured second lien term loan
to be borrowed by Covis Finco S.a r.l. (Covis) and its subsidiary
Covis US Finco, LLC (the co-borrowers). Parent company Covis Midco
2 S.a r.l., which provides respiratory and critical care drugs, is
currently in syndication to refinance its entire capital
structure.
As a result of changes in the proposed capital structure, Moody's
has also upgraded to B1 from B2 Covis' first lien debt instruments,
including the backed senior secured first-lien term loan B (upsized
to $550 million from $350 million) as well as pari passu ranking
$100 million backed senior secured multicurrency revolving credit
facility (RCF) and the proposed $350 million equivalent
Euro-denominated backed senior secured notes (downsized from
previously proposed $375 million).
The existing debt ratings of Covis Midco 2 S.a r.l., including its
B2 corporate family rating (CFR), are unchanged. The outlook on all
entities is stable.
RATINGS RATIONALE
The Caa1 rating on the proposed backed senior secured second lien
term loan, two notches below the CFR, reflects its ranking behind
$900 million equivalent of backed senior secured first lien debt in
the event of security enforcement.
Conversely, the upgrade of the proposed backed senior secured first
lien debt facilities to B1 from B2, one notch above the CFR,
reflects the benefit of having a sizeable amount of second lien
debt providing some cushion in a default scenario.
Although unchanged, the B2 CFR on Covis remains weakly positioned.
Following updates to the pricing guidance, Moody's estimates that
annual interest payments will be around $20 million higher than
expected at the time of the CFR assignment. It will reduce Moody's
adjusted free cash flow (FCF) accordingly, to around $60 million in
2022. While still solid, the lower FCF will result in a slower cash
build, thereby limiting the company's ability to fund future
business development through internal resources. Nevertheless,
Moody's has stated before that the current rating and outlook would
not accommodate any material product or business acquisitions in
the next 12 to 18 months.
ESG CONSIDERATIONS
Governance factors that Moody's considers in Covis' credit profile
include the risk of material or debt-funded acquisitions which
would increase leverage or business risk and the company's private
equity ownership which exposes Covis' credit profile to the risk of
shareholder distributions.
Social risks for Covis pertain to (i) demographic and social trends
as payors seek to limit healthcare expenditure, (ii) customer
relations risks in the context of legal proceedings regarding
marketing practices for Makena in the US and (iii) risks related to
responsible production such as product safety and regulatory risks
linked to manufacturing compliance.
RATING OUTLOOK
The stable outlook reflects Moody's expectations that Covis' credit
metrics will deteriorate in the next 12 to 18 months before the
company returns to low single digit organic growth in revenue and
EBITDA from 2023. Good cash conversion and free cash flow
generation of at least $80 million per annum under the current
business perimeter support the stable outlook. The stable outlook
also assumes that Covis will not pursue material product or
business acquisitions or shareholder distributions in the next 12
to 18 months. Furthermore, the potential market removal of Makena
represents an event risk which is not formally factored into the
outlook.
Lastly, the stable outlook assumes that no new material debt will
be used to fund the original issue discounts on the proposed debt
instruments.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if (i) risks associated with product
concentration significantly abate, including good mitigation of
generic entry on Feraheme, growth in the respiratory portfolio and
certainty that Makena will remain on the market with stable
revenues, and (ii) Covis maintains or grows Moody's adjusted EBITDA
from its 2021 level under the pro forma business perimeter and
Moody's adjusted gross debt to EBITDA reduces to around 4.0x on a
sustainable basis, and (iii) Covis generates free cash flow (FCF,
after royalties, interest and exceptional items) consistently above
$100 million with FCF/debt toward 15%, and (iv) the company does
not make any additional large product and business acquisitions or
shareholder distributions.
The ratings could be downgraded in case Covis' revenues and
earnings decline beyond 2022 including as a result of generic
competition on Feraheme and potential delays in the recovery of
Alvesco sales. Downward rating pressure could also arise if (i)
Moody's-adjusted debt/EBITDA rises toward 5.5x sustainably, (ii)
cash generation weakens such that Moody's adjusted free cash
flow/debt decreases toward 5% and liquidity weakens, (iii) Covis
embarks upon additional large product or business acquisitions
before the AstraZeneca assets are fully transitioned and
consolidated in its accounts for a full 12 months, (iv) Makena is
removed from the market or its share reduces significantly.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Pharmaceuticals
published in November 2021.
LIST OF AFFECTED RATINGS
Upgrades:
Issuer: Covis Finco S.a r.l.
BACKED Senior Secured Bank Credit Facility, Upgraded to B1 from
B2
BACKED Senior Secured Regular Bond/Debenture, Upgraded to B1 from
B2
Assignments:
Issuer: Covis Finco S.a r.l.
BACKED Senior Secured Bank Credit Facility, Assigned Caa1
Withdrawals:
Issuer: Covis Finco S.a r.l.
BACKED Senior Secured Regular Bond/Debenture, Withdrawn,
previously rated B2
Outlook Actions:
Issuer: Covis Finco S.a r.l.
Outlook, Remains Stable
CORPORATE PROFILE
Covis, headquartered in Zug (Switzerland) and Luxembourg, markets
and distributes patent-protected and mature drugs to treat chronic
disorders and life-threatening conditions in the respiratory and
critical care areas, with presence in over 50 countries. Founded in
2011 by management and Cerberus Capital, it was acquired by funds
affiliated with Apollo Global Management in March 2020. In the 12
months to September 30, 2021, Covis had revenue of around $590
million, including the assets recently acquired from AstraZeneca
PLC.
=============
U K R A I N E
=============
UKRAINE: Fitch Affirms 'B' LT FC IDR, Alters Outlook to Stable
--------------------------------------------------------------
Fitch Ratings has revised the Outlook on Ukraine's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to Stable from
Positive and affirmed the IDR at 'B'.
KEY RATING DRIVERS
The revision of the Outlook reflects the following key rating
drivers and their relative weights:
HIGH
Expectations of a more protracted period of heightened tensions
with Russia, an increased downside risk of conflict, constrained
financing conditions, moderate capital outflows and weakening
international reserves, have increased external financing risks
since Fitch's previous review in August. The Stable Outlook partly
reflects Fitch's base case that full-scale military conflict with
Russia will be avoided, and that the somewhat greater availability
of IFI and bilateral finance, Ukraine's credible macro-policy
framework and strengthened fiscal and FX reserves position coming
into 2022, will help mitigate impacts.
There is a high degree of uncertainty about the near-term strategic
objectives of President Putin, and the increased risk of an
invasion reflects the extended period of troop build-up along
Ukraine's border, weak prospects for agreement on the core demands
articulated by the Russian administration, and the heightened
preparatory response by the US.
Our base case that there is not a full-scale military invasion is
partly due to the likely economic, military, and geopolitical cost
and risks to Russia, the absence of firm domestic popular support
for such action, and to a lesser extent, the potential for some
limited policy concessions - set against the uncertain strategic
gain. However, Fitch expects a protracted period of elevated
tensions and risk, and see a somewhat higher probability of more
contained military operations such as in the Donbas region.
MEDIUM
Severely constrained external financing conditions, a wider current
account deficit, and moderate outflows of non-resident holdings of
government debt and from the domestic private sector will weaken
the international reserve position. Fitch forecasts FX reserves
fall by USD6 billion in 2022 to USD25 billion, equivalent to 2.8
months of current external payments, and then partially recover to
3.1 months at end-2023 but below the projected 'B' median of 4.2
months. Net FX sales by the National Bank of Ukraine (NBU) were
close to USD1.5 billion in January, with the currency depreciating
to UAH/USD28.2 from UAH/USD26.1 in early November. Fitch assumes
there is no new sovereign Eurobond issuance this year.
Fitch forecasts the current account deficit widens 1.6pp in 2022 to
2.6% of GDP, and to 3.4% in 2023, driven by worsening terms of
trade. Sovereign external debt service is relatively high at USD4.3
billion in 2022 and USD5.4 billion in 2023, although amortisations
are lighter until September when near USD1.4 billion falls due.
There is some offset from higher IFI and bilateral financing, which
Fitch assumes totals USD6 billion in 2022.
There is greater uncertainty over the extent to which domestic
banks will roll over government debt, despite their sound
liquidity, due to geopolitical risk, and increased regulatory
capital charges for foreign-currency sovereign debt, in the context
of already high holdings (banks account for 52% of outstanding
domestic debt). However, the very back-ended nature of budget
expenditure provides flexibility (Fitch estimates it could be cut
particularly on capital by around 1.5% of GDP in 4Q22 if funding
remains constrained) and government cash holdings have been stable
at USD2 billion.
Ukraine's 'B' rating also reflects the following rating drivers:
The rating is supported by Ukraine's credible macroeconomic policy
framework (underpinned by exchange rate flexibility, commitment to
inflation targeting, and prudent fiscal policy), a record of
multilateral support, favourable human development indicators, a
net external creditor position of 9% of GDP, and public debt below
the 'B' median. Set against these factors are weak governance
indicators and exposure to geopolitical risk, low external
liquidity relative to a large sovereign external debt service
requirement, and legislative and judicial risk to policy
implementation.
The general government deficit narrowed an estimated 2.2pp in 2021
to 3.8% of GDP, outperforming the target (by 1.7pp) for the second
consecutive year. Fitch forecasts a general government deficit of
3.4% of GDP in 2022, with 0.5pp of tax-raising measures helping
offset recurrent expenditure pressures and expected gas subsidies.
The deficit is projected to fall further to 2.8% of GDP in 2023,
and compares favourably with the 'B' median of 3.7%.
General government debt has resumed the downward trend that was
interrupted by the coronavirus shock, falling an estimated 9.2pp in
2021 to 44.3% of GDP (50.2% including guarantees). This was driven
by higher nominal GDP, boosted by a high deflator, and takes public
debt/GDP back to the end-2019 level. Fitch forecasts a more gradual
decline, to 42.2% of GDP at end-2023, below the projected 'B'
median of 67.6%. The share of foreign currency-denominated debt has
remained broadly stable at 60%, close to the peer group median of
62%.
Despite further slow progress against the second review of the IMF
Standby Arrangement (SBA; extended to end-June 2022), the
conditionality on politically challenging areas is much lighter
than for the first review, and Fitch expects accelerated execution
in 2Q22 and full release of the remaining USD2.3 billion programme
funds. Fitch anticipates that a new programme will be agreed this
year. Its form, duration and size is uncertain, but recent
experience points to an annual funding envelope of around USD4
billion under normal access.
More generally, the long delay to agreeing the first SBA review
underlines the policy implementation challenges facing President
Zelensky, partly due to the influence of oligarchs, pro-Russian
interests and unexpected reversals by the Constitutional Court.
Parliamentary elections due in October 2023 could add to
legislative challenges, with polls indicating his Servant of the
People Party would not secure a majority. Continued IMF engagement
will remain key to accessing external financing, in Fitch's view.
Fitch forecasts GDP growth of 2.9% in 2022, from 3.0% in 2021, a
1pp downward revision from the August review due to slowing growth
in real wages and private consumption, a drag on domestic demand
from heightened geopolitical risk, and the high gas price. GDP
growth is projected to pick up to 3.5% in 2023, broadly in line
with Ukraine's trend rate, and the 'B' median. Fitch forecasts
inflation remains elevated at close to 10% in 1H22 (with a further
200bp NBU policy rate rise to 12%), before falling to 7.9% at
end-2022 and 5.3% at end-2023.
The Ukrainian banking sector's credit fundamentals have improved
over recent years and banks are reasonably placed to withstand
current market volatility. Liquidity buffers are substantial
(highly liquid assets were 26% of deposits at end-November) and
Fitch has not observed material deposit outflows or increased
dollarisation so far this year. The non-performing loan ratio is
high (31%) but declining and largely provisioned, core capital is
adequate (12%), pre-impairment profitability robust (8% of gross
loans) and the deposit dollarisation ratio has fallen 5pp since
end-2019 to 35%.
ESG - Governance: Ukraine has an ESG Relevance Score (RS) of 5 for
both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption.
These scores reflect the high weight that the World Bank Governance
Indicators (WBGI) have in Fitch's proprietary Sovereign Rating
Model (SRM). Ukraine has a low WBGI ranking at the 32nd percentile,
reflecting the Russian-Ukrainian conflict, weak institutional
capacity, uneven application of the rule of law and a high level of
corruption.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Structural: Materialisation of political/geopolitical shocks
that threaten macroeconomic stability, growth prospects and
Ukraine's fiscal and external position.
-- Macro and External Finances: Increased external financing
pressures, sharp decline in international reserves or
increased macroeconomic instability, for example stemming from
IMF programme disengagement due to deterioration in the
consistency of the policy mix and/or reform reversals.
-- Public Finances: Persistent increase in general government
debt/GDP, for example due to fiscal loosening, weak GDP
growth, or currency depreciation.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- External Finances: Reduction in external financial
vulnerabilities, for example due to reduced geopolitical risk,
sustained increase in international reserves, greater
financing flexibility, or greater confidence in the ability to
maintain IMF programme engagement and market access.
-- Macro and Structural: Increased confidence that macroeconomic
stability will not be impaired by materialisation of
geopolitical risk, and that progress in reforms will lead to
improvement in governance standards and higher trend GDP
growth prospect.
-- Public Finances: Sustained fiscal consolidation that places
general government debt/GDP on a firm downward path over the
medium term.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Ukraine a score equivalent to a
rating of 'B+' on the Long-Term FC IDR scale.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final LT FC IDR by applying its QO, relative to
rated peers, as follows:
-- External Finances: -1 notch: to reflect a) low external
liquidity relative to a high sovereign external debt service
requirement, and b) the degree of uncertainty over external
financing sources, partly due to heightened geopolitical risk,
and to legislative and judicial risks to policy implementation
that could undermine IMF programme engagement and market
access.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within
Fitch's criteria that are not fully quantifiable and/or not fully
reflected in the SRM.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure 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 three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Ukraine has an ESG Relevance Score of '5' for Political Stability
and Rights as WBGI have the highest weight in Fitch's SRM and are
highly relevant to the rating and a key rating driver with a high
weight. A major escalation of the conflict in the east of Ukraine
or invasion by Russia represent risks. As Ukraine has a percentile
below 50 for the respective Governance Indicator, this has a
negative impact on the credit profile.
Ukraine has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGI have the highest weight in Fitch's SRM and in the case of
Ukraine weaken the business environment, investment and reform
prospects; this is highly relevant to the rating and a key rating
driver with high weight. As Ukraine has a percentile rank below 50
for the respective Governance Indicators, this has a negative
impact on the credit profile.
Ukraine has an ESG Relevance Score of '4[+]' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
WBGI is relevant to the rating and a rating driver. As Ukraine has
a percentile rank above 50 for the respective Governance Indicator,
this has a positive impact on the credit profile.
Ukraine has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Ukraine, as for all sovereigns. As Ukraine
has a fairly recent restructuring of public debt in 2015, this has
a negative impact on the credit profile.
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
===========================
ATLANTICA SUSTAINABLE: Egan-Jones Keeps B- Sr. Unsecured Ratings
----------------------------------------------------------------
Egan-Jones Ratings Company on January 21, 2022, maintained its 'B-'
foreign currency and local currency senior unsecured ratings on
debt issued by Atlantica Sustainable Infrastructure PLC. EJR also
maintained its 'B' rating on commercial paper issued by the
Company.
Headquartered in the United Kingdom, Atlantica Sustainable
Infrastructure PLC provides renewable energy solutions.
BULB ENERGY: Administrators May Tap Lazard to Handle Sale
---------------------------------------------------------
Nathalie Thomas, Arash Massoudi and Michael O'Dwyer at The
Financial Times report that administrators of Bulb Energy, the UK
energy supplier bailed out by taxpayers last year, are preparing to
appoint Lazard to handle the sale of the business, according to
three people familiar with the situation.
Bulb was placed into "special administration" in November after
regulators deemed it too large to process via the energy industry's
normal mechanism for distributing the customers of failed suppliers
to rival companies, the FT recounts.
The group was Britain's seventh-biggest supplier, with 1.5 million
customers, and had to admit to regulators last year that it was no
longer able to withstand record wholesale gas and power prices, the
FT notes.
The company was the first in the energy industry to be placed into
special administration and its working capital is being supported
by a GBP1.7 billion government loan, the FT states. The process is
being run by Teneo, the FT discloses.
According to the FT, one of the people said Lazard was set to be
called back in partly because it was familiar with Bulb's
business.
The investment bank last year sought to find Bulb new investors and
to sell it to a rival but the process came to nothing as wholesale
gas prices, in particular, continued to surge, the FT recounts.
Lazard, the FT says, will now seek to rekindle interest in the
business. Rivals including Centrica, Ovo Energy and Octopus all
ran the rule over Bulb during last year's sales process, the FT
discloses.
Those efforts to find a buyer were abandoned in November after
potential bidders indicated they were no longer willing to invest
in or acquire the company "on a solvent basis", the FT relays,
citing documents sent to creditors in January.
Teneo told creditors in January that a sale or rescue of the
company "might not be possible until spring 2022", although
industry experts said this was optimistic given current conditions
in the energy retail market, the FT recounts.
According to the FT, reports published by Teneo and administrators
for Bulb's parent company Simple Energy in recent weeks have shown
the company owed GBP254 million to customers when it was rescued in
November using a taxpayer loan. The reports also highlighted flaws
in Bulb's hedging strategy that led to its collapse, the FT
states.
CARILLION PLC: Liquidators Sue KPMG for GBP1.3 Bil. Over Audit
--------------------------------------------------------------
Kirstin Ridley at Reuters reports that KPMG has been sued for
GBP1.3 billion (US$1.77 billion) by the liquidators of Carillion
for missing "red flags" during audits of the construction giant, in
one of the largest claims against one of the world's top
accountants.
According to Reuters, Britain's Official Receiver, part of the
Insolvency Service, which is liquidating the former blue-chip
group, alleged that negligent failures by KPMG to detect
misstatements in the accounts of Carillion -- which collapsed in
2018 under GBP7 billion of debt -- cost claimants "extensive loss
and damage".
KPMG said it believed the lawsuit, details of which were made
public on Feb. 3, was without merit and vowed to defend the case
robustly, Reuters relates.
The claim, filed on behalf of creditors, turns on allegations that
Carillion amassed vast trading losses, paid out about GBP210
million in dividends between 2014 and 2016 and almost GBP39 million
in professional fees in 2017, because it relied on KPMG's audits,
Reuters discloses.
The liquidator alleged KPMG failed to remain independent from its
client and failed to exercise proper professional scepticism,
Reuters states. The lawsuit alleged one audit engagement partner
repeatedly accepted hospitality from and offered hospitality to
senior Carillion management, Reuters notes.
DERBY COUNTY FOOTBALL: EFL Rejects Insolvency Laws to Settle Debts
------------------------------------------------------------------
BBC Sport reports that the EFL says Derby County must not use
insolvency laws to settle some of their outstanding debts -- if
they wish to come out of administration.
The Championship club are the subject of unresolved compensation
claims from fellow clubs Middlesbrough and Wycombe.
Derby say both should not be treated as "football-related debts",
BBC Sport relates.
According to BBC Sport, in a statement, the EFL says it does not
agree and feels the club's administrators Quantuma must now
consider how they wish to proceed.
Quantuma have been given until the beginning of March to provide
proof of how Derby will be funded for the rest of the season, BBC
Sport notes.
That deadline was extended from February 1, BBC discloses.
Derby, BBC says, have been in administration since September and
remain in the Championship relegation zone, seven points from
safety, having already been deducted 21 points this season.
BBC Sport understands one of the club's potential buyers fears
Derby are headed for liquidation.
The Binnie family submitted a formal GBP28 million takeover offer
last month, but that price did not include the club's stadium, BBC
Sport recounts.
Pride Park is still owned by Mel Morris, who put Derby into
administration, BBC Sport notes. It also has a charge in excess of
GBP20 million to American finance company MSD, for which Morris is
the guarantor, according to BBC Sport.
"The club is suffering from critical legacy debt issues that reach
into tens of millions, all of which need to be resolved if a
solution is to be found," BBC Sport quotes the EFL as saying. "That
also includes monies owed to HMRC and the loans from MSD secured
against club assets and the stadium."
It has been suggested a combined payment of about GBP7 million
would settle the issues involving Middlesbrough and Wycombe, BBC
Sport states.
Both clubs claim to have lost out because of Derby's financial rule
breaches.
But the Binnie family are understood to be reluctant to commit to
paying the settlement as well as the additional cost of buying both
the club and the stadium, BBC Sport relates.
The EFL also renewed its calls for "formal collaborative
negotiations" between the current preferred bidder, Middlesbrough,
Wycombe, Quantuma, Morris, MSD Partners and HMRC "to ensure Derby
County has a long-term future", BBC Sport recounts.
About Derby County Football Club
Founded in 1884, Derby County Football Club is a professional
association football club based in Derby, Derbyshire, England.
The club competes in the English Football League Championship
(EFL, the 'Championship'), the second tier of English football.
The team gets its nickname, The Rams, to show tribute to its
links with the First Regiment of Derby Militia, which took a
ram as its mascot. Mel Morris is the owner while Wayne Rooney
is the manager of the club.
On Sept. 22, 2021, the club went into administration. The EFL
sanctioned a 12-point deduction on the club, putting the team at
the bottom of the Championship. Andrew Hosking, Carl Jackson and
Andrew Andronikou, managing directors at business advisory firm
Quantuma, had been appointed joint administrators to the club.
HARBEN FINANCE 2017-1: Fitch Rates 2 Note Classes 'B-(EXP)'
-----------------------------------------------------------
Fitch Ratings has assigned Harben Finance 2017-1 PLC's notes
expected ratings.
The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.
DEBT RATING
---- ------
Harben Finance 2017-1 Plc (2022 Refi)
Class A XS2433720039 LT AAA(EXP)sf Expected Rating
Class B XS2433722324 LT AA(EXP)sf Expected Rating
Class C XS2433722753 LT A(EXP)sf Expected Rating
Class D XS2433730855 LT BBB(EXP)sf Expected Rating
Class E XS2433738080 LT BB+(EXP)sf Expected Rating
Class F XS2433749525 LT B+(EXP)sf Expected Rating
Class G XS2433821738 LT B-(EXP)sf Expected Rating
Class R XS2433822207 LT NR(EXP)sf Expected Rating
Class X XS2433822462 LT B-(EXP)sf Expected Rating
Class Z XS2433821902 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is a securitisation of UK buy-to-let (BTL) loans
originated by Bradford and Bingley (B&B) and its wholly owned
subsidiary, Mortgage Express, between 2005 and 2008. Loans were
previously securitized under Harben Finance 2017-1 plc (Harben
2017).
KEY RATING DRIVERS
Seasoned Loans, Stable Performance: The portfolio comprises
15-year-seasoned BTL loans originated by B&B. Fitch applied a 1.0x
originator adjustment for the portfolio, taking into account the
sound historical performance of Harben 2017 since its closing in
April 2017. Harben 2017 benefited from positive selection through
the exclusion of loans in arrears by more than one month, which
resulted in lower arrears and repossessions than some other BTL
legacy portfolios and a performance generally in line with Fitch's
BTL performance indices.
Interest-Only Concentration Drives Foreclosure Frequencies: The
portfolio has high interest-only (IO) concentration. During
2031-2033, 39.7% of the loans in the portfolio mature and must make
principal payments.
Fitch derives an IO concentration weighted average (WA) foreclosure
frequency (FF) based on this peak concentration and applies the
higher of this WAFF and the standard portfolio WAFF for each rating
level in its analysis. The IO concentration WAFF is higher than the
standard portfolio WAFF at the majority of rating levels.
Low Margins, Moderate Affordability: All loans track the Bank of
England base rate (BBR). Similarly, 97.0% of the loans in the
portfolio are IO. WA margins for these loans are relatively low,
standing at 1.7%. Affordability for these loans is moderate
compared with other BTL legacy portfolios, with a WA interest
coverage ratio of 123.0% due to B&B's slightly weaker lending
policy. The low WA margin adds to a low realised and expected
constant prepayment rate for the pool.
Basis Risk Unhedged: The transaction is exposed to basis risk
between BBR and SONIA as the notes pay daily compounded SONIA.
Fitch stressed the transaction cash flows for basis risk, in line
with its criteria. Combined with the low asset margins, this
resulted in limited excess spread in Fitch's cash flow analysis.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The transaction's performance may be affected by changes in
market conditions and the economic environment. Weakening
economic performance is strongly correlated to increasing
levels of delinquencies and defaults that could reduce credit
enhancement available to the notes.
-- In addition, unanticipated declines in recoveries could result
in lower net proceeds, which may make certain notes
susceptible to potential negative rating action depending on
the extent of the decline in recoveries. Fitch conducts
sensitivity analyses by stressing both a transaction's base
case FF and recovery rate (RR) assumptions. For example, a 15%
WAFF increase and 15% WARR decrease would result in a class A
model-implied downgrade of up to one notch.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance driven by stable
delinquencies and defaults would lead to increasing credit
enhancement levels and consideration for potential upgrades.
Fitch tested an additional rating sensitivity scenario by
applying a decrease in the WAFF of 15% and an increase in the
WARR of 15%, implying upgrades of up to five notches.
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.
DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
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.
HARBEN FINANCE 2017-1: S&P Assigns Prelim B-(sf) Rating to X Notes
------------------------------------------------------------------
S&P Global Ratings has assigned preliminary credit ratings to
Harben Finance 2017-1 PLC's class A, B, C-Dfrd, D-Dfrd, E-Dfrd,
F-Dfrd, G-Dfrd, and X-Dfrd U.K. RMBS notes. At closing, Harben
Finance 2017-1 will also issue unrated class Z and R notes and X1,
X2, and Y certificates.
The transaction is a refinancing of the Harben Finance 2017-1
transaction, which closed in April 2017 (the original
transaction).
S&P said, "We have based our credit analysis on the GBP1.24 billion
pool. The pool comprises first-lien U.K. buy-to-let (BTL)
residential mortgage loans that Bradford & Bingley PLC and Mortgage
Express PLC originated. The loans are secured on properties in
England and Wales, and were originated between 1997 and 2009. The
underlying loans in the securitized portfolio are serviced by Topaz
Finance Ltd., which is also the legal title holder. Topaz Finance
is a subsidiary of Computershare Mortgage Services Ltd. (CMS). We
reviewed CMS' servicing and default management processes and are
satisfied that it is capable of performing its functions in the
transaction.
"The collateral performance has historically been better than our
legacy BTL index.
All of the loans in the portfolio are more than 10 years seasoned.
S&P said, "Our preliminary ratings on the class A and B notes
address the timely payment of interest and the ultimate payment of
principal. Our preliminary ratings on the class C-Dfrd to G-Dfrd
notes and X-Dfrd notes reflect the ultimate payment of interest and
principal. Our rating definitions are in line with the notes' terms
and conditions."
The rated notes are supported by the principal borrowing mechanism,
the general reserve, and the liquidity reserve (class A and B
notes). They are subject to a principal deficiency ledger condition
for the class B to G-Dfrd notes unless they are the most senior
outstanding. These reserve funds will be funded at closing.
S&P said, "Our cash flow analysis indicates that the available
credit enhancement for the class B, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd,
and G-Dfrd notes is commensurate with the assigned preliminary
ratings. The preliminary ratings on these notes reflect their
ability to withstand joint lead manager (JLM) indemnity claims and
the higher-than-expected loss severity observed on the original
transaction since its closing until the first optional redemption
date. In our analysis, the class X-Dfrd notes are unable to
withstand the stresses we apply at our 'B' rating level. However,
payment on this class of notes does not rely on favorable business,
financial, and economic conditions. Consequently, we have assigned
a 'B- (sf)' rating to the notes in line with our criteria.
"A portion of JLM indemnity claims ranks senior and are therefore
modelled in our cash flow analysis. They represent a potential
expense (to the benefit of JLMs) if, for instance, investors sue
the JLMs for a breach of representations and warranties."
There is no swap counterparty to hedge the mismatch between the
interest rate paid under the loans and the interest rate paid under
the notes.
There are no rating constraints in the transaction under our
counterparty, operational risk, or structured finance sovereign
risk criteria. S&P considers the issuer to be bankruptcy remote.
Preliminary Ratings
CLASS PRELIM. RATING* CLASS SIZE (%)
A AAA (sf) 93.60
B AA+ (sf) 2.75
C-Dfrd AA- (sf) 1.75
D-Dfrd A (sf) 1.05
E-Dfrd A- (sf) 0.30
F-Dfrd BBB+ (sf) 0.30
G-Dfrd BBB (sf) 0.15
Z NR 0.10
R NR 1.73
X-Dfrd B- (sf) 1.15
X1 certs NR N/A
X2 certs NR N/A
Y certs NR N/A
*S&P Global Ratings' ratings address timely receipt of interest
and ultimate repayment of principal for the class A and B notes,
and the ultimate payment of interest and principal on the other
rated notes.
N/A--Not applicable.
NR--Not rated.
INTERNATIONAL GAME: Egan-Jones Keeps CCC+ Senior Unsecured Ratings
------------------------------------------------------------------
Egan-Jones Ratings Company on January 19, 2022, maintained its
'CCC+' foreign currency and local currency senior unsecured ratings
on debt issued by International Game Technology. EJR also
maintained its 'B' rating on commercial paper issued by the
Company.
Headquartered in London, United Kingdom, International Game
Technology designs and manufactures computerized casino gaming
systems.
ONE LEGAL: Administration Process Extended Until January 2023
-------------------------------------------------------------
John Hyde at The Law Society Gazette reports that the
administration of a collapsed criminal legal aid firm has been
extended by almost a year despite creditors expressing concern
about mounting costs.
High-profile outfit One Legal went into administration two years
ago owing more than GBP5.4 million to staff and creditors, The Law
Society Gazette recounts. The meagre assets and work in progress
of the firm mean that those owed money are likely to receive
nothing back, The Law Society Gazette notes.
According to The Law Society Gazette, an update from joint
administrator Robert Adamson, published last week, reveals that he
had sought a decision from secured and preferential creditors to
increase the administration fees from GBP198,700 to GBP301,188.
This was to facilitate further investigations into the financial
affairs of the firm.
The update states that former employees rejected the request for an
increase, forcing an application to the court which was successful,
resulting in the administration being extended until January 2,
2023, The Law Society Gazette relays.
As well as details of the extension, the update also reveals the
extent of the debts incurred by One Legal Services, which was
co-founded by former Stobart Barristers director Trevor Howarth and
acquired Kaim Todner in 2016 to become one of the biggest criminal
practices in the country.
The company's records confirm there was a fixed and floating charge
over the assets of the company held by Barclays Bank, which is owed
around GBP526,000, The Law Society Gazette discloses.
Preferential creditors, who are employees claiming for outstanding
wages, holiday pay and redundancy payments, are thought to be owed
almost GBP100,000 in total, according to The Law Society Gazette.
The biggest debt is to unsecured creditors who are owed GBP4.93
million, The Law Society Gazette says. The report notes it is
"uncertain" whether there will be any distribution to unsecured
creditors, but given the firm's total assets only come to
GBP229,000 at this stage, there appears little chance of such debts
being repaid, The Law Society Gazette relates.
OWL FINANCE: Moody's Lowers CFR to Ca, Outlook Negative
-------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating for Owl Finance Limited (Owl Finance) to Ca from Caa2, as
well as its probability of default rating to C-PD from Caa2-PD. Owl
Finance is the indirect 100% shareholder of Yell Limited (Yell), a
leading provider of digital marketing services to small and medium
enterprises ("SMEs") in the UK.
The ratings downgrade follow the company's announcement on January
28, 2022 that it reached an agreement in principle with majority of
its bondholders (representing around 97% of the outstanding notes)
for a debt restructuring transaction. Bondholders will exchange
GBP214 million of outstanding Notes for GBP65 million of amended
notes and 95% of equity in Yell Holdco Limited, the Company's
immediate parent. The agreement is subject to final negotiations
and certain conditions (including approval by the shareholders of
Yell Group Limited) and is expected to close in March/April 2022.
Moody's has concurrently also downgraded the rating for the
GBP214.0 million of outstanding senior secured notes due 2023
issued by Yell Bondco plc to Ca from Caa2. The outlook on all
ratings is negative.
RATINGS RATIONALE
Moody's expects to consider this transaction as a distressed
exchange which is a default under Moody's definitions. The agency
will assign an "/LD" (Limited Default) to the PDR for a period of
three business days, on completion of the 30-day grace period if
Yell does not make the coupon payment due on its GBP214 million of
outstanding bond on March 15, 2022 or upon the signing of the
proposed restructuring agreement, whichever takes place earlier.
The company's capital structure had turned unsustainable. Its bond
was falling due in 2023 and its leverage was elevated with a
Moody's adjusted Gross Debt/ EBITDA of around 9.0x for the last
twelve months ended September 30, 2021. Nevertheless, the company's
cash balance of GBP24 million as of December 31, 2021 would have
been sufficient to make the March 2022 coupon payment of GBP9
million.
The amended GBP65 million notes will have a coupon of 8.75% and a
maturity date of March 31, 2027. The existing March 2022 coupon on
the GBP214 million of outstanding Notes will be waived as part of
the restructuring deal and Yell will have an option to capitalize
the coupon for the year to March 2023 by adding it to the principal
amount of the amended Notes instead of paying it in cash.
Moody's positively acknowledges that the completion of the
announced debt restructuring will help to bring the company's debt
leverage down meaningfully thereby restoring the company's
financial flexibility. Moody's plans to reassess Yell's capital
structure and its ratings upon the completion of the restructuring
transaction.
ESG CONSIDERATIONS
Yell's Chief Executive, Claire Miles, who joined in October 2019 is
aiming to turnaround the business via executing the
'stabilize-evolve-transform' strategy. The company also hired a new
CFO, Adam Hurst in January 2021. However, the company has been
suffering from high leverage and pressured operating performance
over the past few years. On July 23, 2020, Yell had indicated that
it was in discussions with its largest bondholders to address its
capital structure issues.
While the new capital structure will alleviate the financial
pressures on Yell, Moody's nevertheless remain cautious around the
execution risks associated with the timely and successful
implementation of the company's strategy for a return to sustained
visible revenue and EBITDA growth.
STRUCTURAL CONSIDERATIONS
The PDR of C-PD reflects that the default is expected to occur with
the successful closing of the debt for equity swap transaction.
Moody's expects that in a default scenario, recovery rates for
bondholders are likely to be in the range of 35% to 65%, which is
commensurate with a Ca rating on the GBP214 million bond.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook on the ratings reflects the high likelihood of
default on the GBP214 million bond over the coming months, if the
announced debt exchange transaction concludes successfully.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's would consider assigning an "/LD" to the PDR for a period
of three business days, on completion of the 30-day grace period if
Yell does not make the coupon payment due on its GBP214 million of
outstanding bond on March 15, 2022 or upon the signing of the
proposed restructuring agreement, whichever takes place earlier.
In view of the action and the negative rating outlook, Moody's does
not currently anticipate upward rating pressure before the
completion of the company's debt exchange transaction.
LIST OF AFFECTED RATINGS
Downgrades:
Issuer: Owl Finance Limited
LT Corporate Family Rating, Downgraded to Ca from Caa2
Probability of Default Rating, Downgraded to C-PD from Caa2-PD
Issuer: Yell Bondco plc
BACKED Senior Secured Regular Bond/Debenture, Downgraded to Ca
from Caa2
Outlook Actions:
Issuer: Owl Finance Limited
Outlook, Remains Negative
Issuer: Yell Bondco plc
Outlook, Remains Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Media published
in June 2021.
Yell is a leading provider of digital marketing services to small
and medium enterprises ("SMEs") in the UK, helping SMEs to build
and maintain an effective online presence and facilitating
interaction with consumers. As of LTM period ended September 2021,
Owl Finance (indirect holding company of Yell) reported revenue and
EBITDA (as calculated by management) of GBP120.6m and GBP24.8m,
respectively.
VODAFONE GROUP: Egan-Jones Keeps BB+ Senior Unsecured Ratings
-------------------------------------------------------------
Egan-Jones Ratings Company on January 18, 2022, maintained its
'BB+' foreign currency and local currency senior unsecured ratings
on debt issued by Vodafone Group PLC.
Headquartered in Berkshire, United Kingdom, Vodafone Group PLC
provides wireless communication services.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Editors.
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